Federal Register, Volume 75 Issue 157 (Monday, August 16, 2010)

[Federal Register Volume 75, Number 157 (Monday, August 16, 2010)]
[Rules and Regulations]
[Pages 50041-50677]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-19092]

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Part II

Book 2 of 2 Books

Pages 50041-50681

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 412, 413, 415, et al.

Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care Hospital Prospective
Payment System Changes and FY2011 Rates; Provider Agreements and
Supplier Approvals; and Hospital Conditions of Participation for
Rehabilitation and Respiratory Care Services; Medicaid Program:
Accreditation for Providers of Inpatient Psychiatric Services; Final
Rule

Federal Register / Vol. 75, No. 157 / Monday, August 16, 2010 / Rules
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 412, 413, 415, 424, 440, 441, 482, 485, and 489

[CMS-1498-Fand CMS-1498-IFC; CMS-1406-F]
RIN 0938-AP80; RIN 0938-AP33

Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System Changes and FY2011 Rates; Provider Agreements and
Supplier Approvals; and Hospital Conditions of Participation for
Rehabilitation and Respiratory Care Services; Medicaid Program:
Accreditation for Providers of Inpatient Psychiatric Services

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

ACTION: Final rules and interim final rule with comment period.

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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems and to implement certain provisions of
the Affordable Care Act and other legislation. In addition, we describe
the changes to the amounts and factors used to determine the rates for
Medicare acute care hospital inpatient services for operating costs and
capital-related costs. We also are setting forth the update to the
rate-of-increase limits for certain hospitals excluded from the IPPS
that are paid on a reasonable cost basis subject to these limits.
We are updating the payment policy and the annual payment rates for
the Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs) and setting forth
the changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS. In addition, we are finalizing the
provisions of the August 27, 2009 interim final rule that implemented
statutory provisions relating to payments to LTCHs and LTCH satellite
facilities and increases in beds in existing LTCHs and LTCH satellite
facilities under the LTCH PPS.
We are making changes affecting the: Medicare conditions of
participation for hospitals relating to the types of practitioners who
may provide rehabilitation services and respiratory care services; and
determination of the effective date of provider agreements and supplier
approvals under Medicare.
We are also setting forth provisions that offer psychiatric
hospitals and hospitals with inpatient psychiatric programs increased
flexibility in obtaining accreditation to participate in the Medicaid
program. Psychiatric hospitals and hospitals with inpatient psychiatric
programs will have the choice of undergoing a State survey or of
obtaining accreditation from a national accrediting organization whose
hospital accreditation program has been approved by CMS.
We are also issuing an interim final rule with comment period to
implement a provision of the Preservation of Access to Care for
Medicare Beneficiaries and Pension Relief Act of 2010 relating to
Medicare payments for outpatient services provided prior to a Medicare
beneficiary's inpatient admission.

DATES: Effective Date: These rules are effective on October 1, 2010,
except for amendments to Sec. 412.2(c)(5) introductory text,
(c)(5)(iii), and (c)(5)(iv); Sec. 412.405; Sec. 412.521(b)(1); Sec.
412.540; Sec. 412.604(f); Sec. 413.40(c)(2) introductory text,
(c)(2)(iii), and (c)(2)(iv), that are effective on June 25, 2010 and
apply to services furnished on or after June 25, 2010. In accordance
with sections 1871(e)(1)(A)(i) and (ii) of the Social Security Act, the
Secretary has determined that retroactive application of these
regulatory amendments is necessary to comply with the statute and that
failure to apply the changes retroactively would be contrary to public
interest:
Comment Period: To be assured consideration, comments on the
interim final rule with comment period (CMS-1498-IFC) that appears as
section IV.M., of the preamble of this document and includes amendments
to Sec. 412.2(c)(5) introductory text, (c)(5)(iii), and (c)(5)(iv);
Sec. 412.405; Sec. 412.521(b)(1); Sec. 412.540; Sec. 412.604(f);
Sec. 413.40(c)(2) introductory text, (c)(2)(iii), and (c)(2)(iv) must
be received at one of the addresses provided below, no later than 5
p.m. EST on September 28, 2010. Comments on other sections of this
document will not be considered.

ADDRESSES: When commenting on issues presented in the interim final
rule with comment period, please refer to file code CMS-1498-IFC.
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. Electronically. You may submit electronic comments on this
regulation at http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the file code CMS-1498-IFC to
submit comments on this interim final rule.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1498-IFC, P.O. Box 8011, Baltimore, MD
21244-1850.

Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY:

Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-1406-IFC, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.

4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to either of the following addresses:

a. Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201

(Because access to the interior of the HHH 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. 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.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Tzvi Hefter, (410) 786-4487, and Ing-
Jye Cheng, (410) 786-4548, Operating Prospective Payment, MS-DRGs,
Hospital Acquired Conditions (HAC),

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Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Acute Care Transfers, Capital
Prospective Payment, Excluded Hospitals, Direct and Indirect Graduate
Medical Education Payments, Disproportionate Share Hospital (DSH), and
Critical Access Hospital (CAH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Reporting of Hospital Quality Data for
Annual Payment Update--Program Administration, Validation, and
Reconsideration Issues.
Shaheen Halim (410) 786-0641, Reporting of Hospital Quality Data
for Annual Payment Update--Measures Issues Except Hospital Consumer
Assessment of Healthcare Providers and Systems
Elizabeth Goldstein (410) 786-6665 Reporting of Hospital Quality
Data for Annual Payment Update--Hospital Consumer Assessment of
Healthcare Providers and Systems Measures Issues.
Marcia Newton, (410-786-5265) and CDR Scott Cooper (U.S. Public
Health Service), (410) 786-9465, Hospital Conditions of Participation
for Rehabilitation Services and Respiratory Therapy Care Issues.
Marilyn Dahl, (410) 786-8665, Provider Agreement and Supplier
Approval Issues.
Melissa Harris, (410) 786-3397 or Adrienne Delozier, (410) 786-
0278, Accreditation of Providers of Inpatient Psychiatric Services to
Individuals under Age 21 Issues.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all comments received before the close of the comment period on
the following Web site as soon as possible after they have been
received: http://www.regulations.gov. Follow the search instructions at
that Web site to view public comments.
Comments received timely will also be available for public
inspection, 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.

Electronic Access

This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
the World Wide Web, (the Superintendent of Documents' home Web page
address is http://www.gpoaccess.gov/), by using local WAIS client
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password required). Dial-in users should use communications software
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password required).

Acronyms

3M 3M Health Information System
AAHKS American Association of Hip and Knee Surgeons
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory surgical center
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIC Beneficiary Identification Code
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified Registered Nurse Anesthetist
CY Calendar year
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EMR Electronic medical record
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FHA Federal Health Architecture
FIPS Federal information processing standards
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HACs Hospital-acquired conditions
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICANHealth Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative

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HwH Hospital-within-a-hospital
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MA Medicare Advantage
MAC Medicare Administrative Contractor
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MPN Medicare provider number
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NP Nurse practitioner
NQF National Quality Forum
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991 (Pub.
L. 104-113)
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PA Physician assistant
PIP Periodic interim payment
PLI Professional liability insurance
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPACA Patient Protection and Affordable Care Act, Public Law 111-148
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement (System)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSN Social Security number
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
UHDDS Uniform hospital discharge data set

Table of Contents

I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
B. Provisions of the Patient Protection and Affordable Care Act
(Pub. L. 111-148) and the Health Care and Education Reconciliation
Act of 2010 (Pub. L. 111-152)
C. Provisions of the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192)
D. Issuance of Two Notices of Proposed Rulemaking for FY 2011
1. Issuance of May 4, 2010 IPPS/LTCH PPS Proposed Rule
a. Proposed Changes to MS-DRG Classifications and Recalibrations
of Relative Weights
b. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
c. Other Decisions and Proposed Changes to the IPPS for
Operating Costs and GME Costs
d. Proposed FY 2011 Policy Governing the IPPS for Capital-
Related Costs
e. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
f. Proposed Changes to the LTCH PPS
g. Proposed Changes Relating to Effective Date of Provider
Agreements and Supplier Approvals
h. Proposed Changes to Medicare Conditions of Participation
Affecting Hospital Rehabilitation Services and Respiratory Care
Services
i. Proposed Changes to the Accreditation Requirements for
Medicaid Providers of Inpatient Psychiatric Services for Individuals
under Age 21
j. Determining Proposed Prospective Payment Operating and
Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals
k. Determining Proposed Prospective Payments Rates for LTCHs
l. Impact Analysis
m. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
n. Discussion of Medicare Payment Advisory Commission
Recommendations
2. Issuance of June 2, 2010 IPPS/LTCH PPS Proposed Rule
E. Public Comments Received on the FY 2011 IPPS/LTCH Proposed
Rule and Supplemental Proposed Rule
F. Finalization of Interim Final Rule with Comment Period That
Implemented Certain Provisions of the ARRA Relating to Payments to
LTCHs and LTCH Satellite Facilities
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
1. General
2. Yearly Review for Making MS-DRG Changes
C. Adoption of the MS-DRGs in FY 2008

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D. FY 2011 MS-DRG Documentation and Coding Adjustment, Including
the Applicability to the Hospital-Specific Rates and the Puerto
Rico-Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Prospective Adjustment to the Average Standardized Amounts
Required by Section 7(b)(1)(A) of Public Law 110-90
3. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Public Law 110-90
4. Retrospective Evaluation of FY 2008 Claims Data
5. Retrospective Analysis of FY 2009 Claims Data
6. Prospective Adjustment for FY 2010 and Subsequent Years
Authorized by Section 7(b)(1)(A) of Public Law 110-90 and Section
1886(d)(3)(vi) of the Act
7. Recoupment or Repayment Adjustment for FY 2010 Authorized by
Section 7(b)(1)(B) of Public Law 110-90
8. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
9. Documentation and Coding Adjustment to the Hospital-Specific
Rates for FY 2011 and Subsequent Fiscal Years
10. Background on the Application of the Documentation and
Coding Adjustment to the Puerto Rico-Specific Standardized Amount
11. Documentation and Coding Adjustment to the Puerto Rico-
Specific Standardized Amount
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
a. Summary of FY 2009 Changes and Discussion for FY 2011
b. Summary of the RAND Corporation Study of Alternative Relative
Weight Methodologies
2. FY 2011 Changes and Timeline for Changes to the Medicare Cost
Report
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Background
a. Statutory Authority
b. HAC Selection
c. Collaborative Process
d. Application of HAC Payment Policy to MS-DRG Classifications
e. Public Input Regarding Selected and Potential Candidate HACs
f. POA Indicator Reporting
2. HAC Conditions for FY 2011
3. RTI Program Evaluation Summary
a. Background
b. RTI Analysis on POA Indicator Reporting Across Medicare
Discharges
c. RTI Analysis on POA Indicator Reporting of Current HACs
d. RTI Analysis of Frequency of Discharges and POA Indicator
Reporting for Current HACs
e. RTI Analysis of Circumstances When Application of HAC
Provisions Would Not Result in MS-DRG Reassignment for Current HACs
f. RTI Analysis of Coding Changes for HAC-Associated Secondary
Diagnoses for Current HACs
g. RTI Analysis of Estimated Net Savings for Current HACs
h. Previously Considered Candidate HACs--RTI Analysis of
Frequency of Discharges and POA Indicator Reporting
i. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
j. Current HACs and Previously Considered Candidate HACs
G. Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (MDCs)
a. Postsurgical Hypoinsulinemia (MS-DRG 008 (Simultaneous
Pancreas/Kidney Transplant))
b. Bone Marrow Transplants
2. MDC 1 (Nervous System): Administration of Tissue Plasminogen
Activator (tPA) (rtPA)
3. MDC 5 (Diseases and Disorders of the Circulatory System):
Intraoperative Fluorescence Vascular Angiography (IFVA) and X-Ray
Coronary Angiography in Coronary Artery Bypass Graft Surgery
a. New MS-DRGs for Intraoperative Fluorescence Vascular
Angiography (IFVA) with CABG
b. New MS-DRG for Intraoperative Angiography, by any Method,
with CABG
c. New Procedure Codes
d. MS-DRG Reassignment of Intraoperative Fluorescence Vascular
Angiography (IFVA)
4. MDC 6 (Diseases and Disorders of the Digestive System):
Gastrointestinal Stenting
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue): Pedicle-Based Dynamic Stabilization
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)
a. Discharges/Transfers of Neonates to a Designated Cancer
Center or a Children's Hospital
b. Vaccination of Newborns
7. Medicare Code Editor (MCE) Changes
a. Unacceptable Principal Diagnosis Edit: Addition of Code for
Gastroparesis
b. Open Biopsy Check Edit
c. Noncovered Procedure Edit
8. Surgical Hierarchies
9. Complication or Comorbidity (CC) Exclusions List
a. Background
b. CC Exclusions List for FY 2011
10. Review of Procedure Codes in MS-DRGs 981 through 983, 984
through 986, and 987 through 989
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-
DRGs 987 through 989 to MDCs
b. Reassignment of Procedures among MS-DRGs 981 through 983, 984
through 986, and 987 through 989
c. Adding Diagnosis or Procedure Codes to MDCs
11. Changes to the ICD-9-CM Coding System, Including Discussion
of the Replacement of the ICD-9-CM System with the ICD-10-CM and
ICD-10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on
Hospital Inpatient Claims
12. Other Issues Not Addressed in the Proposed Rule
a. Rechargeable Dual Array Deep Brain Stimulation System
b. IntraOperative Electron RadioTherapy (IOERT)
c. Brachytherapy
d. Excisional Debridement
H. Recalibration of MS-DRG Weights
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2011 Status of Technologies Approved for FY 2010 Add-On
Payments
a. Spiration[supreg] IBV[supreg] Valve System
b. CardioWest^TM Temporary Total Artificial Heart
System (CardioWest^TM TAH-t)
4. FY 2011 Applications for New Technology Add-On Payments
a. Auto Laser Interstitial Thermal Therapy
(AutoLITT^TM) System
b. LipiScan^TM Coronary Imaging System
c. LipiScan^TM Coronary Imaging System with
Intravascular Ultrasound (IVUS)
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Wage Index Reform
1. Wage Index Study Required under the MIEA-TRHCA
a. Legislative Requirement
b. Interim and Final Reports on Results of Acumen's Study
2. FY 2009 Policy Changes in Response to Requirements under
Section 106(b) of the MIEA-TRHCA
a. Reclassification Average Hourly Wage Comparison Criteria
b. Budget Neutrality Adjustment for the Rural and Imputed Floors
3. Floor for Area Wage Index for Hospitals in Frontier States
4. Plan for Reforming the Wage Index under Section 3137(b) of
Affordable Care Act
C. Core-Based Statistical Areas for the Hospital Wage Index
D. Occupational Mix Adjustment to the FY 2011 Wage Index
1. Development of Data for the FY 2011 Occupational Mix
Adjustment Based on the 2007-2008 Occupational Mix Survey
2. New 2010 Occupational Mix Survey for the FY 2013 Wage Index
3. Calculation of the Occupational Mix Adjustment for FY 2011
E. Worksheet S-3 Wage Data for the FY 2011 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals under the IPPS
F. Verification of Worksheet S-3 Wage Data
G. Method for Computing the FY 2011 Unadjusted Wage Index
H. Analysis and Implementation of the Occupational Mix
Adjustment and the

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FY 2011 Occupational Mix Adjusted Wage Index
I. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General
2. Effects of Reclassification/Redesignation
3. FY 2011 MGCRB Reclassifications
a. FY 2011 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2012
c. Appeals of MGCRB Denials of Withdrawals and Terminations
4. Redesignations of Hospitals under Section 1886(d)(8)(B) of
the Act
5. Reclassifications under Section 1886(d)(8)(B) of the Act
6. Reclassifications under Section 508 of Public Law 108-173
J. FY 2011 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
K. Process for Requests for Wage Index Data Corrections
L. Labor-Market Share for the FY 2011 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and
GME Costs
A. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
1. Background
a. Overview
b. Hospital Quality Data Reporting under Section 501(b) of
Public Law 108-173
c. Hospital Quality Data Reporting under Section 5001(a) of
Public Law 109-171
d. Hospital Quality Data Reporting under Section 3001(a)(2) and
3401(a)(2) of Public Law 111-148
e. Quality Measures
f. Maintenance of Technical Specifications for Quality Measures
g. Public Display of Quality Measures
2. Retirement of RHQDAPU Program Measures
a. Considerations in Retiring Quality Measures from the RHQDAPU
Program
b. Retirement of Quality Measures under the RHQDAPU Program for
the FY 2011 Payment Determination and Subsequent Years
3. Expansion Plan for Quality Measures for the FY 2012, FY 2013,
and FY 2014 Payment Determinations
a. Considerations in Expanding and Updating Quality Measures
under the RHQDAPU Program
b. RHQDAPU Program Quality Measures for the FY 2012 Payment
Determination
c. RHQDAPU Program Quality Measures for the FY 2013 Payment
Determination
d. RHQDAPU Program Quality Measures for the FY 2014 Payment
Determination
4. Possible New Quality Measures for Future Years
5. Form, Manner, and Timing of Quality Data Submission
a. RHQDAPU Program Requirements for FY 2012, FY 2013, and FY
2014
b. Additional RHQDAPU Program Procedural Requirements for FY
2012, FY 2013, and FY 2014 Payment Determinations
6. RHQDAPU Program Disaster Extensions and Waivers
7. Chart Validation Requirements for Chart-Abstracted Measures
a. Chart Validation Requirements and Methods for the FY 2012
Payment Determination
b. Supplements to the Chart Validation Process for the FY 2013
Payment Determination and Subsequent Years
8. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2012 Payment Determination and Subsequent Years
9. Public Display Requirements for the FY 2012 Payment
Determination and Subsequent Years
10. Reconsideration and Appeal Procedures for the FY 2011
Payment Determination
11. RHQDAPU Program Withdrawal Deadlines
12. Electronic Health Records
a. Background
b. EHR Testing of Quality Measures Submission
c. HITECH Act EHR Provisions
13. Qualification of Registries for RHQDAPU Data Submission
14. RHQDAPU and Hospital Value-Based Purchasing
B. Payment for Transfers of Cases from Medicare Participating
Acute Care Hospitals to Nonparticipating Hospitals and CAHs
1. Background
2. Policy Change
C. Rural Referral Centers (RRCs)
1. Case-Mix Index (CMI)
2. Discharges
D. Payment Adjustment for Low-Volume Hospitals
1. Background
2. Temporary Changes for FYs 2011 and 2012
E. Indirect Medical Education (IME) Adjustment
1. Background
2. IME Adjustment Factor for FY 2011
3. IME-Related Changes in Other Sections of this Final Rule
F. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs): Supplemental Security Income (SSI) Fraction
1. Background
2. CMS' Current Data Matching Process for the SSI Fraction
3. Baystate Medical Center v. Leavitt Court Decision
4. CMS' Proposed Process for Matching Medicare and SSI
Eligibility Data
a. Inclusion of Stale Records and Forced Pay Records in the SSI
Eligibility Data Files
b. Use of SSNs in the Revised Match Process
c. Timing of the Match
5. CMS Ruling 1498-R
6. Clarification of Language on Inclusion of Medicare Advantage
Days in the SSI Fraction of the Medicare DSH Calculation
G. Medicare-Dependent, Small Rural Hospitals (MDHs): Change to
Criteria
1. Background
2. Medicare-Dependency: Counting Medicare Inpatients
3. Extension of the MDH Program
H. Payments for Direct Graduate Medical Education (GME) Costs
1. Background
2. Identifying ``Approved Medical Residency Programs''
a. Residents in Approved Medical Residency Programs
b. Determining Whether an Individual Is a Resident or a
Physician
c. Formal Enrollment and Participation in a Program
3. Electronic Submission of Affiliation Agreements
I. Certified Registered Nurse Anesthetist (CRNA) Services
Furnished in Rural Hospitals and CAHs
J. Additional Payments for Qualifying Hospitals with Lowest Per
Enrollee Medicare Spending
1. Background
2. Eligible Counties
a. Development of Risk Adjustment Model
b. Calculation of County Level Part A and Part B Spending
3. Application of the Age/Sex/Race Adjustment to Part A and Part
B County Spending
4. Qualifying Hospitals and Annual Payment Amounts
5. Payment Determination and Distribution
6. Hospital Weighting Factors
7. Results
8. Finalization of Eligible Counties, Qualifying Hospitals and
Qualifying Hospitals' Weighting Factors
K. Rural Community Hospital Demonstration Program
L. Technical Change to Regulations
M. Interim Final Rule with Comment Period: Bundling of Payments
for Services Provided to Outpatients Who Later Are Admitted As
Inpatients: 3-Day Payment Window
1. Introduction
2. Background for Policy
3. Requirements of Section 102 of Public Law 111-192
4. Application of the Provisions of Section 102 of Public Law
111-192
5. Waiver of Notice of Proposed Rulemaking
6. Collection of Information Requirements
7. Response to Public Comments
8. Regulatory Impact Analysis
N. Changes in the Inpatient Hospital Market Basket Update
1. FY 2010 Inpatient Hospital Update
2. FY 2011 Inpatient Hospital Update
3. FY 2010 and FY 2011 Puerto Rico Hospital Update
V. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Exception Payments
C. New Hospitals
D. Hospitals Located in Puerto Rico
E. Changes for FY 2011: MS-DRG Documentation and Coding
Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009
2. Retrospective Evaluation of FY 2008 Claims Data
3. Retrospective Analysis of FY 2009 Claims Data

[[Page 50047]]

4. Prospective MS-DRG Documentation and Coding Adjustment to the
National Capital Federal Rate for FY 2011 and Subsequent Years
5. Documentation and Coding Adjustment to the Puerto Rico-
Specific Capital Rate
F. Other Changes for FY 2011
VI. Changes for Hospitals Excluded from the IPPS
A. Excluded Hospitals
B. Critical Access Hospitals (CAHs)
1. Background
2. CAH Optional Method Election for Payment of Outpatient
Services
3. Costs of Provider Taxes as Allowable Costs for CAHs
a. Background and Statutory Basis
b. Clarification of Payment Policy for Provider Taxes
C. Report of Adjustment (Exceptions) Payments
VII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2011
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded from the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2011
3. Development of the FY 2011 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2011
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the RY 2011 MS-LTC-DRG Relative Weights
C. Changes to the LTCH Payment Rates and Other Changes to the FY
2011 LTCH PPS
1. Overview of Development of the LTCH Payment Rates
2. Market Basket for LTCHs Reimbursed under the LTCH PPS
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Changes to Reflect the Market Basket Update for LTCHs for RY
2010
d. Market Basket under the LTCH PPS for FY 2011
e. Market Basket Update for LTCHs for FY 2011
f. Labor-Related Share under the LTCH PPS for FY 2011
3. Adjustment for Changes in LTCHs' Case-Mix Due to Changes in
Documentation and Coding Practices That Occurred in a Prior Period
a. Background
b. Evaluation of FY 2009 Claims Data
c. FY 2011 Documentation and Coding Adjustment
D. Change in Terminology from ``Rate Year'' to ``Fiscal Year''
and Other Changes
E. Finalization of Interim Final Rule with Comment Period
Implementing Section 4302 of the American Recovery and Reinvestment
Act of 2009 (Pub. L. 111-5) Relating to Payments to LTCHs and LTCH
Satellite Facilities
1. Background
2. Amendments Relating to Payment Adjustment to LTCHs and LTCH
Satellite Facilities Made by Section 4302 of the ARRA
3. Amendment to the Moratorium on the Increase in Number of Beds
in Existing LTCHs or LTCH Satellite Facilities Made by Section 4302
of the ARRA
F. Extension of Certain Payment Rules for LTCH Services and
Moratorium on the Establishment of Certain Hospitals and Facilities
and the Increase in Number of Beds in Existing LTCHs and LTCH
Satellite Facilities
VIII. Determination of Effective Date of Provider Agreements and
Supplier Approvals
A. Background
B. Departmental Appeals Board Decision
C. Revisions to Regulations
IX. Medicare Hospital Conditions of Participation Affecting
Rehabilitation Services and Respiratory Care Services
X. Changes to the Accreditation Requirements for Medicaid Providers
of Inpatient Psychiatric Services for Individuals under Age 21
A. Background
B. Revision of Policy and Regulations
XI. MedPAC Recommendations
XII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
1. Legislative Requirement for Solicitation of Comments
2. Requirements in Regulation Text
a. ICRs Regarding Withdrawing an Application, Terminating an
Approved 3 Year Reclassification, or Canceling a Previous Withdrawal
or Termination (Revised Sec. 412.273)
b. ICRs Regarding Condition of Participation: Respiratory Care
Services (Sec. 482.57)
3. Additional Information Collection Requirements
a. Present on Admission (POA) Indicator Reporting
b. Add-On Payments for New Services and Technologies
c. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
d. Occupational Mix Adjustment to the FY 2011 Index (Hospital
Wage Index Occupational Mix Survey)
e. Hospital Applications for Geographic Reclassifications by the
MGCRB
f. Direct GME Payments: General Requirements
Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and
Rate-of-Increase Percentages Effective with Cost Reporting Periods
Beginning on or after October 1, 2010
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2011
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. MS-DRG Relative Weights
D. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2011
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2011
C. Capital Input Price Index
IV. Changes to Payment Rates for Certain Excluded Hospitals: Rate-
of-Increase Percentages
V. Changes to the Payment Rates for the LTCH PPS for FY 2011
A. LTCH PPS Standard Federal Rate for FY 2011
B. Adjustment for Area Wage Levels under the LTCH PPS for FY
2011
C. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
D. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2011
VI. Tables
Table 1A--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (68.8 Percent Labor Share/31.2 Percent Nonlabor Share
If Wage Index Is Greater Than 1)
Table 1B--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If
Wage Index Is Less Than or Equal to 1)
Table 1C--Adjusted Operating Standardized Amounts for Puerto
Rico, Labor/Nonlabor
Table 1D--Capital Standard Federal Payment Rate
Table 1E--LTCH Standard Federal Prospective Payment Rate
Table 2--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2009; Hospital Wage Indexes for
Federal Fiscal Year 2011; Hospital Average Hourly Wages for Federal
Fiscal Years 2009 (2005 Wage Data), 2010 (2006 Wage Data), and 2011
(2007 Wage Data); and 3-Year Average of Hospital Average Hourly
Wages
Table 3A--FY 2011 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA
Table 3B--FY 2011 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA
Table 4A.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for

[[Page 50048]]

Acute Care Hospitals in Urban Areas by CBSA and by State--FY 2011
Table 4B.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State--
FY 2011
Table 4C.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2011
Table 4D-1 (This table is discontinued due to section 3141 of
the Affordable Care Act returning the rural floor budget neutrality
to a uniform national adjustment.)
Table 4D-2.--States Designated as Frontier, with Acute Care
Hospitals Receiving at a Minimum the Frontier State Floor Wage
Index; Urban Areas with Acute Care Hospitals Receiving the Statewide
Rural Floor or Imputed Floor Wage Index--FY 2011
Table 4E.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2011
Table 4F.--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2011
Table 4J.--Out-Migration Adjustment for Acute Care Hospitals--FY
2011
Table 5.--List of Medicare Severity Diagnosis-Related Groups
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic
Mean Length of Stay--FY 2011
Table 6A.--New Diagnosis Codes
Table 6B.--New Procedure Codes
Table 6C.--Invalid Diagnosis Codes
Table 6D.--Invalid Procedure Codes
Table 6E.--Revised Diagnosis Code Titles
Table 6F.--Revised Procedure Code Titles
Table 6G.--Additions to the CC Exclusions List (Available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6H.--Deletions from the CC Exclusions List (Available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6I.--Complete List of Complication and Comorbidity (CC)
Exclusions (Available only through the Internet on the CMS Web site
at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6J.--Major Complication and Comorbidity (MCC) List
(Available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6K.--Complication and Comorbidity (CC) List (Available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 7A.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2009 MedPAR Update--March 2010
GROUPER V27.0 MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2009 MedPAR Update--March 2010
GROUPER V28.0 MS-DRGs
Table 8A.--Statewide Average Operating Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals--July 2010
Table 8B.--Statewide Average Capital Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals--July 2010
Table 8C.--Statewide Average Total Cost-to-Charge Ratios (CCRs)
for LTCHs--July 2010
Table 9A.--Hospital Reclassifications and Redesignations--FY
2011
Table 9C.--Hospitals Redesignated as Rural under Section
1886(d)(8)(E) of the Act--FY 2011
Table 10.--Geometric Mean Plus the Lesser of .75 of the National
Adjusted Operating Standardized Payment Amount (Increased To Reflect
the Difference Between Costs and Charges) or .75 of One Standard
Deviation of Mean Charges by Medicare Severity Diagnosis-Related
Groups (MS-DRGs)--July 2010
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average
Length of Stay, Short-Stay Outlier Threshold, and IPPS Comparable
Threshold for Discharges Occurring from October 1, 2010 through
September 30, 2011 under the LTCH PPS
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges
Occurring from October 1, 2010 through September 30, 2011
Table 12B.--LTCH PPS Wage Index for Rural Areas for Discharges
Occurring from October 1, 2010 through September 30, 2011
Appendix A--Regulatory Impact Analysis
I. Overall Impact
II. Objectives of the IPPS
III. Limitations of Our Analysis
IV. Hospitals Included in and Excluded from the IPPS
V. Effects on Hospitals and Hospital Units Excluded from the IPPS
VI. Quantitative Effects of the Policy Changes under the IPPS for
Operating Costs
A. Basis and Methodology of Estimates
B. Analysis of Table I
C. Effects of the Changes to the MS-DRG Reclassifications and
Relative Cost-Based Weights (Column 1)
D. Effects of the Application of Recalibration Budget Neutrality
(Column 2)
E. Effects of Wage Index Changes (Column 3)
F. Application of the Wage Budget Neutrality Factor (Column 4)
G. Combined Effects of MS-DRG and Wage Index Changes (Column 5)
H. Effects of MGCRB Reclassifications (Column 6)
I. Effects of the Rural Floor and Imputed Floor, Including
Application of Budget Neutrality at the State Level (Column 7)
J. Effects of the Wage Index Adjustment for Out-Migration
(Column 8)
K. Effects of All Changes Prior to Documentation and Coding (Or
CMI) Adjustment (Column 9)
L. Effects of All Changes With CMI Adjustment (Column 10)
M. Effects of Policy on Payment Adjustments for Low-Volume
Hospitals
N. Impact Analysis of Table II
VII. Effects of Other Policy Changes
A. Effects of Policy on HACs, Including Infections
B. Effects of Policy Changes Relating to New Medical Service and
Technology Add-On Payments
C. Effects of Requirements for Hospital Reporting of Quality
Data for Annual Hospital Payment Update
D. Effects of Policy on Payment for Transfer Cases from Medicare
Participating Hospitals to Nonparticipating Hospitals and CAHs
E. Effects of Change in Criteria for MDHs
F. Effects of Change Relating to Payment Adjustment for
Disproportionate Share Hospitals
G. Effects of Changes Relating to Payments for IME and Direct
GME
1. Background
2. Identifying ``Approved Medical Residency Programs''
3. Submission of Electronic Affiliation Agreements
4. Technical Correction to the Regulations Relating to the Cost
of Approved Nursing and Allied Health Education Activities
H. Effects of Changes Relating to CRNA Services Furnished in
Rural Hospitals and CAHs
I. Effects of Implementation of Rural Community Hospital
Demonstration Program
J. Effects of Changes Relating to CAHs
1. CAH Optional Method of Payment for Outpatient Services
2. Consideration of Costs of Provider Taxes as Allowable Costs
for CAHs
K. Effects of Policy Relating to Effective Date of Provider
Agreements and Supplier Approvals
L. Effects of Changes Relating to Hospital Rehabilitation
Services and Respiratory Care Services Conditions of Participation
VIII. Effects of Changes in the Capital IPPS
A. General Considerations
B. Results
IX. Effects of Payment Rate Changes and Policy Changes under the
LTCH PPS
A. Introduction and General Considerations
B. Impact on Rural Hospitals
C. Anticipated Effects of LTCH PPS Payment Rate Change and
Policy Changes
D. Effect on the Medicare Program
E. Effect on Medicare Beneficiaries
X. Effects of Policy Changes Relating to Accreditation Requirements
for Medicaid Providers of Inpatient Psychiatric Services to
Individuals under Age 21
XI. Alternatives Considered
XII. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs
XIII. Accounting Statements
A. Acute Care Hospitals
B. LTCHs
XIV. Executive Order 12866
Appendix B--Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2011
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare

[[Page 50049]]

I. Background

A. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to pay for the capital-related costs of hospital inpatient
stays under a prospective payment system (PPS). Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of low-income patients, it
receives a percentage add-on payment applied to the DRG-adjusted base
payment rate. This add-on payment, known as the disproportionate share
hospital (DSH) adjustment, provides for a percentage increase in
Medicare payments to hospitals that qualify under either of two
statutory formulas designed to identify hospitals that serve a
disproportionate share of low-income patients. For qualifying
hospitals, the amount of this adjustment may vary based on the outcome
of the statutory calculations.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate based on
their costs in a base year. For example, sole community hospitals
(SCHs) receive the higher of a hospital-specific rate based on their
costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY
2006) or the IPPS Federal rate based on the standardized amount.
Through and including FY 2006, a Medicare-dependent, small rural
hospital (MDH) received the higher of the Federal rate or the Federal
rate plus 50 percent of the amount by which the Federal rate is
exceeded by the higher of its FY 1982 or FY 1987 hospital-specific
rate. As discussed below, for discharges occurring on or after October
1, 2007, but before October 1, 2012, an MDH will receive the higher of
the Federal rate or the Federal rate plus 75 percent of the amount by
which the Federal rate is exceeded by the highest of its FY 1982, FY
1987, or FY 2002 hospital-specific rate. SCHs are the sole source of
care in their areas, and MDHs are a major source of care for Medicare
beneficiaries in their areas. Specifically, section 1886(d)(5)(D)(iii)
of the Act defines an SCH as a hospital that is located more than 35
road miles from another hospital or that, by reason of factors such as
isolated location, weather conditions, travel conditions, or absence of
other like hospitals (as determined by the Secretary), is the sole
source of hospital inpatient services reasonably available to Medicare
beneficiaries. In addition, certain rural hospitals previously
designated by the Secretary as essential access community hospitals are
considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as
a hospital that is located in a rural area, has not more than 100 beds,
is not an SCH, and has a high percentage of Medicare discharges (not
less than 60 percent of its inpatient days or discharges in its cost
reporting year beginning in FY 1987 or in two of its three most
recently settled Medicare cost reporting years). Both of these
categories of hospitals are afforded this special payment protection in
order to maintain access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, cancer
hospitals, and RNHCIs continue to be paid solely under a reasonable
cost-based system subject to a rate-of-increase ceiling on inpatient
operating costs per discharge.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.

[[Page 50050]]

3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) effective for cost
reporting periods beginning on or after October 1, 2002. The LTCH PPS
was established under the authority of sections 123(a) and (c) of
Public Law 106-113 and section 307(b)(1) of Public Law 106-554 (as
codified under section 1886(m)(1) of the Act). During the 5-year
(optional) transition period, a LTCH's payment under the PPS was based
on an increasing proportion of the LTCH Federal rate with a
corresponding decreasing proportion based on reasonable cost
principles. Effective for cost reporting periods beginning on or after
October 1, 2006, all LTCHs are paid 100 percent of the Federal rate.
The existing regulations governing payment under the LTCH PPS are
located in 42 CFR part 412, subpart O. Beginning October 1, 2009, we
issue the annual updates to the LTCH PPS in the same documents that
update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments are
made to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413.

B. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148) and the Health Care and Education Reconciliation Act of
2010 (Pub. L. 111-152)

On March 23, 2010, the Patient Protection and Affordable Care Act
(PPACA), Public Law 111-148 was enacted. Following the enactment of
Public Law 111-148, the Health Care and Education Reconciliation Act of
2010, Public Law 111-152 (enacted on March 30, 2010), amended certain
provisions of Public Law 111-148 and certain sections of the Social
Security Act, and, in certain instances, included certain
``freestanding'' provisions that affect implementation of the IPPS and
the LTCH PPS. (Pub. L. 111-148 and Pub. L. 111-152 are collectively
referred to as the ``Affordable Care Act.'') A number of the provisions
of the Affordable Care Act affected the updates to the IPPS and the
LTCH PPS and the providers and suppliers that were addressed in the FY
2011 IPPS/LTCH PPS proposed rule that appeared in the Federal Register
on May 4, 2010 (75 FR 23852). However, due to the timing of the passage
of the legislation, we were unable to address those provisions in the
May 4, 2010 proposed rule. Therefore, on June 2, 2010, we issued in the
Federal Register two additional documents:
1. A supplemental proposed rule (75 FR 30918) to the FY 2010 IPPS/
LTCH PPS proposed rule published on May 4, 2010, that proposed to
implement certain provisions of the Affordable Care Act. These proposed
provisions are outlined in section I.D.2. of this final rule, and are
being finalized in the appropriate subject-matter sections of this
final rule.
2. A notice (75 FR 31118) that contained the final wage indices,
hospital reclassifications, payment rates, impacts, and other related
tables, effective for the FY 2010 IPPS and the RY 2010 LTCH PPS, that
were required by or directly resulted from implementation of provisions
of the Affordable Care Act.

C. Provisions of the Preservation of Access To Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192)

On June 25, 2010, the Preservation of Access to Care for Medicare
Beneficiaries and Pension Relief Act of 2010 (Pub. L. 111-192) was
enacted. Section 102 of Public Law 111-192 amended section 1886(a)(4)
and (d)(7) of the Act affecting Medicare payments for preadmission
services furnished to outpatients who are later admitted as inpatients
during a specified payment window. We are implementing this legislative
provision as discussed under section IV.M. of the preamble of this
document through an interim final rule with comment period.

D. Issuance of Two Notices of Proposed Rulemaking for FY 2011

1. Issuance of May 4, 2010 IPPS/LTCH PPS Proposed Rule
On May 4, 2010, we issued in the Federal Register the FY 2011 IPPS/
LLTCH PPS proposed rule (75 FR 23852). In that proposed rule, we set
forth proposed changes to the Medicare IPPS for operating costs and for
capital-related costs of acute care hospitals in FY 2011. We also set
forth proposed changes relating to payments for IME costs and payments
to certain hospitals and units that continue to be excluded from the
IPPS and paid on a reasonable cost basis.
In addition, in that proposed rule, we set forth proposed changes
to the payment rates, factors, and other payment rate policies under
the LTCH PPS for FY 2011. We note that because the annual update of
payment rates for the LTCH PPS now takes place on the same schedule and
in the same publication as for the IPPS, for the sake of clarity, in
section VII.D. of the proposed rule, we proposed to use ``fiscal year
(FY)'' instead of ``rate year (RY)'' when referring to updates and
changes to the LTCH PPS to be effective October 1, 2010. Therefore,
throughout the proposed rule (and this final rule), we use the phrase
``fiscal year (FY)'' in referring to updates and changes to the LTCH
PPS.
Below is a summary of the major changes that we proposed to make in
the May 4, 2010 proposed rule:
a. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the proposed rule, we included--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment for FY 2011 resulting from implementation of the MS-DRG
system.
A discussion of the Research Triangle International, Inc.
(RTI) and RAND Corporation reports and recommendations relating to
charge compression.
Proposed recalibrations of the MS-DRG relative weights.
We also presented a listing and discussion of hospital-acquired

[[Page 50051]]

conditions (HACs), including infections, that are subject to the
statutorily required quality adjustment in MS-DRG payments for FY 2011.
We discussed the FY 2011 status of two new technologies approved
for add-on payments for FY 2010 and presented our evaluation and
analysis of the FY 2011 applicants for add-on payments for high-cost
new medical services and technologies (including public input, as
directed by Pub. L. 108-173, obtained in a town hall meeting).
b. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to the proposed rule, we proposed
revisions to the wage index for acute care hospitals and the annual
update of the wage data. Specific issues addressed included the
following:
Budget neutrality for the rural floor and imputed floor.
Changes to titles and principal cities of CBSA
designations.
The proposed FY 2011 wage index update using wage data
from cost reporting periods beginning in FY 2007.
Analysis and implementation of the proposed FY 2011
occupational mix adjustment to the wage index for acute care hospitals,
including discussion of the 2010 occupational mix survey.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2011 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2011 hospital wage index.
Determination of the labor-related share for the proposed
FY 2011 wage index.
c. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section IV. of the preamble of the proposed rule, we discussed a
number of the provisions of the regulations in 42 CFR parts 412, 413,
and 489, including the following:
The reporting of hospital quality data as a condition for
receiving the full annual payment update increase.
Payment for transfer cases from Medicare participating
hospitals to nonparticipating hospitals and CAHs.
A change to the definition criteria for MDHs.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
The statutorily required IME adjustment factor for FY
2011.
The proposed policy change relating to the determination
of the SSI ratio of the Medicare fraction in the formula for
determining the payment adjustments for disproportionate share
hospitals.
A proposed clarification of ``approved medical residency
programs'' policies relating to payment for IME and direct GME and our
proposal to accept the electronic submission of Medicare GME
affiliation agreements.
Proposed policy change for payments for services furnished
by certified registered nurse anesthetists (CRNAs) in rural hospitals
and CAHs.
Discussion of the status of the Rural Community Hospital
Demonstration Program.
d. Proposed FY 2011 Policy Governing the IPPS for Capital-Related Costs
In section V. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2011 and the proposed MS-DRG
documentation and coding adjustment for FY 2011.
e. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VI. of the preamble of the proposed rule, we discussed--
Proposed changes to payments to excluded hospitals.
Proposed changes relating to the election by CAHs of the
optional method of payment for outpatient services
Proposed clarification of the policies on costs of
provider taxes as allowable costs for CAHs.
f. Proposed Changes to the LTCH PPS
In section VII. of the preamble of the proposed rule, we set forth
proposed changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS for FY 2011, including the annual update of
the MS-LTC-DRG classifications and relative weights for use under the
LTCH PPS for FY 2011 and the proposed documentation and coding
adjustment under the LTCH PPS for FY 2011.
g. Proposed Changes Relating to Effective Date of Provider Agreements
and Supplier Approvals
In section VIII. of the preamble of the proposed rule, we set forth
our proposed change in the provisions for determining the effective
date of provider agreements and supplier approvals and to make changes
to assure that accredited and nonaccredited facilities are treated in
the same manner in determining this effective date.
h. Proposed Changes to Medicare Conditions of Participation Affecting
Hospital Rehabilitation Services and Respiratory Care Services
In section IX. of the preamble of the proposed rule, we proposed
changes to the Medicare conditions of participation regarding which
practitioners are allowed to order rehabilitation and respiratory care
services in the hospital setting.
i. Proposed Changes to the Accreditation Requirements for Medicaid
Providers of Inpatient Psychiatric Services for Individuals Under Age
21
In section X. of the preamble of the proposed rule, we proposed to
remove the requirement for accreditation by The Joint Commission of
psychiatric hospitals and hospitals with inpatient psychiatric
programs. Hospitals with inpatient psychiatric programs would be
afforded the flexibility in obtaining accreditation by a national
accrediting organization whose hospital accrediting program has been
approved by CMS. (We note that we proposed a similar change for
psychiatric rehabilitation treatment facilities, which we are not
adopting in this final rule.)
j. Determining Proposed Prospective Payment Operating and Capital Rates
and Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2011
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We also proposed to establish the threshold
amounts for outlier cases. In addition, we addressed the proposed
update factors for determining the rate-of-increase limits for cost
reporting periods beginning in FY 2011 for certain hospitals excluded
from the IPPS.
k. Determining Proposed Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2011
prospective standard Federal rate. We also proposed to establish the
proposed adjustments for wage levels, the labor-related share, the
cost-of-living adjustment, and high-cost outliers, including the fixed-
loss

[[Page 50052]]

amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
l. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected acute care
hospitals and LTCHs.
m. Recommendation of Update Factors for Operating Cost Rates of Payment
for Hospital Inpatient Services
In Appendix B of the proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of
the appropriate percentage changes for FY 2011 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
n. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 1 of each year, in which MedPAC
reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2010 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs under the IPPS, for hospitals
and distinct part hospital units excluded from the IPPS. We addressed
these recommendations in Appendix B of the proposed rule. For further
information relating specifically to the MedPAC March 2008 report or to
obtain a copy of the report, contact MedPAC at (202) 220-3700 or visit
MedPAC's Web site at: http://www.medpac.gov.
2. Issuance of June 2, 2010 Proposed Rule
A number of the provisions of the Affordable Care Act affected the
IPPS and the LTCH PPS and the applicable providers and suppliers. Due
to the timing of the passage of the legislation, we were unable to
address these provisions in the FY 2011 IPPS/LTCH PPS proposed rule
that appeared in the May 4, 2010 Federal Register (75 FR 23852).
Therefore, various proposed policies and payment rates in that proposed
rule did not reflect the new legislation. We noted in that proposed
rule that we would issue separate Federal Register documents addressing
the provisions of the Affordable Care Act that affected our proposed
policies and payment rates for FY 2010 and FY 2011 under the IPPS and
for RY 2010 and FY 2011 under the LTCH PPS.
On June 2, 2010, we issued a supplemental proposed rule in the
Federal Register (75 FR 30918) that addressed the following FY 2011
policies and provisions of the Affordable Care Act:
Hospital wage index improvement related to geographic
reclassification criteria for FY 2011 (section 3137 of Pub. L. 111-
148).
National budget neutrality in the calculation of the rural
floor for hospital wage index (section 3141 of Pub. L. 111-148).
Protections for frontier States (section 10324 of Pub. L.
111-148).
Revisions of certain market basket updates (sections 3401
and 10319 of Pub. L. 111-148 and section 1105 of Pub. L. 111-152).
Temporary improvements to the low-volume hospital
adjustment (sections 3125 and 10314 of Pub. L. 111-148).
Extension of Medicare-dependent hospitals (MDHs) (section
3124 of Pub. L. 111-148).
Additional payments in FYs 2011 and 2012 for qualifying
hospitals in the lowest quartile of per capital Medicare spending
(section 1109 of Pub. L. 111-152).
Extension of the rural community hospital demonstration
(sections 3123 and 10313 of Pub. L. 111-148).
Technical correction related to CAH services (section 3128
of Pub. L. 111-148).
Extension of certain payment rules for LTCH services and
of moratorium on the establishment of certain hospitals and facilities
and increases in beds in existing LTCHs or LTCH satellite facilities
(sections 3106 and 10312 of Pub. L. 111-148).
We also noted that we planned to issue further instructions
implementing the provisions of the Affordable Care Act that affect the
policies and payment rates for FY 2010 under the IPPS and for RY 2010
under the LTCH PPS in a separate document published elsewhere in June
2, 2010 Federal Register.
In this final rule, we are finalizing both the provisions of the
May 4, 2010 proposed rule and the June 2, 2010 supplemental proposed
rule in one document.

E. Public Comments Received on the FY 2011 IPPS/LTCH PPS Proposed Rule
and Supplemental Proposed Rule

We received over 700 public comments on the May 4, 2010 FY 2011
IPPS/LTCH PPS proposed rule and approximately 33 public comments on the
June 2, 2010 FY 2011 IPPS/LTCH PPS supplemental proposed rule. One
comment addressed the comment period for the supplemental proposed
rule.
Comment: One commenter objected to our decision to shorten the
usual 60-day comment period for the supplemental proposed rule. The
commenter did not believe that CMS had the authority to shorten the
comment period and stated that the period allowed for comment on the
policies in the supplemental proposed rule was insufficient.
Response: We disagree with the commenter that the waiver of the
full 60-day comment period in the supplemental proposed rule was
insufficient. As we explained in the supplemental proposed rule, due to
the timing of the enactment of the Affordable Care Act, the policies
and payment rates outlined in the FY 2011 IPPS/LTCH proposed rule
published in the Federal Register on May 4, 2010, did not reflect the
changes made by that law to the IPPS and LTCH PPS. The supplemental
proposed rule addressed the changes that affect our policies and
payment rates for FY 2011 under the IPPS and the LTCH PPS. We refer
readers to the waiver of 60-day comment period discussion in the
supplemental proposed rule (75 FR 30971), and we welcome the
opportunity to provide additional details regarding our decision to
waive the 60-day comment period.
Our decision to shorten the customary 60-day comment period is
consistent with past agency practice (see, for example, 74 FR 26603
(June 3, 2009), 74 FR 43952 (August 27, 2009), and 68 FR 34772 (June
10, 2003)), as well as the language of section 1871(b)(2)(C) of the
Act. We read section 1871(b)(2)(C) of the Act to permit a waiver of any
or all of the procedures set forth in section 1871(b)(1) of the Act,
including the 60-day comment period, if good cause exists.
We believe the commenter's description of the period allowed for
comment overstated the inconvenience that the shortened comment period
may have created. We believe that the detailed and thoughtful comments
that we received in response to the contents of the supplemental
proposed rule support our position that there was time for meaningful
public participation in

[[Page 50053]]

the development of these policies. In addition, as the commenter
admits, parties had 28 days from the posting of the supplemental
proposed rule to submit comments to CMS, and a Listserv posting alerted
outside parties to the posting of agency regulations.
The FY 2011 IPPS/LTCH PSS final rule must be effective as of
October 1, 2010, the start of FY 2011. Given this statutory deadline,
we believe it was necessary to shorten the time period, as permitted by
section 1871(b)(2)(C) of the Act. As we explained in the waiver of 60-
day comment period discussion in the supplemental proposed rule, unless
we shortened the comment period, there would have been no opportunity
for the agency to appropriately consider the comments we received and
resolve whether any of the proposed policies would be modified in light
of comments received. The comment period set forth in the supplemental
proposed rule provided the agency with the minimum time needed for a
careful consideration of the public comments on both the FY 2011 IPPS/
LTCH PPS final rules. Moreover, a full 60-day comment period from the
date of publication in the Federal Register, which is what the comment
period would be if the commenter's reading of section 1871(b)(2)(C) of
the Act were adopted by the agency, would have extended into August,
which would have been impracticable, given the required effective date
of October 1, 2010.
The remaining public comments we received on the two proposed rules
addressed issues on multiple topics in both of the proposed rules. We
present a summary of the public comments and our responses to them in
the applicable subject-matter sections of this final rule.

F. Finalization of the Interim Final Rule With Comment Period That
Implemented Certain Provisions of the ARRA Relating to Payments to
LTCHs and LTCH Satellite Facilities

Section 4302 of the American Recovery and Reinvestment Act of 2009
(ARRA, Pub. L. 111-5) included several amendments to section 114 of
Public Law 110-173 (MMSEA) relating to payments to LTCHs and LTCH
satellite facilities that were discussed under section X. of the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43976 through 43990).
These amendments are effective as if they were enacted as part of
section 114 of Public Law 110-173 (MMSEA). We issued instructions to
the fiscal intermediaries and Medicare administrative contractors
(MACs) to interpret these amendments (Change Request 6444). In section
XI. of the FY 2010/RY 2010 LTCH PPS final rule (74 FR 43990), we
implemented the provisions of section 4302 of Public Law 111-5 through
an interim final rule with comment period. Sections 3106 and 10312 of
the Affordable Care Act added an additional 2 years to the 3-year
implementation delay established by section 114(c) and (d)(1) of MMSEA.
These provisions of the Affordable Care Act applicable to the LTCH PPS
were discussed in the June 2, 2010 supplemental proposed rule (75 FR
30967).
In section VII.E. of the preamble of this final rule, we respond to
the public comment that we received in a timely manner on this interim
final rule with comment period and finalize the interim final rule.

II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights

A. Background

Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as DRGs) for inpatient
discharges and adjust payments under the IPPS based on appropriate
weighting factors assigned to each DRG. Therefore, under the IPPS,
Medicare pays for inpatient hospital services on a rate per discharge
basis that varies according to the DRG to which a beneficiary's stay is
assigned. The formula used to calculate payment for a specific case
multiplies an individual hospital's payment rate per case by the weight
of the DRG to which the case is assigned. Each DRG weight represents
the average resources required to care for cases in that particular
DRG, relative to the average resources used to treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.

B. MS-DRG Reclassifications

1. General
As discussed in the preamble to the FY 2008 IPPS final rule with
comment period (72 FR 47138), we focused our efforts in FY 2008 on
making significant reforms to the IPPS consistent with the
recommendations made by MedPAC in its ``Report to the Congress,
Physician-Owned Specialty Hospitals'' in March 2005. MedPAC recommended
that the Secretary refine the entire DRG system by taking severity of
illness into account and applying hospital-specific relative value
(HSRV) weights to DRGs.\1\ We began this reform process by adopting
cost-based weights over a 3-year transition period beginning in FY 2007
and making interim changes to the DRG system for FY 2007 by creating 20
new CMS DRGs and modifying 32 other DRGs across 13 different clinical
areas involving nearly 1.7 million cases. As described in more detail
below, these refinements were intermediate steps towards comprehensive
reform of both the relative weights and the DRG system as we undertook
further study. For FY 2008, we adopted 745 new Medicare Severity DRGs
(MS-DRGs) to replace the CMS DRGs. We refer readers to section II.D. of
the FY 2008 IPPS final rule with comment period for a full detailed
discussion of how the MS-DRG system, based on severity levels of
illness, was established (72 FR 47141).
---------------------------------------------------------------------------

\1\ Medicare Payment Advisory Commission: Report to the
Congress, Physician-Owned Specialty Hospitals, March 2005, page
viii.
---------------------------------------------------------------------------

Currently, cases are classified into MS-DRGs for payment under the
IPPS based on the following information reported by the hospital: the
principal diagnosis, up to eight additional diagnoses, and up to six
procedures performed during the stay. (We refer readers to section
II.G.11.c. of this final rule for a discussion of our efforts to
increase our internal systems capacity to process diagnosis and
procedures on hospital claims to 25 diagnosis codes and 25 procedure
codes prior to the use of the International Classification of Diseases,
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding
and the International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10 PCS) for inpatient hospital procedure
coding, effective October 1, 2013.) In a small number of MS-DRGs,
classification is also based on the age, sex, and discharge status of
the patient. The diagnosis and procedure information is reported by the
hospital using codes from the International Classification of Diseases,
Ninth Revision, Clinical Modification (ICD-9-CM) prior to October 1,
2013. We refer readers to section II.G.11.b. of this final rule for a
reference to the replacement of ICD-9-CM, Volumes 1 and 2, including
the Official ICD-9-CM Guidelines for Coding and Reporting, Volume 3,
with the ICD-10-CM and ICD-10-PCS, including the Official ICD-10-CM and
ICD-10-PCS

[[Page 50054]]

Guidelines for Coding and Reporting, effective October 1, 2013 (FY
2014).
The process of developing the MS-DRGs was begun by dividing all
possible principal diagnoses into mutually exclusive principal
diagnosis areas, referred to as Major Diagnostic Categories (MDCs). The
MDCs were formulated by physician panels to ensure that the DRGs would
be clinically coherent. The diagnoses in each MDC correspond to a
single organ system or etiology and, in general, are associated with a
particular medical specialty. Thus, in order to maintain the
requirement of clinical coherence, no final MS-DRG could contain
patients in different MDCs. For example, MDC 6 is Diseases and
Disorders of the Digestive System. This approach is used because
clinical care is generally organized in accordance with the organ
system affected. However, some MDCs are not constructed on this basis
because they involve multiple organ systems (for example, MDC 22
(Burns)). For FY 2010, cases were assigned to one of 746 MS-DRGs in 25
MDCs. For FY 2011, cases will be assigned to one of 747 MS-DRGs in 25
MDCs. The table below lists the 25 MDCs.

Major Diagnostic Categories (MDCs)
------------------------------------------------------------------------

------------------------------------------------------------------------
1......................................... Diseases and Disorders of
the Nervous System.
2......................................... Diseases and Disorders of
the Eye.
3......................................... Diseases and Disorders of
the Ear, Nose, Mouth, and
Throat.
4......................................... Diseases and Disorders of
the Respiratory System.
5......................................... Diseases and Disorders of
the Circulatory System.
6......................................... Diseases and Disorders of
the Digestive System.
7......................................... Diseases and Disorders of
the Hepatobiliary System
and Pancreas.
8......................................... Diseases and Disorders of
the Musculoskeletal System
and Connective Tissue.
9......................................... Diseases and Disorders of
the Skin, Subcutaneous
Tissue and Breast.
10........................................ Endocrine, Nutritional and
Metabolic Diseases and
Disorders.
11........................................ Diseases and Disorders of
the Kidney and Urinary
Tract.
12........................................ Diseases and Disorders of
the Male Reproductive
System.
13........................................ Diseases and Disorders of
the Female Reproductive
System.
14........................................ Pregnancy, Childbirth, and
the Puerperium.
15........................................ Newborns and Other Neonates
with Conditions Originating
in the Perinatal Period.
16........................................ Diseases and Disorders of
the Blood and Blood Forming
Organs and Immunological
Disorders.
17........................................ Myeloproliferative Diseases
and Disorders and Poorly
Differentiated Neoplasms.
18........................................ Infectious and Parasitic
Diseases (Systemic or
Unspecified Sites).
19........................................ Mental Diseases and
Disorders.
20........................................ Alcohol/Drug Use and Alcohol/
Drug Induced Organic Mental
Disorders.
21........................................ Injuries, Poisonings, and
Toxic Effects of Drugs.
22........................................ Burns.
23........................................ Factors Influencing Health
Status and Other Contacts
with Health Services.
24........................................ Multiple Significant Trauma.
25........................................ Human Immunodeficiency Virus
Infections.
------------------------------------------------------------------------

In general, cases are assigned to an MDC based on the patient's
principal diagnosis before assignment to an MS-DRG. However, under the
most recent version of the Medicare GROUPER (Version 27.0), there are
13 MS-DRGs to which cases are directly assigned on the basis of ICD-9-
CM procedure codes. These MS-DRGs are for heart transplant or implant
of heart assist systems; liver and/or intestinal transplants; bone
marrow transplants; lung transplants; simultaneous pancreas/kidney
transplants; pancreas transplants; and tracheostomies. Cases are
assigned to these MS-DRGs before they are classified to an MDC. The
table below lists the 13 current pre-MDCs.

Pre-Major Diagnostic Categories (Pre-MDCs)
------------------------------------------------------------------------

------------------------------------------------------------------------
MS-DRG 001.................... Heart Transplant or Implant of Heart
Assist System with MCC.
MS-DRG 002.................... Heart Transplant or Implant of Heart
Assist System without MCC.
MS-DRG 003.................... ECMO or Tracheostomy with Mechanical
Ventilation 96+ Hours or Principal
Diagnosis Except for Face, Mouth, and
Neck Diagnosis with Major O.R.
MS-DRG 004.................... Tracheostomy with Mechanical Ventilation
96+ Hours or Principal Diagnosis Except
for Face, Mouth, and Neck Diagnosis
with Major O.R.
MS-DRG 005.................... Liver Transplant with MCC or Intestinal
Transplant.
MS-DRG 006.................... Liver Transplant without MCC.
MS-DRG 007.................... Lung Transplant.
MS-DRG 008.................... Simultaneous Pancreas/Kidney Transplant.
MS-DRG 009.................... Bone Marrow Transplant.
MS-DRG 010.................... Pancreas Transplant.
MS-DRG 011.................... Tracheostomy for Face, Mouth, and Neck
Diagnoses with MCC.
MS-DRG 012.................... Tracheostomy for Face, Mouth, and Neck
Diagnoses with CC.
MS-DRG 013.................... Tracheostomy for Face, Mouth, and Neck
Diagnoses without CC/MCC.
------------------------------------------------------------------------

Once the MDCs were defined, each MDC was evaluated to identify
those additional patient characteristics that would have a consistent
effect on hospital resource consumption. Because the presence of a
surgical procedure that required the use of the operating room would
have a significant effect on the type of hospital resources used by a
patient, most MDCs were initially divided into surgical DRGs and
medical DRGs. Surgical DRGs are based on a hierarchy that orders
operating room (O.R.) procedures or groups of O.R. procedures by
resource intensity. Medical DRGs generally are differentiated on the
basis of diagnosis and age (0 to 17 years of age or greater than 17
years of age). Some surgical and medical DRGs are further
differentiated based on the presence or absence of a complication or
comorbidity (CC) or a major complication or comorbidity (MCC).
Generally, nonsurgical procedures and minor surgical procedures
that are not usually performed in an operating room are not treated as
O.R. procedures. However, there are a few non-O.R. procedures that do
affect MS-DRG assignment for certain principal diagnoses. An example is
extracorporeal shock wave lithotripsy for patients with

[[Page 50055]]

a principal diagnosis of urinary stones. Lithotripsy procedures are not
routinely performed in an operating room. Therefore, lithotripsy codes
are not classified as O.R. procedures. However, our clinical advisors
believe that patients with urinary stones who undergo extracorporeal
shock wave lithotripsy should be considered similar to other patients
who undergo O.R. procedures. Therefore, we treat this group of patients
similar to patients undergoing O.R. procedures.
Once the medical and surgical classes for an MDC were formed, each
diagnosis class was evaluated to determine if complications or
comorbidities would consistently affect hospital resource consumption.
Each diagnosis was categorized into one of three severity levels. These
three levels include a major complication or comorbidity (MCC), a
complication or comorbidity (CC), or a non-CC. Physician panels
classified each diagnosis code based on a highly iterative process
involving a combination of statistical results from test data as well
as clinical judgment. As stated earlier, we refer readers to section
II.D. of the FY 2008 IPPS final rule with comment period for a full
detailed discussion of how the MS-DRG system was established based on
severity levels of illness (72 FR 47141).
A patient's diagnosis, procedure, discharge status, and demographic
information is entered into the Medicare claims processing systems and
subjected to a series of automated screens called the Medicare Code
Editor (MCE). The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
After patient information is screened through the MCE and further
development of the claim is conducted, the cases are classified into
the appropriate MS-DRG by the Medicare GROUPER software program. The
GROUPER program was developed as a means of classifying each case into
an MS-DRG on the basis of the diagnosis and procedure codes and, for a
limited number of MS-DRGs, demographic information (that is, sex, age,
and discharge status).
After cases are screened through the MCE and assigned to an MS-DRG
by the GROUPER, the PRICER software calculates a base MS-DRG payment.
The PRICER calculates the payment for each case covered by the IPPS
based on the MS-DRG relative weight and additional factors associated
with each hospital, such as IME and DSH payment adjustments. These
additional factors increase the payment amount to hospitals above the
base MS-DRG payment.
The records for all Medicare hospital inpatient discharges are
maintained in the Medicare Provider Analysis and Review (MedPAR) file.
The data in this file are used to evaluate possible MS-DRG
classification changes and to recalibrate the MS-DRG weights. However,
in the FY 2000 IPPS final rule (64 FR 41499 and 41500), we discussed a
process for considering non-MedPAR data in the recalibration process.
We stated that for use of non-MedPAR data to be feasible for purposes
of DRG recalibration and reclassification, the data must, among other
things: (1) Be independently verified; (2) reflect a complete set of
cases (or a representative sample of cases); and (3) enable us to
calculate appropriate DRG relative weights and ensure that cases are
classified to the ``correct'' DRG, and to one DRG only, in the
recalibration process. Further, in order for us to consider using
particular non-MedPAR data, we must have sufficient time to evaluate
and test the data. The time necessary to do so depends upon the nature
and quality of the non-MedPAR data submitted. Generally, however, a
significant sample of the non-MedPAR data should be submitted by mid-
October for consideration in conjunction with the next year's proposed
rule. This date allows us time to test the data and make a preliminary
assessment as to the feasibility of using the data. Subsequently, a
complete non-MedPAR database should be submitted by early December for
consideration in conjunction with the next year's proposed rule.
As we indicated above, for FY 2008, we made significant
improvements in the DRG system to recognize severity of illness and
resource usage by adopting MS-DRGs that were reflected in the FY 2008
GROUPER, Version 25.0, and were effective for discharges occurring on
or after October 1, 2007. Our MS-DRG analysis for the FY 2011 proposed
rule was based on data from the September 2009 update of the FY 2009
MedPAR file, which contained hospital bills received through September
30, 2009, for discharges occurring through September 30, 2009. For this
FY 2011 final rule, our MS-DRG analysis is based on data from the March
2010 update of the FY 2009 MedPAR file, which contained hospital bills
received through March 31, 2010, for discharges occurring through
September 30, 2009.
2. Yearly Review for Making MS-DRG Changes
Many of the changes to the MS-DRG classifications we make annually
are the result of specific issues brought to our attention by
interested parties. We encourage individuals with comments about MS-DRG
classifications to submit these comments no later than early December
of each year so they can be carefully considered for possible inclusion
in the annual proposed rule and, if included, may be subjected to
public review and comment. Therefore, similar to the timetable for
interested parties to submit non-MedPAR data for consideration in the
MS-DRG recalibration process, comments about MS-DRG classification
issues should be submitted no later than early December in order to be
considered and possibly included in the next annual proposed rule
updating the IPPS.
The actual process of forming the MS-DRGs was, and will likely
continue to be, highly iterative, involving a combination of
statistical results from test data combined with clinical judgment. In
the FY 2008 IPPS final rule (72 FR 47140 through 47189), we described
in detail the process we used to develop the MS-DRGs that we adopted
for FY 2008. In addition, in deciding whether to make further
modification to the MS-DRGs for particular circumstances brought to our
attention, we considered whether the resource consumption and clinical
characteristics of the patients with a given set of conditions are
significantly different than the remaining patients in the MS-DRG. We
evaluated patient care costs using average charges and lengths of stay
as proxies for costs and relied on the judgment of our medical advisors
to decide whether patients are clinically distinct or similar to other
patients in the MS-DRG. In evaluating resource costs, we considered
both the absolute and percentage differences in average charges between
the cases we selected for review and the remainder of cases in the MS-
DRG. We also considered variation in charges within these groups; that
is, whether observed average differences were consistent across
patients or attributable to cases that were extreme in terms of charges
or length of stay, or both. Further, we considered the number of
patients who will have a given set of characteristics and generally
preferred not to create a new MS-DRG unless it would include a
substantial number of cases.

C. Adoption of the MS-DRGs in FY 2008

In the FY 2006, FY 2007, and FY 2008 IPPS final rules, we discussed
a number of recommendations made by MedPAC regarding revisions to the
DRG system used under the IPPS (70 FR 47473 through 47482; 71 FR 47881
through 47939; and 72 FR 47140 through 47189). As we noted in the FY
2006 IPPS final rule, we had insufficient time to

[[Page 50056]]

complete a thorough evaluation of these recommendations for full
implementation in FY 2006. However, we did adopt severity-weighted
cardiac DRGs in FY 2006 to address public comments on this issue and
the specific concerns of MedPAC regarding cardiac surgery DRGs. We also
indicated that we planned to further consider all of MedPAC's
recommendations and thoroughly analyze options and their impacts on the
various types of hospitals in the FY 2007 IPPS proposed rule.
For FY 2007, we began this process. In the FY 2007 IPPS proposed
rule, we proposed to adopt Consolidated Severity DRGs (CS DRGs) for FY
2008 (if not earlier). Based on public comments received on the FY 2007
IPPS proposed rule, we decided not to adopt the CS DRGs. In the FY 2007
IPPS final rule (71 FR 47906 through 47912), we discussed several
concerns raised by public commenters regarding the proposal to adopt CS
DRGs. We acknowledged the many public comments suggesting the logic of
Medicare's DRG system should continue to remain in the public domain as
it has since the inception of the PPS. We also acknowledged concerns
about the impact on hospitals and software vendors of moving to a
proprietary system. Several commenters suggested that CMS refine the
existing DRG classification system to preserve the many policy
decisions that were made over the last 20 years and were already
incorporated into the DRG system, such as complexity of services and
new device technologies. Consistent with the concerns expressed in the
public comments, this option had the advantage of using the existing
DRGs as a starting point (which was already familiar to the public) and
retained the benefit of many DRG decisions that were made in recent
years. We stated our belief that the suggested approach of
incorporating severity measures into the existing DRG system was a
viable option that would be evaluated.
Therefore, we decided to make interim changes to the existing DRGs
for FY 2007 by creating 20 new DRGs involving 13 different clinical
areas that would significantly improve the CMS DRG system's recognition
of severity of illness. We also modified 32 DRGs to better capture
differences in severity. The new and revised DRGs were selected from 40
existing CMS DRGs that contained 1,666,476 cases and represented a
number of body systems. In creating these 20 new DRGs, we deleted 8
existing DRGs and modified 32 existing DRGs. We indicated that these
interim steps for FY 2007 were being taken as a prelude to more
comprehensive changes to better account for severity in the DRG system
by FY 2008.
In the FY 2007 IPPS final rule (71 FR 47898), we indicated our
intent to pursue further DRG reform through two initiatives. First, we
announced that we were in the process of engaging a contractor to
assist us with evaluating alternative DRG systems that were raised as
potential alternatives to the CMS DRGs in the public comments. Second,
we indicated our intent to review over 13,000 ICD-9-CM diagnosis codes
as part of making further refinements to the current CMS DRGs to better
recognize severity of illness based on the work that CMS (then HCFA)
did in the mid-1990's in connection with adopting severity DRGs. We
describe below the progress we have made on these two initiatives and
our actions for FYs 2008, 2009, and 2010, and our proposed and final
actions for FY 2011 based on our continued analysis of reform of the
DRG system. We note that the adoption of the MS-DRGs to better
recognize severity of illness has implications for the outlier
threshold, the application of the postacute care transfer policy, the
measurement of real case-mix versus apparent case-mix, and the IME and
DSH payment adjustments. We discuss these implications for FY 2011 in
other sections of this preamble and in the Addendum to this final rule.
In the FY 2007 IPPS proposed rule, we discussed MedPAC's
recommendations to move to a cost-based HSRV weighting methodology
using HSRVs beginning with the FY 2007 IPPS proposed rule for
determining the DRG relative weights. Although we proposed to adopt the
HSRV weighting methodology for FY 2007, we decided not to adopt the
proposed methodology in the final rule after considering the public
comments we received on the proposal. Instead, in the FY 2007 IPPS
final rule, we adopted a cost-based weighting methodology without the
HSRV portion of the proposed methodology. The cost-based weights were
adopted over a 3-year transition period in \1/3\ increments between FY
2007 and FY 2009. In addition, in the FY 2007 IPPS final rule, we
indicated our intent to further study the HSRV-based methodology as
well as other issues brought to our attention related to the cost-based
weighting methodology adopted in the FY 2007 final rule. There was
significant concern in the public comments that our cost-based
weighting methodology does not adequately account for charge
compression--the practice of applying a higher percentage charge markup
over costs to lower cost items and services and a lower percentage
charge markup over costs to higher cost items and services. Further,
public commenters expressed concern about potential inconsistencies
between how costs and charges are reported on the Medicare cost reports
and charges on the Medicare claims. In the FY 2007 IPPS final rule, we
used costs and charges from the cost reports to determine departmental
level cost-to-charge ratios (CCRs) which we then applied to charges on
the Medicare claims to determine the cost-based weights. The commenters
were concerned about potential distortions to the cost-based weights
that would result from inconsistent reporting between the cost reports
and the Medicare claims. After publication of the FY 2007 IPPS final
rule, we entered into a contract with RTI International (RTI) to study
both charge compression and the extent, if any, to which our
methodology for calculating DRG relative weights is affected by
inconsistencies between how hospitals report costs and charges on the
cost reports and how hospitals report charges on individual claims.
Further, as part of its study of alternative DRG systems, the RAND
Corporation analyzed the HSRV cost-weighting methodology. We refer
readers to section II.E. of the preamble of this final rule for a
discussion of the issue of charge compression and the cost-weighting
methodology for FY 2011.
We believe that revisions to the DRG system to better recognize
severity of illness and changes to the relative weights based on costs
rather than charges are improving the accuracy of the payment rates in
the IPPS. We agree with MedPAC that these refinements should be
pursued. Although we continue to caution that any prospective payment
system based on grouping cases will always present some opportunities
for providers to specialize in cases they believe have higher margins,
we believe that the changes we have adopted and the continuing reforms
we are making in this final rule for FY 2011 will improve payment
accuracy and reduce financial incentives to create specialty hospitals.
We refer readers to section II.D. of the FY 2008 IPPS final rule
with comment period for a full discussion of how the MS-DRG system was
established based on severity levels of illness (72 FR 47141).

[[Page 50057]]

D. FY 2011 MS-DRG Documentation and Coding Adjustment, Including the
Applicability to the Hospital-Specific Rates and the Puerto Rico-
Specific Standardized Amount

1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
As we discussed earlier in this preamble, we adopted the MS-DRG
patient classification system for the IPPS, effective October 1, 2007,
to better recognize severity of illness in Medicare payment rates for
acute care hospitals. The adoption of the MS-DRG system resulted in the
expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008.
(Currently, there are 746 MS-DRGs for FY 2010; there will be 747 MS-
DRGs in FY 2011, with the deletion in this final rule of one MS-DRG and
the creation of two new MS-DRGs.) By increasing the number of MS-DRGs
and more fully taking into account patient severity of illness in
Medicare payment rates for acute care hospitals, MS-DRGs encourage
hospitals to improve their documentation and coding of patient
diagnoses. In the FY 2008 IPPS final rule with comment period (72 FR
47175 through 47186), we indicated that the adoption of the MS-DRGs had
the potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percent to
the national standardized amount. We provided for phasing in this -4.8
percent adjustment over 3 years. Specifically, we established
prospective documentation and coding adjustments of -1.2 percent for FY
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007, Public Law 110-90. Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008
and -0.9 percent for FY 2009. Section 7(a) of Public Law 110-90 did not
adjust the FY 2010 -1.8 percent documentation and coding adjustment
promulgated in the FY 2008 IPPS final rule with comment period. To
comply with section 7(a) of Public Law 110-90, we promulgated a final
rule on November 27, 2007 (72 FR 66886) that modified the IPPS
documentation and coding adjustment for FY 2008 to -0.6 percent, and
revised the FY 2008 payment rates, factors, and thresholds accordingly.
These revisions were effective on October 1, 2007.
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent instead of the -1.8
percent adjustment established in the FY 2008 IPPS final rule with
comment period. As discussed in the FY 2009 IPPS final rule (73 FR
48447) and required by statute, we applied a documentation and coding
adjustment of -0.9 percent to the FY 2009 IPPS national standardized
amount. The documentation and coding adjustments established in the FY
2008 IPPS final rule with comment period, as amended by Public Law 110-
90, are cumulative. As a result, the -0.9 percent documentation and
coding adjustment for FY 2009 was in addition to the -0.6 percent
adjustment for FY 2008, yielding a combined effect of -1.5 percent.
2. Prospective Adjustment to the Average Standardized Amounts Required
by Section 7(b)(1)(A) of Public Law 110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that, if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual aggregate IPPS payments are the same as the payments
that otherwise would have been made had the prospective adjustments for
documentation and coding applied in FY 2008 and FY 2009 reflected the
change that occurred in those years.
3. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Public Law 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay) spending in excess of (or less than) spending that would
have occurred had the prospective adjustments for changes in
documentation and coding applied in FY 2008 and FY 2009 precisely
matched the changes that occurred in those years. Public Law 110-90
requires that the Secretary make these recoupment or repayment
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
4. Retrospective Evaluation of FY 2008 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we indicated in the FY 2009 IPPS final rule (73 FR 48450) that
we planned a thorough retrospective evaluation of our claims data. We
stated that the results of this evaluation would be used by our
actuaries to determine any necessary payment adjustments to the
standardized amounts under section 1886(d) of the Act to ensure the
budget neutrality of the MS-DRGs implementation for FY 2008 and FY
2009, as required by law. In the FY 2009 IPPS proposed rule (73 FR
23541 through 23542), we described our preliminary plan for a
retrospective analysis of inpatient hospital claims data and invited
public input on our proposed methodology.

[[Page 50058]]

In that proposed rule, we indicated that we intended to measure and
corroborate the extent of the overall national average changes in case-
mix for FY 2008 and FY 2009. We expected that the two largest parts of
this overall national average change would be attributable to
underlying changes in actual patient severity of illness and to
documentation and coding improvements under the MS-DRG system. In order
to separate the two effects, we planned to isolate the effect of shifts
in cases among base DRGs from the effect of shifts in the types of
cases within-base DRGs.
The MS-DRGs divide the base DRGs into three severity levels (with
MCC, with CC, and without CC); the previously used CMS DRGs had only
two severity levels (with CC and without CC). Under the CMS DRG system,
the majority of hospital discharges had a secondary diagnosis which was
on the CC list, which led to the higher severity level. The MS-DRGs
significantly changed the code lists of what was classified as an MCC
or a CC. Many codes that were previously classified as a CC are no
longer included on the MS-DRG CC list because the data and clinical
review showed these conditions did not lead to a significant increase
in resource use. The addition of a new level of high severity
conditions, the MCC list, also provided a new incentive to code more
precisely in order to increase the severity level. We anticipated that
hospitals would examine the MS-DRG MCC and CC code lists and then work
with physicians and coders on documentation and coding practices so
that coders could appropriately assign codes from the highest possible
severity level. We note that there have been numerous seminars and
training sessions on this particular coding issue. The topic of
improving documentation practices in order to code conditions on the
MCC list was also discussed extensively by participants at the March
11-12, 2009 ICD-9-CM Coordination and Maintenance Committee meeting.
Participants discussed their hospitals' efforts to encourage physicians
to provide more precise documentation so that coders could
appropriately assign codes that would lead to a higher severity level.
Because we expected most of the documentation and coding changes under
the MS-DRG system would occur in the secondary diagnoses, we believed
that the shifts among base DRGs were less likely to be the result of
the MS-DRG system and the shifts within-base DRGs were more likely to
be the result of the MS-DRG system. We also anticipated evaluating data
to identify the specific MS-DRGs and diagnoses that contributed
significantly to the documentation and coding payment effect and to
quantify their impact. This step entailed analysis of the secondary
diagnoses driving the shifts in severity within specific base DRGs.
In that same proposed rule, we also stated that, while we believed
that the data analysis plan described previously would produce an
appropriate estimate of the extent of case-mix changes resulting from
documentation and coding changes, we might decide, if feasible, to use
historical data from our Hospital Payment Monitoring Program (HPMP) to
corroborate the within-base DRG shift analysis. The HPMP is supported
by the Medicare Clinical Data Abstraction Center (CDAC).
In the FY 2009 IPPS proposed rule, we solicited public comments on
the analysis plans described above, as well as suggestions on other
possible approaches for performing a retrospective analysis to identify
the amount of case-mix changes that occurred in FY 2008 and FY 2009
that did not reflect real increases in patient severity of illness.
A few commenters, including MedPAC, expressed support for the
analytic approach described in the FY 2009 IPPS proposed rule. A number
of other commenters expressed concerns about certain aspects of the
approach and/or suggested alternate analyses or study designs. In
addition, one commenter recommended that any determination or
retrospective evaluation by the actuaries of the impact of the MS-DRGs
on case-mix be open to public scrutiny prior to the implementation of
the payment adjustments beginning in FY 2010.
We took these comments into consideration as we developed our
proposed analysis plan and in the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24092 through 24101) solicited public comment on
our methodology and analysis. For the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule, we performed a retrospective evaluation of the FY 2008
data for claims paid through December 2008. Based on this evaluation,
our actuaries determined that implementation of the MS-DRG system
resulted in a 2.5 percent change due to documentation and coding that
did not reflect real changes in case-mix for discharges occurring
during FY 2008.
In the analysis of data for that proposed rule, we found that the
within-base DRG increases were almost entirely responsible for the
case-mix change, supporting our conclusion that the 2.5 percent
estimate was an accurate reflection of the FY 2008 effect of changes in
documentation and coding under the MS-DRG system. In fact, almost every
base DRG that was split into different severity levels under the MS-DRG
system experienced increases in the within-base DRGs. We then further
analyzed the changes in the within-base DRGs to determine which MS-DRGs
had the highest contributions to this increase. The results of the
analysis for the proposed rule provided additional support for our
conclusion that the proposed 2.5 percent estimate accurately reflected
the FY 2008 increases in documentation and coding under the MS-DRG
system. While we attempted to use the CDAC data to distinguish real
increase in case-mix growth from documentation and coding in the
overall case-mix number, we found aberrant data and significant
variation across the FY 1999 through FY 2007 analysis period. It was
not possible to distinguish changes in documentation and coding from
changes in real case-mix in the CDAC data. Therefore, we concluded that
the CDAC data would not support analysis of real case-mix growth that
could be used in our retrospective evaluation of the FY 2008 claims
data.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768
through 43772), we responded to comments on our methodology for the
retrospective evaluation of FY 2008 claims data. Commenters raised
concerns that our estimate in the proposed rule did not fully consider
other potential causes of increased case-mix, such as patients
requiring less complex services receiving care in other settings and
healthier patients enrolling in Medicare Advantage plans in increasing
numbers. Other commenters indicated that factors such as the changes in
the CC/MCC definitions, limitations on the number of codes used by CMS
for payment and ratesetting, resequencing of secondary diagnoses, the
transition to the cost-based weights, less use of not otherwise
specified codes, and increases in real case-mix due to health care
reform efforts also resulted in an inaccurate documentation and coding
analysis. One commenter indicated that, of the overall case-mix
increase, 1.0 percent to 1.5 percent is real case-mix increase, while
1.0 percent to 1.5 percent is due to documentation and coding or other
increases.
In considering these comments concerning historical real case-mix,
in the FY 2010 final rule, we calculated overall increases in case-mix
for the period from FY 2000 to FY 2007 using

[[Page 50059]]

the cases from each year and the GROUPER and the relative weights
applicable for each year. The results ranged from -0.7 to +1.4 percent.
Overall case-mix growth is predominately comprised of three
factors: real case-mix growth; a documentation and coding effect; and a
measurement effect. Under the reasonable assumption that there has been
a relatively small measurement effect in those years, the assertion
that there is a historical pattern of steady annual increases of 1.2 to
1.3 percent in real case-mix implies that the documentation and coding
effect in many of the years in the FY 2000 to FY 2007 time period was
negative. For example, as discussed in that rule (74 FR 43769), we
estimated a recent measurement effect of +0.3 percent. There was an
overall case-mix growth of -0.2 percent in FY 2007. The overall case-
mix growth of -0.2 percent net of a measurement effect of +0.3 percent
results in growth of +0.1 percent. Had real case-mix growth been +1.2
percent in FY 2007, therefore, it would imply a negative documentation
and coding effect of approximately -1.1 percent. It is not obvious why
documentation and coding would have had such a large negative effect in
FY 2007, or in any other year where the overall case-mix change is
significantly less than the average annual trend claimed by the
commenters, calling into question the assertion that real case-mix
growth is a steady 1.2 to 1.3 percent per year.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43770
through 43771), we indicated that our estimate of the overall case-mix
growth for FY 2008 based on more recent data than the data used in the
FY 2010 proposed rule was 2.0 percent, still less than our actuaries'
estimate of a 2.5 percent documentation and coding increase. With
respect to the concerns raised by commenters about our finding of
negative real case-mix growth in FY 2008, a finding of negative real
case-mix growth is consistent with the fact that, in some years,
overall case-mix growth has been negative.
5. Retrospective Analysis of FY 2009 Claims Data
We performed the same analysis for FY 2009 claims data using the
same methodology as we did for FY 2008 claims in the FY 2010 final
rule. We note that in the FY 2011 IPPS/LTCH PPS proposed rule, we
performed this analysis using FY 2009 claims paid through December
2009. In this FY 2011 IPPS/LTCH PPS final rule, we have updated the
analysis with FY 2009 claims paid through March 2010, as we discussed
in the proposed rule. We note that, for non-Puerto Rico IPPS hospitals,
the estimates are unchanged from those in the proposed rule.
We first divided the case-mix index (CMI) obtained by grouping the
FY 2009 claims data through the FY 2009 GROUPER (Version 26.0) by the
CMI obtained by grouping these same FY 2009 claims through the FY 2007
GROUPER (Version 24.0). This resulted in a value of 1.056. Because
these cases are the same FY 2009 cases grouped using Versions 24.0 and
26.0 of the GROUPER, we attribute this increase primarily to two
factors: (1) The effect of changes in documentation and coding under
the MS-DRG system; and (2) the measurement effect from the calibration
of the GROUPER. We estimated the measurement effect from the
calibration of the GROUPER by dividing the CMI obtained by grouping
cases in the FY 2007 claims data through the FY 2009 GROUPER by the CMI
obtained by grouping cases in these same claims through the FY 2007
GROUPER. This resulted in a value of 1.0019. In order to isolate the
documentation and coding effect, we then divided the combined effect of
the changes in documentation and coding and measurement (1.056) by the
measurement effect (1.0019) to yield 1.054. Therefore, our estimate of
the documentation and coding increase that did not reflect real changes
in case-mix for discharges was 5.4 percent.
In parallel to our analysis in the proposed rule, we then sought to
corroborate this 5.4 percent estimate by examining the increases in the
within-base DRGs as compared to the increases in the across base DRGs
as described earlier in our analysis plan. In other words, we looked
for improvements in code selection that would lead to a secondary
diagnosis increasing the severity level to either a CC or an MCC level.
We found that the within-base DRG increases were almost entirely
responsible for the case mix change, supporting our conclusion that the
5.4 percent estimate was an accurate reflection of the FY 2009 effect
of changes in documentation and coding under the MS-DRG system. We then
further analyzed the changes in the within-base DRGs to determine which
MS-DRGs had the highest contributions to this increase. The results of
the analysis for the proposed rule provided additional support for our
conclusion that the proposed 5.4 percent estimate accurately reflected
the FY 2009 increases in documentation and coding under the MS-DRG
system.

[[Page 50060]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.000

As reflected in the above chart, for short-term acute care
hospitals, SCHs, and MDHs, there is approximately an 8 percentage point
increase in the discharge severity with MCCs from 20 percent to 28
percent, and a corresponding decrease of approximately 8 percentage
points in discharge severity without CC/MCC from 57 percent to 49
percent.
Consistent with the expectations of our medical coding experts
concerning areas with potential for documentation and coding
improvements, the top contributors were heart failure, chronic
obstructive pulmonary disease, and simple pneumonia and pleurisy. Heart
failure is a very common secondary diagnosis among Medicare hospital
admissions. The heart failure codes are assigned to all three severity
levels. Some codes are classified as non-CCs, while other codes are on
the CC and MCC lists. By changing physician documentation to more
precisely identify the type of heart failure, hospitals are able to
appropriately change the severity level of cases from the lowest level
(non-CC) to a higher severity level (CC or MCC) through coding. This
point was stressed repeatedly at the March 11-12, 2009 ICD-9-CM
Coordination and Maintenance Committee meeting as coders discussed
their work with physicians on this coding issue. Many of the
participants indicated that additional work was still needed with their
physicians in order to document conditions in the medical record more
precisely.
The results of this analysis provided additional support for our
conclusion that the proposed 5.4 percent estimate accurately reflected
the FY 2009 increases in documentation and coding under the MS-DRG
system.
As in prior years, the FY 2008 and FY 2009 MedPAR files are
available to the public to allow independent analysis of the FY 2008
and FY 2009 documentation and coding effect. Interested individuals may
still order these files through the Web site at: http://www.cms.hhs.gov/LimitedDataSets/ by clicking on MedPAR Limited Data Set
(LDS)-Hospital (National). This Web page describes the file and
provides directions and further detailed instructions for how to order.
Persons placing an order must send the following: a Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check for
$3,655 to:
Mailing address if using the U.S. Postal Service: Centers for
Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O.
Box 7520, Baltimore, MD 21207-0520.

Mailing address if using express mail: Centers for Medicare &
Medicaid Services, OFM/Division of Accounting--RDDC, 7500 Security
Boulevard, C3-07-11, Baltimore. MD 21244-1850.
6. Prospective Adjustment for FY 2010 and Subsequent Years Authorized
by Section 7(b)(1)(A) of Public Law 110-90 and Section 1886(d)(3)(vi)
of the Act
Based on our evaluation of FY 2008 Medicare claims data that were
most current at the time of the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule, the estimated 2.5 percent change in FY 2008 case-mix due to
changes in documentation and coding that did not reflect real changes
in case-mix for discharges occurring during FY 2008 exceeded the -0.6
percent prospective documentation and coding adjustment applied under
section 7(a) of Public Law 110-90 by 1.9 percentage points. Under
section 7(b)(1)(A) of Public Law 110-90, the Secretary is required to
make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the
Act to the average standardized amounts for subsequent fiscal years in
order to eliminate the full effect of the documentation and coding
changes on future payments. As we have consistently stated since the
initial implementation of the MS-DRG system, we do not believe it is
appropriate for expenditures to increase due to MS-DRG-related changes
in documentation and coding that do not reflect real changes in case-
mix.
We also estimated in the FY 2010 IPPS/RY 2010 LTCH PPS proposed and
final rules that the additional change in case-mix due to changes in
documentation and coding that do not reflect real changes in case-mix
for discharges occurring during FY 2009 was 2.3 percent, which would
exceed by

[[Page 50061]]

1.4 percentage points the -0.9 percent prospective documentation and
coding adjustment for FY 2009 applied under section 7(a) of Public Law
110-90. We had the statutory authority to adjust the FY 2010 rates for
this estimated 1.4 percentage point increase. However, given that
Public Law 110-90 requires a retrospective claims evaluation for the
additional adjustments (as described in section II.D.3. of this
preamble), we stated in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
and final rule (74 FR 24096 and 43772, respectively) that we believed
our evaluation of the extent of the overall national average changes in
case-mix for FY 2009 should also be based on a retrospective evaluation
of all FY 2009 claims data. Because we did not receive all FY 2009
claims data prior to publication of the FY 2010 final rule, we
indicated we would address any difference between the additional
increase in FY 2009 case-mix due to changes in documentation and coding
that did not reflect real changes in case-mix for discharges occurring
during FY 2009 and the -0.9 percent prospective documentation and
coding adjustment applied under section 7(a) of Public Law 110-90 in
the FY 2011 rulemaking cycle.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24096),
we solicited public comment on the proposed -1.9 percent prospective
adjustment to the standardized amounts under section 1886(d) of the Act
to address the effects of documentation and coding changes unrelated to
changes in real case-mix in FY 2008. In addition, we solicited public
comments on addressing in the FY 2011 rulemaking cycle any differences
between the increase in FY 2009 case-mix due to changes in
documentation and coding changes that do not reflect real changes in
case-mix for discharges occurring during FY 2009 and the -0.9 percent
prospective documentation and coding adjustment applied under section
7(a) of Public Law 110-90. In response to the proposed rule, MedPAC
summarized its comments on when CMS should reduce payment rates to
prevent further overpayments and to recover overpayments occurring in
2008 and 2009 as follows: ``We support CMS's proposal to reduce IPPS
payments in 2010 by 1.9 percent to prevent further overpayments. While
we and the CMS actuaries believe that a 1.9 percent reduction will not
fully prevent overpayments from continuing in 2010, this is a
reasonable first step toward reducing overpayments.'' Most of the other
commenters opposed the proposed -1.9 percent prospective FY 2010
adjustment for FY 2008 documentation and coding increases, but
supported the proposal not to apply a FY 2010 prospective adjustment
for estimated FY 2009 documentation and coding increases. Many
commenters expressed concern over the financial impact of the proposed
-1.9 percent adjustment and the methodology for calculating the
adjustment. Other commenters recommended that CMS seek to extend the
timeframe beyond 2 years to phase in the then-estimated -6.6 percent
adjustment to the standardized amount.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule in response to
these commenters, we indicated that we fully understood that our
proposed adjustment of -1.9 percent would reduce the increase in
payments that affected hospitals would have received in FY 2009 in the
absence of the adjustment. We explained that, although we are required
to make a prospective adjustment to eliminate the full effect of coding
or classification changes that did not reflect real changes in case-mix
for discharges occurring during FY 2008, we believed we had some
discretion regarding when to implement this adjustment. Section
7(b)(1)(A) of Public Law 110-90 requires that if the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different than the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, the Secretary shall
make an ``appropriate'' adjustment under section 1886(d)(3)(A)(vi) of
the Act.
Therefore, we determined that it would be appropriate to postpone
adopting documentation and coding adjustments as authorized under
section 7(a) of Public Law 110-90 and section 1886(d)(3)(A)(vi) of the
Act until a full analysis of case-mix changes could be completed. We
indicated that, while we had the statutory authority to make this -1.9
percent prospective adjustment entirely in FY 2010, we believed it
would be prudent to wait until we had completed data on the magnitude
of the documentation and coding effect in FY 2009. Specifically, we
stated that if the documentation and coding effect were to be less in
FY 2009 than our estimates at that time, it could lessen the
anticipated adjustment that we had estimated we would have had to make
for FY 2008 and FY 2009 combined. We indicated that, in future
rulemaking, we would consider applying a prospective adjustment based
upon a complete analysis of FY 2008 and FY 2009 claims data, beginning
in FY 2011. We indicated that we intended to address any difference
between the increase in FY 2009 case-mix due to changes in
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2009 and the -0.9 percent
prospective documentation and coding adjustment applied under section
7(a) of Public Law 110-90 in the FY 2011 rulemaking cycle.
After analysis of the FY 2009 claims data for this FY 2011 IPPS/
LTCH PPS final rule, we have found a total prospective documentation
and coding effect of 1.054. After accounting for the -0.6 percent and
the -0.9 percent documentation and coding adjustments in FYs 2008 and
2009, we find a remaining documentation and coding effect of 3.9
percent. As we have discussed, an additional cumulative adjustment of -
3.9 percent would be necessary to meet the requirements of section
7(b)(1)(A) of Public Law 110-90 to make an adjustment to the average
standardized amounts in order to eliminate the full effect of the
documentation and coding changes on future payments. Unlike section
7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not specify
when we must apply the prospective adjustment, but merely requires us
to make an ``appropriate'' adjustment. Therefore, we believe we have
some discretion as to the manner in which we apply the prospective
adjustment of -3.9 percent. Applying the full prospective adjustment of
-3.9 percent for FY 2011, in combination with the proposed recoupment
adjustment of -2.9 percent, discussed below, would require an aggregate
adjustment of -6.8 percent. As we discuss more fully below, it has been
our practice to moderate payment adjustments when necessary to mitigate
the effects of significant downward adjustments on hospitals, to avoid
what could be widespread, disruptive effects of such adjustments on
hospitals. As we also discuss below, we are required to implement the
adjustment in section 7(b)(1)(B) of Public Law 110-90 no later than FY
2012, and accordingly, in the FY 2011 proposed rule, we proposed an
adjustment under that section for FY 2011 (75 FR 23870-23871).
Therefore, we believe it is appropriate to not implement any or all of
the -3.9 percent prospective adjustment in FY 2011. Accordingly, we did
not propose a prospective adjustment under section 7(b)(1)(A) of Public
Law 110-90 for FY 2011 (75 FR 23868-23870). We note

[[Page 50062]]

that, as a result, payments in FY 2011 (and in each future year until
we implement the requisite adjustment) will be 3.9 percent higher than
they would have been if we had implemented an adjustment under section
7(b)(1)(A) of Public Law 110-90. Our actuaries estimate that this 3.9
percentage point increase will result in an aggregate payment of
approximately $4 billion. We also note that payments in FY 2010 are
expected to be 3.9 percent higher than they would have been if we had
implemented an adjustment under section 7(b)(1)(A) of Public Law 110-
90, which our actuaries estimate will increase aggregate payments by
approximately $4 billion in FY 2010.
In the FY 2011 IPPS/LTCH PPS proposed rule, we sought public
comment on our proposal not to apply in FY 2011 the -3.9 percent
prospective adjustment to the average standardized amounts required
under section 7(b)(1)(A) of Public Law 110-90 in order to eliminate the
full effect of the documentation and coding changes on future payments.
We note that this proposal would require us to apply the -3.9 percent
adjustment in future payment years, which may be applied all at once in
a single year or phased in over more than one year. As noted earlier,
we have updated our analysis with FY 2009 data on claims paid through
March 2010 for this FY 2011 IPPS/LTCH PPS final rule.
MedPAC addressed the issue of providing for the required -3.9
percent prospective adjustment to the average standardized amounts
required under section 7(b)(1)(A) of Public Law 110-90. We discuss its
recommendation in the context of our proposal for a recoupment
adjustment below.
7. Recoupment or Repayment Adjustment for FY 2010 Authorized by Section
7(b)(1)(B) of Public Law 110-90
As indicated in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43773), we estimated a 2.5 percent change (estimated from analysis of
more recent data for the FY 2010 final rule than the data used for that
proposed rule) due to documentation and coding that did not reflect
real changes in case-mix for discharges occurring during FY 2008,
exceeding the -0.6 percent prospective documentation and coding
adjustment applied under section 7(a) of Public Law 110-90 by 1.9
percentage points. We stated that our actuaries had estimated that this
1.9 percentage point increase resulted in an increase in aggregate
payments of approximately $2.2 billion. As described earlier, section
7(b)(1)(B) of Public Law 110-90 requires an adjustment for discharges
occurring in FYs 2010, 2011, and/or 2012 to offset the estimated amount
of this increase in aggregate payments (including interest). Although
section 7(b)(1)(B) of Public Law 110-90 requires us to make this
adjustment in FYs 2010, 2011, and/or 2012, we have discretion as to
when during this 3-year period we will apply the adjustment.
We did not propose to make an adjustment to the FY 2010 average
standardized amounts to offset, in whole or in part, the estimated
increase in aggregate payments for discharges occurring in FY 2008, but
stated in the proposed rule that we intended to address this issue in
future rulemaking. That is, we stated that we would address recouping
the additional expenditures that occurred in FY 2008 as a result of the
1.9 percentage point difference between the actual changes in
documentation and coding that do not reflect real changes in case-mix
(2.5 percent), and the -0.6 percent adjustment applied under Public Law
110-90 in FY 2011 and/or FY 2012, as required by law. We indicated
that, while we had the statutory authority to make this -1.9 percent
recoupment adjustment entirely in FY 2010, we were delaying the
adjustment until FY 2011 and FY 2012 because we did not yet have any
data on the magnitude of the documentation and coding effect in FY
2009. We stated that as we have the authority to recoup the aggregate
effect of this 1.9 percentage point difference in FY 2008 IPPS payments
in FY 2011 or FY 2012 (with interest), delaying this adjustment would
have no effect on Federal budget outlays. We indicated that we intended
to wait until we have a complete year of data on the FY 2009
documentation and coding effect before applying a recoupment adjustment
for IPPS spending that occurred in FY 2008 or we estimate will occur in
FY 2009.
As discussed above, section 7(b)(1)(B) of Public Law 110-90
requires the Secretary to make an adjustment to the standardized
amounts under section 1886(d) of the Act to offset the estimated
increase or decrease in aggregate payments for FY 2009 (including
interest) resulting from the difference between the estimated actual
documentation and coding effect and the documentation and coding
adjustments applied under section 7(a) of Public Law 110-90. This
determination must be based on a retrospective evaluation of claims
data. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43774), we
stated that because we would not receive all FY 2009 claims data prior
to publication of the final rule, we would address any increase or
decrease in FY 2009 payments in future rulemaking for FY 2011 and 2012
after we perform a retrospective evaluation of the FY 2009 claims data.
At that time, our actuaries estimated that this adjustment would be
approximately -3.3 percent. This reflected the difference between the
estimated 4.8 percent cumulative actual documentation and coding
changes for FY 2009 (2.5 percent for FY 2008 and an additional 2.3
percent for FY 2009) and the cumulative -1.5 percent documentation and
coding adjustments applied under section 7(a) of Public Law 110-90 (-
0.6 percent in FY 2008 and -0.9 percent in FY 2009). We noted that the
actual adjustments were multiplicative and not additive. This estimated
4.8 percent cumulative actual documentation and coding changes for FY
2009 included the impact of the changes in documentation and coding
first occurring in FY 2008 because we believed hospitals would continue
these changes in documentation and coding in subsequent fiscal years.
Consequently, we believed that these documentation and coding changes
would continue to impact payments under the IPPS absent a prospective
adjustment to account for the effect of these changes.
We note that, unlike the adjustment to the standardized amounts
under section 7(b)(1)(A) of Public Law 110-90 described earlier, any
adjustment to the standardized amounts under section 7(b)(1)(B) of
Public Law 110-90 would not be cumulative, but would be removed for
subsequent fiscal years once we have offset the increase in aggregate
payments for discharges for FY 2008 expenditures and FY 2009
expenditures, if any.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24096),
we did not propose to offset the 1.9 percent increase in aggregate
payments (including interest) for discharges occurring in FY 2008
resulting from the adoption of the MS-DRGs, but to instead address this
issue in future rulemaking for FYs 2011 and 2012.
In response to the FY 2010 proposed rule, MedPAC stated in its
comments on the adjustment to the standardized amounts under section
7(b)(1)(B) of Public Law 110-90: ``In addition, it would be desirable
for CMS to minimize year-to-year changes in payment adjustments it must
make to recover overpayments that were made in 2008 and 2009. To
achieve this goal, CMS should consider spreading the recovery of 2008
overpayments over 3 years, beginning in 2010.'' Some commenters
recommended that CMS seek to extend the timeframe beyond 2 years to
phase

[[Page 50063]]

in the estimated -6.6 percent adjustment to the standardized amount.
The commenters asked CMS to seek necessary legislative action to
accommodate such a policy. Most commenters expressed concern with the
significant negative financial impacts that would be incurred by
providers if CMS adopted that proposed -1.9 percent documentation and
coding adjustment in FY 2010. The commenters cited providers' already
small or negative margins for Medicare payments, and requested that CMS
not further reduce payments during the current period of economic
instability and reduced State funding. Other commenters indicated that
it would be appropriate to delay any adjustment to the standardized
amounts under section 7(b)(1)(B) of Public Law 110-90 until after CMS
has the opportunity to fully examine the FY 2009 claims data.
In response to these comments in FY 2010, we indicated that we
recognized that any adjustment to account for the documentation and
coding effect observed in the FY 2008 and FY 2009 claims data may
result in significant future payment reductions for providers. However,
we indicated that we are required under section 7(b)(1)(B) of Public
Law 110-90 to recapture the difference of actual documentation and
coding effect in FY 2008 and FY 2009 that is greater than the prior
adjustments. We agreed with the commenters who requested that CMS delay
any adjustment and, for the reasons stated above, indicated that we
expect to address this issue in this FY 2011 rulemaking.
As indicated in section II.D.4. of this preamble, the change due to
documentation and coding that did not reflect real changes in case mix
for discharges occurring during FY 2008 and FY 2009 exceeded the -0.6
and -0.9 percent prospective documentation and coding adjustment
applied under section 7(a) of Public Law 110-90 for those 2 years
respectively by 1.9 percentage points in FY 2008 and 3.9 percentage
points in FY 2009. In total, this change exceeded the cumulative
prospective adjustments by 5.8 percentage points. Our actuaries
currently estimate that this 5.8 percentage point increase resulted in
an increase in aggregate payments of approximately $6.9 billion. We
note that there may be a need to actuarially adjust the recoupment
adjustment to accurately reflect accumulated interest. Therefore, an
aggregate adjustment of -5.8 percent in FYs 2011 and 2012, subject to
actuarial adjustment to reflect accumulated interest, is necessary in
order to meet the requirements of section 7(b)(1)(B) of Public Law 110-
90 to adjust the standardized amounts for discharges occurring in FYs
2010, 2011, and/or 2012 to offset the estimated amount of the increase
in aggregate payments (including interest) in FYs 2008 and 2009. In the
FY 2011 proposed rule (75 FR 23871), we stated that we intend to take
into account the need to reflect accumulated interest in proposing a
recoupment adjustment under section 7(b)(1)(B) of Public Law 110-90 for
FY 2012. We indicated that we will invite public comments on our
proposal at that time.
It is often our practice to phase in rate adjustments over more
than one year in order to moderate the effect on rates in any one year.
Therefore, consistent with the policies we have adopted in many similar
cases, in the FY 2011 proposed rule, we proposed to make an adjustment
to the standardized amount of -2.9 percent, representing approximately
half of the aggregate adjustment required under section 7(b)(1)(B) of
Public Law 110-90, for FY 2011. An adjustment of this magnitude allows
us to moderate the effects on hospitals in one year while
simultaneously making it possible to implement the entire adjustment
within the timeframe required under section 7(b)(1)(B) of Public Law
110-90. As we have previously noted, unlike the prospective adjustment
to the standardized amounts under section 7(b)(1)(A) of Public Law 110-
90 described earlier, the recoupment or repayment adjustment to the
standardized amounts under section 7(b)(1)(B) of Public Law 110-90 is
not cumulative, but would be removed for subsequent fiscal years once
we have offset the increase in aggregate payments for discharges for FY
2008 expenditures and FY 2009 expenditures. In keeping with our
practice of moderating payment adjustments when necessary, we stated
that we anticipated that the proposal will have an additional, and
significant, moderating effect on implementing the requirements of
section 7(b)(1)(B) of Public Law 110-90 for FY 2012. Specifically, we
noted an advantage of the proposal for FY 2011 is that we anticipate
removing the proposed FY 2011 -2.9 percent adjustment from the rates in
FY 2012, when it would also be necessary under current law to apply the
remaining approximately -2.9 percent adjustment required by section
7(b)(1)(B) of Public Law 110-90. These two steps in FY 2012, restoring
the FY 2011 -2.9 percent adjustment, and applying the remaining
adjustment of approximately -2.9 percent, would effectively cancel each
other out. The result would be an aggregate adjustment of approximately
0.0 percent (subject to the need to account for accumulated interest,
as discussed above) under section 7(b)(1)(B) of Public Law 110-90 in FY
2012. However, while we noted this anticipated effect of the FY 2011
proposal, we did not make a formal proposal for the further
implementation of section 7(b)(1)(B) of Public Law 110-90 in FY 2012 in
the FY 2011 proposed rule.
In the FY 2011 IPPS/LTCH PPS proposed rule, we sought public
comment on our proposal to offset part of the total 5.8 percent
increase in aggregate payments (including interest) for discharges
occurring in FY 2008 and FY 2009 resulting from the adoption of the MS-
DRGs in FY 2011, noting that this proposal would result in a -2.9
percent adjustment to the standardized amount. We noted that we
intended to update our analysis with FY 2009 data on claims paid
through March 2009 (sic) for this FY 2011 IPPS/LTCH PPS final rule. (We
note that the March 2009 update date for claims data in the proposed
rule should have been March 2010.) As intended, we have updated our
analysis with FY 2009 data on claims paid through March 2010 in this FY
2011 IPPS/LTCH PPS final rule.
We received numerous comments on our proposal, especially from
national and regional hospital associations, hospital systems, and
individual hospitals. MedPAC also commented on our proposal.
Comment: One commenter requested that CMS refrain from using
``negative terminology'' to refer the documentation and coding
improvement practices that, in response to the introduction of MS-DRGs,
resulted in overall case-mix increase. While CMS frequently refers to
implementing negative payment adjustments to account for this case-mix
increase, the commenter requested that CMS we refer to any such
adjustment as a ``budget-neutrality adjustment.'' The commenter
contended that referring to ``overpayments'' and ``negative payment
adjustments'' inaccurately portrays coding professionals in a poor
manner, and is counterproductive to CMS' goal of improving the quality
and consistency of health care data.
Response: When describing the MS-DRG documentation and coding
adjustment, we have not intended to suggest that these adjustments are
necessary because coders have acted inappropriately, unethically, or
otherwise in bad faith by employing documentation and coding
improvement practices associated with the adoption of the MS-DRG
system.

[[Page 50064]]

Under the previous DRG definitions, it was possible for high-severity
cases not to be paid more than cases with lower severity. The MS-DRGs
were introduced as part of the effort to ensure that the relative
Medicare payment rates that hospitals received more reasonably matched
the resources that hospitals expended in furnishing care, and CMS
encouraged hospitals to code as accurately as possible with that goal
in mind.
However, it is our finding that the systematic effect of changing
documentation and coding in order to receive the fullest payment for
providing care to beneficiaries under the MS-DRGs has led to an
increase in aggregate payments that do not reflect real changes in
case-mix severity, and the statute specifically requires that we adjust
for and recover these associated overpayments due to such documentation
and coding improvements. We believe our use of certain terminology (to
which the commenter took exception) is the most accurate description of
the specific statutorily required activities that CMS must pursue.
Comment: Numerous commenters detailed the potentially severe
negative fiscal impact that would be experienced by providers if the
proposed documentation and coding improvement adjustment were to be
implemented. Many commenters contended that their individual hospital
documentation and coding practices were not specifically changed or did
not change at the levels shown by our analysis with the introduction of
MS-DRGs, and that they would be unfairly penalized by the payment
adjustment. Some of these commenters provided examples that they
believed supported their claims. Another commenter requested that CMS
implement a more refined payment adjustment methodology that would not
penalize hospitals with compliant and ethical documentation and coding
standards.
Response: We understand the concerns about possible financial
disruption that may be caused by the proposed documentation and coding
improvement payment adjustment. However, we are required by section
7(b)(1)(B) of Public Law 110-90 to implement the appropriate recoupment
or repayment adjustment based on our analysis no later FY 2012. These
payment adjustments are necessary to correct past overpayments due to
increases in aggregate payments that do not reflect real changes in
case-mix severity, but instead are caused solely by documentation and
coding improvements. We proposed a phase-in implementation of the
required adjustments to allow hospitals time to adjust to future
payment differences and to moderate the effect of this adjustment in
any given year. We do not believe that it would prudent to postpone
making any recoupment adjustment beyond FY 2011. A postponement would
require us to make the entire -5.8 percent adjustment that is warranted
by our analysis in just one year (FY 2012) in order to meet the
statutory requirement of section 7(b)(1)(B) of Public Law 110-90. Such
a delay in making the required adjustment would not be to the financial
benefit of hospitals.
Under Medicare's prospective payment systems, it is neither
feasible nor possible to quantify any amount of case-mix increase due
to documentation and coding improvements by a specific hospital.
Therefore, it is necessary for CMS to propose a national adjustment to
meet the statutory requirement of section 7(b)(1)(B) of Public Law 110-
90 to calculate and recover any overpayments caused by documentation
and coding improvements due to the introduction of the MS-DRG system.
Comment: In its public comment, MedPAC describes the history and
nature of the documentation and coding adjustment. MedPAC stated that
``CMS adopted the MS-DRGs to improve the distribution of payments.''
Specifically, it discussed how, under the DRG definitions used
previously, high-severity cases may have been paid similarly to cases
with low or moderate severity. MedPAC emphasized that ``the shift to
MS-DRGs was taken to improve the distribution of payments, not change
the aggregate level of payments.'' Further, MedPAC described the
financial incentive for hospitals to improve documentation and coding
under the MS-DRG system, and also the statutory requirement for CMS to
ensure that changes in the DRGs and relative weights do not increase or
decrease aggregate IPPS payments absent those changes, noting that
Public Law 110-90 provided for specific requirements related to
payments for FYs 2008 and 2009. MedPAC pointed out that, as a result of
these combined legal requirements, our proposals ``do not represent
payment cuts, but rather offset unintended overpayments to hospitals.''
MedPAC performed an independent analysis of claims data to
determine the effect of documentation and coding in FYs 2008 and 2009.
MedPAC stated, ``[i]n our judgment, CMS's analytic methods are valid.
Using similar methods, our analysis of Medicare hospital inpatient
claims for 2007-2009 confirms all of CMS's findings.'' (We note that,
in line with our evaluation of claims data in for this final rule,
MedPAC's retrospective evaluation of the same claims data yielded
nearly identical results.)
MedPAC's analysis demonstrated that the cumulative effect of
documentation and coding in FY 2009 was 5.4 percent and the cumulative
overpayment in FY 2009 was 5.8 percent. Furthermore, because CMS has
already implemented adjustments of -0.6 percent and -0.9 percent in FYs
2008 and 2009 respectively, MedPAC concurred that the necessary
adjustment under section 7(b)(1)(B) of Public Law 110-90 requires CMS
to prospectively reduce payment rates by -3.9 percent to prevent
further increases in aggregate spending due to the change to MS-DRGs.
(As we discuss elsewhere in this section, unlike the recoupment
adjustment, the statute does not prescribe a specific timeframe within
which we must implement the prospective adjustment.) In fact, MedPAC
concluded, ``CMS correctly estimated the effect of documentation and
coding on case mix and patients.''
However, while acknowledging the concerns we expressed in opting to
phase in implementing the full retrospective adjustment (-5.8 percent)
together with the prospective adjustment (-3.9 percent), noting that
this combined adjustment of -9.7 percent ``may be financially
disruptive''), MedPAC expressed concerns that our proposal to adjust
rates by -2.9 percent, which is half of the retrospective adjustment
needed to address the cumulative overpayment in FY 2011, is
insufficient to fully offset unintended overpayments to hospitals.
Furthermore, MedPAC stated that such a delay in implementing offsets
for the operating and capital IPPS will cause a progressive
accumulation in overpayments, which cannot be recovered based upon
current statutory authority. MedPAC stated plainly that ``CMS will not
achieve budget neutrality unless Congress directs it to recover all
overpayments.''
As such, MedPAC recommended, for both the operating and capital
IPPS, that ``overpayments should be stopped [and] all overpayment
should be recovered.'' In making that recommendation, MedPAC directed
CMS to its March 2010 Report to Congress where it recommended that
Congress change the law to require CMS to recover all overpayments with
interest. It noted that this would shift our focus to the prevention of
future overpayments in the operating and capital IPPS. MedPAC further
noted that such a shift might be implemented as prospective adjustments
and would results in slower

[[Page 50065]]

accumulation of future overpayments. Specifically, it summarized its
recommendations for both the operating and capital IPPS as:
MedPAC's approach would reduce payments in increments of
no more than 2 percent for 3 years.
Hospitals would continue to receive their scheduled
updates, which would offset much of their reduction.
After 3 years, hospitals would receive their scheduled
updates without any additional offsets.
After roughly 6 years, overpayments would be fully
recovered, and hospitals would see an increase in payments of roughly 2
percent in addition to their scheduled update.
In the absence of the changes in law that would permit such an
approach, MedPAC provided an alternative multiyear approach in its
public comments in response to our request for comments on our proposal
to offset part of the cumulative overpayment in FY 2011 and our
proposal not to apply the remaining prospective adjustment in FY 2011.
MedPAC recommended that CMS recover the FY 2008 and 2009 overpayments
as quickly as possible to mitigate the need for further and more
drastic payment corrections. In FY 2012, MedPAC recommended completing
the retrospective adjustment, with accumulated interest, to fulfill the
requirements of section 7(b)(1)(B) of Public Law 110-90 and then making
additional prospective adjustments in that year of -2.0 percent. The
nature of the retrospective adjustment would moderate the impact of the
total adjustment for FY 2012, and MedPAC estimated the net effect to be
roughly 2.0 percent. (As we discuss below, one reason for the
moderating effect of the recoupment adjustment is that it is only a 1-
year adjustment, rather than a permanent and cumulative adjustment. As
a result, the FY 2011 recoupment adjustment would be removed from the
FY 2012 rate before any new adjustments are applied. For example, in FY
2012, the -2.9 percent adjustment from FY 2011 would be removed by
adding 2.9 percent to the FY 2012 rate before making any additional
adjustments through rulemaking.) In FY 2013, MedPAC recommended
completing the prospective adjustment for increases that occurred in
FYs 2008 and 2009, noting that, again, in FY 2013, the impact of the
prospective adjustment would be moderated by the expiration of the
retrospective adjustment in the prior year.
Response: We appreciate MedPAC's independent validation and support
of our methodology. We note that MedPAC stated that its estimate for
the cumulative documentation and coding effect for FYs 2008 and 2009
net of measurement error is 5.4 percent. This estimate was derived
using the same data sources and analogous methodologies as the analysis
set forth by CMS in this FY 2011 IPPS/LTCH-PPS final rule and matches
the CMS estimate in the prior discussion.
Furthermore, we agree with MedPAC's conclusions on the overall
financial implications of implementing our proposed -2.9 percent
payment rate adjustment. We share MedPAC's concerns about delaying the
prevention of future overpayments in both the capital and operating
IPPS, but we appreciate its acknowledgment of CMS' discretion regarding
the timing of implementation of the prospective adjustment and of the
potential financial disruption from implementation of the full
prospective reduction in FY 2011 (-3.9 percent) in addition to the
proposed retroactive adjustment (-2.9 percent). We also appreciate
MedPAC's concerns for prioritizing the recoupment of FYs 2008-2009
overpayments for the operating IPPS because CMS lacks the statutory
authority to adjust for further accumulation of these overpayments
beyond FY 2012. MedPAC appropriately pointed out the moderating effect
of the multiyear approach to implementing the retroactive adjustment to
recover overpayments in FYs 2008 and 2009. The expiration of these
adjustments in the following year mitigates any negative adjustments
made in that following year. We thank MedPAC for its specificity in
setting forth an approach for completing the adjustments prescribed
under sections 7(b) and (c) of Public Law 110-90 and will take these
recommendations into consideration in future rulemaking. Finally, we
concur with MedPAC's statement that these adjustments associated with
Public Law 110-90 and section 1886(d)(3)(vi) of the Act should not be
seen as payment cuts, but as offsets to unintended overpayments to
hospitals.
Comment: Most commenters, including the AHA, agreed that there were
documentation and classification increases that were in excess of the
statutory 0.6 percent and 0.9 percent adjustments specified in Public
Law 110-90. However, as in prior rulemaking on this issue, most
commenters again questioned the methodology employed by MedPAC and our
actuaries to determine the magnitude of the excess. These comments were
generally similar to or cited the comment from the AHA, which stated in
summary:
``The AHA believes there is a fundamental flaw in CMS' methodology
for determining the effect of documentation and coding changes on the
FY 2008 and FY 2009 CMIs. Specifically, in its analysis, CMS states
that the increase in payments it found could not be due to real case-
mix change because its analysis looks at only one year of patient
claims. However, we assert that the increase cannot be deemed
documentation and coding change either, because, again, the analysis
looks at only one year of patient claims.''
``Our analysis, which used multiple years of patient claims,
clearly shows that a significant portion of the change CMS found is
actually the continuation of historical trends, rather than the effect
of documentation and coding changes due to implementation of MS-DRGs.
This analysis found a documentation and coding effect of 0.9 percent
for FYs 2008 and 2009.''
The AHA also submitted trend analyses in support of its contention
that real case-mix is increasing as corroboration of its alternative
finding of a documentation and coding effect of 0.9 percent. These
materials included a trend analysis of the percentage of Medicare
discharges involving the ICU, a trend analysis of data from the Medical
Expenditure Panel Survey (MEPS), and a trend analysis of data from the
Healthcare Cost and Utilization Project (HCUP).
Some commenters, including the AHA, also stated that even without
taking into account the alternative analyses presented by the AHA, the
CMS methodology overstates the documentation and classification growth
due to an understatement in the CMI value obtained when grouping the FY
2009 claims data through the FY 2007 pre MS-DRG GROUPER. This assertion
was also based on a trend analysis.
Response: As stated earlier, we agree with MedPAC's comment that
``CMS correctly estimated the effect of DCI on case mix and payments *
* * . In our judgment, CMS's analytic methods are valid. Using similar
methods, our analysis of Medicare hospital inpatient claims for 2007-
2009 confirms all of CMS's findings.''
We also agree with the commenters, including the AHA, to the extent
that they indicated that there were documentation and classification
increases that were in excess of the statutory 0.6 percent and 0.9
percent adjustments specified in Public Law 110-90. However, we
disagree with the

[[Page 50066]]

commenters' assertion that there is a fundamental flaw in the
analytical approach used by our actuaries and MedPAC to determine the
magnitude of the documentation and classification increase because our
methodology primarily utilizes a single year (FY 2009) of claims data.
As stated in prior rulemaking, most recently in the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23867), overall case-mix growth is
predominately comprised of three factors: Real case-mix growth; a
documentation and classification effect; and a measurement effect.
Section 7(b)(1)(B) of Public Law 110-90 requires that the Secretary
make appropriate adjustment following a determination that the
implementation of the MS-DRG system ``resulted in changes in coding and
classification that did not reflect real changes in case mix.'' Section
7 of Public Law 110-90 does not require that we use a specific
methodology when conducting this analysis, and we believe that the use
of the FY 2009 claims data allows us to directly remove real changes in
case-mix from the calculation, consistent with the statutory
requirement. Differences in case-mix calculated using the pre- and
post-MS-DRG GROUPERs on the FY 2009 data, as detailed previously in
this final rule, cannot reflect real case-mix change, by definition,
because the same set of patients and claims is being processed under
the two GROUPERs. The corroborative analyses performed by MedPAC and
our actuaries more directly examine shifts in cases from lower severity
and cost MS-DRGs to higher severity and cost groups within the same
base DRG than the alternative approach submitted by the commenters who
asserted that real growth in case mix follows a historical trend line.
The alternative approach does not disaggregate the overall growth in
case mix into its three components as does the methodology we set forth
that MedPAC corroborates. As MedPAC stated in its comment letter:
``The share of cases without a CC or MCC declined more than 6
percentage points in 2008 and an additional 2 percentage points in
2009, while the shares of cases with a MCC increased by more than 6 and
3 percentage points, respectively * * * When we looked at all 259 base
DRGs that are split in some fashion based on secondary diagnoses, we
found that all but one had essentially the same pattern of shifts in
2008 and 2009 toward the highest severity and cost MS-DRG and away from
the lowest severity or cost MS-DRG. In 68 of these base DRGs, the
cumulative shift from 2007 to 2009 in the share of cases toward the
highest-weighted MS-DRG was at least 10 percentage points.''
Nevertheless, despite our position that our methodology more
directly measures the relevant increase, we did examine the alternative
approach favored by commenters for calculating the documentation and
classification increase. As a general statement, the approach of
examining historical trends to estimate what case-mix would have been
in the absence of the adoption of the MS-DRGs should not necessarily
yield significantly different results from the analysis done by our
actuaries and MedPAC if an appropriate historical trend can be
determined. We have concerns about the determination of an appropriate
historical trend.
We believe that the determination of an appropriate historical
trend is less straightforward than our methodology, which, as described
above, simply removes real case-mix growth from the calculation. One
issue with the trend analysis is the determination of the appropriate
time period on which to base the trend. We note in our examination of
the AHA approach that it begins with the case-mix change for FY 2001.
MedPAC, in its comment letter, provided an analysis of the change in
actual case-mix from FY 1998 to FY 2009:
``We calculated the annual percent change in the national aggregate
case-mix index (CMI) for the period from 1997 to 2009. These actual CMI
values are based on the DRG version, relative weights, and transfer
policies that were in effect for each year. To calculate the percent
change for each year, we used national aggregate average CMIs for the
cohort of hospitals paid under the IPPS in each pair of adjacent years.
We also excluded all hospitals that had converted to critical access
hospital status (CAH) by the end of 2009.''
We created the following table summarizing the results of MedPAC's
analysis.

Changes in Case Mix for IPPS Hospitals
------------------------------------------------------------------------
Year Percent
------------------------------------------------------------------------
1998.................................................... -0.5
1999.................................................... -0.7
2000.................................................... -0.8
2001.................................................... -0.7
2002.................................................... 0.7
2003.................................................... 1.0
2994.................................................... 0.9
2005.................................................... 0.6
2006.................................................... 0.4
2007.................................................... -0.2
2008.................................................... 2.0
2009.................................................... 2.6
------------------------------------------------------------------------

We note that the sustained negative changes in actual CMI from FY
1998 through FY 2000 are not reflected in the AHA analysis. If
included, they would significantly increase the AHA estimate of
documentation and coding growth because the slope of the AHA trend line
would be significantly less.
A second critical issue with the AHA approach is the determination
of the appropriate cohort of hospitals to include in the calculation.
For example, if a hospital converts to CAH status, decisions with
respect to the inclusion or exclusion of data from the time period
before the conversion will influence the trend analysis. In FY 2000,
there were approximately 300 CAHs, but, by FY 2007, there were
approximately 1,300 CAHs. We note that MedPAC excluded all hospitals
that had converted to CAH status by the end of 2009. It was not
apparent how the data from these hospitals was treated in the AHA
approach. CAHs tend to have lower than average case-mix values;
therefore, including the data from one or more years before the
conversion and then excluding the data after the conversion
artificially increases the trend line and decreases the magnitude of
the documentation and classification estimate.
Given these concerns about the appropriateness of the AHA
historical trend, it follows that we are concerned about extrapolating
the AHA historical trend into FY 2009. AHA's extrapolation assumes that
changes in case-mix increase at a linear and, therefore, consistent
rate, when, in fact, changes in case-mix do not necessarily follow a
consistent pattern over time, as MedPAC's case-mix analysis pointed
out.
After a careful review of the comments, we continue to find the
methodology used by our actuaries and MedPAC to determine the magnitude
of the changes in coding and classification that did not reflect real
changes in case mix to be the most appropriate methodology because it
directly removes real changes in case-mix from the calculation
consistent with the statutory requirement. We also question the time
period and cohort selections made by the AHA in its analysis and the
appropriateness of extrapolating this AHA trend to FY 2009 when a much
more straightforward methodology exists for estimating documentation
and coding growth.
Comment: One commenter, while supporting the proposed FY 2011
adjustment of -2.9 percent, stated that CMS should not implement any
further adjustment in FY 2012 without a more detailed quantification of
the factors

[[Page 50067]]

contributing to case-mix growth so that CMS can separate the factors
that should be included in the adjustment from the factors that should
be excluded. For example, the commenter appears to believe that the
effect of resequencing the diagnosis codes on a claim (as opposed to
the addition of new or different diagnosis codes) should not be
included in the section 7 adjustments because the commenter believes
this is not a documentation and coding change, even if the resequencing
results in classification to a higher MS-DRG. Other factors cited by
the commenter included new diagnosis codes and certain definitional
changes to the base-DRGs.
Response: Section 7 of Public Law 110-90 requires us to adjust for
changes in ``coding and classification'' that do not reflect real
changes in case-mix. We believe that the reclassifications cited by the
commenter are properly accounted for in the documentation and coding
adjustment; these factors may affect the MS-DRG classification and
affect payment without a corresponding real increase in patient
severity of illness. For this reason, we believe that the effects of
these factors are appropriately included in the section 7 adjustments,
consistent with section 7(b)(1)(B) of Public Law 110-90, which requires
adjustments to the extent that ``implementation'' of the MS-DRG system
results in ``coding and classification that did not reflect real change
in case-mix.''
After consideration of the public comments we received, as well as
MedPAC's detailed analysis, we have decided to finalize our proposal to
make an adjustment to the standardized amount of -2.9 percent,
representing approximately half of the aggregate recoupment adjustment
required under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. We
are persuaded by MedPAC's analysis, and by our own review of the
methodologies recommended by various commenters, that the methodology
we have employed to determine the required recoupment adjustment is
sound. We understand the concerns expressed by many commenters about
the potential adverse financial effects on hospitals. However, we are
required by the statute to implement this adjustment no later than FY
2012. We do not believe that it would be in the interest of hospitals
to delay this required adjustment entirely until FY 2012. Rather, we
have sought, as we commonly do, to moderate the potential impact on
hospitals by phasing in the required adjustment over more than one
year. The adjustment to the standardized amount of -2.9 percent that we
are finalizing represents approximately half of the aggregate
adjustment required under section 7(b)(1)(B) of Public Law 110-90 for
FY 2011. As we noted in making the proposal, there is a distinct
advantage to phasing in the required adjustment in this manner. As we
stated above, a major advantage of making the -2.9 percent adjustment
to the standardized amount in FY 2011 is that, because the required
recoupment adjustment is not cumulative, we can anticipate removing the
FY 2011 -2.9 percent adjustment from the rates in FY 2012, when it
would also be necessary under current law to apply the remaining
approximately -2.9 percent adjustment required by section 7(b)(1)(B) of
Public Law 110-90. These two steps in FY 2012, restoring the FY 2011 -
2.9 percent adjustment and then applying the remaining adjustment of
approximately -2.9 percent, would effectively cancel each other out.
The result would be an aggregate adjustment of approximately 0.0
percent (subject to the need to account for accumulated interest, as
discussed above) under section 7(b)(1)(B) of Public Law 110-90 in FY
2012. However, while we again note this anticipated effect of the FY
2011 policy, we have not yet made a formal proposal for the further
implementation of section 7(b)(1)(B) of Public Law 110-90 in FY 2012.
Nevertheless, this anticipated consequence of adopting a -2.9 percent
adjustment for FY 2011 should substantially reduce the potential
financial impact of this required adjustment on hospitals. We believe
that this is a reasonable and fair approach which satisfies the
requirements of the statute while substantially moderating the impact
on hospitals.

FY 2011 MS-DRG Documentation and Coding Adjustment
----------------------------------------------------------------------------------------------------------------
Required Required Recoupment
prospective recoupment Total adjustment to Remaining
adjustment for adjustment for adjustment FY 2011 adjustment
FYs 2008-2009 FYs 2008-2009 payments
----------------------------------------------------------------------------------------------------------------
Level of adjustments............ -3.9% -5.8% -9.7% -2.9% -6.8%
----------------------------------------------------------------------------------------------------------------

8. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
Under section 1886(d)(5)(D)(i) of the Act, SCHs are paid based on
whichever of the following rates yields the greatest aggregate payment:
the Federal rate; the updated hospital-specific rate based on FY 1982
costs per discharge; the updated hospital-specific rate based on FY
1987 costs per discharge; the updated hospital-specific rate based on
FY 1996 costs per discharge; or the updated hospital-specific rate
based on FY 2006 costs per discharge. Under section 1886(d)(5)(G) of
the Act, MDHs are paid based on the Federal national rate or, if
higher, the Federal national rate plus 75 percent of the difference
between the Federal national rate and the updated hospital-specific
rate based on the greatest of the FY 1982, FY 1987, or FY 2002 costs
per discharge. In the FY 2008 IPPS final rule with comment period (72
FR 47152 through 47188), we established a policy of applying the
documentation and coding adjustment to the hospital-specific rates. In
that final rule with comment period, we indicated that because SCHs and
MDHs use the same DRG system as all other hospitals, we believe they
should be equally subject to the budget neutrality adjustment that we
are applying for adoption of the MS-DRGs to all other hospitals. In
establishing this policy, we relied on section 1886(d)(3)(A)(vi) of the
Act, which provides us with the authority to adjust ``the standardized
amount'' to eliminate the effect of changes in coding or classification
that do not reflect real change in case-mix.
However, in the final rule that appeared in the Federal Register on
November 27, 2007 (72 FR 66886), we rescinded the application of the
documentation and coding adjustment to the hospital-specific rates
retroactive to October 1, 2007. In that final rule, we indicated that,
while we still believe it would be appropriate to apply the
documentation and coding adjustment to the hospital-specific rates,
upon further review, we decided that the

[[Page 50068]]

application of the documentation and coding adjustment to the hospital-
specific rates is not consistent with the plain meaning of section
1886(d)(3)(A)(vi) of the Act, which only mentions adjusting ``the
standardized amount'' under section 1886(d) of the Act and does not
mention adjusting the hospital-specific rates.
In the FY 2009 IPPS proposed rule (73 FR 23540), we indicated that
we continued to have concerns about this issue. Because hospitals paid
based on the hospital-specific rate use the same MS-DRG system as other
hospitals, we believe they have the potential to realize increased
payments from documentation and coding changes that do not reflect real
increases in patients' severity of illness. In section
1886(d)(3)(A)(vi) of the Act, Congress stipulated that hospitals paid
based on the standardized amount should not receive additional payments
based on the effect of documentation and coding changes that do not
reflect real changes in case-mix. Similarly, we believe that hospitals
paid based on the hospital-specific rates should not have the potential
to realize increased payments due to documentation and coding changes
that do not reflect real increases in patient severity of illness.
While we continue to believe that section 1886(d)(3)(A)(vi) of the Act
does not provide explicit authority for application of the
documentation and coding adjustment to the hospital-specific rates, we
believe that we have the authority to apply the documentation and
coding adjustment to the hospital-specific rates using our special
exceptions and adjustment authority under section 1886(d)(5)(I)(i) of
the Act. The special exceptions and adjustment provision authorizes us
to provide ``for such other exceptions and adjustments to [IPPS]
payment amounts * * * as the Secretary deems appropriate.'' In the FY
2009 IPPS final rule (73 FR 48448 through 48449), we indicated that,
for the FY 2010 rulemaking, we planned to examine our FY 2008 claims
data for hospitals paid based on the hospital-specific rate. We further
indicated that if we found evidence of significant increases in case-
mix for patients treated in these hospitals that do not reflect real
changes in case-mix, we would consider proposing application of the
documentation and coding adjustments to the FY 2010 hospital-specific
rates under our authority in section 1886(d)(5)(I)(i) of the Act.
In response to public comments received on the FY 2009 IPPS
proposed rule, we stated in the FY 2009 IPPS final rule that we would
consider whether such a proposal is warranted for FY 2010. To gather
information to evaluate these considerations, we indicated that we
planned to perform analyses on FY 2008 claims data to examine whether
there has been a significant increase in case-mix for hospitals paid
based on the hospital-specific rate. If we found that application of
the documentation and coding adjustment to the hospital-specific rates
for FY 2010 is warranted, we indicated that we would include a proposal
to do so in the FY 2010 IPPS proposed rule.
9. Documentation and Coding Adjustment to the Hospital-Specific Rates
for FY 2011 and Subsequent Fiscal Years
In the FY 2010 IPPS/RY 2010 LTCH proposed rule and final rule (74
FR 24098 through 24100 and 74 FR 43775 through 43776, respectively), we
discussed our performance of a retrospective evaluation of the FY 2008
claims data for SCHs and MDHs using the same methodology described
earlier for other IPPS hospitals. We found that, independently for both
SCHs and MDHs, the change due to documentation and coding that did not
reflect real changes in case-mix for discharges occurring during FY
2008 slightly exceeded the proposed 2.5 percent result discussed
earlier, but did not significantly differ from that result.
Again, for the FY 2010 proposed rule, we found that the within-base
DRG increases were almost entirely responsible for the case-mix change.
In that proposed rule, we presented two Figures to display our results.
Therefore, consistent with our statements in prior IPPS rules, we
proposed to use our authority under section 1886(d)(5)(I)(i) of the Act
to prospectively adjust the hospital-specific rates by the proposed -
2.5 percent in FY 2010 to account for our estimated documentation and
coding effect in FY 2008 that does not reflect real changes in case-
mix. We proposed to leave this adjustment in place for subsequent
fiscal years in order to ensure that changes in documentation and
coding resulting from the adoption of the MS-DRGs do not lead to an
increase in aggregate payments for SCHs and MDHs not reflective of an
increase in real case-mix. The proposed -2.5 percent adjustment to the
hospital-specific rates exceeded the -1.9 percent adjustment to the
national standardized amount under section 7(b)(1)(A) of Public Law
110-90 because, unlike the national standardized rates, the FY 2008
hospital-specific rates were not previously reduced in order to account
for anticipated changes in documentation and coding that do not reflect
real changes in case-mix resulting from the adoption of the MS-DRGs.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24100),
we solicited public comment on the proposed -2.5 percent prospective
adjustment to the hospital-specific rates under section
1886(d)(5)(I)(i) of the Act and our proposal to address in the FY 2011
rulemaking cycle any changes in FY 2009 case-mix due to changes in
documentation and coding that do not reflect real changes in case-mix
for discharges occurring during FY 2009. We also indicated that we
intended to update our analysis with FY 2008 data on claims paid
through March 2008 [sic] for the FY 2010 IPPS final rule. (We note that
the March 2008 update claims paid data date in the proposed rule should
have been March 2009.)
Consistent with our approach for IPPS hospitals discussed earlier,
in the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we also delayed
adoption of a documentation and coding adjustment to the hospital-
specific rate until FY 2011. Similar to our approach for IPPS
hospitals, we indicated that we would consider, through future
rulemaking, phasing in the documentation and coding adjustment over an
appropriate period. We also indicated that we would address, through
future rulemaking, any changes in documentation and coding that do not
reflect real changes in case-mix for discharges occurring during FY
2009. We noted that, unlike the national standardized rates, the FY
2009 hospital-specific rates were not previously reduced in order to
account for anticipated changes in documentation and coding that do not
reflect real changes in case-mix resulting from the adoption of the MS-
DRGs. However, as we noted earlier with regard to IPPS hospitals, if
the estimated documentation and coding effect determined based on a
full analysis of FY 2009 claims data is more or less than our current
estimates, it would change, possibly lessen, the anticipated cumulative
adjustments that we currently estimate we would have to make for the FY
2008 and FY 2009 combined adjustment. Therefore, we believed that it
would be more prudent to delay implementation of the documentation and
coding adjustment to allow for a more complete analysis of FY 2009
claims data for hospitals receiving hospital-specific rates.
BILLING CODE 4120-01-P

[[Page 50069]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.001

BILLING CODE 4120-01-C
Consistent with our analysis of IPPS hospitals, the two charts
above show that we found after analysis of FY 2009 discharge data that
the distribution of severity discharges for MDHs and SCHs both
proportionally shifted from the without CC/MCC to with MCC category.
This analysis was updated to include data for FY 2009 claims paid
through March 2010. Similarly, we found using a methodology consistent
with our analysis of IPPS hospitals that the change due to
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2009 slightly exceeded the proposed
2.5 percent result discussed earlier, but did not significantly differ
from that result.
As we have noted above, because SCHs and MDHs use the same MS-DRG
system as all other hospitals, we believe they have the potential to
realize increased payments from documentation and coding changes that
do not reflect real increases in patient severity of illness.
Therefore, we believe they should be equally subject to a prospective
budget neutrality adjustment that we are applying for adoption of the
MS-DRGs to all other hospitals. We believe the documentation and coding
estimates for all subsection (d) hospitals should be the same. While
the findings for the documentation and coding effect for all IPPS
hospitals are similar to the effect for SCHs and slightly different to
the effect for MDHs, we continue to believe that this is the
appropriate policy so as to neither advantage or disadvantage

[[Page 50070]]

different types of providers. As we have also discussed above, our best
estimate, based on the most recently available data, is that a
cumulative adjustment of -5.4 percent is required to eliminate the full
effect of the documentation and coding changes on future payments.
Unlike the case of standardized amounts paid to IPPS hospitals, we have
not made any previous adjustments to the hospital-specific rates paid
to SCHs and MDHs to account for documentation and coding changes.
Therefore, the entire -5.4 percent adjustment remains to be
implemented.
As discussed above, in the FY 2011 IPPS/LTCH PPS proposed rule, we
proposed to make an adjustment to the standardized amount for IPPS
hospitals of -2.9 percent under section 7(b)(1)(B) of Public Law 110-
90, for FY 2011. As we also discussed above, it has been our practice
to moderate payment adjustments when necessary to mitigate the effects
of significant downward adjustments on hospitals, to avoid what could
be widespread, disruptive effects of such adjustments on hospitals.
Because payments for non-SCH and non-MDH IPPS hospitals and SCHs and
MDHs are determined on the basis of the same MS-DRG system, SCHs and
MDHs have the potential to realize increased payments from
documentation and coding changes that do not reflect real increases in
patient severity of illness. Therefore, in determining the level and
pace of adjustments to account for such documentation and coding
changes, we believe that it is important to maintain, as much as
possible, both consistency and equity among these classes of hospitals.
In addition, as in the case of the documentation and coding adjustment
for non-SCH and non-MDH IPPS hospitals, we also believe that it is
important to provide as much as possible for moderating the effects of
adjustments on hospital payments. Therefore, we proposed an adjustment
of -2.9 percent in FY 2011 to the hospital-specific rates paid to SCHs
and MDHs. This proposal is consistent with our proposed adjustment for
IPPS hospitals in two ways. First, as in the case of the IPPS
adjustment, we did not propose to implement the entire adjustment that
is warranted by our data (in this case, 5.4 percent) in one year.
Second, we proposed to maintain consistency by proposing the same
numerical level of adjustment for both groups of hospitals in FY 2011.
While this proposed adjustment to the hospital-specific rates
represented somewhat over half of the entire adjustment that is
appropriate for SCHs and MDHs, it would allow us to maintain complete
consistency, at least for FY 2011, in the effects on the relevant
classes of hospitals. Although the proposed adjustment for SCHs and
MDHs is cumulative and prospective, as opposed to the noncumulative
recoupment adjustment we proposed for other IPPS hospitals, we believe
that proposing equal numerical adjustments in this first year is the
most appropriate means to maintain such consistency and equity at this
time. We indicated in the proposed rule that we will continue, as much
as possible, consistent with sections 7(b)(1) of Public Law 110-90 and
section 1886(d)(5)(I)(i) of the Act, to take such consistency and
equity into account in developing future proposals for implementing
documentation and coding adjustments.
In the FY 2011 IPPS/LTCH PPS proposed rule, we sought public
comment on the proposed -2.9 percent prospective adjustment to
hospital-specific rates under section 1886(d)(5)(I)(i) of the Act and
addressing in future rulemaking cycles changes in FY 2008 and FY 2009
case-mix due to changes in documentation and coding that do not reflect
real changes in case-mix for discharges occurring during FY 2008 and FY
2009, noting that our current estimates of the remaining adjustment is
-2.5 percent. We stated that we intended to update our analysis with FY
2009 data on claims paid through March 2009 (sic) for this FY 2011
IPPS/LTCH PPS final rule and have updated our analysis with FY 2009
data on claims paid through March 2010 in this FY 2011 IPPS/LTCH PPS
final rule. (We note that the March 2009 update date for claims paid
data in the proposed rule should have been March 2010.)
Comment: Numerous commenters requested that CMS withdraw its
proposal to apply the documentation and coding adjustment to SCHs and
MDHs and questioned CMS' statutory authority to apply this adjustment
to providers receiving a hospital-specific rate. The commenters argued
that because section 1886(d)(3)(A)(vi) of the Act only authorizes
application of a documentation and coding adjustment to the
standardized amount, Congress' specific instruction as to the
applicability of this type of adjustment makes it impermissible for CMS
to apply the adjustment to the hospital-specific rates. Furthermore,
commenters contend that, due to their critical role in isolated
communities, any negative documentation and coding adjustment to SCHs
and MDHs would endanger their ability to provide the type of care that
Congress specifically sought to protect by establishing their special
Medicare payment systems.
Response: We continue to disagree with the commenters that the
Secretary's broad authority to make exceptions and adjustment to
payment amounts under section 1886(d)(3)(A)(vi) of the Act cannot be
applied in this instance. We have discussed the basis for applying such
an adjustment in prior rules (in the FY 2009 proposed rule (73 FR
23540), the FY 2009 final rule (73 FR 48448), and the FY 2010 proposed
rule (74 FR 24098)) and do not agree that the language in section
1886(d)(3)(A)(vi) of the Act limits our authority under section
1886(d)(5)(I)(i) of the Act to make such an adjustment. We recognize
that SCHs and MDHs are entitled, through legislation, to receive the
hospital-specific rate in order to compensate for their unique service
requirements in the provider community. Similar to our approach with
IPPS hospitals, we are implementing a phase-in of the documentation and
coding adjustment over an appropriate period, beginning in FY 2011. We
will continue to separately analyze SCH and MDH claims data to ensure
than any future adjustment is appropriate for these provider types.
Comment: MedPAC responded to our request for comments regarding the
level of adjustment for special categories of hospitals, such as
hospitals paid under the hospital-specific payment rate, by pointing
out that these hospitals have the same financial incentives for
documentation and coding improvements and the same ability to benefit
from increased payments that do not reflect real changes in case-mix
severity of illness levels. Therefore, MedPAC recommended that ``all
IPPS hospitals should be treated the same.'' At the same time, MedPAC
also stated that ``delaying prevention of overpayments * * * creates a
problem because overpayments will continue to accumulate in 2010 and
later years until the effect of documentation and coding improvement is
fully offset in the payment rates.'' In setting forward its multiyear
recommendation to CMS for complying with the requirements of section 7
of Public Law 110-90, MedPAC emphasized ``minimizing the accumulation
of overpayments.''
Response: We thank MedPAC for its comments and agree that it is
appropriate to conclude that hospitals paid under the hospital-specific
rate have experienced a 5.4 percent increase in documentation and
coding in FYs 2008 and 2009, insofar as these hospitals had the same
financial incentives to improve documentation and coding as other IPPS
hospitals, as

[[Page 50071]]

confirmed by the analysis we have described above. We further agree
with MedPAC that it is appropriate to focus on minimizing the
accumulation of overpayments; we interpret this statement to mean that
MedPAC recommends that CMS move forward as quickly as possible with
appropriate prospective adjustments. We appreciate MedPAC's guidance
that ``all hospitals be treated the same,'' and we agree that it is
important to treat various classes of similarly situated hospitals in
our payment policy determinations in a consistent manner.
Therefore, we are finalizing our proposal to apply an adjustment of
-2.9 percent in FY 2011 to the hospital-specific rates paid to SCHs and
MDHs. This adjustment is prospective in nature. We continue to believe
that such an adjustment is appropriate because, as MedPAC noted, all
hospitals have the same financial incentives for documentation and
coding improvements, and the same ability to benefit from the resulting
increase in aggregate payments that do not reflect real change in case-
mix severity of illness levels. As we describe above, our analysis of
claims data shows that the documentation and coding effect for all IPPS
hospitals is similar to the effect for SCHs and slightly different to
the effect for MDHs, and we believe the documentation and coding
estimates for all subsection (d) hospitals should be the same. This
adjustment also maintains, as much as possible, consistency in the
treatment of various classes of hospitals that are similarly situated
with respect to their ability to adjust their documentation and coding
practices. Specifically, this adjustment is consistent with our
adjustment for other IPPS hospitals in two ways. First, as in the case
of the IPPS adjustment, we are not implementing the entire adjustment
that is warranted by our data (in this case, 5.4 percent) in 1 year.
Second, we are treating hospitals in a consistent manner by applying
the same numerical level of adjustment for both groups of hospitals in
FY 2011. While this adjustment to the hospital-specific rates
represents somewhat over half of the entire adjustment that is
appropriate for SCHs and MDHs, it would allow us to maintain complete
consistency, at least for FY 2011, in the effects on the relevant
classes of hospitals. Although the proposed adjustment for SCHs and
MDHs is cumulative and prospective, as opposed to the noncumulative
recoupment adjustment we proposed for other IPPS hospitals, we believe
that applying equal numerical adjustments in this first year is the
most appropriate means to maintain such consistency and equity at this
time. As we indicated in the proposed rule, we will continue, as much
as possible, consistent with sections 7(b)(1) of Public Law 110-90 and
section 1886(d)(5)(I)(i) of the Act, to take such consistency and
equity into account in developing future proposals for implementing
documentation and coding adjustments.
10. Application of the Documentation and Coding Adjustment to the
Puerto Rico-Specific Standardized Amount
a. Background
Puerto Rico hospitals are paid based on 75 percent of the national
standardized amount and 25 percent of the Puerto Rico-specific
standardized amount. As noted previously, the documentation and coding
adjustment we adopted in the FY 2008 IPPS final rule with comment
period relied upon our authority under section 1886(d)(3)(A)(vi) of the
Act, which provides the Secretary the authority to adjust ``the
standardized amounts computed under this paragraph'' to eliminate the
effect of changes in coding or classification that do not reflect real
changes in case-mix. Section 1886(d)(3)(A)(vi) of the Act applies to
the national standardized amounts computed under section 1886(d)(3) of
the Act, but does not apply to the Puerto Rico-specific standardized
amount computed under section 1886(d)(9)(C) of the Act. In calculating
the FY 2008 payment rates, we made an inadvertent error and applied the
FY 2008 -0.6 percent documentation and coding adjustment to the Puerto
Rico-specific standardized amount, relying on our authority under
section 1886(d)(3)(A)(vi) of the Act. However, section
1886(d)(3)(A)(vi) of the Act authorizes application of a documentation
and coding adjustment to the national standardized amount and does not
apply to the Puerto Rico specific standardized amount. In the FY 2009
IPPS final rule (73 FR 48449), we corrected this inadvertent error by
removing the -0.6 percent documentation and coding adjustment from the
FY 2008 Puerto Rico-specific rates.
While section 1886(d)(3)(A)(vi) of the Act is not applicable to the
Puerto Rico-specific standardized amount, we believe that we have the
authority to apply the documentation and coding adjustment to the
Puerto Rico-specific standardized amount using our special exceptions
and adjustment authority under section 1886(d)(5)(I)(i) of the Act.
Similar to SCHs and MDHs that are paid based on the hospital-specific
rate, we believe that Puerto Rico hospitals that are paid based on the
Puerto Rico-specific standardized amount should not have the potential
to realize increased payments due to documentation and coding changes
that do not reflect real increases in patient severity of illness.
Consistent with the approach described for SCHs and MDHs, in the FY
2009 IPPS final rule (73 FR 48449), we indicated that we planned to
examine our FY 2008 claims data for hospitals in Puerto Rico. We
indicated in the FY 2009 IPPS proposed rule (73 FR 23541) that if we
found evidence of significant increases in case-mix for patients
treated in these hospitals, we would consider proposing application of
the documentation and coding adjustments to the FY 2010 Puerto Rico-
specific standardized amount under our authority in section
1886(d)(5)(I)(i) of the Act.
b. Documentation and Coding Adjustment to the Puerto Rico-Specific
Standardized Amount
For the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we performed a
retrospective evaluation of the FY 2008 claims data for Puerto Rico
hospitals using the same methodology described earlier for IPPS
hospitals paid under the national standardized amounts under section
1886(d) of the Act. We found that, for Puerto Rico hospitals, the
increase in payments for discharges occurring during FY 2008 due to
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2008 was approximately 1.1 percent.
When we calculated the within-base DRG changes and the across-base DRG
changes for Puerto Rico hospitals, we found that responsibility for the
case-mix change between FY 2007 and FY 2008 is much more evenly shared.
Across-base DRG shifts accounted for 44 percent of the changes, and
within-base DRG shifts accounted for 56 percent. Thus, the change in
the percentage of discharges with an MCC was not as large as that for
other IPPS hospitals. In Figure 4 in the FY 2010 proposed rule, we
showed that, for Puerto Rico hospitals, there was a 3 percentage point
increase in the discharges with an MCC from 22 percent to 25 percent
and a corresponding decrease of 3 percentage points from 58 percent to
55 percent in discharges without a CC or an MCC.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24101),
we solicited public comment on the proposed -1.1 percent prospective
adjustment to the hospital-specific rates under section
1886(d)(5)(I)(i) of the Act and our intent to address in the FY 2011

[[Page 50072]]

rulemaking cycle any changes in FY 2009 case-mix due to changes in
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2009. We also stated that we
intended to update our analysis with FY 2008 data on claims paid
through March 2009 for the FY 2010 IPPS final rule.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43777), we
indicated that, given these documentation and coding increases,
consistent with our statements in prior IPPS rules, we would use our
authority under section 1886(d)(5)(I)(i) of the Act to adjust the
Puerto Rico-specific rate. However, in parallel to our decision to
postpone adjustments to the Federal standardized amount, we indicated
that we were adopting a similar policy for the Puerto Rico-specific
rate for FY 2010 and would consider the phase-in of this adjustment
over an appropriate time period through future rulemaking. The
adjustment would be applied to the Puerto Rico-specific rate that
accounts for 25 percent of payments to Puerto Rico hospitals, with the
remaining 75 percent based on the national standardized amount.
Consequently, the overall reduction to the payment rates for Puerto
Rico hospitals to account for documentation and coding changes will be
slightly less than the reduction for IPPS hospitals paid based on 100
percent of the national standardized amount. We noted that, as with the
hospital-specific rates, the Puerto Rico-specific standardized amount
had not previously been reduced based on estimated changes in
documentation and coding associated with the adoption of the MS-DRGs.
However, as we note earlier for IPPS hospitals and hospitals receiving
hospital-specific rates, if the estimated documentation and coding
effect determined based on a full analysis of FY 2009 claims data is
more or less than our current estimates, it would change, possibly
lessen, the anticipated cumulative adjustments that we currently
estimate we would have to make for the FY 2008 and FY 2009 combined
adjustment. Therefore, we believed that it would be more prudent to
delay implementation of the documentation and coding adjustment to
allow for a more complete analysis of FY 2009 claims data for Puerto
Rico hospitals.
Consistent with our approach for IPPS hospitals for FY 2010, we
indicated that we would address in the FY 2011 rulemaking cycle any
change in FY 2009 case-mix due to documentation and coding that did not
reflect real changes in case-mix for discharges occurring during FY
2009. We noted that, unlike the national standardized rates, the FY
2009 hospital-specific rates were not previously reduced in order to
account for anticipated changes in documentation and coding that do not
reflect real changes in case-mix resulting from the adoption of the MS-
DRGs.
As we have noted above, similar to SCHs and MDHs, hospitals in
Puerto Rico use the same MS-DRG system as all other hospitals and we
believe they have the potential to realize increased payments from
documentation and coding changes that do not reflect real increases in
patient severity of illness. Therefore, we believe they should be
equally subject to the prospective budget neutrality adjustment that we
intend to apply to prospective payment rates for IPPS hospitals
including SCHs and MDHs in order to eliminate the full effect of the
documentation and coding changes associated with implementation of the
MS-DRG system.
[GRAPHIC] [TIFF OMITTED] TR16AU10.002

In the above chart, consistent with our findings for IPPS
hospitals, for Puerto Rico hospitals, there is a corresponding increase
in the discharge severity with MCCs compared to a decrease in discharge
severity in the without CC/MCC category. This analysis reflects FY 2009
claims paid through March 2010.
Using the same methodology we applied to estimate documentation and
coding changes under IPPS for non-Puerto Rico hospitals, as we have
also discussed above, our best estimate, based on the most recently
available data (FY 2009 claims paid through March 2010), is that a
cumulative adjustment of -2.6 percent is required to eliminate the full
effect of the documentation and coding changes on future payments from
the Puerto Rico-

[[Page 50073]]

specific rate. Unlike the case of standardized amounts paid to IPPS
hospitals, we have not made any previous adjustments to the hospital-
specific rates paid to Puerto Rico hospitals to account for
documentation and coding changes. Therefore, the entire -2.6 percent
adjustment remains to be implemented.
As we stated above, we believe it important to maintain both
consistency and equity among all hospitals paid on the basis of the
same MS-DRG system. At the same time, however, we recognize that the
estimated cumulative impact on aggregate payment rates resulting from
implementation of the MS-DRG system was smaller for Puerto Rico
hospitals as compared to IPPS hospitals and SCHs and MDHs. Therefore,
in the FY 2011 IPPS LTCH PPS proposed rule (75 FR 23876), we proposed
an adjustment of -2.4 percent in FY 2011 to Puerto Rico-specific rate
that accounts for 25 percent of payments to Puerto Rico hospitals, with
the remaining 75 percent based on the national standardized amount,
which we proposed to adjust as described above. Consequently, the
overall reduction to rates for Puerto Rico hospitals to account for the
documentation and coding changes will be slightly less than the
reduction for IPPS hospitals based on 100 percent of the national
standardized amount. We noted that the proposed prospective adjustment
would have eliminated the full effect of the documentation and coding
changes (as estimated at the time) on the portion of future payments to
Puerto Rico hospitals based on the Puerto Rico-specific rate. We
believe that this a full prospective adjustment is the most appropriate
means to take into full account the effect of documentation and coding
changes on payments, and to maintain equity as much as possible between
hospitals paid on the basis of different prospective rates. (As
discussed below, the estimated -2.4 percent adjustment that we
calculated in the proposed rule no longer represents a ``full
prospective adjustment.'') One reason for proposing the full
prospective adjustment for the Puerto Rico-specific rate in FY 2011 was
to maintain equity as much as possible in the documentation and coding
adjustments applied to various hospital rates in FY 2011. Because our
proposal was to make an adjustment that represents the full adjustment
that is warranted for the Puerto Rico-specific rate, we indicated that
we do not anticipate proposing any additional adjustments to the this
rate for documentation and coding effects.
In the FY 2011 proposed rule, we sought public comment on the
proposed full prospective adjustment, which we estimated at that time
to be -2.4 percent, to the Puerto Rico-specific standardized amount
under section 1886(d)(5)(I)(i) of the Act. We stated that we intended
to update our analysis with FY 2009 data on claim paid through March
2009 (sic) for this FY 2011 IPPS/LTCH PPS final rule. (We note that the
March 2009 update date for claims paid data in the proposed rule should
have been March 2010.) We have updated our analysis, as planned, with
FY 2009 data on claims paid through March 2010 in this FY 2011 IPPS/
LTCH PPS final rule. This updated data analysis shows that a cumulative
adjustment of -2.6 percent is required to eliminate the full effect of
the document and coding changes on future payments from the Puerto
Rico-specific rate.
Comment: MedPAC responded to our request for comments regarding the
level of adjustment for special categories of hospitals, such as Puerto
Rico hospitals, by pointing out that these hospitals have the same
financial incentives for documentation and coding improvements and the
same ability to benefit from increased payments that do not reflect
real change in case-mix severity of illness levels. Therefore, MedPAC
recommended that ``all IPPS hospitals should be treated the same.'' At
the same time, MedPAC also stated that ``delaying prevention of
overpayments * * * creates a problem because overpayments will continue
to accumulate in 2010 and later years until the effect of documentation
and coding improvement is fully offset in the payment rates.'' In
setting forward its multiyear recommendation to CMS for complying with
the requirements of section 7 of Public Law 110-90, MedPAC emphasizes
``minimizing the accumulation of overpayments.''
Response: We thank MedPAC for its comments and agree that Puerto
Rico hospitals have had the same financial incentives to improve
documentation and coding as other IPPS hospitals. We further agree with
MedPAC that it is appropriate to focus on minimizing the accumulation
of overpayments; we interpret this statement to mean that MedPAC
recommends that CMS move forward as quickly as possible with
appropriate prospective adjustments. We appreciate MedPAC's guidance
that ``all hospitals be treated the same,'' and we agree that it is
important for our payment policy determinations to treat various
classes of hospitals that are similarly situated with respect to the
ability to adjust their documentation and coding practices in as
consistent a manner as possible.
Therefore, we are finalizing our proposal to apply an adjustment to
the Puerto Rico specific rate in FY 2011 using our authority under
section 1886(d)(5)(I)(i) of the Act as proposed (that is, a full
prospective adjustment). We note that our updated data analysis shows
that this adjustment will be -2.6 percent. We continue to believe that
such an adjustment is appropriate because, as MedPAC found, all
hospitals have the same financial incentives for documentation and
coding improvements and the same ability to benefit from the resulting
change in case-mix. As we indicated in the proposed rule, we will
continue, as much as possible, consistent with sections 7(b)(1) of
Public Law 110-90 and section 1886(d)(5)(I)(i) of the Act, to take such
consistency and equity into account in developing future proposals for
implementing documentation and coding adjustments.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
In the FY 2009 IPPS final rule (73 FR 48450), we continued to
implement significant revisions to Medicare's inpatient hospital rates
by completing our 3-year transition from charge-based relative weights
to cost-based relative weights. Beginning in FY 2007, we implemented
relative weights based on cost report data instead of based on charge
information. We had initially proposed to develop cost-based relative
weights using the hospital-specific relative value cost center (HSRVcc)
methodology as recommended by MedPAC. However, after considering
concerns expressed in the public comments we received on the proposal,
we modified MedPAC's methodology to exclude the hospital-specific
relative weight feature. Instead, we developed national CCRs based on
distinct hospital departments and engaged a contractor to evaluate the
HSRVcc methodology for future consideration. To mitigate payment
instability due to the adoption of cost-based relative weights, we
decided to transition cost-based weights over 3 years by blending them
with charge-based weights beginning in FY 2007. (We refer readers to
the FY 2007 IPPS final rule for details on the HSRVcc methodology and
the 3-year transition blend from charge-based relative weights to cost-
based relative weights (71 FR 47882 through 47898).)
In FY 2008, we adopted severity-based MS-DRGs, which increased the
number of DRGs from 538 to 745. Many

[[Page 50074]]

commenters raised concerns as to how the transition from charge-based
weights to cost-based weights would continue with the introduction of
new MS-DRGs. We decided to implement a 2-year transition for the MS-
DRGs to coincide with the remainder of the transition to cost-based
relative weights. In FY 2008, 50 percent of the relative weight for
each DRG was based on the CMS DRG relative weight and 50 percent was
based on the MS-DRG relative weight.
In FY 2009, the third and final year of the transition from charge-
based weights to cost-based weights, we calculated the MS-DRG relative
weights based on 100 percent of hospital costs. We refer readers to the
FY 2007 IPPS final rule (71 FR 47882) for a more detailed discussion of
our final policy for calculating the cost-based DRG relative weights
and to the FY 2008 IPPS final rule with comment period (72 FR 47199)
for information on how we blended relative weights based on the CMS
DRGs and MS-DRGs.
a. Summary of the RTI Study of Charge Compression and CCR Refinement
As we transitioned to cost-based relative weights, some public
commenters raised concerns about potential bias in the weights due to
``charge compression,'' which is the practice of applying a higher
percentage charge markup over costs to lower cost items and services,
and a lower percentage charge markup over costs to higher cost items
and services. As a result, the cost-based weights would undervalue
high-cost items and overvalue low-cost items if a single CCR is applied
to items of widely varying costs in the same cost center. To address
this concern, in August 2006, we awarded a contract to RTI to study the
effects of charge compression in calculating the relative weights and
to consider methods to reduce the variation in the CCRs across services
within cost centers. RTI issued an interim draft report in January 2007
with its findings on charge compression (which was posted on the CMS
Web site at: http://www.cms.hhs.gov/reports/downloads/Dalton.pdf). In
that report, RTI found that a number of factors contribute to charge
compression and affect the accuracy of the relative weights. RTI's
findings demonstrated that charge compression exists in several CCRs,
most notably in the Medical Supplies and Equipment CCR.
In its interim draft report, RTI offered a number of
recommendations to mitigate the effects of charge compression,
including estimating regression-based CCRs to disaggregate the Medical
Supplies Charged to Patients, Drugs Charged to Patients, and Radiology
cost centers, and adding new cost centers to the Medicare cost report,
such as adding a ``Devices, Implants and Prosthetics'' line under
``Medical Supplies Charged to Patients'' and a ``CT Scanning and MRI''
subscripted line under ``Radiology-Diagnostics''. Despite receiving
public comments in support of the regression-based CCRs as a means to
immediately resolve the problem of charge compression, particularly
within the Medical Supplies and Equipment CCR, we did not adopt RTI's
recommendation to create additional regression-based CCRs. (For more
details on RTI's findings and recommendations, we refer readers to the
FY 2009 IPPS final rule (73 FR 48452).) RTI subsequently expanded its
analysis of charge compression beyond inpatient services to include a
reassessment of the regression-based CCR models using both outpatient
and inpatient charge data. This interim report was made available in
April 2008 during the public comment period on the FY 2009 IPPS
proposed rule and can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200804.pdf. The IPPS-specific chapters, which were
separately displayed in the April 2008 interim report, as well as the
more recent OPPS chapters, were included in the July 3, 2008 RTI final
report entitled, ``Refining Cost-to-Charge Ratios for Calculating APC
[Ambulatory Payment Classification] and DRG Relative Payment Weights,''
that became available at the time of the development of the FY 2009
IPPS final rule. The RTI final report can be found on RTI's Web site
at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf.
RTI's final report found that, under the IPPS and the OPPS,
accounting improvements to the cost reporting data reduce some of the
sources of aggregation bias without having to use regression-based
adjustments. In general, with respect to the regression-based
adjustments, RTI confirmed the findings of its March 2007 report that
regression models are a valid approach for diagnosing potential
aggregation bias within selected services for the IPPS and found that
regression models are equally valid for setting payments under the
OPPS.
RTI also noted that cost-based weights are only one component of a
final prospective payment rate. There are other rate adjustments (wage
index, IME, and DSH) to payments derived from the revised cost-based
weights, and the cumulative effect of these components may not improve
the ability of final payment to reflect resource cost. RTI endorsed
short-term regression-based adjustments, but also concluded that more
refined and accurate accounting data are the preferred long-term
solution to mitigate charge compression and related bias in hospital
cost-based weights. For a more detailed summary of RTI's findings,
recommendations, and public comments we received on the report, we
refer readers to the FY 2009 IPPS final rule (73 FR 48452 through
48453).
b. Summary of the RAND Corporation Study of Alternative Relative Weight
Methodologies
One of the reasons that we did not implement regression-based CCRs
at the time of the FY 2008 IPPS final rule with comment period was our
inability to investigate how regression-based CCRs would interact with
the implementation of MS-DRGs. In the FY 2008 final rule with comment
period (72 FR 47197), we stated that we engaged the RAND Corporation as
the contractor to evaluate the HSRV methodology in conjunction with
regression-based CCRs, and that we would consider its analysis as we
prepared for the FY 2009 IPPS rulemaking process.
RAND evaluated six different methods that could be used to
establish relative weights; CMS' current relative weight methodology of
15 national CCRs and 5 alternatives, including a method in which the 15
national CCRs are disaggregated using the regression-based methodology,
and a method using hospital-specific CCRs for the 15 cost center
groupings. In addition, RAND analyzed our standardization methodologies
that account for systematic cost differences across hospitals. The
purpose of standardization is to eliminate systematic facility-specific
differences in cost so that these cost differences do not influence the
relative weights. Overall, RAND found that none of the methods it
studied of calculating the relative weights represented a marked
improvement in payment accuracy over the current method, and there was
little difference across methods in their ability to predict cost at
either the discharge-level or the hospital-level. In their regression
analysis, RAND found that, after controlling for hospital payment
factors, the relative weights are compressed (that is, understated).
However, RAND also found that the hospital payment factors are
overstated and increase more rapidly than cost. Therefore, while the
relative weights are compressed, these payment factors

[[Page 50075]]

offset the compression such that total payments to hospitals increase
more rapidly than hospitals' costs.
In the FY 2009 IPPS final rule (73 FR 48453 through 48457), we
provided a summary of the RAND report and the public comments we
received in response to the FY 2009 IPPS proposed rule. The report may
be found on RAND's Web site at: http://www.rand.org/pubs/working_papers/WR560/.
2. Proposed and Final Policy Changes for FY 2011 and Timeline for
Changes to the Medicare Cost Report
In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in
response to the RTI's recommendations concerning cost report
refinements, and because of RAND's finding that regression-based
adjustments to the CCRs do not significantly improve payment accuracy,
we discussed our decision to pursue changes to the cost report to split
the cost center for Medical Supplies Charged to Patients into one line
for ``Medical Supplies Charged to Patients'' and another line for
``Implantable Devices Charged to Patients.'' We acknowledged, as RTI
had found, that charge compression occurs in several cost centers that
exist on the Medicare cost report. However, as we stated in the final
rule, we focused on the CCR for Medical Supplies and Equipment because
RTI found that the largest impact on the MS-DRG relative weights could
result from correcting charge compression for devices and implants. In
determining what should be reported in these respective cost centers,
we adopted the commenters' recommendation that hospitals should use
revenue codes established by AHA's National Uniform Billing Committee
to determine what should be reported in the ``Medical Supplies Charged
to Patients'' and the ``Implantable Devices Charged to Patients'' cost
centers.
When we developed the FY 2009 IPPS final rule, we considered all of
the public comments we received both for and against adopting
regression-based CCRs. Also noteworthy is RAND's belief that
regression-based CCRs may not significantly improve payment accuracy,
and that it is equally, if not more, important to consider revisions to
the current IPPS hospital payment factor standardization method in
order to improve payment accuracy. For FY 2010, we solicited comments
on improving the standardization process, although we did not make any
changes to the standardization process for FY 2010. We also stated that
we continued to believe that, ultimately, improved and more precise
cost reporting is the best way to minimize charge compression and
improve the accuracy of the cost weights. Accordingly, a new
subscripted line 55.30 for Implantable Devices Charged to Patients was
created in July 2009 as part of CMS' Transmittal 20 update to the
existing cost report Form CMS-2552-96. This new subscripted cost center
is available for use for cost reporting periods beginning on or after
May 1, 2009.
With respect to the initiative to reform, update, and streamline
the Medicare cost report, which has been the subject of many comments
and our responses in the IPPS (and OPPS) Federal Register notices of
rulemaking over the past several years, CMS is continuing to work on
this project. The new draft hospital cost report Form CMS-2552-10 was
published in the Federal Register on July 2, 2009, and was subject to a
60-day review and comment period, which ended August 31, 2009. CMS
received numerous comments on the draft hospital cost report Form CMS-
2552-10, specifically regarding the creation of new cost centers from
which data would be ultimately used in the relative weights
calculation. The public comments on the July 2, 2009 Federal Register
notice were incorporated in a Federal Register notice that was issued
on April 30, 2010 (75 FR 22810). We now plan to issue the final
hospital cost report Form CMS-2552-10 later this summer. However, in
part, in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23878 through
23880), we provided a summary of the public comments received on the
July 2, 2009 notice that specifically related to the relative weights
and responded to those comments. Our responses to the comments in the
FY 2011 IPPS/LTCH PPS proposed rule constituted our proposals for FY
2011 regarding the relative weights.
Several commenters asked that CMS create cost centers to house the
costs of magnetic resonance imaging (MRI), Computed Tomography (CT),
nuclear medicine services, cardiac catheterization, drugs that require
detailed coding, and magnetoencephalography (MEG). One commenter
indicated, that in RTI's July 2008 report (http://www.rti.org/reports/cms/), RTI made an argument that CMS should create new standard cost
centers in which hospitals would report the costs of MRI scans, CT
scans, cardiac catheterization, and drugs that require detailed coding,
in addition to the new cost center for ``Implantable Devices Charged to
Patients.'' The commenter stated that these additional lines are needed
to distinguish items and services that hospitals tend to markup
differently within existing revenue centers, citing RTI's finding that
CT scans have a significantly higher markup than most other radiology
services. The commenter indicated that when CMS uses the overall
radiology department CCR to convert charges for CT scans to costs, it
overestimates the cost of these services, resulting in overstated
relative weights for MS-DRGs under the IPPS and for APCs under the OPPS
that incorporate CT scanning. The commenter argued that having a
separate cost center for each of these services would resolve the
problem. The commenter also stated that, while CMS has done something
similar with the creation of the cost center for high cost medical
devices, making cost center changes for some services, but not others,
where such changes are warranted could create additional distortion in
the relative weights. The commenter further argued that cost center
changes should be made for all service areas with significant volume
where services with sizable differences in markup are currently
combined in a single cost center. The commenter asserted that creating
these cost centers should not create reporting burden for hospitals
because the RTI report indicated that roughly one-third of the
hospitals are already reporting costs for CT scans, MRI scans, and
cardiac catheterization under the specific nonstandard cost centers
currently available in the cost report.
Another commenter also recommended the creation of the cost centers
for CT scans, MRI scans, and nuclear medicine services, but for
different reasons than the first commenter. Specifically, this
commenter believed these new cost centers are necessary in order for
the high capital costs to be appropriately allocated to these services
and to be correctly reflected in the CCRs that are used in the
establishment of the MS-DRG and APC payment rates for the services. The
commenter stated that, under the existing cost report structure, some
providers are allocating high capital costs for these services in a
single radiology line, diluting the high capital costs associated with
CT scans, MRI scans, and nuclear medicine services across all radiology
services, including low cost services. Therefore, the commenter
concluded that the resulting radiology CCRs that CMS applies to charges
for CT scans, MRI scans, and nuclear medicine services to arrive at the
relative costs used to set payment rates for both the IPPS and OPPS
understate the cost of high cost radiology services and overstate the
cost of low cost radiology services, resulting

[[Page 50076]]

in payments that are too low for the high cost services. The commenter
indicated that CMS should not only create these new cost centers but
should also require all hospitals to use them, and should issue
explicit instructions on how to report the costs of these services in
the new standard cost centers.
We agree that it is appropriate to create standard cost centers for
CT scans, MRI scans, and cardiac catheterization and to require that
hospitals report the costs and charges for these services under new
cost centers on the revised Medicare cost report Form CMS 2552-10. As
we discussed in the FY 2009 IPPS and CY 2009 OPPS proposed and final
rules, RTI found that the costs and charges of CT scans, MRI scans, and
cardiac catheterization differ significantly from the costs and charges
of other services included in the standard associated cost center. RTI
also concluded that both the IPPS and OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
costs centers for CT scanning, MRIs, and cardiac catheterization in
order for hospitals to report separately the costs and charges for
those services and in order for CMS to calculate unique CCRs to
estimate the cost from charges on claims data.
In its analysis, RTI concluded that the estimated costs for CT
scanning and MRI scans would decline significantly and that the
estimated cost for cardiac catheterization would increase modestly if
specific standard cost centers were used. RTI found that cardiac
catheterization has very different cost inputs from most cardiac
testing (for example, electrocardiograms or cardiac stress testing)
captured in the 5300 ``Electrocardiology'' cost center and that the
accuracy of the CCR for both types of services, cardiac catheterization
and other cardiac testing, would improve with creation of a standard
cost center for cardiac catheterization. RTI also found that one-third
of hospitals already report cardiac catheterization costs and charges
separately through the available nonstandard cost center or through
subscripted lines to the ``Electrocardiology'' cost center. Similarly,
RTI found that approximately one-third of hospitals already separately
report the costs for CT scanning and MRI scans on their Medicare cost
report through subscripted lines and the available nonstandard cost
centers. We believe the current prevalence of reporting for the
nonstandard cost centers for these three services suggests a modest
hospital burden required to adopt these cost centers.
We discussed the possibility of creating standard cost centers for
these three different services in our CY 2009 OPPS proposed and final
rule with comment period (73 FR 41432 and 73 FR 68525) and solicited
general comments on RTI's recommendations. The commenters who objected
to the creation of the standard cost centers for CT scanning and MRI
scans largely did so based on RTI projected lower estimated costs for
these services if CMS created these cost centers. The commenters
suggested that the current CCRs for advanced imaging may reflect a
misallocation of capital costs and requested that CMS not adopt
separate cost centers or statistical adjustment simulating lower CCRs
for CT scanning and MRI until CMS could understand how providers are
allocating the extensive capital costs for these services to the
revenue producing cost centers. We also received comments suggesting
that the accuracy of estimated costs would improve with better
allocation, potentially increasing the CCR as more capital cost would
be appropriately allocated to both CT scanning and MRI and not spread
across all services in the radiology cost center. We noted in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68525) that our
recommended allocation of moveable equipment costs in Worksheet B of
the Medicare cost report is based on dollar value, and that it would be
important to encourage improved accuracy of capital allocation through
dollar value or direct assignment if we were to make these cost centers
standard cost centers.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23879), we stated
that, at that time, we did not know the impact on CCRs and estimated
costs of adopting standard cost centers specific to CT scanning and
MRI. However, we stated our belief that these areas constitute
significant payment under both the IPPS and OPPS and that these are
common imaging services already widely reported by hospitals.
Therefore, in the proposed rule, we proposed to adopt new standard cost
centers for CT scanning and MRI. We agreed with those commenters who
asserted that creation of standard cost centers for CT scanning and MRI
would improve the accuracy of cost estimation for these services, in
part by creating incentives for hospitals to more accurately allocate
the capital and equipment associated with these services.
With regard to cardiac catheterization, we received one comment on
the CY 2009 OPPS/ASC proposed rule suggesting that hospitals might find
it difficult to allocate costs for these services to specific cost
centers, especially for cardiac catheterization, and that allocated
overhead costs would, in most cases, be an estimate (73 FR 68527).
However, given the number of hospitals already reporting the
nonstandard cost center for cardiac catheterization and the number
subscripting these costs and charges (approximately 50 percent,
according to RTI's July 2008 report (pages 71 and 72) at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf), we believe that hospitals do
allocate overhead costs to a cardiac catheterization-specific cost
center.
We also received public comments on the cost report notice urging
us to create standard cost centers for nuclear medicine services, for
drugs that require detailed coding, and for MEG. In the proposed rule,
we indicated that we continue to believe that it is not appropriate to
create standard cost centers for these three services. The Medicare
cost report already contains standard cost center 4300 (Radioisotope)
to capture the costs and charges for the radioisotopes used in nuclear
medicine services, the items that may have significantly different
costs and hospital markup than the supplies and equipment used in other
radiology services. Moreover, the cost report already contains standard
cost center 4100 (Diagnostic Radiology) in which the costs of staff,
minor equipment, and supplies for diagnostic nuclear medicine services
can be reported. Major moveable equipment should be allocated to this
cost center on Worksheet B unless the provider received approval from
its contractor for direct assignment of the costs (Provider
Reimbursement Manual (PRM), Part I, Section 2307). Therefore, we
continue to believe that creating a new standard cost center for
nuclear medicine services is not necessary. We also continue to believe
that it is not appropriate to create a standard cost center for drugs
that require detailed coding. We refer readers to the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68655) for a detailed discussion
on our final decision not to create this cost center. Finally, with
respect to MEG services, the extremely low volume of claims for MEG
services furnished to Medicare beneficiaries in the hospital outpatient
setting and the extremely low number of hospitals that report these
codes relative to the volumes we typically have considered in adding
both standard and nonstandard cost centers to the cost report lead us
to conclude that a specific cost center for MEG is not justified at
this time.

[[Page 50077]]

Comment: Commenters both supported and opposed our proposal to
establish standard cost centers for the reporting of costs for CT
scanning and for MRI. Some commenters supported the proposal because
they agree with RTI's finding that there is aggregation bias in the
radiology cost centers. RTI found that CT and MRI scans have a
significantly higher markup in their respective nonstandard cost
centers or subscripted standard cost center lines than most other
radiology services. The commenters indicated that when CMS uses the
overall radiology department CCR that ``ignores'' costs and charges
reported in the CT and MRI nonstandard cost centers and other
subscripted cost centers to convert charges to costs for CT and MRI
scans, it overestimates the cost of these services, resulting in
overstated relative weights for MS-DRGs under the IPPS and for APCs
under the OPPS that incorporate CT scanning. These commenters believed
that the creation of standard cost centers for CT scanning and MRI
services will result in more accurate estimation of the cost of these
services.
Some commenters who objected to the proposal believed that it is
premature to establish these new standard cost centers without
understanding the payment implications of these changes on both IPPS
relative weights and OPPS payments. The commenters were concerned that
adoption of these cost centers would result in very low CCRs for these
services, as already observed in the nonstandard cost centers and
estimated by RTI in its July 2008 report. Some commenters stated that
if the proposal were finalized, they believe that a chest CT scan would
be paid at the same level as a routine chest X-ray under the OPPS.
Commenters also were concerned that estimating costs on claims data
using CCRs based on cost and charge data from standard cost centers for
CT scanning and MRI services would adversely impact payment for the
technical component of imaging services paid under the Medicare
Physician Fee Schedule (MPFS), which is capped at the level paid under
the OPPS fee schedule. Commenters suggested that CMS examine all the
costs incorporated into CT scans and MRI services before accepting very
low CCRs for these services. Some commenters suggested that CMS should
analyze the CCR methodology by performing specific procedure cost
comparisons of low value versus high value diagnostic imaging equipment
for both inpatient and outpatient settings to ensure that the CCRs
accurately reflect the cost of capital equipment used in the procedure
cost.
Response: After consideration of these comments, we continue to
believe that the creation of standard cost centers for CT scanning and
MRI services is necessary because of the potentially significant
improvement in the accuracy of estimated costs, as recommended by RTI.
We understand the commenters' concerns that the final CCRs for CT scans
and MRI maybe low in light of current cost report data findings and
that this may result in lower payment for CT scans and MRI services. We
do not believe that we can assess whether inappropriate payments would
result with our current data and, for that reason, we believe that we
should collect standard cost center cost and charge data for these
areas, using those data to assess the resulting CCRs specific to CT
scanning and MRI services as a means of eliminating aggregation bias
for these and other radiology services in the IPPS and OPPS. Therefore,
we are establishing standard cost centers for CT scanning and MRI
services in hospital cost reports for cost report periods beginning on
or after May 1, 2010. We believe that establishing these standard cost
centers is necessary to improving the accuracy of estimating costs for
imaging services and will allow us to perform the impact assessment
that some commenters want us to do.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880), we also
noted that there is typically a 3-year lag between the availability of
the cost report data that we use to calculate the relative weights both
under the IPPS and the OPPS and a given fiscal or calendar year, and
therefore, the data from the proposed standard cost centers for CT
scans, MRI, and cardiac catheterization respectively, should they be
finalized, would not even be available for possible use in calculating
the relative weights earlier than 3 years after Form CMS-2552-10
becomes available. We stated that at that time, we would analyze the
data and determine if it is appropriate to use those data to create
distinct CCRs from these cost centers for use in the relative weights
for the respective payment systems. Therefore, we wish to reassure the
commenters that there is no need for immediate concern regarding
possible negative payment impacts on MRI and CT scans under the IPPS
and OPPS because the cost report data that would be used for the
calculation of the relative weights is at least 3 years from being
available. We will first thoroughly analyze and run impacts on the data
and provide the public with the opportunity to comment, as usual,
before distinct CCRs for MRI and CT scans would be finalized for use in
the calculation of the relative weights. Our decision to finalize our
proposal regarding cost centers for these services is only the first
step to a longer process during which we will continue to consider
public comment.
In this final rule, we are finalizing our proposal to create
standard cost centers for MRI and CT scans on the new Medicare cost
report Form CMS-2552-10, and urge all hospitals to properly report
their costs and charges for MRI, CT scans, and all other services so
that, in several years' time, we will have reliable data from all
hospitals on which to base a decision as to whether to incorporate
additional CCRs into the relative weight calculation. We note that the
impact on physician payment for the technical component of these
services that results from changes to payment to hospitals is not
within scope of the proposed rule.
Comment: Some commenters stated that the current reporting of the
high cost of CT and MRI equipment results in inaccurate estimates of
the cost of these services. Specifically, they asserted that some
hospitals consider CT and MRI equipment costs to be capital costs,
which are spread across various cost centers based on square footage or
another allocation methodology, resulting in an underallocation of
capital costs to the radiology department and CT and MRI nonstandard
cost centers and inappropriately low CCRs for these services. In
addition, the commenters believed that some hospitals report CT and MRI
equipment costs as part of hospital fixtures and not as moveable
equipment, allocating their direct capital costs across the whole
hospital, rather than to the radiology cost center. One commenter
stated the revised Medicare cost report Form 2552-10 recommended using
a simplified cost allocation methodology where movable equipment is
allocated on a square footage basis, which appeared contrary to the
IPPS proposed rule that discussed that a dollar value could be used as
the statistical basis for cost allocation.
Finally, some commenters stated that hospitals do not have an
incentive to report these costs accurately in disaggregated cost
centers, given the time and resources to do the cost allocation. They
believed that hospitals have a modest incentive to spread their capital
cost across all services rather than allocating imaging equipment costs
in the imaging cost centers. One commenter argued that because many

[[Page 50078]]

non-Medicare third party payers continue to pay hospitals on the basis
of a percentage of charges and, to the extent that specific allocation
of equipment and other capital costs to MRI and CT scans reduces the
charges for other services, hospital may have a financial disincentive
to specifically allocate those costs. The commenter also pointed out
that, in some States, cost reporting practices are required to conform
to State regulatory requirements, which may be inconsistent with
specific allocation of capital costs.
Response: Section 104 of the PRM-1 contains definitions of
buildings (section 104.2), building equipment (section 104.3), major
moveable equipment (section 104.4), and minor equipment (section 104.5)
that apply for purposes of cost report completion. We believe that it
is clear that CT and MRI equipment are ``major moveable equipment'' and
are neither a building cost nor a building equipment cost.
Specifically, section 104.4 of the PRM-1 defines ``major moveable
equipment'' as follows: ``The general characteristics of this equipment
are: (a) A relatively fixed location in the building; (b) capable of
being moved, as distinguished from building equipment; (c) a unit cost
sufficient to justify ledger control; (d) sufficient size and identity
to make control feasible by means of identification tags; and (e) a
minimum life of approximately three years. Major moveable equipment
includes such items as accounting machines, beds, wheelchairs, desks,
vehicles, x-ray machines, etc.'' In addition to this longstanding
instruction, we believe that our view that CT scanning and MRI
equipment are major moveable equipment is supported by the 2008 edition
of ``Estimated Useful Lives of Depreciable Hospital Assets,'' which
states that the estimated useful life of a CT scanner is 5 years, an
MRI is 5 years, and an X-ray unit is 7 years. Therefore, we believe
that our longstanding policy makes it clear that CT scanning and MRI
equipment is major moveable equipment and should be reported as such on
the cost report. As major moveable equipment, the costs should be
reported together with the rest of the hospital's major moveable
equipment cost in the ``Capital Related Cost--Moveable Equipment'' cost
center(s) on Worksheet A (lines 2 and 4). The costs in this cost center
are allocated to all the hospital's cost centers that use major
moveable equipment (including CT and MRI) using ``dollar value'' or
``square feet'' if the provider obtained the contractor's approval
under Provider Reimbursement Manual, Part II (PRM-II), Section 3617, to
use the simplified cost allocation methodology. However, a hospital
that is concerned that this method of allocation may result in
inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and
other ancillary cost centers may request contractor approval under
section 2307 of the PRM-I to directly assign the cost of moveable
equipment to all of the hospital's cost centers that use moveable
equipment, including CT scans and MRI. If the hospital meets all of the
criteria in section 2307 of the PRM-I, the contractor may approve the
direct assignment method. This would ensure that the high cost of the
CT scanning and MRI equipment would be reflected in the CCR that would
be calculated for those departments and that would be used to estimate
the cost of CT scanning and MRI services. In any case, hospitals with
accounting systems that include the cost of CT scanning and MRI
equipment in the ``Capital Related Costs--Building and Fixtures'' cost
center should correct their cost reporting practices to come into
compliance with CMS longstanding policy in this regard. Reporting of
costs and charges on the Medicare cost report must be compliant with
Medicare cost reporting principles, regardless of differing payment
structures and incentives of other payers or State reporting
requirements.
Comment: Commenters raised concerns about rural hospitals being
unable to accurately report costs in CT scanning, MRI and cardiac
catheterization cost centers. One commenter noted that rural hospitals,
like CAHs, provide some of these radiology services internally or
through arrangement, and that it is difficult for them to track the
costs for these cost centers. The commenter requested that CAHs be
exempt from the requirement to report their costs in the proposed
standard cost centers. Other commenters noted that the proposed
creation of a standard cardiac catheterization cost center would pose a
significant burden to hospitals to change their cost reporting to
allocate costs to this cost center. In particular, they stated that
smaller hospitals may have fewer resources to be able to separate their
costs and charges for these cost centers, which would pose a
significant burden. The commenters indicated that, for example, while
revenue code 481 ``Cardiology-Catheterization Lab'' contains cardiac
catheterization charges, there are some revenue codes that contain
other charges for cardiac catheterization, like revenue codes 360 and
361, ``Operating Room-General'' and ``Operating Room-Minor,''
respectively.
Response: As we stated in the CY 2009 OPPS final rule (73 FR
68522), with regard to creation of new cost centers, hospitals that do
not currently maintain distinct departments or accounts in their
internal accounting systems for CT scanning, MRI, or cardiac
catheterization are not required to create distinct departments or
accounts. We do not expect additional burden for reporting under these
new standard cost centers to be significant because hospitals that
provide these services and maintain a separate account for these
services in their internal accounting records to capture the costs and
charges are currently required in accordance with Sec. 413.53(a)(1) to
report these cost centers in the cost report, even if CMS does not
identify a cost center code for the department(s). Specifically, under
those regulations defining the departmental method of cost
apportionment, the hospital must separately apportion the cost of each
ancillary department. CMS defines a cost center in PRM-I, Section
2302.8, as an organizational unit, generally a department or its
subunit, having a common functional purpose for which direct and
indirect costs are accumulated, allocated, and apportioned. With
respect to the comments regarding the revenue codes for cardiac
catheterization, if the hospital operates a separate department for
cardiac catheterization and maintains a separate General Ledger account
for this department, the hospital would be expected to report the costs
and charges in the new cardiac catheterization standard cost center and
ensure that the charges are billed under appropriate UB revenue codes.
Comment: Some commenters supported the proposal to create a
standard cost center for cardiac catheterization services. However,
some commenters objected to the proposal to create a standard cost
center for Cardiac Catheterization. Some commenters were uncertain
whether it would have a significant impact on charge compression and
believed that it may not be necessary to secure more accurate estimated
costs. Commenters were concerned that RTI's analysis of charge
compression in the cardiology cost centers may be flawed; when RTI
analyzed the costs and charges included in the current nonstandard
cardiac catheterization cost center, RTI hypothesized that the
nonstandard cardiac catheterization cost center contains costs from
services that were not cardiac catheterization. As such,

[[Page 50079]]

commenters believed that hospitals may not be reporting their costs
appropriately for this cost center.
Response: We continue to believe that it is appropriate to create a
standard cost center to capture the cost and charges of cardiac
catheterization services in hospitals that maintain the cost of such
services in distinct departments or accounts, and that standardizing
where hospitals report their costs and charges for cardiac
catheterization will improve the estimation of the cost of this high
volume Medicare service for both the IPPS and the OPPS. Moreover, once
the information from a standard cardiac catheterization cost center is
available, we will carefully evaluate the effect on the CCRs that are
derived from these data and will make the decision regarding whether to
implement the resulting CCRs, as usual, through our public Federal
Register proposed and final notice process. However, in this final
rule, we are finalizing our proposal to add a standard cost center to
the cost report for cardiac catheterization.
Comment: Commenters opposed a regression-based approach for
addressing charge compression in the relative weights where CMS would
use regression-based CCRs in the relative weights methodology. The
commenters preferred more accurate and uniform cost reporting, to
mitigate charge compression in the cost-based relative weights.
Response: We agree that more accurate cost reporting is a better
means of mitigating charge compression than applying regression-based
adjustments and, for this reason, have proposed to create certain cost
centers that we believe will ultimately result in more refined CCRs,
thereby leading to better estimates of hospital cost for MRI, CT
scanning, and cardiac catheterization services about which the public
has repeatedly raised concerns due to the hospital practice of setting
charges for low cost services at a much higher percentage of cost than
the percentage by which the charge for high cost services exceeds the
cost of those services.
Comment: One commenter stated that CMS should work closely with the
hospital industry for comprehensive cost report reform rather than have
piecemeal changes to the cost report. The commenter believed that CMS'
collaboration with the industry would promote cost report
simplification.
Response: We have just completed a major redesign of the hospital
cost report in which the public had multiple opportunities to provide
input to the specific proposed revisions. However, that larger
redesign, reassessment, and revision effort does not negate the need to
make additional targeted changes as appropriate to resolve particular
identified problems, such as aggregation bias in the payment for
devices, CT scanning, MRI services and cardiac catheterization. As
discussed above, the proposal to create standard cost centers for CT
scanning, MRI services and cardiac catheterization evolved from the
findings of the RTI report of aggregation bias in the payment of
several types of services paid under the IPPS and OPPS, including, but
not limited to, high cost medical devices for which CMS created a
standard cost center for cost report periods beginning on and after May
1, 2009. We believe that the creation of standard cost centers for CT
scanning, MRI services, and cardiac catheterization is both appropriate
and that CMS has provided numerous opportunities for public input.
Comment: One commenter recommended that CMS issue explicit,
unambiguous guidance to hospitals on how to improve allocation of large
capital costs to the radiology cost center. The commenter noted that
the draft Medicare cost report Form 2552-10 did not provide any
mandatory reporting guidance to hospitals on how to improve the
accuracy of cost allocation for imaging equipment.
Response: We believe that the current instructions on allocation of
the cost of major moveable equipment needed to provide CT scans, MRIs,
and other radiology services are clear. We refer readers to the
regulations at 42 CFR 413.24(b) and 413.24(f) and CMS instructions in
Sections 2304 through 2320 of the PRM-I and Sections 3617 and 3618 of
the PRM-II.
Comment: One commenter raised a number of concerns about what CT
and MRI information hospitals should report in these cost centers.
Those concerns include whether equipment installation or de-
installation or equipment maintenance costs are reported in this cost
center and whether costs associated with supplies related to MRI and CT
equipment (like diagnostic contrast agents) are reported in this cost
center. The commenter speculated whether each new item of advanced
diagnostic equipment warranted a new cost center. The commenter
requested that CMS provide guidance to the hospital industry on what
types of costs should be reported in these cost centers.
Response: As with any other ancillary cost center, the providers
would report the direct cost accumulated in the CT scanning or MRI
departmental accounts that are reflected in the general ledger working
trial balance.
Comment: One commenter recommended that CMS work with the Medicare
contractors to simplify the cost allocation process, which the
commenter found to be lengthy and burdensome. The commenter stated that
if hospitals want to change the order of allocation or their allocation
statistics, they must make a written request to their fiscal
intermediary or MAC 90 days prior to the end of the cost reporting
period. The commenter stated that the hospital must demonstrate that
the change more accurately allocates costs and provide supporting
documentation. The fiscal intermediary or MAC has 60 days to decide
whether or not to approve or deny the request, while the provider must
maintain both sets of cost allocation statistics in the meantime. The
commenter requested that CMS simplify this process.
Response: We believe that the current process provides Medicare
contractors with the minimum time needed to evaluate a contractor
request to change the order of allocation or their allocation
statistics, given the importance of the decision and the need for the
contractor to assess whether the change would result in a more valid
determination of hospital costs.
Comment: Commenters encouraged CMS to ensure that hospitals are
appropriately allocating costs to the Implantable Devices Charged to
Patients cost center, which was a standard cost center that we added
for cost report periods beginning on and after May 1, 2009, as a result
of the findings of the RTI report that there is aggregation bias in our
estimates of the cost of expensive medical devices.
Response: Hospitals are expected to comply with our regulations at
42 CFR 413.24(b)(1) and 413.24(f) and to follow the instructions in
Sections 2304 through 2320 of the PRM-I and Sections 3617 and 3618 of
the PRM-II, as well as all other related instructions when allocating
cost to the Implantable Devices Charged to Patients cost center.
Medicare contractors review how hospitals allocate costs on the
Medicare cost report for all cost centers, including the Implantable
Devices Charged to Patients cost center, in accordance with their audit
plans.
Comment: One commenter opposed the HSRV methodology for
standardization of the relative weights. The commenter found this
methodology to be inappropriate in a cost-based relative weight
methodology and only appropriate for removing the effects of different
markup practices in a charge-based relative weight methodology.
Response: We appreciate the comment but note that we did not

[[Page 50080]]

propose any changes with respect to the HSRV methodology for
standardizing the relative weights.
In summary, we are establishing standard cost centers for CT
scanning, MRI services, and cardiac catheterization in hospital cost
reports for cost report periods beginning on or after May 1, 2010.

F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections

1. Background
a. Statutory Authority
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. Section 1886(d)(4)(D)
of the Act specifies that by October 1, 2007, the Secretary was
required to select, in consultation with the Centers for Disease
Control and Prevention (CDC), at least two conditions that: (a) Are
high cost, high volume, or both; (b) are assigned to a higher paying
MS-DRG when present as a secondary diagnosis (that is, conditions under
the MS-DRG system that are CCs or MCCs); and (c) could reasonably have
been prevented through the application of evidence-based guidelines.
Section 1886(d)(4)(D) of the Act also specifies that the list of
conditions may be revised, again in consultation with CDC, from time to
time as long as the list contains at least two conditions.
Section 1886(d)(4)(D)(iii) of the Act requires that hospitals,
effective with discharges occurring on or after October 1, 2007, submit
information on Medicare claims specifying whether diagnoses were
present on admission (POA). Section 1886(d)(4)(D)(i) of the Act
specifies that effective for discharges occurring on or after October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA. Thus, if a
selected condition that was not POA manifests during the hospital stay,
it is considered a HAC and the case is paid as though the secondary
diagnosis was not present. However, even if a HAC manifests during the
hospital stay, if any nonselected CC/MCC appears on the claim, the
claim will be paid at the higher MS-DRG rate. Under the HAC payment
policy, all CCs/MCCs on the claim must be HACs in order to generate a
lower MS-DRG payment. In addition, Medicare continues to assign a
discharge to a higher paying MS-DRG if a selected condition is POA.
The POA indicator reporting requirement and the HAC payment
provision apply to IPPS hospitals only. Non-IPPS hospitals, including
CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children's hospitals,
hospitals in Maryland operating under waivers, rural health clinics,
federally qualified health centers, RNHCIs, and Department of Veterans
Affairs/Department of Defense hospitals, are exempt from POA reporting
and the HAC payment provision. Throughout this section, the term
``hospital'' refers to an IPPS hospital.
The HAC provision found in section 1886(d)(4)(D) of the Act is part
of an array of Medicare value-based purchasing (VBP) tools that we are
using to promote increased quality and efficiency of care. Those tools
include measuring performance, using payment incentives, publicly
reporting performance results, applying national and local coverage
policy decisions, enforcing conditions of participation, and providing
direct support for providers through Quality Improvement Organization
(QIO) activities. The application of VBP tools, such as this HAC
provision, is transforming Medicare from a passive payer to an active
purchaser of higher value health care services. We are applying these
strategies for inpatient hospital care and across the continuum of care
for Medicare beneficiaries.
These VBP tools are highly compatible with the underlying purposes
as well as existing structural features of Medicare's IPPS. Under the
IPPS, hospitals are encouraged to treat patients efficiently because
they receive the same DRG payment for stays that vary in length and in
the services provided, which gives hospitals an incentive to avoid
unnecessary costs in the delivery of care. In some cases, conditions
acquired in the hospital do not generate higher payments than the
hospital would otherwise receive for cases without these conditions. To
this extent, the IPPS encourages hospitals to avoid complications.
However, the treatment of certain conditions can generate higher
Medicare payments in two ways. First, if a hospital incurs
exceptionally high costs treating a patient, the hospital stay may
generate an outlier payment. Because the outlier payment methodology
requires that hospitals experience large losses on outlier cases before
outlier payments are made, hospitals have an incentive to prevent
outliers. Second, under the MS-DRGs system that took effect in FY 2008
and that has been refined through rulemaking in subsequent years,
certain conditions can generate higher payments even if the outlier
payment requirements are not met. Under the MS-DRG system, there are
currently 259 sets of MS-DRGs that are split into 2 or 3 subgroups
based on the presence or absence of a CC or an MCC. The presence of a
CC or an MCC generally results in a higher payment. However, since we
implemented the HAC provisions, if a secondary diagnosis acquired
during a hospital stay is a HAC and no other CCs or MCCs are present,
the hospital receives a payment under the MS-DRGs as if the HACs were
not present. (We refer readers to section II.D. of the FY 2008 IPPS
final rule with comment period for a discussion of DRG reforms (72 FR
47141).)
b. HAC Selection
Beginning in FY 2007, we have proposed, solicited, and responded to
public comments and have implemented section 1886(d)(4)(D) of the Act
through the IPPS annual rulemaking process. For specific policies
addressed in each rulemaking cycle, we direct readers to the following
publications: the FY 2007 IPPS proposed rule (71 FR 24100) and final
rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed rule (72 FR
24716 through 24726) and final rule with comment period (72 FR 47200
through 47218); the FY 2009 IPPS proposed rule (73 FR 23547), and final
rule (73 FR 48471); and the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24106) and final rule (74 FR 43782). A complete list of the 10
current categories of HACs is included in section II.F.2. of this
preamble.
In the FY 2011 IPPS/LTCH proposed rule (75 FR 23880 through 23898),
we did not propose any additional HACs or changes to policies already
established under the authority of section 1886(d)(4)(D) of the Act.
c. Collaborative Process
As noted in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23881),
in establishing the HAC payment policy under section 1886(d)(4)(D) of
the Act, our experts have worked closely with public health and
infectious disease professionals from across the Department of Health
and Human Services, including CDC, the Agency for Healthcare Research
and Quality (AHRQ), and the Office of Public Health and Science (OPHS),
to identify the candidate preventable HACs, review comments, and select
HACs. CMS and CDC have also collaborated on the process for hospitals
to submit a POA indicator for each diagnosis listed on IPPS hospital
Medicare claims and on the payment implications of the various POA
reporting options. As discussed below, we have also used rulemaking

[[Page 50081]]

and Listening Sessions to obtain public input.
d. Application of HAC Payment Policy to MS-DRG Classifications
As described above, in certain cases application of the HAC payment
policy provisions can result in MS-DRG reassignment to a lower paying
MS-DRG. The following diagram portrays the logic of the HAC payment
policy provision as adopted in the FY 2008 IPPS final rule with comment
period (72 FR 47200) and in the FY 2009 IPPS final rule (73 FR 48471):
[GRAPHIC] [TIFF OMITTED] TR16AU10.003

e. Public Input Regarding Selected and Potential Candidate HACs
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880 through
23898), we did not propose to add or remove categories of HACs, nor did
we propose any changes to previously established policies.
Given the timeliness of the HAC discussion, particularly when
considered within the context of recent legislative health care reform
initiatives, however, we remain eager to engage in an ongoing public
dialogue about the various aspects of this policy. We plan to continue
to include updates and findings from the RTI evaluation on CMS'
Hospital-Acquired Conditions and Present on Admission Indicator Web
site available at: http://www.cms.hhs.gov/HospitalAcqCond/.
f. POA Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In the FY 2011 IPPS/LTCH PPS proposed rule, we listed the instructions
and change requests that were issued to IPPS hospitals and also to non-
IPPS hospitals regarding the submission of POA indicator data for all
diagnosis codes on Medicare claims and the processing of non-PPS claims
(75 FR 23381) We also indicated that specific instructions on how to
select the correct POA indicator for each diagnosis code were included
in the ICD-9-CM Official Guidelines for Coding and Reporting, available
on the CDC Web site at: http://www.cdc.gov/nchs/data/icd9/icdguide09.pdf. We reiterate that additional information regarding POA
indicator reporting and application of the POA reporting options is
available on the CMS Web site at: http://www.cms.hhs.gov/HospitalAcqCond although, historically we have not provided coding
advice. Rather, we collaborate with the American Hospital Association
(AHA) through the Coding Clinic for ICD-9-CM. We continue to
collaborate with the AHA to promote the Coding Clinic for ICD-9-CM as
the source for coding advice about the POA indicator.
As discussed in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23882) as well as in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR 43784), there are five POA indicator reporting options, as defined
by the ICD-9-CM Official Guidelines for Coding and Reporting:

------------------------------------------------------------------------
Indicator Descriptor
------------------------------------------------------------------------
Y............................. Indicates that the condition was present
on admission.
W............................. Affirms that the hospital has determined
that, based on data and clinical
judgment, it is not possible to
document when the onset of the
condition occurred.
N............................. Indicates that the condition was not
present on admission.
U............................. Indicates that the documentation is
insufficient to determine if the
condition was present at the time of
admission.
1............................. Signifies exemption from POA reporting.
CMS established this code as a
workaround to blank reporting on the
electronic 4010A1. A list of exempt ICD-
9-CM diagnosis codes is available in
the ICD-9-CM Official Guidelines for
Coding and Reporting.
------------------------------------------------------------------------

[[Page 50082]]

In the FY 2009 IPPS final rule (73 FR 48486 through 48487), we
adopted final payment policies to: (1) Pay the CC/MCC MS-DRGs for those
HACs coded with ``Y'' and ``W'' indicators; and (2) not pay the CC/MCC
MS-DRGs for those HACs coded with ``N'' and ``U'' indicators.
On or after January 1, 2011, hospitals are required to begin
reporting POA indicators using the 5010 electronic transmittal
standards format. The 5010 format removes the need to report a POA
indicator of ``1'' for codes that are exempt from POA reporting. The
POA indicator of ``1'' is currently being used because of reporting
restrictions from the use of the 4010 electronic transmittal standards
format.
Comment: Several commenters supported CMS' plans to no longer
require a POA indicator of ``1'' for codes exempt from the POA
reporting requirement with the implementation of the new 5010
electronic transaction standards.
Response: We appreciate the commenters' support of our efforts to
move to the new 5010 electronic transaction standards format. We agree
that the use of this format will prove beneficial for a number of
reasons, including POA indicator reporting as well as facilitating the
move to the use of ICD-10 coding systems.
Hospitals reporting with the 5010 format on and after January 1,
2011, will no longer report a POA indicator of ``1'' for POA exempt
codes. The POA field will instead be left blank for codes exempt from
POA reporting. We plan to issue CMS instructions on this reporting
change.
2. HAC Conditions for FY 2011
As changes to diagnosis codes and new diagnosis codes are proposed
and finalized for the list of CCs and MCCs, we modify the list of
selected HACs to reflect these changes. In Table 6A in the Addendum to
the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 24207), we listed the
proposed addition of five new ICD-9-CM diagnosis codes to replace
existing ICD-9-CM code 999.6 (ABO incompatibility reaction) for FY
2011. ICD-9-CM code 999.6 is currently the only code identified under
the Blood Incompatibility HAC category. We proposed to delete code
999.6 and form a new subcategory of code 999.6 to identify new
diagnoses relating to ABO incompatibility reaction due to transfusion
of blood or blood products. These diagnoses meet the criteria for the
Blood Incompatibility HAC category based on the predecessor code 999.6
being a selected HAC.
As shown in Table 6C in the Addendum to the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 24210), we proposed that code 999.6 become invalid
as a diagnosis code in FY 2011 with the creation of this new ICD-9-CM
subcategory. This proposed new subcategory would allow room for
expansion and the creation of the following new diagnosis codes:

------------------------------------------------------------------------
Proposed CC/MCC
ICD-9-CM Code Code Descriptor Designation
------------------------------------------------------------------------
999.60..................... ABO incompatibility CC
reaction, unspecified.
999.61..................... ABO incompatibility with CC
hemolytic transfusion
reaction not specified as
acute or delayed.
999.62..................... ABO incompatibility with CC
acute hemolytic
transfusion reaction.
999.63..................... ABO incompatibility with CC
delayed hemolytic
transfusion reaction.
999.69..................... Other ABO incompatibility CC
reaction.
------------------------------------------------------------------------

We invited public comments on the proposed adoption of the five
ICD-9-CM diagnosis codes as CCs that are listed above which, if
finalized, would be added to the current HAC Blood Incompatibility
category.
Comment: Several commenters supported CMS' proposal to add new ICD-
9-CM codes 999.60, 999.61, 999.62, 999.63, and 999.69, to replace code
999.6, to specify ABO incompatibility reaction for FY 2011 and their
classification as CCs.
Response: We appreciate the support of the commenters. We are
finalizing our proposal to make code 999.6 an invalid code and to add
codes 999.60, 999.61, 999.62, 999.63, and 999.69 as CCs to the HAC
blood incompatibility category for FY 2011.
Comment: Some commenters questioned why the five ICD-9-CM codes
(999.60, 999.61, 999.62, 999.63, and 999.69) were being proposed to
replace the existing code (999.6) to identify blood incompatibility
when the analysis indicated that only an extremely low volume of
discharges (23) reported this condition as a secondary diagnosis.
Response: The five ICD-9-CM codes listed above were proposed and
finalized through the ICD-9-CM Coordination and Maintenance Committee
meeting process. Further information regarding the diagnosis coding
proposal for Hemolytic Transfusion Reactions (HTR) from the September
17, 2009 meeting can be located at the following CDC Web site: http://www.cdc.gov/nchs/icd/icd9cm_maintenance.htm.
For the reasons set forth in the proposed rule, we are finalizing
our proposal to make code 999.6 an invalid code and to add codes
999.60, 999.61, 999.62, 999.63, and 999.69 as CCs to the HAC blood
incompatibility category for FY 2011.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23882 and 23883),
we also invited public comment on our proposal that the current list of
HAC categories and the ICD-9-CM codes that had been finalized through
FY 2010 continue to be subject to the HAC payment provision for FY
2011. We also indicated that the final FY 2011 list of HAC conditions
would include the proposed five new refinement codes to identify blood
incompatibility as CCs if these codes were finalized. We received
public comments on our proposal that the listed conditions continue to
be subject to the HAC payment provisions which are summarized below.
Comment: One commenter stated that the current HAC categories and
codes finalized through FY 2010 are, for the most part, rational based
on the statutory criteria that HACs must be high cost, high volume, or
both and reasonably preventable through the application of evidence
based guidelines. However, the commenter expressed reservations
regarding the inclusion of deep vein thrombosis (DVT) and pulmonary
embolism (PE) following certain orthopedic procedures. The commenter
stated that the proportion of these events that can be prevented with
evidence-based guidelines is unclear, given that there is uncertainty
about the ideal length of time DVT prophylaxis should be continued
postoperatively, differing practices and guidelines for DVT
prophylaxis, and patient-specific factors (that is, thrombophilia) that
can impact risk of postoperative venous thromboembolism. The commenter
stated that an unintended consequence

[[Page 50083]]

of this HAC category could be excess bleeding occurrences from longer
prescriptions of anticoagulation in attempts to comply with the
measure. The commenter stated that, rather than including DVTs and PEs
under the HAC provision, these conditions may be more appropriately
managed as a measure under the RHQDAPU, as is being proposed for
reducing avoidable readmissions.
Response: We appreciate the commenter's support for the current HAC
categories. We also appreciate the commenter's concern regarding
whether DVTs and PEs following certain orthopedic procedures are
reasonably preventable, given evidence-based guidelines. We are
providing data on the frequency of our 10 categories of HACs for the
first time in this year's rulemaking. As the public reviews these data
and evaluates the effectiveness of the HAC program, we will be
soliciting recommendations for refinements to this list. As discussed
earlier, section 1886(d)(4)(D) of the Act specifies that the HAC list
of conditions may be revised, in consultation with CDC, from time to
time as long as the list contains at least two conditions. We did not
propose any modification to the HAC list in the proposed rule. We
instead shared data on the HACs, which we have discussed earlier. As we
move forward, we will be working with the health care industry to
refine and update the HAC list. Therefore, we will not remove DVTs and
PEs following certain orthopedic procedures from the HAC list at this
time.
Comment: One commenter requested that CMS clarify how a hospital
can appeal a decision under which a particular patient falls under the
HAC policy and is ineligible for a higher DRG payment. The commenter
believed that an appeals process is essential to ensure accountability.
Response: As we explained in the FY 2008 IPPS final rule (72 FR
47216), under 42 CFR 412.60(d), a hospital has 60 days after the date
of the notice of the initial assignment of a discharge to an MS-DRG to
request a review of that assignment. The hospital may submit additional
information as part of its request. A hospital that believes a
discharge was assigned to the incorrect MS-DRG as a result of the
payment adjustment for HACs may request review of the MS-DRG assignment
by its fiscal intermediary or MAC consistent with Sec. 412.60(d) of
the regulations.
As final policy for FY 2011, the following conditions will continue
to be subject to the HAC payment provision:
BILLING CODE 4120-01-P

[[Page 50084]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.004

[[Page 50085]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.005

BILLING CODE 4120-01-C
We refer readers to section II.F.6. of the FY 2008 IPPS final rule
with comment period (72 FR 47202 through 47218) and to section II.F.7.
of the FY 2009 IPPS final rule (73 FR 48474 through 48486) for detailed
analyses supporting the selection of each of the HACs selected through
FY 2010.
3. RTI Program Evaluation Summary
a. Background
On September 30, 2009, a contract was awarded to Research Triangle
Incorporated (RTI) to evaluate the impact of the Hospital-Acquired
Condition-Present on Admission (HAC-POA) provisions on the changes in
the incidence of selected conditions, effects on Medicare payments,
impacts on coding accuracy, unintended consequences, and infection and
event rates. This is an intra-agency project with funding and technical
support coming from CMS, OPHS, AHRQ, and CDC. The evaluation will also
examine the implementation of the program and evaluate additional
conditions for future selection.
RTI's evaluation of the HAC-POA provisions is divided into several
parts, only some of which were completed prior to the publication date
of the FY 2011 IPPS/LTCH PPS proposed rule. In the FY 2011 IPPS/LTCH
PPS proposed rule (75 FR 23883 through 23898), we summarized the
analyses that were completed. RTI's analyses of POA indicator
reporting, frequencies and net savings associated with current HACs,
and frequencies of previously considered candidate HACs reflect MedPAR
claims from October 2008 through June 2009.
We received a number of public comments regarding the evaluation
conducted by RTI, despite the fact that we did not propose any new
policies or policy revisions based on the evaluation. Several of these
public comments are addressed later in another section of this
preamble, but we believe that it is appropriate to acknowledge the
following issues here.
Comment: Several commenters expressed concern that the RTI
evaluation did not include an analysis on the costs of complying with
the HAC-POA provision. According to the commenters, compliance with our
HAC-POA policy results in additional costs to providers and
individuals, as well as to the Medicare program by necessitating
additional expensive preadmission screening tests in order to achieve
more accurate admission documentation. The commenters also stated that
the estimated savings to Medicare is not accurate if providers are
utilizing additional resources to perform these expensive tests on
their patients.
Response: We understand the seriousness of this concern and refer
to our original discussion of HAC-POA issues in the FY 2009 IPPS final
rule (73 FR 23547 through 23559) in which we included a comprehensive
discussion of what we understood to be the full impact of this policy.
We will continue to evaluate the financial costs of compliance with our
HAC-POA program, as well as its impact on our overall goal of providing
the highest quality of care for Medicare beneficiaries at the most
reasonable costs.
Comment: Several commenters commended CMS for making the early
findings of the RTI study, as well as HAC-POA data, available to the
public. The commenters encouraged CMS to continue to make additional
findings available.
Response: We agree with the commenters that it continues to be
important to make HAC-POA data and findings available to the public
prior to proposing any significant updates to the HAC list. As RTI
continues its work, we will share the findings and additional HAC-POA
data.
Comment: Several commenters expressed interest in seeing data on
the most common secondary diagnoses on the CC and MCC list that are
reported along with an HAC code.
Response: We have asked RTI to include a list of the most commonly
reported secondary CC and MCC diagnoses and display this list along
with the other HAC-POA data on its Web site at: http://www.rti.org/reports/cms.
In this final rule, we are updating our summary of the analyses
with additional data that have become available since issuance of the
proposed rule.
b. RTI Analysis on POA Indicator Reporting Across Medicare Discharges
To better understand the impact of HACs on the Medicare program, it
is necessary to first examine the incidence of POA indicator reporting
across all eligible Medicare discharges. As

[[Page 50086]]

mentioned previously, only IPPS hospitals are required to submit POA
indicator data for all diagnosis codes on Medicare claims. Therefore,
all non-IPPS hospitals were excluded, as well as providers in waiver
States (Maryland) and territories other than Puerto Rico.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880 through
23898), we provided a preliminary analysis on claims data from October
2008 through June 2009. Since publication of that proposed rule, an
additional 3 months of data for FY 2009 that include claims from July
2009 through September 2009 have become available. Below we present the
cumulative results of RTI's findings for FY 2009.
Using MedPAR claims data from October 2008 through September 2009,
RTI found a total of approximately 65.22 million secondary diagnoses
across approximately 9.3 million discharges. As shown in Chart A below,
the majority of all secondary diagnoses (83.69 percent) were reported
with a POA indicator of ``Y,'' meaning the condition was POA.
[GRAPHIC] [TIFF OMITTED] TR16AU10.006

c. RTI Analysis on POA Indicator Reporting of Current HACs
Following the initial analysis of POA indicator reporting for all
secondary diagnoses, RTI then evaluated POA indicator reporting for
specific HAC-associated secondary diagnoses. The term ``HAC-associated
secondary diagnosis'' refers to those diagnoses that are on the
selected HAC list and were reported as a secondary diagnosis. Chart B
below shows a summary of the HAC categories with the frequency in which
each HAC was reported as a secondary diagnosis and the corresponding
POA indicators assigned on the claims. It is important to note that,
because more than one HAC-associated diagnosis code can be reported per
discharge (that is, on a single claim), the frequency of HAC-associated
diagnosis codes may be more than the actual number of discharges that
have a HAC-associated diagnosis code reported as a secondary diagnosis.
Below we discuss the frequency of each HAC-associated diagnosis code
and the POA indicators assigned to those claims.
RTI analyzed the frequency of each reported HAC-associated
secondary diagnosis (across all 9.3 million discharges) and the POA
indicator assigned to the claim. Chart B below shows that the most
frequently reported conditions were in the Falls and Trauma HAC
category, with a total of 153,284 HAC-associated diagnosis codes being
reported for that HAC category. Of these 153,284 diagnoses, 5,684
reported a POA indicator of ``N'' for not POA and 147,257 diagnoses
reported a POA indicator of ``Y'' for POA. The lowest frequency appears
in the Surgical Site Infection (SSI) Following Bariatric Surgery for
Obesity HAC category with only 17 HAC-associated secondary diagnosis
codes (and procedure codes) reported. It is important to note that the
number of secondary diagnosis codes classified as POA is likely
overstated due to coding practices, and, therefore, the number of HACs
not POA are expected to be greater than indicated in Charts B and C. As
a result, these data likely underestimate the number of complications
some would consider acquired in the hospital or other health care
setting. For example, the HACs listed as present on admission (POA =
``Y'') include those instances where the HAC condition was present on
admission from the emergency room or other outpatient settings within
the admitting institution. The POA indicator of ``Y'' is also used to
identify cases where a patient was discharged and then readmitted one
calendar day or more after the date of discharge due to complications
from a HAC. In addition, the POA indicator of ``Y'' may also include
patient transfers to the acute care hospital from other health care
facilities, like nursing homes, or from a home health setting, where
the secondary diagnosis considered to be a HAC was initially acquired.
Using current coding guidelines, all of the above scenarios can be
correctly and appropriately classified as POA (where POA = ``Y'') on an
inpatient claim, and CMS does not have data from which to determine
where the condition described in the secondary diagnisos was acquired.
Therefore, while a fraction of the HACs reported as POA were acquired
outside the hospital prior to admission, some conditions could also
have been acquired at the hospital in an outpatient setting or through
a prior admission.

[[Page 50087]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.007

BILLING CODE 4120-01-C
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23885), we
welcomed public comments on the data presented that could provide
insight into the accuracy of those data, the use of comparative data
sets or analysis, and how aspects of the coding system might influence
these data.
Comment: One commenter expressed its past and continuing support of
the HAC-POA program. This commenter applauded CMS' efforts to evaluate
the payment and clinical impacts of the HAC-POA policy and for making
the preliminary data available for public comment. However, the
commenter reported that it found the preliminary published POA data for
certain conditions interesting. Specifically, the commenter noted that
the POA data for the catheter-associated urinary tract infection
(CAUTI) condition was unexpected in that 85 percent of the cases
reporting that condition as a secondary diagnosis were assigned a POA
indicator of ``Y'' (meaning that the condition was present on
admission). The commenter further noted that there were other
conditions whose POA data analysis results were equally unexpected.
This commenter stated it looked forward to reviewing further

[[Page 50088]]

analyses and understanding how the POA indicator is being documented
and the accuracy of the documentation.
Response: We appreciate and acknowledge the commenter's support of
the HAC-POA provision. As stated earlier, one aspect of the HAC-POA
program evaluation is to examine the accuracy of coding, which includes
a review of the POA indicator data. RTI will continue to study these
data and, when they become available, we plan to publish the results.
Comment: Commenters expressed concern about the accuracy of POA
indicator reporting for the HACs related to intracranial injury with
loss of consciousness. One commenter stated that it has come to the
attention of the American Hospital Association's Central Office on ICD-
9-CM that there have been different interpretations of the POA coding
guidelines for the reporting of the following ICD-9-CM code categories:
850 Concussions;
851 Cerebral laceration and contusion;
852 Subarachnoid, subdural, and extradural hemorrhage,
following injury;
853 Other and unspecified intracranial hemorrhage
following injury; and
854 Intracranial injury of other and unspecified nature.
The commenter pointed out that the above mentioned ICD-9-CM code
categories require a fifth digit to specify whether there was a loss of
consciousness, and the approximate length of time that the patient was
unconscious. The commenter stated that, currently, the POA guidelines
state to ``assign `N' if any part of the combination code was not
present on admission.'' The commenter further indicated that, in some
instances, coders have assigned ``N'' to these codes if the patient
lost consciousness after admission, even though the intracranial injury
occurred prior to admission. The commenter stated that loss of
consciousness is a component of intracranial injuries rather than a
separate condition. The commenter believed that this guideline has
resulted in data implying that the intracranial injuries were a result
of trauma sustained after admission to the hospital, when the injury
occurred prior to admission.
The commenter stated that this POA guideline was discussed by the
Editorial Advisory Board for Coding Clinic for ICD-9-CM. After review,
the commenter stated that the Board determined that the POA guideline
should be clarified so that coders will understand that these
intracranial injury cases that have a loss of consciousness after
admission should be assigned a POA indicator of ``Y'' rather than a
``N.'' The commenter stated that this advice will be provided in a
future issue of Coding Clinic for ICD-9-CM. The commenter pointed out
that CMS collaborated in this decision.
Response: We agree that there appears to be inconsistency in how
coders interpret and apply the official POA coding guideline for these
combination codes that include loss of consciousness. CMS participated
as a voting member of the American Hospital Association's Editorial
Advisory Board for Coding Clinic for ICD-9-CM to develop clarifications
on the POA reporting for combination codes that involve loss of
consciousness. We agree that this clarification will lead to greater
consistency and accuracy in POA indicator reporting. CMS looks forward
to continuing its efforts as part of the American Hospital
Association's Editorial Advisory Board for Coding Clinic for ICD-9-CM
to provide guidance on accuracy of coding and the reporting of POA
indicators. Hospitals look to this publication to provide detailed
guidance on ICD-9-CM code and POA reporting. We encourage hospitals to
send any other questions about ICD-9-CM codes or POA indicator
selection to the American Hospital Association so that the Editorial
Advisory Board can continue its role of providing instruction on the
accurate selection and reporting of both ICD-9-CM codes and POA
indicators.
As described earlier, in the FY 2009 IPPS final rule (73 FR 48486
through 48487), we adopted as final our proposal to: (1) Pay the CC/MCC
MS-DRGs for those HACs coded with ``Y'' and ``W'' indicators; and (2)
not pay the CC/MCC MS-DRGs for those HACs coded with ``N'' and ``U''
indicators. We also discussed the comments we received urging CMS to
strongly consider changing the policy and to pay for those HACs
assigned a POA indicator of ``U'' (documentation is insufficient to
determine if the condition was present at the time of admission). We
stated we would monitor the extent to which and under what
circumstances the ``U'' POA reporting option is used. In the FY 2010
IPPS/RY 2010 LTCH PPS final rule, we also discussed and responded to
comments regarding HACs coded with the ``U'' indicator (74 FR 43784 and
43785). As shown in Chart B above, RTI's analysis provides some data on
a total of 404 HAC-associated secondary diagnoses reported with a POA
indicator of ``U.'' Of those diagnoses, 270 (0.2 percent) were assigned
to the Falls and Trauma HAC category.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23885), we stated
that we continue to believe that better documentation will result in
more accurate public health data. Because the RTI analysis we
summarized in the FY 2011 IPPS/LTCH PPS proposed rule was based on
preliminary data, we did not propose to change our policy under which
CMS does not pay at the higher CC/MCC amount when a selected HAC
diagnosis code is reported with a POA indicator of ``U.''
Comment: Several commenters asked CMS to change our policy under
which we do not pay at the higher CC/MCC amount when a HAC code
reported with a POA of ``U.'' (A POA indicator of ``U'' means that
documentation was insufficient to determine if the condition was
present at the time of the inpatient admission.) The commenters stated
that while hospitals are continuing to work on coding and documentation
improvement issues with physicians who practice in their facilities, in
some cases, hospitals have not been successful in obtaining clear
documentation to clarify whether or not a condition was present on
admission. They added that when physicians do not provide clear
documentation in the medical record, a POA indicator of ``U'' is
assigned. The commenters asked that CMS allow these cases with poor
documentation to result in a higher payment if the HAC code is reported
with a ``U.''
Response: We are committed to improving the accuracy of health care
data. Accurate and complete documentation within the health record is
important for patient management, outcome measurement, and quality
improvement, as well as payment accuracy. We believe that it would be
inappropriate to pay a higher amount to hospitals based on incomplete
or poor documentation. If accurate information is not available within
the health record for a hospital to report a precise POA indicator,
hospitals are encouraged to seek this additional documentation from
their physicians and/or other hospitals if the hospital treated a
patient who was transferred. For these reasons, we believe that
reducing payment for conditions on the HAC list with poor documentation
is appropriate. Therefore, we did not propose to change our approach to
discounting the CC or MCC assignment for selected HACs reported with a
POA indicator of ``U.'' We will maintain our existing policy and not
allow HACs with a POA indicator of ``U'' to lead to the higher payment.

[[Page 50089]]

In the FY 2011 IPPS/LTCH PPS proposed rule, we encouraged readers
to further review the RTI detailed report which demonstrates the
frequency of each individual HAC-associated diagnosis code within the
HAC categories. For example, in the Foreign Object Retained After
Surgery HAC category, there are two unique ICD-9-CM diagnosis codes to
identify that condition: code 998.4 (Foreign body accidentally left
during a procedure) and code 998.7 (Acute reaction to foreign substance
accidentally left during a procedure). In the updated detailed RTI
report, readers can view that code 998.4 was reported 428 times and
code 998.7 was reported 13 times, for a total of 441 times, as shown in
Chart B above. The RTI detailed report is available at the following
Web site: http://www.rti.org/reports/cms/.
d. RTI Analysis of Frequency of Discharges and POA Indicator Reporting
for Current HACs
RTI further analyzed the effect of the HAC provision by studying
the frequency in which a HAC-associated diagnosis was reported as a
secondary diagnosis with a POA indicator of ``N'' or ``U'' and, of that
number, how many resulted in MS-DRG reassignment. In Chart C below,
Column A shows the number of discharges for each HAC category where the
HAC-associated diagnosis was reported as a secondary diagnosis. For
example, there were 33 discharges that reported Air Embolism as a
secondary diagnosis. Column C shows the number of discharges for each
HAC reported with a POA indicator of ``N'' or ``U.'' Continuing with
the example of Air Embolism, the chart shows that, of the 33 reported
discharges, 24 discharges (72.73 percent) had a POA indicator of ``N''
or ``U'' and was identified as a HAC discharge. There were a total of
24 discharges to which the HAC policy applies and that could,
therefore, have had an MS-DRG reassignment. Column E shows the number
of discharges where an actual MS-DRG reassignment occurred. As shown in
Column E, the number of discharges with an Air Embolism that resulted
in actual MS-DRG reassignments is 12 (50 percent of the 24 discharges
with a POA indicator of ``N'' or ``U''). Thus, while there were 24
discharges (72.73 percent of the original 33) with an Air Embolism
reported with a POA indicator of ``N'' or ``U'' identified as a HAC
discharge that could have caused MS-DRG reassignment, the end result
was 12 (50 percent) actual MS-DRG reassignments. There are a number of
reasons why a selected HAC reported with a POA indicator of ``N'' or
``U'' will not result in MS-DRG reassignment. These reasons were
illustrated with the diagram in section II.F.1.c. of this preamble and
will be discussed in further detail in section II.F.3.e. of this
preamble.
Chart C below also shows that, of the 264,810 discharges with a
HAC-associated diagnosis as a secondary diagnosis, 3,416 discharges
ultimately resulted in MS-DRG reassignment. As we discuss below, there
were 15 claims that resulted in MS-DRG reassignment where two HACs were
reported on the same admission. The four HAC categories that had the
most discharges resulting in MS-DRG reassignment were: (1) Falls and
Trauma; (2) Pulmonary Embolism and DVT Orthopedic (Orthopedic PE/DVT);
(3) Pressure Ulcer Stages III & IV; and (4) Catheter-Associated Urinary
Tract Infection (UTI). Codes falling under the Falls and Trauma HAC
category were the most frequently reported secondary diagnoses with
126,078 discharges. Of these 126,078 discharges, 5,312 (4.21 percent)
were coded as not POA and identified as HAC discharges. This category
also contained the greatest number of discharges that resulted in an
MS-DRG reassignment. Of the 5,312 discharges within this HAC category
that were not POA, 1,577 (29.69 percent) resulted in an MS-DRG
reassignment.
Of the 264,810 total discharges reporting HAC-associated diagnoses
as a secondary diagnosis, 3,110 discharges were coded with a secondary
diagnosis of Orthopedic PE/DVT. Of these 3,110 discharges, 2,335 (75.08
percent) were coded as not POA and identified as HAC discharges. This
category contained the second greatest number of discharges resulting
in an MS-DRG reassignment. Of the 2,335 discharges in this HAC category
that were not POA, 1,024 discharges (43.85 percent) resulted in an MS-
DRG reassignment.
The Pressure Ulcer Stages III & IV category had the second most
frequently coded secondary diagnoses, with 99,656 discharges. Of these
discharges, 1,316 (1.32 percent) were coded as not POA and identified
as HAC discharges. This category contained the third greatest number of
discharges resulting in an MS-DRG reassignment. Of the 1,316 discharges
in this HAC category that were not POA, 384 discharges (29.18 percent)
resulted in an MS-DRG reassignment.
The Catheter-Associated UTI category had the third most frequently
coded secondary diagnoses, with 14,089 discharges. Of these discharges,
2,333 (16.56 percent) were coded as not POA and identified as HAC
discharges. This category contained the fourth greatest number of
discharges resulting in an MS-DRG reassignment. Of the 2,333 discharges
in this HAC category that were not POA, 223 discharges (9.56 percent)
resulted in a MS-DRG reassignment.
The remaining 6 HAC categories only had 208 discharges that
ultimately resulted in MS-DRG reassignment. We note that, even in cases
where a large number of HAC-associated secondary diagnoses were coded
as not POA, this finding did not necessarily translate into a large
number of discharges that resulted in MS-DRG reassignment. For example,
only 26 of the 2,573 Vascular Catheter-Associated Infection secondary
diagnoses that were coded as not POA and identified as HAC discharges
resulted in a MS-DRG reassignment.
There were a total of 417 discharges with a HAC-associated
secondary diagnosis reporting a POA indicator of ``N'' or ``U'' that
were excluded from acting as a HAC discharge (subject to MS-DRG
reassignment) due to the CC Exclusion List logic within the GROUPER.
The CC Exclusion List identifies secondary diagnosis codes designated
as a CC or MCC that are disregarded by the GROUPER logic when reported
with certain principal diagnoses. For example, a claim with the
principal diagnosis code of 250.83 (Diabetes with other specified
manifestations, type 1 [juvenile type], uncontrolled) and a secondary
diagnosis code of 250.13 (Diabetes with ketoacidosis, type 1, [juvenile
type], uncontrolled) with a POA indicator of ``N'' would result in the
HAC-associated secondary diagnosis code 250.13 being ignored as a CC.
According to the CC Exclusion List, code 250.13 is excluded from acting
as a CC when code 250.83 is the principal diagnosis. As a result, the
HAC logic would not be applicable to that case. For a detailed
discussion on the CC Exclusion List, we refer readers to section
II.G.9. of this preamble.
Discharges where the HAC logic was not applicable due to the CC
Exclusion List occurred among the following 4 HAC categories: Pressure
Ulcer Stages III and IV (44 cases), Falls and Trauma (311 cases),
Catheter-Associated UTI (9 cases), Vascular Catheter-Associated
Infection (4 cases), and Manifestations of Poor Glycemic Control (49
cases). Further information regarding the specific number of cases that
were excluded for each HAC-associated secondary diagnosis code within
each of the above mentioned HAC categories is also available. We refer
readers to the RTI detailed report at the following Web site: http://www.rti.org/reports/cms/.

[[Page 50090]]

In summary, Chart C below demonstrates that there were a total of
264,810 discharges with a reported HAC-associated secondary diagnosis.
Of the total 264,810 discharges, 14,681 (5.68 percent) discharges
included HACs that were reported with a POA indicator of ``N'' or ``U''
and were identified as a HAC discharge. Of these 14,681 discharges, the
number of discharges resulting in MS-DRG reassignments was 3,416 (22.72
percent).
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
An extremely small number of discharges had multiple HACs reported
during the same stay. In reviewing the 9.3 million claims, RTI found 60
cases in which two HACs were reported on the same discharge. Chart D
below summarizes these cases. There were 9 cases in which a Falls and
Trauma HAC was reported in addition to a Pressure Ulcer Stages III & IV
HAC. Twenty of the cases with two HACs involved Pressure Ulcer Stages
III & IV and 24 cases involved Falls or Trauma. Other multiple HAC
cases included 10 Catheter-Associated UTI cases and 6 Vascular
Catheter-Associated Infection cases.
Some of these cases with multiple HACs reported had both HAC codes
ignored in the MS-DRG assignment. Of these 60 claims, 15 did not
receive higher payments based on the presence of one or both of these
reported HACs and we describe these claims below in section
II.F.3.g.(2) of this preamble. Depending on the MS-DRG to which the
cases were originally assigned, ignoring the HAC codes would have led
to a MS-DRG reassignment if there were no other MCCs or CCs reported,
if the MS-DRG was subdivided into severity levels, and if the case were
not already in the lowest severity level prior to ignoring the HAC
codes.

[[Page 50092]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.010

e. RTI Analysis of Circumstances When Application of HAC Provisions
Would Not Result in MS-DRG Reassignment for Current HACs
As discussed in section II.F.1. and illustrated in the diagram in
section II.F.1.c. of this preamble, there are instances when the MS-DRG
assignment does not change even when a HAC-associated secondary
diagnosis has a POA indicator of either ``N'' or ``U.'' In analyzing
our claims data, RTI identified four main reasons why a MS-DRG
assignment would not change despite the presence of a HAC. Those four
reasons are described below and are shown in Chart E below. Column A
shows the frequency of discharges that included a HAC-associated
secondary diagnosis. Column B shows the frequency of discharges where
the HAC-associated secondary diagnosis was coded as not POA and
identified as a HAC discharge. Column C shows the frequency of
discharges in which the HAC-associated secondary diagnosis coded as not
POA resulted in a change in MS-DRG. Columns D, E, F, and G show the
frequency of discharges in which the HAC-associated secondary diagnosis
coded as not POA did not result in a change in MS-DRG assignment.
Columns D, E, F, and G are explained in more detail below.
(1) Other MCCs/CCs Prevent Reassignment
Column D (Other MCC/CCs that Prevent Reassignment) in Chart E below
indicates the number of cases reporting a HAC-associated secondary
diagnosis code that did not have a MS-DRG reassignment because of the
presence of other secondary diagnoses on the MCC or CC list. A claim
that is coded with a HAC-associated secondary diagnoses and a POA
status of either ``N'' or ``U'' may have other secondary diagnoses that
are classified as an MCC or a CC. In such cases, the presence of these
other MCC and CC diagnoses will still lead to the assignment of a
higher severity level, despite the fact that the GROUPER software is
disregarding the ICD-9-CM code that identifies the selected HAC in
making the MS-DRG assignment for that claim. For example, there were 96
cases in which the ICD-9-CM codes for the Foreign Object Retained After
Surgery HAC category were present, but the presence of other secondary
diagnoses that were MCCs or CCs resulted in no change to the MS-DRG
assignment. Chart E shows that a total of 8,208 cases did not have a
change in the MS-DRG assignment because of the presence of other
reported MCCs and CCs.
(2) Two Severity Levels Where HAC Does Not Impact MS-DRG Assignment
Column E (Number of MS-DRGs with Two Severity Levels Where HAC Does
Not Impact MS-DRG Assignment) shows the frequency with which discharges
with a HAC as a secondary diagnosis coded as not POA did not result in
an MS-DRG change because the MS-DRG is subdivided solely by the
presence or absence of an MCC. A claim with a HAC and a POA indicator
of either ``N'' or ``U'' may be assigned to an MS-DRG that is
subdivided solely by the presence or absence of an MCC. In such cases,
removing a HAC ICD-9-CM CC code will not lead to further changes in the
MS-DRG assignment. Examples of these MS-DRG subdivisions are shown in
the footnotes to the chart and include the following examples:
MS-DRGs 100 and 101 (Seizures with or without MCC,
respectively)
MS-DRGs 102 and 103 (Headaches with or without MCC,
respectively)

[[Page 50093]]

The codes that fall under the HAC category of Foreign Object
Retained After Surgery are CCs. If this case were assigned to a MS-DRG
with an MCC subdivision such as MS-DRGs 100 and 101, the presence of
the HAC code would not affect the MS-DRG severity level assignment. In
other words, if the Foreign Object Retained After Surgery code was the
only secondary diagnosis reported, the case would be assigned to MS-DRG
101. If the POA indicator was ``N,'' the HAC Foreign Object Retained
After Surgery code would be ignored in the MS-DRG assignment logic.
Despite the fact that the code was ignored, the case would still be
assigned to the same, lower severity level MS-DRG. Therefore, there
would be no impact on the MS-DRG assignment.
Column E in Chart E below shows that there were a total of 1,793
cases where the HAC code was ``N'' or ``U'' and the MS-DRG assignment
did not change because the case was already assigned to the lowest
severity level.
(3) No Severity Levels
Column F (Number of MS-DRGs with No Severity Levels) shows the
frequency with which discharges with an HAC as a secondary diagnosis
coded as not POA did not result in an MS-DRG change because the MS-DRG
is not subdivided by severity levels. A claim with a HAC and a POA of
``N'' or ``U'' may be assigned to a MS-DRG with no severity levels. For
instance, MS-DRG 311 (Angina Pectoris) has no severity level
subdivisions; this MS-DRG is not split based on the presence of an MCC
or a CC. If a patient assigned to this MS-DRG develops a secondary
diagnosis such as a Stage III pressure ulcer after admission, the
condition would be considered to be a HAC. The code for the Stage III
pressure ulcer would be ignored in the MS-DRG assignment because the
condition developed after the admission (the POA indicator was ``N'').
Despite the fact that the ICD-9-CM code for the HAC Stage III pressure
ulcer was ignored, the MS-DRG assignment would not change. The case
would still be assigned to MS-DRG 311. Chart E below shows that 1,255
cases reporting a HAC-associated secondary diagnosis did not undergo a
change in the MS-DRG assignment based on the fact that the case was
assigned to a MS-DRG that had no severity subdivisions (that is, the
MS-DRG is not subdivided based on the presence or absence of an MCC or
a CC, rendering the presence of the HAC irrelevant for payment
purposes).
(4) MS-DRG Logic
Column G (MS-DRG Logic Issues) shows the frequency with which a HAC
as a secondary diagnosis coded as not POA did not result in an MS-DRG
change because of MS-DRG assignment logic. There were nine discharges
where the HAC criteria were met and the HAC logic was applied, however,
due to the structure of the MS-DRG logic, these cases did not result in
MS-DRG reassignment. These cases may appear similar to those discharges
where the MS-DRG is subdivided into two severity levels by the presence
or absence of an MCC and did not result in MS-DRG reassignment;
however, these discharges differ slightly in that the MS-DRG logic also
considers specific procedures that were reported on the claim. In other
words, for certain MS-DRGs, a procedure may be considered the
equivalent of an MCC or CC. The presence of the procedure code dictates
the MS-DRG assignment despite the presence of the HAC-associated
secondary diagnosis code with a POA indicator of ``N'' or ``U''.
For example, a claim with the principal diagnosis code of 441.1
(Thoracic aneurysm, ruptured) with HAC-associated secondary diagnosis
code of 996.64 (Infection and inflammatory reaction due to indwelling
urinary catheter) and diagnosis code 599.0 (Urinary tract infection,
site not specified), having POA indicators of ``Y'', ``N'', ``N'',
respectively, and procedure code 39.73 (Endovascular implantation of
graft in thoracic aorta), results in an assignment to MS-DRG 237 (Major
Cardiovascular Procedures with MCC or Thoracic Aortic Aneurysm Repair).
In this case, the thoracic aortic aneurysm repair is what dictated the
MS-DRG assignment and the presence of the HAC-associated secondary
diagnosis code, 996.64, did not affect the MS-DRG assigned. Other
examples of MS-DRGs that are subdivided in this same manner are as
follows:
MS-DRG 029 (Spinal procedures with CC or Spinal
Neurostimulators)
MS-DRG 129 (Major Head & Neck Procedures with CC/MCC or
Major Device)
MS-DRG 246 (Percutaneous Cardiovascular Procedure with
Drug-Eluting Stent with MCC or 4+ Vessels/Stents)
Column G in the chart below shows that four of the nine cases that
did not result in MS-DRG reassignment due to the MS-DRG logic were in
the Catheter Associated UTI HAC category, three cases were in the Falls
and Trauma HAC category, one case was in the Foreign Body Retained
After surgery HAC category, and one case was in the Vascular Catheter-
Associated Infection HAC Category.
In conclusion, a total of 11,265 cases (8,208 + 1,793 + 1,255 + 9)
did not have a change in MS-DRG assignment, regardless of the presence
of a HAC. The reasons described above explain why only 3,416 cases had
a change in MS-DRG assignment despite the fact that there were 14,681
HAC cases with a POA of ``N'' or ``U.'' We refer readers to the RTI
detailed report at the Web site: http://www.rti.org/reports/cms for
further information.
BILLING CODE 4120-01-P

[[Page 50094]]

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BILLING CODE 4120-01-C
f. RTI Analysis of Coding Changes for HAC-Associated Secondary
Diagnoses for Current HACs
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23892), we
discussed RTI's preliminary analysis on coding changes using 9 months
of claims data from October 2008 through June 2009. We noted that, in
addition to studying claims from October 2008 through June 2009, RTI
evaluated claims data from 2 years prior to determine if there were
significant changes in the number of discharges with a HAC being
reported as a secondary diagnosis. For this FY 2011 IPPS/LTCH PPS final
rule analysis, RTI examined an additional 3 months of claims data for
each fiscal year (FY 2007 and FY 2008), and compared these data to the
updated FY 2009 data. Below we summarize the results of the fiscal year
to fiscal year comparison using 12 months of claims data.
RTI's analysis found that there was an overall increase in the
reporting of secondary diagnoses that are currently designated as HACs
from FY 2007 to FY 2008. The most significant increase was in the
Catheter-Associated UTI HAC category, with 12,459 discharges being
reported in FY 2007, while 15,408 discharges were reported in FY 2008,
an increase of 2,949 cases. The next significant increase was in the
Falls and Trauma HAC category with 151,321 discharges being reported in
FY 2007, while 153,600 discharges were reported in FY 2008, an increase
of 2,279 cases.
However, the analysis also found that there was an overwhelming
decrease in the HAC-associated secondary diagnoses reported from FY
2008 to FY 2009. The most significant decrease was in the Falls and
Trauma HAC category, with 153,600 discharges being reported in FY 2008,
while 125,505 discharges were reported in FY 2009, a decrease of 28,095
cases. We point out that because diagnosis codes for the Pressure Ulcer
Stages III & IV HAC did not become effective until October 1, 2008,
there are

[[Page 50096]]

no data available for FY 2007 or FY 2008.
We refer readers to the RTI detailed report for all the conditions
in each fiscal year (FY 2007 through FY 2009) as described above at the
following Web site: http://www.rti.org/reports/cms/.
g. RTI Analysis of Estimated Net Savings for Current HACs
RTI estimated the net savings generated by the HAC payment policy
based on 12 months of MedPAR claims from October 2008 through September
2009.
(1) Net Savings Estimation Methodology
The payment impact of a HAC is the difference between the IPPS
payment amount under the initially assigned MS-DRG and the amount under
the reassigned MS-DRG. The amount for the reassigned MS-DRG appears on
the MedPAR files. To construct this, RTI modeled the IPPS payments for
each MS-DRG following the same approach that we use to model the impact
of IPPS annual rule changes. Specifically, RTI replicated the payment
computations carried out in the IPPS PRICER program using payment
factors for IPPS providers as identified in various CMS downloaded
files. The files used are as follows:
Version 26 of the Medicare Severity GROUPER software
(applicable to discharges between October 1, 2008 and September 30,
2009). IPPS MedPAR claims were run through this file to obtain needed
HAC-POA output variables.
The FY 2009 MS-DRG payment weight file. This file includes
the weights, geometric mean length of stay (GLOS), and the postacute
transfer payment indicators.
CMS standardized operating and capital rates. Tables 1A
through 1C, as downloaded from the Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/IPPS2009, include the full update and reduced update
amounts, as well as the information needed to compute the blended
amount for providers located in Puerto Rico.
The IPPS impact files for FY 2009, also as downloaded from
the Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/IPPS2009/.
This file includes the wage index and geographic adjustment factors,
plus the provider type variable to identify providers qualifying for
alternative hospital-specific amounts and their respective HSP rates.
The IPPS impact files for FY 2010, as downloaded from the
Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/10FR/. This file
includes indirect medical education (IME) and disproportionate share
(DSH) percent adjustments that were in effect as of March 2009.
CMS historical provider-specific files (PSF). This
includes the indicator to identify providers subject to the full or
reduced standardized rates and the applicable operating and capital
cost-to-charge ratios. A SAS version was downloaded from the Web site
at: http://www.cms.hhs.gov/ProspMedicareFeeSvcPmtGen/04_psf_SAS.asp.
There were 50 providers with discharges in the final HAC analysis
file that did not appear in the FY 2009 impact file, of which 11 also
did not appear in the FY 2010 impact file. For these providers, we
identified the geographic CBSA from the historical PSF and assigned the
wage index using values from Tables 4A and 4C as downloaded from the
Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/IPPS2009/. For
providers in the FY 2010 file but not the FY 2009 file, we used IME and
DSH rates from FY 2010. The 11 providers in neither impact file were
identified as non-IME and non-DSH providers in the historical PSF file.
The steps for estimating the HAC payment impact are as follows:
Step 1: Rerun the Medicare Severity Grouper on all records in the
analysis file. This is needed to obtain information on actual HAC-
related MS-DRG reassignments in the file, and to identify the CCs and
MCCs that contribute to each MS-DRG assignment.
Step 2: Model the base payment and outlier amounts associated with
the initial MS-DRG if the HAC were excluded using the computations laid
out in the CMS file ``Outlier Example FY 2007 new.xls,'' as downloaded
from the Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/04_outlier.asp#TopOfPage, and modified to accommodate FY 2009 factors.
Step 3: Model the base payment and outlier amounts associated with
the final MS-DRG where the HAC was excluded using the computations laid
out in the CMS file ``Outlier Example FY 2007 new.xls,'' as downloaded
from the Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/04_outlier.asp#TopOfPage and modified to accommodate FY 2009 factors.
Step 4: Compute MS-DRG base savings as the difference between the
nonoutlier payments for the initial and final MS-DRGs. Compute outlier
amounts as the difference in outlier amounts due under the initial and
final reassigned MS-DRG. Compute net savings due to HAC reassignment as
the sum of base savings plus outlier amounts.
Step 5: Adjust the model to incorporate short-stay transfer payment
adjustments.
Step 6: Adjust the model to incorporate hospital-specific payments
for qualifying rural providers receiving the hospital-specific payment
rates.
It is important to mention that using the methods described above,
the MS-DRG and outlier payments amounts that are modeled for the final
assigned MS-DRG do not always match the DRG price and outlier amounts
that appear in the MedPAR record. There are several reasons for this.
Some discrepancies are caused by using single wage index, IME and DSH
factors for the full period covered by the discharges, when in practice
these payment factors can be adjusted for individual providers during
the course of the fiscal year. In addition, RTI's approach disregards
any Part A coinsurance amounts owed by individual beneficiaries with
greater than sixty covered days in a spell of illness. Five percent of
all HAC discharges showed at least some Part A coinsurance amount due
from the beneficiary, although less than two percent of reassigned
discharges (55 cases in the analysis file) showed Part A coinsurance
amounts due. Any Part A coinsurance payments would reduce the actual
savings incurred by the Medicare program.
There are also a number of less common special IPPS payment
situations that are not factored into RTI's modeling. These could
include new technology add-on payments, payments for blood clotting
factors, reductions for replacement medical devices, adjustments to the
capital rate for new providers, and adjustments to the capital rate for
certain classes of providers who are subject to a minimum payment level
relative to capital cost.
(2) Net Savings Estimate
Chart F below summarizes the estimated net savings of current HACs
based on MedPAR claims from October 2008 through September 2009, based
on the methodology described above. Column A shows the number of
discharges where a MS-DRG reassignment for each HAC category occurred.
For example, there were 12 discharges with an Air Embolism that
resulted in an actual MS-DRG reassignment. Column B shows the total net
savings caused by MS-DRG reassignments for each HAC category.
Continuing with the example of Air Embolism, the chart shows that the
12 discharges with an MS-DRG reassignment resulted in a total net

[[Page 50097]]

savings of $148,394. Column C shows the net savings per discharge for
each HAC category. For the Air Embolism HAC category, the net savings
per discharge is $12,366.
BILLING CODE 4120-01-P
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[[Page 50098]]

BILLING CODE 4120-01-C
As shown in Chart F above, the total net savings calculated for the
12-month period from October 2008 through September 2009 was roughly
$18.78 million. The three HACs with the largest number of discharges
resulting in MS-DRG reassignment, Falls and Trauma, Orthopedic PE/DVT,
and Pressure Ulcer Stages III & IV, generated $17.17 million of net
savings for the 12 month period. Estimated net savings for the 12-month
period associated with the Falls and Trauma category were $8.09
million. Estimated net savings associated with Orthopedic PE/DVT for
the 12-month period were $6.92 million. Estimated net savings for the
12-month period associated with Pressure Ulcer Stages III & IV were
$2.16 million.
The mean net savings per discharge calculated for the 12-month
period from October 2008 through September 2009 was roughly $5,522. The
HAC categories of Air Embolism; SSI, Mediastinitis, Following Coronary
Artery Bypass Graft (CABG); and SSI Following Certain Orthopedic
Procedures had the highest net savings per discharge, but represented a
small proportion of total net savings because the number of discharges
that resulted in MS-DRG reassignment for these HACs was low. With the
exception of Blood Incompatibility, where no savings occurred because
no discharges resulted in MS-DRG reassignment, SSI Following Bariatric
Surgery for Obesity and Catheter-Associated UTI had the lowest net
savings per discharge.
We refer readers to the RTI detailed report available at the
following Web site: http://www.rti.org/reports/cms/.
As mentioned previously, an extremely small number of cases in the
12-month period of FY 2009 analyzed by RTI had multiple HACs during the
same stay. In reviewing our 9.3 million claims, RTI found 60 cases
where two HACs were reported on the same admission as noted in section
II.F.3. d. of this preamble. Of these 60 claims, 15 resulted in MS-DRG
reassignment. Chart G below summarizes these cases. There were 15 cases
that had two HACs not POA that resulted in an MS-DRG reassignment. Of
these, 5 discharges involved Pressure Ulcer Stages III & IV and Falls
and Trauma and 4 discharges involved Orthopedic PE/DVT and Falls and
Trauma.
[GRAPHIC] [TIFF OMITTED] TR16AU10.014

As we discuss in section II.F.1.b. of this preamble, implementation
of this policy is part of an array of Medicare VBP tools that we are
using to promote increased quality and efficiency of care. We again
point out that a decrease over time in the number of discharges where
these conditions are not POA is a desired consequence. We recognize
that estimated net savings should likely decline as the number of such
discharges decline. However, we believe that the sentinel effect
resulting from CMS identifying these conditions is critical. (We refer
readers to section IV.A. of this preamble for a discussion of the
inclusion of the incidence of these conditions in the RHQDAPU program.)
It is our intention to continue to monitor trends associated with the
frequency of these HACs and the estimated net payment impact through
RTI's program evaluation and possibly beyond.
h. Previously Considered Candidate HACs--RTI Analysis of Frequency of
Discharges and POA Indicator Reporting
RTI evaluated the frequency of conditions previously considered,
but not adopted as HACs in prior rulemaking, that were reported as
secondary diagnoses (across all 9.3 million discharges) as well as the
POA indicator assignments for these conditions. Chart H below indicates
that the three previously considered candidate conditions most
frequently reported as a secondary diagnosis were: (1) Clostridium
Difficile-Associated Disease (CDAD), which demonstrated the highest
frequency, with a total of 85,096 secondary diagnoses codes being
reported for that condition, of which 28,844 reported a POA indicator
of ``N''; (2) Staphylococcus aureus Septicemia, with a total of 22,433
secondary diagnoses codes being reported for that condition, with 5,004
of those reporting a POA indicator of ``N''; and (3) Iatrogenic
Pneumothorax, with a total of 20,673 secondary diagnoses codes being
reported for that condition, with 17,602 of those reporting a POA
indicator of ``N.'' As these three conditions had the most significant
impact for reporting a POA indicator of ``N,'' it is reasonable to
believe that these same three conditions would have the greatest number
of potential MS-DRG reassignments. The frequency of discharges for the
previously considered HACs that could lead to potential changes in MS-
DRG assignment is discussed in the next section. We take this
opportunity to remind readers that because more than

[[Page 50099]]

one previously considered HAC diagnosis code can be reported per
discharge (on a single claim) that the frequency of these diagnosis
codes may be more than the actual number of discharges with a
previously considered candidate condition reported as a secondary
diagnosis.
[GRAPHIC] [TIFF OMITTED] TR16AU10.015

In Chart I below, Column A shows the number of discharges for each
previously considered candidate HAC category when the condition was
reported as a secondary diagnosis. For example, there were 85,096
discharges that reported CDAD as a secondary diagnosis. Previously
considered candidate HACs reported with a POA indicator of ``N'' or
``U'' may cause MS-DRG reassignment (which would result in reduced
payment to the facility). Column C shows the discharges for each
previously considered candidate HAC reported with a POA indicator of
``N'' or ``U.'' Continuing with the example of CDAD, Chart I shows
that, of the 85,096 discharges, 29,296 discharges (34.43 percent) had a
POA indicator of ``N'' or ``U.'' Therefore, there were a total of
29,296 discharges that could potentially have had an MS-DRG
reassignment. Column E shows the number of discharges where an actual
MS-DRG reassignment could have occurred; the number of discharges with
CDAD that could have resulted in actual MS-DRG reassignments is 896
(3.06 percent). Thus, while there were 29,296 discharges with CDAD
reported with a POA indicator of ``N'' or ``U'' that could potentially
have had an MS-DRG reassignment, the result was 896 (3.06 percent)
potential MS-DRG reassignments. As discussed above, there are a number
of reasons why a condition reported with a POA indicator of ``N'' or
``U'' would not result in a MS-DRG reassignment.
In summary, Chart I below demonstrates there were a total of
203,844 discharges with a previously considered candidate HAC reported
as a secondary diagnosis. Of those, 57,902 discharges were reported
with a POA indicator of ``N'' or ``U.'' The total number of discharges
that could have resulted in MS-DRG reassignments is 3,527.

[[Page 50100]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.016

i. Current and Previously Considered Candidate HACs--RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes an updated report that provides
references for all evidence-based guidelines available for each of the
selected and previously considered candidate HACs that provide
recommendations for the prevention of the corresponding conditions.
Guidelines were primarily identified using the AHRQ National Guidelines
Clearing House (NGCH) and the CDC, along with relevant professional
societies. Guidelines published in the United States were used, if
available. In the absence of U.S. guidelines for a specific condition,
international guidelines were included.
Evidence-based guidelines that included specific recommendations
for the prevention of the condition were identified for each of the 10
selected conditions. In addition, evidence-based guidelines were also
found for the previously considered candidate conditions.
Comment: Several commenters stated that CMS should not pay for HACs
only when evidence-based guidelines indicate that the occurrence of an
event can be reduced to zero, or near zero. The commenters stated that
some patients, particularly high-risk, co-morbid individuals, may still
develop conditions on the HAC list even though protocols have been
strictly followed.
Response: We thank the commenters for this comment. The statute
requires that CMS only choose conditions to be selected HACs if they
could ``reasonably'' be prevented through the application of evidence-
based guidelines. We noted in the FY 2008 IPPS final rule that we only
selected those conditions where, if hospital personnel are engaging in
good medical practice, the additional costs of the hospital-acquired
condition will, in most cases, be avoided (72 FR 47201).
RTI prepared a final report to summarize its findings regarding
evidence-based guidelines, which can be found on the Web site at:
http://www.rti.org/reports/cms.
j. Final Policy Regarding Current HACs and Previously Considered
Candidate HACs
We believe that the updated RTI analysis summarized above does not
provide additional information that would require us to change our
previous determinations regarding either current HACs (as described in
section II.F.2. of this preamble) or previously considered candidate
HACs in the FY 2008 IPPS final rule with comment period and FY 2009
IPPS final rule (72 FR 47200 through 47218 and 73 FR 48471 through
48491, respectively). Accordingly, in the

[[Page 50101]]

FY 2011 IPPS/LTCH PPS proposed rule, we did not propose to add or
remove categories of HACs, although we proposed to revise the Blood
Incompatibility HAC category as discussed and finalized in section
II.F.2. of this preamble. We also note that in section II.F.3.b. of
this preamble, we discuss our current policy regarding the treatment of
the ``U'' POA indicator. However, we continue to encourage public
dialogue about refinements to the HAC list.
We refer readers to section II.F.6. of the FY 2008 IPPS final rule
with comment period (72 FR 47202 through 47218) and to section II.F.7.
of the FY 2009 IPPS final rule (73 FR 48474 through 48491) for detailed
discussion supporting our determination regarding each of these
conditions.

G. Changes to Specific MS-DRG Classifications

In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23898 through
23910), we invited public comment on each of the MS-DRG classification
proposed changes described below, as well as our proposals to maintain
certain existing MS-DRG classifications, which are also discussed
below. In some cases, we proposed changes to the MS-DRG classifications
based on our analysis of claims data. In other cases, we proposed to
maintain the existing MS-DRG classification based on our analysis of
claims data. Below, we also summarize the public comments that we
received, if any, on our proposals, present our responses to these
comments, and state our final policies.
1. Pre-Major Diagnostic Categories (MDCs)
a. Postsurgical Hypoinsulinemia (MS-DRG 008 (Simultaneous Pancreas/
Kidney Transplant))
Diabetes mellitus is a pancreatic disorder in which the pancreas
fails to produce sufficient insulin, or in which the body cannot
process insulin. Many patients with diabetes will eventually experience
complications of the disease, including poor kidney function. When
these patients show signs of advanced kidney disease, they are usually
referred for transplant evaluation. Currently, many doctors recommend
that individuals with diabetes being evaluated for kidney
transplantation also be considered for pancreas transplantation. A
successful pancreas transplant may prevent, stop, or reverse the
complications of diabetes.
Occasionally, secondary diabetes may be surgically induced
following a pancreas transplant. This condition would be identified by
using ICD-9-CM diagnosis code 251.3 (Postsurgical hypoinsulinemia).
However, currently the list of principal diagnosis codes assigned to
surgical MS-DRG 008 (Simultaneous Pancreas/Kidney Transplant) does not
include diagnosis code 251.3. Therefore, when diagnosis code 251.3 is
assigned to a case as a principal diagnosis, the case is not assigned
to MS-DRG 008. Instead, these cases are grouped to MS-DRG 652 (Kidney
Transplant) under MDC 11 (Diseases and Disorders of the Kidney and
Urinary Tract). The use of diagnosis code 251.3 as a principal
diagnosis without a secondary diagnosis of diabetes mellitus and with a
procedure code for pancreas transplant only during that admission
results in assignment of the case to MS-DRG 628, 629, or 630 (Other
Endocrine, Nutritional & Metabolic Operating Room Procedures with MCC,
with CC, and without CC/MCC, respectively). These MS-DRGs are assigned
to MDC 10 (Endocrine, Nutritional and Metabolic Diseases and
Disorders).
As we stated in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23898), we believe that the exclusion of diagnosis code 251.3 from the
list of principal diagnosis codes assigned to surgical MS-DRG 008 is an
error of omission. Therefore, in that proposed rule, we proposed to add
diagnosis code 251.3 to the list of principal or secondary diagnosis
codes assigned to MS-DRG 008. As a conforming change, we also proposed
to add diagnosis code 251.3 to the list of principal or secondary
diagnosis codes assigned to MS-DRG 010 (Pancreas Transplant).
Comment: Commenters concurred with CMS' proposal to add diagnosis
code 251.3 to the list of principal or secondary diagnosis codes
assigned to MS-DRG 008. In addition, the commenters concurred with the
proposal to add diagnosis code 251.3 to the list of principal or
secondary diagnosis codes assigned to MS-DRG 010.
Response: We appreciate the support for our proposals.
We are adopting as final without modification our proposals to add
diagnosis code 251.3 to the list of acceptable principal diagnoses in
MS-DRG 008 and, as a conforming change, to add diagnosis code 251.3 to
the list of acceptable principal or secondary diagnoses in MS-DRG 010.
b. Bone Marrow Transplants
As we discussed in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23898), we received two requests to review whether cost differences
between an autologous bone marrow transplant (where the patient's own
bone marrow or stem cells are used) and an allogeneic bone marrow
transplant (where bone marrow or stem cells come from either a related
or unrelated donor) necessitate the creation of separate MS-DRGs to
more appropriately account for the clinical nature of the services
being rendered as well as the costs. One of the requestors stated that
there are dramatic differences in the costs between the two types of
transplants where allogeneic cases are significantly more costly.
Bone marrow transplantation and peripheral blood stem cell
transplantation are used in the treatment of certain cancers and bone
marrow diseases. These procedures restore stem cells that have been
destroyed by high doses of chemotherapy and/or radiation treatment.
Currently, all bone marrow transplants are assigned to MS-DRG 009 (Bone
Marrow Transplant).
For the FY 2011 IPPS/LTCH PPS proposed rule, we performed an
analysis of the FY 2009 MedPAR data and found 1,664 total cases
assigned to MS-DRG 009 with average costs of approximately $43,877 and
an average length of stay of approximately 21 days. Of these MS-DRG 009
cases, 395 of them were allogeneic bone marrow transplant cases
reported with one of the following ICD-9-CM procedure codes: 41.02
(Allogeneic bone marrow transplant with purging); 41.03 (Allogeneic
bone marrow transplant without purging); 41.05 (Allogeneic
hematopoietic stem cell transplant without purging); 41.06 (Cord blood
stem cell transplant); or 41.08 (Allogeneic hematopoietic stem cell
transplant). The average costs of these allogeneic cases, approximately
$64,845, were higher than the overall average costs of all cases in MS-
DRG 009, approximately $43,877. The average length of stay for the
allogeneic cases, approximately 28 days, was slightly higher than the
average length of stay for all cases assigned to MS-DRG 009,
approximately 21 days.
We found 1,269 autologous bone marrow transplant cases reported
with one of the following ICD-9-CM procedure codes: 41.00 (Bone marrow
transplant, not otherwise specified); 41.01 (Autologous bone marrow
transplant without purging); 41.04 (Autologous hematopoietic stem cell
transplant without purging); 41.07 (Autologous hematopoietic stem cell
transplant with purging); or 41.09 (Autologous bone marrow transplant
with purging). The average costs of these cases, approximately $37,350,
was less than the overall average costs of all

[[Page 50102]]

cases in MS-DRG 009 and the average costs associated with the
allogeneic bone marrow transplant cases. The average length of stay, of
approximately 19 days, was less than the average lengths of stay for
all the cases assigned to MS-DRG 009 and for the allogeneic bone marrow
transplant cases. We included in our analysis of the autologous bone
marrow transplants cases, 5 cases that were reported with procedure
code 41.00 (Bone marrow transplant, not otherwise specified). These 5
cases had average costs of approximately $41,084 and an average length
of stay of approximately 12 days, which was similar to the other
autologous bone marrow transplant cases.
The table below illustrates our findings:

As a result of our analysis, the data support the requestor's
suggestion that there are cost differences associated with the
autologous bone marrow transplants and allogeneic bone marrow
transplants and warrants a separate MS-DRG for these procedures.
Therefore, in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23898 and
23899), we proposed to delete MS-DRG 009 and create two new MS-DRGs:
MS-DRG 014 (Allogeneic Bone Marrow Transplant) and MS-DRG 015
(Autologous Bone Marrow Transplant). We proposed that proposed MS-DRG
014 would include cases reported with one of the following ICD-9-CM
procedure codes:
41.02, Allogeneic bone marrow transplant with purging
41.03, Allogeneic bone marrow transplant without purging
41.05, Allogeneic hematopoietic stem cell transplant
without purging
41.06, Cord blood stem cell transplant
41.08, Allogeneic hematopoietic stem cell transplant
We proposed that proposed MS-DRG 015 would include cases reported
with one of the following ICD-9-CM procedure codes:
41.00 (Bone marrow transplant, not otherwise specified)
41.01 (Autologous bone marrow transplant without purging)
41.04 (Autologous hematopoietic stem cell transplant
without purging)
41.07 (Autologous hematopoietic stem cell transplant with
purging)
41.09 (Autologous bone marrow transplant with purging)
Comment: Several commenters supported our proposed changes and
stated that these proposed MS-DRGs more precisely recognize the
substantial differences in clinical complexity and costs associated
with allogeneic and autologous bone marrow transplants, allowing for
more appropriate hospital reimbursement.
Response: We appreciate the support of the commenters.
Comment: Two commenters who supported the proposed reclassification
of the proposed bone marrow transplant MS-DRGs requested further
refinement to account for severity of illness. The commenters suggested
a three-way split for each proposed MS-DRG: With MCC, with CC, and
without MCC or CC. A few commenters stated that the clinical and cost
differences between unrelated and related allogeneic transplants
necessitate further reclassification of proposed MS-DRG 014. However,
one of the commenters pointed out that there were no ICD-9-CM codes to
classify allogeneic transplant cases by cell source.
Response: As we outlined in our FY 2008 IPPS/LTCH PPS final rule
with comment period published in the Federal Register on August 22,
2007 (72 FR 47169), in designating an MS-DRG as one that would be
subdivided into subgroups based on the presence of a CC or an MCC, we
developed a set of criteria to facilitate our decision-making process.
In order to warrant creation of a CC or an MCC subgroup within a base
MS-DRG, the subgroup must meet all of the following five criteria:
A reduction in variance of charges of at least 3 percent.
At least 5 percent of the patients in the MS-DRG fall
within the CC or MCC subgroup.
At least 500 cases are in the CC or MCC subgroup.
There is at least a 20-percent difference in average
charges between subgroups.
There is a $4,000 difference in average charges between
subgroups.
We did not further subdivide proposed MS-DRG 014 and MS-DRG 015
into severity levels as the commenters suggested because the proposed
MS-DRGs did not meet our criteria for subdivision. With regard to the
commenter who stated that there were no ICD-9-CM codes to classify
allogeneic transplant cases by cell source, we note that, contrary to
the commenter's statement about the lack of being able to report the
donor source, there are three ICD-9-CM procedure codes that identify
the donor source of the transplant: 00.91 (Transplant from live related
donor); 00.92 (Transplant from live non-related donor); and 00.93
(Transplant from cadaver). We refer the commenter to section II.G.7. of
this preamble for further information if the commenter is interested in
submitting suggestions on coding issues.
After consideration of the public comments we received, we are
finalizing our proposal to delete MS-DRG 009, and to create two new MS-
DRGs: MS-DRG 014 (Allogeneic Bone Marrow Transplant) and MS-DRG 015
(Autologous Bone Marrow Transplant). New MS-DRG 014 will include cases
reported with one of the following ICD-9-CM procedure codes: 41.02;
41.03; 41.05; 41.06; or 41.08.
New MS-DRG 015 will include cases reported with one of the
following ICD-9-CM procedure codes: 41.00; 41.01; 41.04; 41.07; or
41.09.
2. MDC 1 (Nervous System): Administration of Tissue Plasminogen
Activator (tPA) (rtPA)
During the comment period for the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule, we received a public comment that had not been the
subject of a proposal in that proposed rule. The commenter had
requested that CMS conduct an analysis of diagnosis code V45.88 (Status
post administration of tPA (rtPA) in a different facility within the
last 24 hours prior to admission to current facility) under MDC 1
(Diseases and Disorders of the Nervous System). Diagnosis code V45.88
was created for use beginning October 1, 2008, to identify patients who
are given tissue plasminogen activator (tPA) at one institution, then
transferred and admitted to a comprehensive stroke center for further
care. This situation is referred to as the ``drip-and-ship'' issue that
was discussed at detail in the FY 2009 IPPS final rule (73 FR 48493).
According to the commenter, the concern at the receiving facilities
is that the costs associated with [caring for]

[[Page 50103]]

more complex stroke patients that receive tPA are much higher than the
cost of the drug, presumably because stroke patients initially needing
tPA have more complicated strokes and outcomes. However, because these
patients do not receive the tPA at the second or transfer hospital, the
receiving hospital will not be assigned to one of the higher weighted
tPA stroke MS-DRGs when it admits these patients whose care requires
the use of intensive resources. The MS-DRGs that currently include
codes for the use of tPA are: 061 (Acute Ischemic Stroke with Use of
Thrombolytic Agent with MCC); 062 (Acute Ischemic Stroke with Use of
Thrombolytic Agent with CC); and 063 (Acute Ischemic Stroke with Use of
Thrombolytic Agent without CC/MCC). These MS-DRGs have higher relative
weights in the hierarchy than the next six MS-DRGs relating to brain
injury. The commenter requested an analysis of the use of diagnosis
code V45.88 reflected in the MedPAR data for FY 2009 and FY 2010. The
commenter believed that the data would show that the use of this code
could potentially result in a new MS-DRG or a new set of MS-DRGs in FY
2011.
In addressing this public comment in the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43798), we noted that the comment was out of
scope for the FY 2010 proposed rule and reiterated that the deadline
for requesting data review and potential MS-DRG changes had been the
previous December. In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23899), we indicated that we were then able to address the commenter's
concern because we had been able to conduct an analysis of MedPAR
claims data for this diagnosis code for that proposed rule.
For the FY 2011 proposed rule, we undertook an analysis of MedPAR
claims data for FY 2009. Our analysis reflected the data study
specifically asked for by the requestor, that is, a review of the
analysis of the presence or absence of diagnosis code V45.88. For our
analysis in the proposed rule, we did not include claims for patient
cases assigned to MS-DRGs 061, 062, or 063. Patients whose cases were
assigned to these MS-DRGs would have been given the tPA at the initial
hospital, had they been admitted there, with assignment of procedure
code 99.10 (Injection or infusion of thrombolytic agent), prior to
their transfer to a comprehensive stroke center. The tPA should not
have been given at the receiving hospital if it had already been
administered at the transferring hospital; therefore, inclusion of
procedure code 99.10 on the receiving hospital's claims would
constitute erroneous coding. Likewise, we did not include MS-DRGs 067
and 068 (Nonspecific CVA & Precerebral Occlusion without Infarction
with MCC, and without MCC, respectively), or MS-DRG 069 (Transient
Ischemia). We believe that claims assigned to MS-DRGs 067, 068, and 069
were unlikely to contain cases in which tPA had been administered.
Our data analysis included MS-DRGs 064, 065, and 066 (Intracranial
Hemorrhage or Cerebral Infarction with MCC, with CC, and without CC/
MCC, respectively) because claims involving diagnosis code V45.88 would
be properly reported in the data for these MS-DRGs for FY 2009. This
analysis can be viewed in the FY 2011 IPPS/LTCH PPS proposed rule
published in the Federal Register on May 4, 2010 (75 FR 23899 through
23900). Based on our review of the data for all cases in MS-DRGs 064,
064, and 066, compared to the subset of cases containing the V45.88
secondary diagnosis code, we concluded that the movement of cases with
diagnosis code V45.88 as a secondary diagnosis from MS-DRGs 064, 065,
and 066 into MS-DRGs 061, 062, and 063 was not warranted.
We determined that the differences in the average lengths of stay
and the average costs were too small to warrant an assignment to the
higher weighted MS-DRGs. Likewise, neither the lengths of stay nor the
average costs were deemed substantial enough to justify the creation of
an additional MS-DRG for transferred tPA cases, or to create separate
MS-DRGs that would mirror the MCC, CC or without CC/MCC severity
levels.
Therefore, for FY 2011, we did not propose any change to MS-DRGs
061, 062, 063, 064, 065, or 066, or any change involving the assignment
of diagnosis code V45.88.
Comment: One commenter agreed with CMS' proposal to not make any
changes to this group of MS-DRGs. The commenter also suggested
revisiting this topic and reviewing the data after CMS begins capturing
25 diagnosis codes and 25 procedure codes in future claims data.
Another commenter suggested that diagnosis code V45.88 may be
underreported, or, even if reported, may appear in a position [on the
claim] that is lower than the nine diagnosis codes currently processed
by Medicare.
Response: The HIPAA ASC X12 Technical Reports Type 3, Version
005010 (Version 5010) standards system update is discussed at length
elsewhere in this preamble. Currently, CMS' claims processing system
recognizes up to nine diagnosis codes and up to six procedure codes for
MS-DRG determination. The ability to process up to 16 additional
diagnosis codes and up to 19 additional procedure codes will begin on
January 1, 2011, according to the Version 5010 update. We will be
interested to see the difference in our MedPAR data that results from
the additional diagnosis and procedure codes, and we will continue to
follow the tPA, ``drip-and-ship,'' and diagnosis code V45.88 topic in
our annual analysis.
Comment: One commenter requested that CMS continue to monitor the
costs and lengths of stays for these patients identified by diagnosis
code V45.88 in order to determine whether, with improved coding
compliance and accurate cost reporting, there will be any change to the
initial findings such that MS-DRG assignments for the care of these
patients need to be changed.
Response: We review MS-DRG assignments annually and will continue
to monitor this category of patients in the future.
Comment: One commenter believed that the CMS data reported in the
FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23899 through 23900)
reflects that the V45.88 diagnosis code is being underused and that the
numbers do not truly represent the much more common occurrence of
stroke centers receiving stroke patients who already had tPA
administered. With this underuse in mind, the commenter requested that
CMS issue a transmittal or MLN Matters article that would inform
physicians and coders alike about the existence of the code and
simultaneously educate them on the proper use of the code.
Response: While CMS is responsible for both changes to the ICD-9-CM
procedure coding system through the ICD-9-CM Coordination and
Maintenance Committee and the incorporation of the resulting diagnostic
and procedure coding changes in CMS' initiatives, we do not provide
coding advice. CMS looks to our partners in the industry to fulfill
this responsibility, specifically through the AHA in their publication
Coding Clinic for ICD-9-CM and through the AHIMA in their coding
training programs.
In addition, we suggest that this commenter encourage its societies
to educate their members through their newsletter or through coding and
documentation presentations at society meetings.
Comment: One commenter was concerned that the data analysis
described above and displayed in the proposed rule did not properly
compare certain patient populations. The commenter suggested that
patients with ICD-9-CM codes associated with

[[Page 50104]]

ischemic stroke that have an accompanying V-code be compared to those
ischemic stroke patients with the ICD-9-CM codes who were not treated
with tPA. The commenter suggested limiting the MS-DRGs to 064, 065, and
066, as well as 067 and 068, and further noted that the V-code should
only be used for ischemic stroke patients who have received tPA at
another hospital. The commenter believed that ischemic stroke patients
who have not received tPA at another hospital should not be included in
the V-code count. The commenter also recommended that cases in which
hemorrhage is the cause of the stroke should not be included with cases
of ischemic stroke since costs associated with these diseases are often
different from each other. The commenter indicated that a more refined
analysis of the data would show that these cases should be split into
separate MS-DRGs, which would allow the cost differences to become
apparent.
Response: With regard to use of the V-code for ischemic stroke
patients who have received tPA at another hospital, we point out that
the correct use of V45.88 was created for that category of patients.
Correct coding practice as well as the code title itself of V45.88
(Status post administration of tPA (rtPA) in a different facility
within the last 24 hours prior to admission to current facility)
precludes inclusion of this code by the sending hospital.
With regard to the comment that ischemic stroke patients who have
not received tPA at another hospital should not be included in the V-
code count, we point out that these patients had not been included in
the analysis published in the proposed rule; neither were they included
in the analysis presented in this final rule. They would not appear in
the data as having received tPA at another facility. Instead, if they
had received tPA at the second or receiving hospital, that hospital
would have coded those cases with ICD-9-CM procedure code 99.10
(Injection or infusion of thrombolytic agent), and the cases would have
been assigned to MS-DRGs 061, 062, and 063 (Acute Ischemic Stroke with
use of Thrombolytic Agent with MCC, with CC, or without CC/MCC,
respectively).
In our original analysis for the proposed rule, we believe that we
did address all of the commenter's concerns. However, for this final
rule, in response to the commenter's request, we have arrayed the data
from the original analysis in the following table in a manner that is
divided into more categories. We also have included MS-DRGs 067 and 068
in the comparison as well, per the commenter's request.
BILLING CODE 4120-01-P

[[Page 50105]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.017

[[Page 50106]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.018

BILLING CODE 4120-01-C
The analysis of MS-DRGs 067 and 068 above does not include a
breakdown for cases of hemorrhage. That is because the principal
diagnoses contained in these two MS-DRGs describe occlusion without
infarct, by arterial site, except for diagnosis code 436 (Acute but
ill-defined, cerebrovascular disease). The commenter believes diagnosis
code 436 is often interpreted to be a ``stroke, not otherwise
specified'' code and has been used to describe stroke events without a
clear etiology, and wanted the analysis included for that reason.
When CMS created the MS-DRGs for use beginning October 1, 2007 (FY
2008), our purpose was, and remains, to accurately stratify groups of
Medicare patients with varying levels of severity. Two of our major
goals were to create DRGs that would more accurately reflect the
severity of the cases assigned to them and to create groups that would
have sufficient volume so that meaningful and stable payment weights
could be developed. In designating an MS-DRG as one that could be
subdivided into subgroups based on the presence of a CC or MCC, we
developed a set of five criteria to facilitate our decision making
process. The subgroup must meet all of the five criteria in order for
division into CC or MCC splits to be considered. The entire discussion
surrounding this process can be found in the FY 2008 IPPS/LTCH PPS
final rule with comment period (72 FR 47169).
Even with additional review of the data, we are unable to justify
either moving the ``drip-and-ship'' cases to higher weighted MS-DRGs or
to consider creation of unique MS-DRGs for these cases. There is a
paucity of data to substantiate such a change, whether due to
underreporting of diagnosis code V45.88, or whether the tPA
administered in another hospital was not documented in the receiving
hospital's records, or whether the code was reported to CMS but was
further down the list than the nine diagnosis codes considered for MS-
DRG assignment. The differences in the average lengths of stay and the
average costs represented in the above table are too small to warrant
an assignment to the higher weighted MS-DRGs, and the differences in
the length of stay and costs are not substantial enough to justify the
creation of additional MS-DRGs. Therefore, for FY 2011, we are not
making any changes to MS-DRGs 061, 062, 063, 064, 065, 066, 067, and
068; nor are we making changes to the MS-DRG assignment of diagnosis
code V45.88.
We will continue to monitor these MS-DRGs and diagnosis code V45.88
in upcoming annual reviews of the IPPS.
3. MDC 5 (Diseases and Disorders of the Circulatory System):
Intraoperative Fluorescence Vascular Angiography (IFVA) and X-Ray
Coronary Angiography in Coronary Artery Bypass Graft Surgery
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43785
through 43787), we discussed a request we received to reassign cases
reporting the use of intraoperative fluorescence vascular angiography
(IFVA) with coronary artery bypass graft (CABG) procedures from MS-DRGs
235 and 236 (Coronary Bypass without Cardiac Catheterization with and
without MCC, respectively) to MS-DRG 233 (Coronary Bypass with Cardiac
Catheterization with MCC) and MS-DRG 234 (Coronary Bypass with Cardiac
Catheterization without MCC). Effective October 1, 2007, procedure code
88.59 (Intraoperative fluorescence vascular angiography (IFVA)) was
established to describe this technology.
In addition, we also discussed receiving related requests (74 FR
43798 through 43799) that were outside the scope of issues addressed
for MDC 5 in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule. There
were three components to these requests. The first component involved
the creation of new MS-DRGs. One request was to create four new MS-DRGs
that would differentiate the utilization of resources between
intraoperative angiography and IFVA when utilized with CABG. A second
request was to create only one new MS-DRG to separately identify the
use of intraoperative angiography, by any method, in CABG surgery. The
second component involved reviewing the ICD-9-CM procedure codes.
Currently, the ICD-9-CM procedure codes do not distinguish between
preoperative, intraoperative, and postoperative angiography. Procedure
code 88.59 (Intraoperative fluorescence vascular angiography (IFVA)) is
one intraoperative angiography technique that allows visualization of
the coronary vasculature. The third component involved reassigning
cases with

[[Page 50107]]

procedure code 88.59 to the ``Other Cardiovascular MS-DRGs'': MS-DRGs
228, 229, and 230 (Other Cardiothoracic Procedures with MCC, CC, and
without CC/MCC, respectively). We stated our intent to consider these
requests during the FY 2011 rulemaking process.
After publication of the FY 2010 IPPS/RY 2010 LTCH PPS final rule,
we were contacted by one of the requestors, the manufacturer of the
IFVA technology. We met with the requestor in mid-November 2009 to
discuss evaluating the data for IFVA (procedure code 88.59) again in
consideration of a proposal to create new MS-DRGs and to discuss a
request for a new procedure code(s).
IFVA technology consists of a mobile device imaging system with
software. It is used to test cardiac graft patency and technical
adequacy at the time of coronary artery bypass grafting (CABG). While
this system does not involve fluoroscopy or cardiac catheterization, it
has been suggested that it yields results that are similar to those
achieved with selective coronary arteriography and cardiac
catheterization. Intraoperative coronary angiography provides
information about the quality of the anastomosis, blood flow through
the graft, distal perfusion, and durability. For additional information
regarding IFVA technology, we refer readers to the September 28-29,
2006 ICD-9-CM Coordination and Maintenance Committee meeting handout at
the following Web site: http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp#TopOfPage.
a. New MS-DRGs for Intraoperative Fluorescence Vascular Angiography
(IFVA) With CABG
As stated in the FY 2010 IPPS/LTCH PPS proposed rule (75 FR 23900),
the manufacturer requested that we create four new MS-DRGs for CABG to
distinguish CABG surgeries performed with IFVA and those performed
without IFVA. According to the requestor, these four new MS-DRGs would
correspond to the existing MS-DRG for CABG but would also include
intraoperative angiography. The requestor proposed the following four
new MS-DRGs:
MS-DRG XXX (Coronary Bypass with Cardiac Catheterization with MCC
with Intraoperative Angiography).
MS-DRG XXX (Coronary Bypass with Cardiac Catheterization without
MCC with Intraoperative Angiography).
MS-DRG XXX (Coronary Bypass without Cardiac Catheterization with
MCC with Intraoperative Angiography).
MS-DRG XXX (Coronary Bypass without Cardiac Catheterization without
MCC with Intraoperative Angiography).
For the FY 2011 proposed rule, using claims data from the FY 2009
MedPAR file, we examined cases identified by procedure code 88.59 in
MS-DRGs 233, 234, 235, and 236. As shown in the table below, for both
MS-DRGs 235 and 236, the cases utilizing IFVA technology (code 88.59)
have a shorter length of stay and lower average costs compared to all
cases in MS-DRGs 235 and 236. There were a total of 10,281 cases in MS-
DRG 235 with an average length of stay of 10.61 days and average costs
of $34,639. There were 114 cases identified by procedure code 88.59
with an average length of stay of 10.38 days with average costs of
$28,238. In MS-DRG 236, there were a total of 22,410 cases with an
average length of stay of 6.37 days and average costs of $23,402; and
there were 186 cases identified by procedure code 88.59 with an average
length of stay of 6.54 days and average costs of $19,305. Similar to
the data reported last year, the data for FY 2009 clearly demonstrate
that the IFVA cases (identified by procedure code 88.59) are assigned
appropriately to MS-DRGs 235 and 236. We also examined cases identified
by procedure code 88.59 in MS-DRGs 233 and 234. Likewise, in MS-DRGs
233 and 234 cases identified by code 88.59 reflect shorter lengths of
stay and lower average costs compared to the remainder of the cases in
those MS-DRGs; and there were a total of 16,475 cases in MS-DRG 233
with an average length of stay of 13.47 days and average costs of
$42,662. There were 58 cases identified by procedure code 88.59 with an
average length of stay of 12.12 days and average costs of $35,940. In
MS-DRG 234, there were a total of 23,478 cases with an average length
of stay of 8.61 days and average costs of $29,615; and there were 67
cases identified by procedure code 88.59 with an average length of stay
of 8.85 days and average costs of $25,379. The data clearly demonstrate
the IFVA cases (identified by procedure code 88.59) are appropriately
assigned to MS-DRGs 233 and 234.

----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
235--All cases.................................................. 10,281 10.61 $34,639
235--Cases with procedure code 88.59............................ 114 10.38 28,238
235--Cases without procedure code 88.59......................... 10,167 10.62 34,711
236--All cases.................................................. 22,410 6.37 23,402
236--Cases with code procedure 88.59............................ 186 6.54 19,305
236--Cases without procedure code 88.59......................... 22,224 6.37 23,436
233--All cases.................................................. 16,475 13.47 42,662
233--Cases with procedure code 88.59............................ 58 12.12 35,940
233--Cases without procedure code 88.59......................... 16,417 13.47 42,686
234--All cases.................................................. 23,478 8.61 29,615
234--Cases with procedure code 88.59............................ 67 8.85 25,379
234--Cases without procedure code 88.59......................... 23,411 8.61 29,627
----------------------------------------------------------------------------------------------------------------

We stated in the proposed rule that if the cases identified by
procedure code 88.59 were proposed to be reassigned from MS-DRGs 235
and 236 to MS-DRGs 233 and 234, they would be significantly overpaid.
In addition, we indicated that because the cases in MS-DRGs 235 and 236
did not actually have a cardiac catheterization performed, a proposal
to reassign cases identified by procedure code 88.59 would result in
lowering the relative weights of MS-DRGs 233 and 234 where a cardiac
catheterization is truly performed.
In summary, in the proposed rule, we indicated that the data do not
support moving IFVA cases (procedure code 88.59) from MS-DRGs 235 and
236 to MS-DRGs 233 and 234. Therefore, we did not propose to make any
MS-DRG modifications for cases reporting procedure code 88.59 for FY
2011.
Comment: Several commenters agreed with CMS' proposal to not make
any MS-DRG modifications in FY 2011 for cases reporting procedure code
88.59. One commenter, the manufacturer, reported that they worked with
a consulting group to conduct an analysis on a subset of MedPAR claims
data that reported procedure code 88.59. According to the data
presented, the consultant's methodology for the

[[Page 50108]]

analysis involved examining only cases from the facilities that
reported procedure code 88.59, in any procedure code sequencing
position, in each one of the four MS-DRGs previously discussed (233,
234, 235, or 236). The manufacturer asserted that results of the
consultant's analysis varied significantly from the CMS data and that
their data supported reassignment of cases reporting procedure code
88.59 from MS-DRGs 235 and 236 to MS-DRGs 233 and 234.
Response: We acknowledge the commenters who supported our proposal
to not make any MS-DRG modifications for cases reporting procedure code
88.59 for FY 2011. In response to the manufacturer who worked with the
consulting group, we point out that the process of evaluating MS-DRG
reclassifications is not based on subsets of facility-specific data,
but rather, as stated earlier in section II.B.2 of the preamble to this
final rule, in deciding whether to make modifications to the MS-DRGs we
consider whether the resource consumption and clinical characteristics
of the patients with a given set of conditions are significantly
different than the remaining patients in the MS-DRG. In addition, in
evaluating resource costs, we consider both the absolute and percentage
differences in average costs between the cases we select for review and
the remainder of cases in the MS-DRG. As the manufacturer noted, the
consultant's analysis submitted for consideration was based on a subset
of facility-specific claims reporting code 88.59. Therefore, it is not
comparable to the analysis conducted by CMS. While the consultant's
analysis included cases that reported procedure code 88.59, it did not
reflect the differences in comparison to MedPAR claims data, as the CMS
analysis did, that are representative of the remaining Medicare
patients grouped in the above mentioned relevant MS-DRGs.
In addition, the manufacturer also submitted the consultant's
summary of observations from the analysis which stated two key points:
(1) The number of discharges they observed in the MedPAR data was
slightly higher than the volumes reported in the proposed rule. They
believed this may be the result of slightly different data files
between what they examined and what CMS used. The volume differences
are comparatively small.
(2) They were unable to account for differences in their cost
calculation for cases reporting procedure code 88.59 and the CMS
published results. Their hypothesis was that, because these represent a
small number of cases, cost report differences may be playing a
significant role in the calculation.
Currently, CMS' systems only process up to six procedure codes and,
as the commenter stated, the consultant's methodology considered
procedure code 88.59 in any sequencing position. Therefore, it is
unclear how many cases may have been reported after the sixth position.
Effective January 1, 2011, the HIPAA ASC X12 Technical Reports Type 3,
Version 005010 (Version 5010) standards system update will become
effective. The version 5010 format will allow facilities to report up
to 25 diagnoses and 25 procedure codes, and CMS' systems will begin to
process all 25 diagnosis and procedure codes. (Further detail regarding
this issue is discussed in section II.G.11. of this final rule.).
Lastly, the manufacturer concluded that ``the cost data continue to
be unreliable due to the sample size and inherent limitations of cost
reporting.'' We reiterate that the analysis conducted by the
manufacturer and consultant were not comparable to the analysis
conducted by CMS that examined cases reporting procedure code 88.59
against all cases in the specified MS-DRGs versus the consultant's
analysis that only provided data on those facilities that are using the
technology and their associated costs. Therefore, we are finalizing our
proposal to not reassign cases reporting procedure code 88.59 for FY
2011.
b. New MS-DRG for Intraoperative Angiography, by Any Method, With CABG
We also received a request to create a single MS-DRG for any type
of intraoperative angiography utilized in CABG surgery. The requestor
suggested the following title for the proposed new MS-DRG: XXX Coronary
Bypass with Intraoperative Angiography, by any Method.
As we indicated in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23901), currently, the only ICD-9-CM procedure code that identifies an
intraoperative angiography is procedure code 88.59 (Intraoperative
fluorescence vascular angiography), as described in the previous
section. Due to the structure of the ICD-9-CM procedure classification
system, it is not possible to distinguish when other types of
angiography are performed intraoperatively. Therefore, we indicated
that we were unable to evaluate any data, other than that for procedure
code 88.59, as shown in the tables above. We did not propose to create
a new MS-DRG in FY 2011 for coronary bypass with intraoperative
angiography, by any method.
Comment: Several commenters agreed with CMS' proposal to not create
a new MS-DRG in FY 2011 for coronary bypass with intraoperative
angiography, by any method. Another commenter, the manufacturer,
acknowledged the limitations of the ICD-9-CM coding structure and the
ability to currently only identify one method of intraoperative
angiography. The manufacturer stated that the creation of a new ICD-9-
CM procedure code to identify intraoperative angiography by
conventional X-ray angiography would allow CMS to obtain accurate data
on intraoperative or completion angiography by either method.
Response: We appreciate the commenter's support of our proposal to
not create a new MS-DRG in FY 2011 for coronary bypass with
intraoperative angiography, by any method. We also acknowledge the
manufacturer's concern regarding the inability to identify
intraoperative angiography by conventional X-ray angiography. As
discussed previously (75 FR 23901) and in further detail below,
proposals for creating a new procedure code must be submitted to the
ICD-9-CM Coordination and Maintenance Committee for consideration.
c. New Procedure Codes
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23901), we
indicated that, in response to our invitation to submit public comments
regarding the proposal not to make any MS-DRG modifications for cases
reporting procedure code 88.59 in the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24106-24107), one requestor presented another
option involving the creation of new ICD-9-CM procedure codes.
According to the requestor, the purpose of these new codes would be to
separately identify the two technologies used to perform intraoperative
coronary angiography in CABG surgery: X-ray coronary angiography with
cardiac catheterization and fluoroscopy versus intraoperative
fluorescence coronary angiography (IFVA). The requestor stated that due
to the structure of the current codes and MS-DRGs for CABG, it is
difficult to identify when x-ray angiography is performed.
X-ray angiography is commonly performed as a separate procedure in
a catheterization laboratory. Currently, there are no procedure codes
to distinguish if this angiography was performed preoperatively,
intraoperatively, and/or postoperatively. We informed the requestor
that they

[[Page 50109]]

could submit a proposal for creating a new procedure code(s) to the
ICD-9-CM Coordination and Maintenance Committee for its consideration.
Therefore, in the FY 2011 proposed rule, we indicated that this topic
would be further evaluated through the ICD-9-CM Coordination and
Maintenance Committee meeting process.
Comment: Similar to comments made at the March 9-10, 2010 ICD-9-CM
Coordination and Maintenance Committee meeting, one commenter, the
manufacturer, stated that the resource utilization costs for a
diagnostic cardiac catheterization, which is routinely performed in a
catheterization laboratory may differ from those costs incurred for
performing intraoperative completion angiography concomitant with a
coronary artery bypass graft procedure in a surgical suite. However,
the manufacturer noted that, regardless of the technology (IFVA or X-
ray angiography), performance of intraoperative completion angiography
in a surgical suite involves similar resources. The commenter further
noted that an intraoperative completion angiography performed with X-
ray angiography cannot be separately identified from a diagnostic
cardiac catheterization due to the coding structure. According to the
commenter, this scenario creates a payment incentive for physicians to
select X-ray technology to perform a completion angiography, despite
the known risks to patients associated with exposure to radiation
because the code used to report X-ray angiography (cardiac
catheterization) is recognized in the MS-DRG assignment. The commenter
urged CMS to remove this incentive by ensuring that procedure code
88.59 will impact MS-DRG assignment in the same way that the code for
X-ray angiography does.
Response: As stated above, requests for updates and changes to the
procedure coding system are discussed through the ICD-9-CM Coordination
and Maintenance Committee meeting process. At the March 9-10, 2010
meeting, a proposal was submitted by the manufacturer and presented.
Details of the initial proposal regarding intraoperative angiography
with coronary artery bypass graft discussed at the March 2010 ICD-9-CM
Coordination and Maintenance Committee meeting along with the summary
report of the meeting can be located at the following CMS Web site:
http://www.cms.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp.
Currently, there is not a mechanism to analyze if both technologies
utilize similar resources in the surgical suite as the manufacturer
asserts since, as stated several times, the coding structure does not
currently distinguish between intraoperative X-ray angiography and
IFVA. Despite the inability to currently differentiate between the two
technologies in an intraoperative setting, we disagree that physicians
have a payment incentive to utilize X-ray angiography over IFVA to
perform a completion angiography. The current MS-DRG assignments are
based on claims data for the purposes of maintaining clinically
coherence, accounting for patient's severity of illness, ensuring
similar utilization of resources and complexity of services and are not
formulated to provide incentives as the commenter indicated. We believe
that physicians provide the most clinically appropriate, quality of
care and make decisions with respect to the individual patient's needs
and not subject patients to inherent risk.
In response to the manufacturer's request urging CMS to ensure that
IFVA impacts the MS-DRG assignment in the same way as a cardiac
catheterization currently does, as stated in the FY 2010 IPPS/LTCH PPS
final rule (74 FR 43787), it would be inappropriate to reassign cases
reporting the use of IFVA to higher weighted MS-DRGs merely as an
incentive for hospitals to invest in the IFVA technology.
As stated earlier, at the March 2010 meeting, an initial proposal
was presented and, as a result, one aspect of the two-part proposal was
finalized that involves an update to an existing code and the creation
of a new code for IFVA. Effective October 1, 2010 (FY 2011), procedure
code 88.59 has been revised to uniquely identify intraoperative
coronary fluorescence vascular angiography and new code 17.71 has been
created to identify noncoronary intraoperative fluorescence vascular
angiography. We do not agree with the manufacturer's comment that these
new code changes for FY 2011 will facilitates the MS-DRG case
reassignment that the commenter proposed for procedure code 88.59 and
believed was appropriate for policy. CMS does believe additional data
are needed to fully evaluate the volume of cases and resources involved
to perform intraoperative completion angiography using X-ray technology
versus IFVA. Therefore, CMS is planning to discuss other options at a
future ICD-9-CM Coordination and Maintenance Committee meeting.
In summary, we are finalizing our proposal not to make any changes
to MS-DRGs 233, 234, 235 or 236 for cases reporting the use of
procedure code 88.59.
d. MS-DRG Reassignment of Intraoperative Fluorescence Vascular
Angiography (IFVA)
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23901 and 23902),
we indicated that we had received a request suggesting that we reassign
procedure code 88.59 (Intraoperative Fluorescence Vascular
Angiography), to the ``Other Cardiovascular MS-DRGs'': MS-DRGs 228,
229, and 230 (Other Cardiothoracic Procedures with MCC, CC, and without
CC/MCC, respectively). The requestor noted that these MS-DRGs have
three levels of severity and that other procedures assigned to these
MS-DRGs (for example, transmyocardial revascularization) are frequently
performed at the same time as a CABG. The requestor believed that
reassigning cases that report IFVA (procedure code 88.59) to these MS-
DRGs would not result in a significant overpayment to hospitals.
In the FY 2011 proposed rule, we pointed out that, in the surgical
hierarchy, MS-DRGs 228, 229, and 230 rank higher than MS-DRGs 233, 234,
235, and 236, which were evaluated in the above tables for CABG
procedures performed with IFVA (procedure code 88.59). The surgical
hierarchy reflects the relative resource requirements of various
surgical procedures. For example, if a CABG surgery were performed
along with another procedure currently assigned to MS-DRGs 228, 229,
and 230, the case would be assigned to one of the ``Other
Cardiothoracic Procedures MS-DRGs'' (228, 229, and 230) because
patients with multiple procedures are assigned to the highest surgical
hierarchy to which one of the procedures is assigned.
Therefore, as the data shown above did not demonstrate that IFVA
utilized an equivalent (or additional) amount of resources as a cardiac
catheterization to warrant a proposal to reassign IFVA cases to MS-DRGs
233 and 234 and the fact that IFVA cases with CABG performed with a
procedure assigned to MS-DRGs 228, 229, and 230 would already be
grouped to those same MS-DRGs, we did not propose to reassign cases
reporting procedure code 88.59 to MS-DRGs 228, 229, and 230 for FY
2011.
Comment: Several commenters supported the proposal not to reassign
cases reporting procedure code 88.59 to MS-DRGs 228, 229, and 230.
Response: We appreciate the commenters' support.
We are finalizing our proposal to not reassign cases reporting
procedure code 88.59 to MS-DRGs 228, 229, and 230 for FY 2011.

[[Page 50110]]

4. MDC 6 (Diseases and Disorders of the Digestive System):
Gastrointestinal Stenting
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR43799), we
discussed a request we received to create new MS-DRGs in FY 2011 to
better identify patients who undergo the insertion of a
gastrointestinal stent. The request was considered outside the scope of
issues addressed in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule;
therefore, we stated our intent to consider this request during the FY
2011 rulemaking process.
Gastrointestinal stenting is performed by inserting a tube (stent)
into the esophagus, duodenum, biliary tract or colon to reestablish or
maintain patency of these structures and allow swallowing, drainage, or
passage of waste. The commenter requested that the new MS-DRGs be
subdivided into three severity levels (with MCC, with CC, and without
CC/MCC) to better align payment rates with resource consumption and
improve the clinical coherence of these cases.
In its own analysis using FY 2008 MedPAR data, the commenter
identified gastrointestinal stenting cases using relevant diagnosis
codes and a combination of procedure codes with revenue code 0278 in
MS-DRGs 374, 375, and 376 (Digestive Malignancy with MCC, with CC, and
without CC/MCC, respectively), MS-DRGs 391and 392 (Esophagitis,
Gastroenteritis and Miscellaneous Digestive Disorders with MCC and
without MCC, respectively), and MS-DRGs 393, 394, and 395 (Other
Digestive System Diagnoses with MCC, with CC, and without CC/MCC,
respectively) in MDC 6 (Diseases and Disorders of the Digestive
System); and MS-DRGs 435, 436, and 437 (Malignancy of Hepatobiliary
System or Pancreas with MCC, with CC, and without CC/MCC, respectively)
in MDC 7 (Diseases and Disorders of the Hepatobiliary System and
Pancreas).
As stated above, the commenter utilized a combination of procedure
codes along with revenue code 0278 for its analysis. There were a total
of six procedure codes included, of which, only three (procedure codes
42.81, 51.87, and 52.93) actually describe the insertion of a stent.
The complete list of procedure codes is as follows:
42.81 (Insertion of permanent tube into esophagus)
45.13 (Other endoscopy of small intestine)
45.22 (Endoscopy of large intestine through artificial
stoma)
46.85 (Dilation of intestine)
51.87 (Endoscopic insertion of stent (tube) into bile
duct)
52.93 (Endoscopic insertion of stent (tube) into
pancreatic duct)
The commenter aggregated the results by the previously mentioned
MS-DRG groupings and did not present results for individual stenting
procedures. According to the commenter, mean standardized charges for
gastrointestinal stenting procedures were higher than those for
nonstenting procedures across all levels of severity of illness. In
addition, the commenter believed that the difference in charges was not
simply related to the costs of the stents, but rather that the extent
of the difference in charges reflected the severity of illness and
resource intensity associated with gastrointestinal stenting
procedures.
As indicated in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23902), in response to the commenter's request, we pointed out that we
do not utilize revenue codes in our process to evaluate if new MS-DRGs
are warranted. The use of revenue codes in the MS-DRG reclassification
process would require a major structural change from the current
process that has been utilized since the inception of the IPPS. In
addition, the commenter included procedure codes in its analysis that
do not identify the insertion of a stent; thereby, the data are
unreliable. Furthermore, two procedure codes describing the insertion
of a colonic stent were recently implemented, effective with discharges
occurring on or after October 1, 2009--procedure code 46.86 (Endoscopic
insertion of colonic stent(s)) and procedure code 46.87 (Other
insertion of colonic stent(s)). However, we do not have data currently
available on these two new procedure codes to include them in a
comprehensive analysis. Lastly, as the commenter indicated, the
differences between those procedures with and without stents is a
reflection on the severity of illness and resource consumption
associated with these types of procedures. The commenter also
acknowledged that patients receiving a gastrointestinal stent who are
severely debilitated due to prolonged illness are reflected by the fact
that the majority of cases are assigned to MS-DRGs for patients with
MCCs (major complications or comorbidities). Therefore, the medical MS-
DRGs to which these procedures are currently assigned already account
for the severity of illness and intensity of resources utilized.
For the FY 2011 IPPS/LTCH PPS proposed rule, using FY 2009 MedPAR
data, we analyzed the three procedure codes that truly identify and
describe the insertion of a stent (procedure codes 42.81, 51.87, and
52.93) within the MS-DRGs referenced above. Similar to the commenter's
findings, our analysis demonstrated a small volume of cases in which
insertion of a gastrointestinal stent occurred in the specified MS-
DRGs. Of the 411,390 total cases across the digestive system MS-DRGs
the requestor identified, there were only 2,011 cases that involved the
actual insertion of a gastrointestinal stent. These cases had average
costs ranging from a low of $5,846 to a high of $17,626. Based on these
findings, in the proposed rule, we indicated that we did not believe it
was appropriate to assign cases with such disparity in costs into a
single, new MS-DRG. Furthermore, in applying the five criteria used to
establish new MS-DRGs, we indicated that the data do not support the
creation of new MS-DRGs with three severity levels (with MCC, with CC,
and without CC/MCC).
For the reasons stated above, we invited the public to submit
comments on our proposal not to make any MS-DRG modifications to cases
involving the use of gastrointestinal stents for FY 2011.
Comment: Several commenters in general supported CMS' proposal not
to make any MS-DRG modifications involving the use of gastrointestinal
stents for FY 2011. One commenter expressed appreciation for CMS'
efforts to consider its request to create a new series of MS-DRGs for
gastrointestinal stent placement cases. The commenter acknowledged the
lack of specific ICD-9-CM procedure codes for colonic and duodenal
stent placement in the data and CMS' practice of not using revenue
codes to help distinguish between different types of procedures. The
commenter agreed that the lack of specific codes and not using revenue
codes in the MS-DRG grouping logic precludes CMS' ability to implement
the requested MS-DRG modifications for gastrointestinal stents for FY
2011. The commenter indicated that it will continue to monitor these
cases in future years and, if appropriate, request the creation of new
MS-DRGs.
Response: We agree with the commenters that our data and claims
analysis support our proposal to not make any MS-DRG modifications to
cases involving the use of gastrointestinal stents for FY 2011.
Therefore, we are finalizing our proposal to not make any MS-DRG
modifications to cases involving the use of gastrointestinal stents for
FY 2011.

[[Page 50111]]

5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue): Pedicle-Based Dynamic Stabilization
As we did for FY 2009 (73 FR 45820), we received a request from a
manufacturer to reassign procedure code 84.82 (Insertion or replacement
of pedicle-based dynamic stabilization device(s)), effective October 1,
2007, from MS-DRG 490 (Back and Neck Procedures Except Spinal Fusion
with CC/MCC or Disc Device/Neurostimulator) to MS-DRG 460 (Spinal
Fusion Except Cervical without MCC). According to the manufacturer, the
technology that is identified by this procedure code, the
Dynesys[supreg] Dynamic Stabilization System, is clinically similar to
lumbar spinal fusion and requires similar utilization of resources.
Dynamic stabilization is a concept that utilizes a flexible system
to stabilize the spine without fusion. The primary goals of dynamic
stabilization are to limit the amount of unnatural spinal motion and
preserve as much of the patient's natural anatomic structures as
possible. The Dynesys[supreg] Dynamic Stabilization System is comprised
of three components with specific functions: titanium alloy pedicle
screws that anchor the system to the spine; a polyethylene-
terephthalate (PET) cord that connects the Dynesys[supreg] screws; and
a polycarbonate-urethane (PCU) spacer that runs over the cord between
the Dynesys[supreg] screws. The system is placed under tension creating
a dynamic interaction between the components.
The MS-DRGs are comprised of clinically coherent groups of patients
who consume similar utilization of resources and complexity of
services. The insertion of a Dynesys[supreg] Dynamic Stabilization
System is clinically not a lumbar fusion. As stated previously, dynamic
stabilization is a concept that utilizes a flexible system to stabilize
the spine without fusion. Therefore, in the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23903), we stated that it would be clinically
inappropriate to reassign cases reporting procedure code 84.82 in the
fusion MS-DRG.
In conclusion, the Dynesys[supreg] Dynamic Stabilization System is
currently FDA approved for use only as an adjunct to spinal fusion,
there is uncertainty regarding the coding and reporting of procedure
code 84.82, as well as off-label use, and currently, all other similar
nonfusion devices are assigned to MS-DRG 490.
For the reasons listed above, we did not propose to reassign cases
reporting procedure code 84.82 from MS-DRG 490 to MS-DRG 460 for FY
2011.
Comment: Several commenters supported CMS' proposal not to reassign
cases reporting procedure code 84.82 from MS-DRG 490 to MS-DRG 460 for
FY 2011. One commenter, the manufacturer, stated that they conducted a
clinical comparison of Dynesys[supreg] as well as an analysis of
charges and costs associated with MS-DRGs 490 and 460, specifically
procedure codes 84.82 (Insertion or replacement of pedicle-based
dynamic stabilization device(s)), and 81.08 (Lumbar and lumbosacral
fusion, posterior technique). According to the manufacturer, the
analysis demonstrated that the resource utilization of Dynesys[supreg]
as a nonfusion device is similar to that of fusion and is greater than
that of other procedures grouped in MS-DRG 490.
Response: We appreciate the manufacturer's analysis. As stated
previously, and as the manufacturer stated in its comments, the FDA has
not yet approved the Post-Market Approval (PMA) application to expand
the indication of Dynesys[supreg] for use as a non-fusion device.
Dynesys[supreg] is currently approved as an adjunct to spinal fusion;
therefore, when reported correctly, cases utilizing the Dynesys[supreg]
technology are appropriately assigned to the fusion MS-DRGs. We will
continue to monitor the resource utilization of procedure codes 84.82
and 81.08 to determine if future MS-DRG reassignments or new MS-DRGs
are warranted. For FY 2011, we are finalizing our proposal not to
reassign cases with procedure code 84.82 from MS-DRG 490 to MS-DRG 460.
6. MDC 15 (Newborns and Other Neonates With Conditions Originating in
the Perinatal Period)
a. Discharges/Transfers of Neonates to a Designated Cancer Center or
Children's Hospital
As discussed in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23903), we received a request to add patient discharge status code 05
(Discharged/transferred to a designated cancer center or children's
hospital) to the MS-DRG GROUPER logic for MS-DRG 789 (Neonates, Died or
Transferred to Another Acute Care Facility). Currently, neonate cases
with the discharge status code 05 are being assigned to MS-DRG 795
(Normal Newborn).
The definition of discharge status code 05 was changed on April 1,
2008, from ``discharged/transferred to another type of health care
institution not defined elsewhere in this code list'' to ``discharged/
transferred to a designated cancer center or children's hospital.'' For
the FY 2011 proposed rule, we examined cases in the FY 2009 MedPAR file
but did not find any cases with the discharge status code 05 that were
assigned to either MS-DRG 789 or MS-DRG 795. However, we indicated that
we believed the request has merit in identifying neonate cases
appropriately. Therefore, for FY 2011, we proposed to add discharge
status code 05 to the MS-DRG GROUPER logic for MS-DRG 789.
Comment: Some commenters supported the proposed change to the MS-
DRG GROUPER logic for discharge status 05. A few commenters commended
CMS for responding to industry requests related to MDC 15, especially
in light of the limited impact on the Medicare population while
acknowledging that other payers also utilize the MS-DRG classification
system. One commenter recommended adding the logic for discharge status
code 05 to the MS-DRG GROUPER logic for all newborn cases assigned to
MS-DRGs: 790 (Extreme Immaturity or Respiratory Distress Syndrome,
Neonate), 791 (Prematurity with Major Problems), 792 (Prematurity
without Major Problems), 793 (Full Term Neonate with Major Problems),
794 (Neonate with Other Significant Problems), and 795 so that these
cases may be appropriately grouped to the MS-DRG 789 for transferred
neonates.
Response: We appreciate the support of the commenters. To clarify
our proposed policy change, we are adding discharge status code 05 to
the MS-DRG GROUPER logic for assigning cases to MS-DRG 789. This change
will result in any case identified with discharge status 05, which
would have normally been assigned to MS-DRGs 790 through 795, being
reassigned to MS-DRG 789, as the commenter recommended.
After consideration of the public comments we received, we contend
that this logic change has merit and, therefore, are adopting it as
final for FY 2011. All newborn cases assigned to MS-DRGs 790 through
795 and indentified with discharge status 05 will be reassigned to MS-
DRG 789 for transferred neonates.
b. Vaccinations of Newborns
As discussed in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR
23903), we received a request to examine the assignment of code V64.05
(Vaccination not carried out because of caregiver refusal) to MS-DRG
794 (Neonate with Other Significant Problems). Code V64.05 is currently
being reported when a physician documents that a parent/caregiver has
refused immunization for a child. The reporting of this code as a
principal or secondary diagnosis

[[Page 50112]]

impacts the MS-DRG assignment for normal newborns cases being assigned
to MS-DRG 794.
For the FY 2011 proposed rule, we examined cases in the FY 2009
MedPAR file but did not find any cases of code V64.05 assigned to MS-
DRG 794. Our medical advisors agree that code V64.05 should not be
assigned to MS-DRG 794. We determined that the presence of code V64.05
does not indicate that there is a significant problem with the newborn
and should not be assigned to MS-DRG 794. Therefore, as we indicated in
the FY 2011 proposed rule, we believe that assignment of code V64.05 to
MS-DRG 795 (Normal Newborn) would be more appropriate for this code
because it does not identify a significant problem.
The logic for MS-DRG 795 contains a list of principal diagnosis
codes for normal newborn and no secondary diagnosis or a list of only
secondary diagnosis codes. Therefore, in the proposed rule, for FY
2011, we proposed to remove code V64.05 from MS-DRG 794 and add this
code to the only secondary diagnosis list for MS-DRG 795.
Comment: Commenters supported this proposed change.
Response: We appreciate the commenters support. As stated above, we
believe that the assignment of code V64.05 to MS-DRG 795 is
appropriate.
After consideration of the public comments we received, we are
adopting our proposal to remove code V64.05 from MS-DRG 794 and to add
it to the only secondary diagnosis list for MS-DRG 795 as final for FY
2011.
7. Medicare Code Editor (MCE) Changes
As explained under section II.B.1. of the preamble of this final
rule, the Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into a MS-DRG. In the FY
2011 IPPS/LTCH PPS proposed rule (75 FR 23903), we indicated that we
intended to make the following changes to the MCE edits and invited
public input on whether or not we should do so:
a. Unacceptable Principal Diagnosis Edit: Addition of Code for
Gastroparesis
It was brought to our attention that diagnosis code 536.3
(Gastroparesis) has a ``code first underlying disease'' note. This note
indicates that diagnosis code 536.3 should not be used as a principal
diagnosis. Therefore, diagnosis code 536.3 should have been included on
the list of unacceptable principal diagnoses in the MCE.
We agree that diagnosis code 536.3 should have been included on the
list of unacceptable principal diagnoses in the MCE. Therefore, in the
proposed rule for FY 2011, we indicated that we intended to add
diagnosis code 536.3 to that list in the MCE.
Comment: A number of commenters opposed the proposed change because
they believed that this sequencing change in the order of reported
codes would eliminate Medicare coverage for the condition of
gastroparesis.
Response: The commenters erroneously believed that this sequencing
change in the order of reported codes would eliminate Medicare coverage
for the condition of gastroparesis. Therefore, we are taking the
opportunity in this final rule to clarify that at no time did we intend
to withdraw coverage for gastroparesis. We believe that many commenters
mistakenly assumed that if diagnosis code 536.3 were not permitted to
be in the principal diagnosis position, it would become a noncovered
condition by Medicare. This is not CMS' intent, nor would it have been
the result of our proposed change. As one commenter stated: ``The
effect of the proposed edit would be that idiopathic gastroparesis * *
* could not be sequenced as a principal diagnosis. We recognize that an
inconsistency currently exists between the MCE and the `code first
underlying disease' associated with [code] 536.3. We understand the
issue is not with the MCE, but rather the note.''
We agree with the commenters and with the medical community that
diagnosis code 536.3 should not be included in the MCE's Unacceptable
Principal Diagnosis Edit, and hereby withdraw our suggestion to put it
on that list. Diagnosis code 536.3 will not be added to the MCE in FY
2011.
We understand that the matter of the ``code first'' note will be
addressed by the ICD-9-CM Coordination & Maintenance Committee in
September 2010.
b. Open Biopsy Check Edit
The Open Biopsy Check edit in the MCE dates back to the early years
of the IPPS when the surgical and medical DRGs were not as expansive as
they are today. In the mid-1980s when the Open Biopsy Check edit was
created, the ICD-9-CM codes did not have many biopsy procedure codes
that clearly showed the approach, such as codes for open, percutaneous,
and closed biopsies. Furthermore, under the current MS-DRGs, the open
biopsy codes do not have as significant an impact as they did in the
early versions of the DRGs. We believe that the Open Biopsy Check edit
no longer serves a useful purpose. Therefore, in the FY 2011 proposed
rule, we indicated that we intended to delete the entire Open Biopsy
Check edit from the MCE, which meant removing the following 63 codes
from the edit:
01.11 (Closed [Percutaneous] [Needle] biopsy of cerebral
meninges)
01.12 (Open biopsy of cerebral meninges)
01.13 (Closed [Percutaneous] [Needle] biopsy of brain)
01.14 (Open biopsy of brain)
04.11 (Closed [Percutaneous] [Needle] biopsy of cranial or
peripheral nerve or ganglion)
04.12 (Open biopsy of cranial or peripheral nerve or
ganglion)
06.11 (Closed [Percutaneous] [Needle] biopsy of thyroid
gland)
06.12 (Open biopsy of thyroid gland)
07.11 (Closed [Percutaneous] [Needle] biopsy of adrenal
gland)
07.12 (Open biopsy of adrenal gland)
22.11 (Closed [Endoscopic] [Needle] biopsy of nasal sinus)
22.12 (Open biopsy of nasal sinus)
25.01 (Closed [Needle] biopsy of tongue)
25.02 (Open biopsy of tongue)
26.11 (Closed [Needle] biopsy of salivary gland or duct)
26.12 (Open biopsy of salivary gland or duct)
31.43 (Closed [Endoscopic] biopsy of larynx)
31.44 (Closed [Endoscopic] biopsy of trachea)
31.45 (Open biopsy of larynx or trachea)
33.24 (Closed [Endoscopic] biopsy of bronchus)
33.25 (Open biopsy of bronchus)
33.26 (Closed [Percutaneous] [Needle] biopsy of lung)
33.28 (Open biopsy of lung)
34.25 (Closed [Percutaneous] [Needle] biopsy of
mediastinum)
34.26 (Open mediastinal biopsy)
41.32 (Closed [Aspiration] [Percutaneous] biopsy of
spleen)
41.33 (Open biopsy of spleen)
42.24 (Closed [Endoscopic] biopsy of esophagus)
42.25 (Open biopsy of esophagus)
44.14 (Closed [Endoscopic] biopsy of stomach)
44.15 (Open biopsy of stomach)
45.14 (Closed [Endoscopic] biopsy of small intestine)

[[Page 50113]]

45.15 (Open biopsy of small intestine)
45.25 (Closed [Endoscopic] biopsy of large intestine)
45.26 (Open biopsy of large intestine)
48.24 (Closed [Endoscopic] biopsy of rectum)
48.25 (Open biopsy of rectum)
50.11 (Closed (Percutaneous) [Needle] biopsy of liver)
50.12 (Open biopsy of liver)
51.12 (Percutaneous biopsy of gallbladder or bile ducts)
51.13 (Open biopsy of gallbladder or bile ducts)
52.11 (Closed [Aspiration] [Needle] [Percutaneous] biopsy
of pancreas)
52.12 (Open biopsy of pancreas)
54.23 (Biopsy of peritoneum)
54.24 (Closed [Percutaneous] [Needle] biopsy of intra-
abdominal mass)
55.23 (Closed [Percutaneous] [Needle] biopsy of kidney)
55.24 (Open biopsy of kidney)
56.32 (Closed percutaneous biopsy of ureter)
56.34 (Open biopsy of ureter)
57.33 (Closed [Transurethral] biopsy of bladder)
57.34 (Open biopsy of bladder)
60.11 (Closed [Percutaneous] [Needle] biopsy of prostate)
60.12 (Open biopsy of prostate)
60.13 (Closed [Percutaneous] biopsy of seminal vesicles)
60.14 (Open biopsy of seminal vesicles)
62.11 (Closed [Percutaneous] [Needle] biopsy of testis)
62.12 (Open biopsy of testis)
68.13 (Open biopsy of uterus)
68.14 (Open biopsy of uterine ligaments)
68.15 (Closed biopsy of uterine ligaments)
68.16 (Closed biopsy of uterus)
85.11 (Closed [Percutaneous] [Needle] biopsy of breast)
85.12 (Open biopsy of breast)
We did not receive any public comments regarding the proposal to
delete the Open Biopsy Check edit from the MCE. Therefore, because
there were no objections to the proposal, we are deleting the Open
Biopsy Check edit from the MCE. The edit containing the codes listed
above will be removed, effective for October 1, 2010 (FY 2011).
c. Noncovered Procedure Edit
The ICD-9-CM procedure codes 52.80 (Pancreatic transplant, not
otherwise specified) and 52.82 (Homotransplant of pancreas) alone (that
is, without procedure code 55.69 (Other kidney transplantation)) are
considered noncovered procedures, except when either one is combined
with at least one specific principal or secondary diagnosis code. These
specific diagnosis codes identify Type I diabetes mellitus, not stated
as uncontrolled, or else identified as uncontrolled.
To conform to the proposed change to Pre-MDC MS-DRGs 008 and 010 as
discussed in section II.G.1. of the FY 2011 IPPS/LTCH PPS proposed
rule, in which we proposed to add code 251.3 (Postsurgical
hypoinsulinemia) to those MS-DRGs, we indicated in that FY 2011
proposed rule that we intended to add procedure code 251.3 to the list
of acceptable principal or secondary diagnosis codes in the MCE.
We did not receive any public comments on our proposal to add
procedure code 251.3 to the list of acceptable principal or secondary
diagnosis codes in the MCE. Therefore, because there were no objections
to this proposal, we are adding procedure code 251.3 (Postsurgical
hypoinsulinemia) to the MCE in the list of acceptable principal or
secondary codes associated with procedure codes 52.80 (Pancreatic
transplant, not otherwise specified) and 52.82 (Homotransplant of
pancreas).
8. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, we
reviewed the surgical hierarchy of each MDC, as we have for previous
reclassifications and recalibrations, to determine if the ordering of
classes coincides with the intensity of resource utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 1 and 2 and surgical class B includes MS-DRGs
3, 4, and 5. Assume also that the average costs of MS-DRG 1 is higher
than that of MS-DRG 3, but the average costs of MS-DRGs 4 and 5 are
higher than the average costs of MS-DRG 2. To determine whether
surgical class A should be higher or lower than surgical class B in the
surgical hierarchy, we would weigh the average costs of each MS-DRG in
the class by frequency (that is, by the number of cases in the MS-DRG)
to determine average resource consumption for the surgical class. The
surgical classes would then be ordered from the class with the highest
average resource utilization to that with the lowest, with the
exception of ``other O.R. procedures'' as discussed below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients in the MDC with these
diagnoses. Therefore, assignment to these surgical classes should only
occur if no other surgical class more closely related to the diagnoses
in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the

[[Page 50114]]

hierarchy change, the average costs are likely to shift such that the
higher-ordered surgical class has a lower average costs than the class
ordered below it.
As we proposed, based on the changes that we are making for FY
2011, as discussed in section II.C.2. of this preamble, we are revising
the surgical hierarchy for Pre-MDCs and MDC 10 (Endocrine, Nutritional
and Metabolic Diseases and Disorders) to reflect the resource
intensiveness of the MS-DRGs, as follows:
In Pre-MDCs, we are reordering new MS-DRG 014 (Allogeneic Bone
Marrow Transplant) above MS-DRG 007 (Lung Transplant); and new MS-DRG
015 (Autologous Bone Marrow Transplant) above MS-DRG 010 (Pancreas
Transplant).
In MDC 10, we are reordering MS-DRG 614 (Adrenal and Pituitary
Procedures With CC/MCC) and MS-DRG 615 (Adrenal and Pituitary
Procedures Without CC/MCC) above MS-DRG 625 (Thyroid, Parathyroid and
Thyroglossal Procedures With MCC).
Comment: Commenters generally supported our proposals without any
objections.
Response: Based on the test of the proposed revisions using the
March 2010 update of the FY 2009 MedPAR file and the revised GROUPER
software, we found that the revisions are still supported by the data.
Therefore, we are incorporating the proposed revisions to the surgical
hierarchy as final for FY 2011.
9. Complications or Comorbidity (CC) Exclusions List
a. Background
As indicated earlier in the preamble of this final rule, under the
IPPS MS-DRG classification system, we have developed a standard list of
diagnoses that are considered CCs. Historically, we developed this list
using physician panels that classified each diagnosis code based on
whether the diagnosis, when present as a secondary condition, would be
considered a substantial complication or comorbidity. A substantial
complication or comorbidity was defined as a condition that, because of
its presence with a specific principal diagnosis, would cause an
increase in the length of stay by at least 1 day in at least 75 percent
of the patients. We refer readers to section II.D.2. and 3. of the
preamble of the FY 2008 IPPS final rule with comment period for a
discussion of the refinement of CCs in relation to the MS-DRGs we
adopted for FY 2008 (72 FR 47121 through 47152).
b. CC Exclusions List for FY 2011
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another.
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another.
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another.
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another.
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\2\
---------------------------------------------------------------------------

\2\ See the FY 1989 final rule (53 FR 38485, September 30,
1988), for the revision made for the discharges occurring in FY
1989; the FY 1990 final rule (54 FR 36552, September 1, 1989), for
the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September
4, 1990), for the FY 1991 revision; the FY 1992 final rule (56 FR
43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final
rule (57 FR 39753, September 1, 1992), for the FY 1993 revision; the
FY 1994 final rule (58 FR 46278, September 1, 1993), for the FY 1994
revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994),
for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782,
September 1, 1995), for the FY 1996 revisions; the FY 1997 final
rule (61 FR 46171, August 30, 1996), for the FY 1997 revisions; the
FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998
revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998), for
the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August
1, 2000), for the FY 2001 revisions; the FY 2002 final rule (66 FR
39851, August 1, 2001), for the FY 2002 revisions; the FY 2003 final
rule (67 FR 49998, August 1, 2002), for the FY 2003 revisions; the
FY 2004 final rule (68 FR 45364, August 1, 2003), for the FY 2004
revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004),
for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640,
August 12, 2005), for the FY 2006 revisions; the FY 2007 final rule
(71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72
FR 47130) for the FY 2008 revisions, the FY 2009 final rule (73 FR
48510), and the FY 2010 final rule (74 FR 43799). In the FY 2000
final rule (64 FR 41490, July 30, 1999, we did not modify the CC
Exclusions List because we did not make any changes to the ICD-9-CM
codes for FY 2000.
---------------------------------------------------------------------------

(1) Limited Revisions Based on Changes to the ICD-9-CM Diagnosis Codes
For FY 2011, as we proposed, we are making limited revisions to the
CC Exclusions List to take into account the changes made in the ICD-9-
CM diagnosis coding system effective October 1, 2009. (We refer readers
to section II.G.11. of the preamble of this final rule for a discussion
of ICD-9-CM changes.) We are making these changes in accordance with
the principles established when we created the CC Exclusions List in
1987. In addition, we are indicating on the CC Exclusions List some
changes as a result of updates to the ICD-9-CM codes to reflect the
exclusion of codes from being MCCs under the MS-DRG system that we
adopted in FY 2008.
(2) Suggested Changes to Severity Levels for Obesity-Related and Major
Osseous Defect Diagnosis Codes
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43793
through 43794), we indicated that several commenters on the FY 2010
IPPS proposed rule recommended that CMS consider making further
adjustments to the MS-DRG assignments based on obesity and major
osseous defects. The commenters stated that obesity, high Body Mass
Index (BMI) ratings, and major osseous defects add to the complexity of
care for patients such as those patients undergoing orthopedic
procedures. The commenters recommended the following changes to the
list of MCCs and CCs:
Several commenters recommended that CMS add the following diagnosis
codes, which are classified as non-CCs, to the CC or MCC list:
731.3 (Major osseous defects)

[[Page 50115]]

V85.35 (Body mass index 35.0-35.9, adult)
V85.36 (Body mass index 36.0-36.9, adult)
V85.37 (Body mass index 37.0-37.9, adult)
V85.38 (Body mass index 38.0-38.9, adult)
V85.39 (Body mass index 39.0-39.9, adult)
Several commenters recommended that CMS add the following diagnosis
code, which is on the CC list, to the MCC list:
V85.40 (Body mass index 40 and over, adult)
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we stated that we
believed these comments were outside the scope of the proposals in the
FY 2010 proposed rule. We did not propose significant revisions to the
MS-DRGs in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR
24091) for these codes. We stated that we were encouraging individuals
with comments about MS-DRG classifications to submit these comments no
later than early December of each year so they can be carefully
considered for possible inclusion in the annual proposed rule and, if
included, may be subjected to public review and comment. Therefore, we
did not add these codes to the MCC list or the CC list for FY 2010. We
stated that we would consider their appropriateness for inclusion in
next year's annual proposed rule.
In addition to the diagnosis codes mentioned above, we also have
received requests that we consider changing the following diagnosis
codes from a non-CC to a CC:
278.00 (Obesity NOS)
278.01 (Morbid obesity)
278.02 (Overweight)
For the FY 2011 IPPS/LTCH PPS proposed rule, we analyzed claims
data for the diagnosis codes mentioned above related to obesity and
major osseous defects. We used the same approach we used in initially
creating the MS-DRGs and classifying secondary diagnosis codes as non-
CCs, CCs, or MCC. A detailed discussion of the process and criteria we
used in this process is described in the FY 2008 IPPS final rule (72 FR
47158 through 47161). We refer the readers to this discussion for
complete information on our approach to developing the non-CC, CC, and
MCC lists. Each diagnosis for which Medicare data were available was
evaluated to determine its impact on resource use and to determine the
most appropriate CC subclass (non-CC, CC, or MCC) assignment. In order
to make this determination, the average cost for each subset of cases
was compared to the expected cost for cases in that subset. The
following format was used to evaluate each diagnosis:

--------------------------------------------------------------------------------------------------------------------------------------------------------

Count (Cnt) is the number of patients in each subset. C1, C2, and
C3 are a measure of the impact on resource use of patients in each of
the subsets. The C1, C2, and C3 values are a measure of the ratio of
average costs for patients with these conditions to the expected
average cost across all cases. The C1 value reflects a patient with no
other secondary diagnosis or with all other secondary diagnoses that
are non-CCs. The C2 value reflects a patient with at least one other
secondary diagnosis that is a CC but none that is a MCC. The C3 value
reflects a patient with at least one other secondary diagnosis that is
a MCC. A value close to 1.0 in the C1 field would suggest that the
diagnosis code produces the same expected value as a non-CC. A value
close to 2.0 suggests the condition is more like a CC than a non-CC but
not as significant in resource usage as an MCC. A value close to 3.0
suggests the condition is expected to consume resources more similar to
an MCC than a CC or non-CC. For additional details on this analysis, we
refer readers to the FY 2008 IPPS final rule at 72 FR 47158 through
47161.
The following chart shows the analysis for each of the obesity
related and major osseous defect diagnosis codes that are currently
classified as non-CCs.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Code Diagnosis Cnt1 C1 Cnt2 C2 Cnt3 C3
--------------------------------------------------------------------------------------------------------------------------------------------------------
278.00............................ Obesity NOS......... 130,310 1.0755 116,304 1.7234 45,565 2.3843
278.01............................ Morbid obesity...... 51,832 1.2619 106,169 1.9630 52,398 2.6787
278.02............................ Overweight.......... 5,242 0.9948 3,594 1.7042 1,033 2.3471
731.3............................. Major osseous 215 1.3833 575 2.3390 186 2.7627
defects.
V85.35............................ BMI 35.0-35.9, adult 2,621 0.9759 1,480 1.6932 499 2.3664
V85.36............................ BMI 36.0-36.9, adult 2,359 0.9729 1,298 1.6536 466 2.3107
V85.37............................ BMI 37.0-37.9, adult 2,305 0.9849 1,271 1.7225 473 2.4032
V85.38............................ BMI 38.0-38.9, adult 2,152 0.9713 1,231 1.5964 432 2.2743
V85.39............................ BMI 39.0-39.9, adult 2,253 0.9857 1,141 1.7741 445 2.4919
--------------------------------------------------------------------------------------------------------------------------------------------------------

The C1 findings do not support a reclassification of any of these
diagnosis codes from a non-CC to a CC. As can be seen by the C1
findings, the codes range from a low of 0.9729 for code V85.35 to a
high of 1.3833 for diagnosis code 731.3. These findings are consistent
with a classification as a non-CC. Therefore, for FY 2011, as we
proposed, we are not changing the CC classification of any of the
diagnosis codes mentioned in the chart above from a non-CC to a CC. Our
clinical advisors agree with this recommendation.
For the FY 2011 proposed rule, we also examined claims data for
diagnosis code V85.4 (Body mass index 40 and over, adult), which is
classified as a CC. We received a request to reclassify this code as a
MCC. The following chart summarizes our findings for this diagnosis
code:

[[Page 50116]]

We note that the C1 finding of 1.2323 does not support a
reclassification of this diagnosis code from a CC to a MCC. This
finding is much more consistent with classifying the code as a non-CC.
Our clinical advisors recommended that CMS not reclassify this
diagnosis code from a CC to a non-CC for FY 2011. They recommended that
CMS analyze data associated with this diagnosis code again in the
future to determine if it continues to act like a non-CC. For the FY
2011 proposed rule, we did not recommend any change in the severity
classification of diagnosis code V85.4. We proposed to retain it as a
CC for FY 2011. We welcomed public comments on our proposal not to
change the severity levels of the diagnosis codes mentioned above.
Comment: Several commenters in general supported the proposal not
to change the following codes from a non-CC to a CC or MCC based on our
data and clinical analysis: 278.00; 278.01; 278.02; 731.3; V85.35;
V85.36; V85.37; V85.38; and V85.39.
The commenters also supported our proposal not to change code
V85.40 from a CC to an MCC.
One commenter stated that it understood that the request to change
the severity level for the obesity related codes was not supported by
the current hospital claim data. The commenter expressed appreciation
for CMS' consideration of its recommendation. However, the commenter
expressed concerns that hospitals may not be fully reporting codes that
describe obesity, and, therefore, all resources associated with obesity
related cases may not be included in the hospital claims data. The
commenter requested that CMS actively encourage hospitals to report
codes that more fully describe obesity and its related conditions. The
commenter stated that if hospitals increased their reporting of obesity
related conditions, our national data would be more accurate and would
more fully reflect hospital resource use associated with these
patients.
Another commenter also acknowledged that the data did not support a
change in the severity level for the obesity related codes. This
commenter also expressed that hospitals may be underreporting obesity
cases, and requested that hospitals be encouraged to more fully and
accurately code and report these conditions. Once a more complete data
set is available to describe these patients, the commenter recommended
that the issue be reviewed again.
Response: We agree with the commenters that our data and clinical
analysis support our proposal not to change the severity level for the
obesity related codes. We appreciate the commenters' statement about
our consideration and review of this issue. We agree that it is
important to provide clear documentation and accurate coding for all
patient diagnoses and conditions, including obesity related conditions.
As discussed in section II.G.11.c. of this preamble, we are expanding
the number of diagnosis and procedure codes processed so that more
codes are available to describe each patient's hospitalization. The
clinical data and the comments received support our recommendation not
to change the severity levels for the obesity related codes. Therefore,
we are finalizing our proposal to continue classifying the following
codes as non-CCs for FY 2011.
278.00 (Obesity NOS)
278.01 (Morbid obesity)
278.02 (Overweight)
731.3 (Major osseous defects)
V85.35 (Body mass index 35.0-35.9, adult)
V85.36 (Body mass index 36.0-36.9, adult)
V85.37 (Body mass index 37.0-37.9, adult)
V85.38 (Body mass index 38.0-38.9, adult)
V85.39 (Body mass index 39.0-39.9, adult)
We are also finalizing our proposal to continue classifying the
following code as a CC for FY 2011.
V85.40 (Body mass index 40 and over, adult)
(3) Suggested Change to the Severity Level for Alzheimer's Disease
Diagnosis Code
We received a request to change the severity classification for
diagnosis code 331.0 (Alzheimer's disease). Currently, this diagnosis
code is classified as a non-CC. For the FY 2011 IPPS/LTCH PPS proposed
rule, we analyzed claims data for this diagnosis code. The following
chart shows our findings:

The C1 finding of 1.1381 for Alzheimer's disease supports the
current classification of this diagnosis code as a non-CC. Our clinical
advisors agree with this classification. Therefore, we did not propose
to change the severity classification of diagnosis code 331.0 from a
non-CC to a CC for FY 2011. We believe the code is appropriately
classified as a non-CC.
Comment: Several commenters in general supported CMS' proposal not
to change diagnosis code 331.0 from a non-CC to a CC for FY 2011. They
stated that the data supported this decision. One commenter stated that
the analysis provided by CMS supports the proposal that diagnosis code
331.0 should continue to be a non-CC. The commenter suggested that this
issue be revisited after CMS begins processing 25 codes instead of the
current limitation of 9 diagnosis codes.
Response: We agree with the commenters that our data support our
proposal not to change diagnosis code 331.0 from a non-CC to a CC for
FY 2011. Therefore, we are finalizing our proposal to continue
classifying diagnosis code 331.0 as a non-CC for FY 2011. We will
revisit the severity level classification of diagnosis code 331.0 once
we begin processing claims using the increase in the number of
diagnosis codes to 25.
(4) Change to the Severity Level for Acute Renal Failure, Unspecified
Diagnosis Code
We received a request to reclassify the diagnosis code, which
captures acute renal failure, 584.9 (Acute kidney failure, unspecified)
from a MCC to a CC. The commenter stated that this code is being widely
used to capture degrees of renal failure that range from that which is
caused by mild dehydration with only minor laboratory abnormalities all
the way through severe renal failure that requires dialysis. The
commenter pointed out that there are no clinical criteria for assigning
diagnosis code 584.9. The attending physician must simply document the
presence of acute renal failure for the diagnosis code to be assigned.
The concern is that the diagnosis code for acute kidney failure,
unspecified (diagnosis code 584.9) is being assigned to patients with a
low clinical severity level.
We also point out that the Editorial Advisory Board of Coding
Clinic for ICD-9-CM has received a number of requests to clarify the
use of diagnosis code 584.9. Coders are observing the

[[Page 50117]]

terminology of ``acute renal failure'' being applied to patients who
are simply dehydrated. These patients do not require renal dialysis,
and they do not appear to be severely ill. Coders have stated that
there appears to be an increase in the use of the terminology of acute
renal failure for patients who were previously referred to as acute
renal insufficiency. When acute renal insufficiency is documented, the
ICD-9-CM index directs the use of code 593.9 (Unspecified disorder of
kidney and ureter). Diagnosis code 593.9 includes acute renal
insufficiency and is classified as a non-CC. The problem is further
compounded by the fact that there is no consistent convention among
clinicians for documenting acute renal insufficiency versus acute renal
failure.
For the FY 2011 IPPS/LTCH PPS proposed rule, we examined claims
data on diagnosis code 584.9, and our findings are shown in the table
below:

The C1 finding of 1.8364 is more consistent with a classification
of a CC. Our clinical advisors agreed that cases captured by diagnosis
code 584.9 are more appropriately classified as a CC. This unspecified
type of kidney failure is clearly not capturing patients with a MCC
severity level. Therefore, we proposed to change the severity level for
diagnosis code 584.9 from a MCC to a CC for FY 2011.
Comment: Most commenters opposed our proposal to change diagnosis
code 584.9 (Acute kidney failure, unspecified) from an MCC to a CC.
However, one commenter supported the proposal to change the severity
level classification of acute renal failure cases from an MCC to a CC.
The commenter stated that there has been an increased reporting of
acute renal failure which is primarily due to increased physician
education by clinical documentation improvement programs. The commenter
further stated that the statistical analysis offered in the proposed
rule was sufficient to support this change.
Response: We agree that the claims data support our proposal to
change diagnosis code 584.9 from an MCC to a CC. We respond to the
specific comments opposing our proposed changes in the following
comments and responses.
Comment: Several commenters suggested that the introduction of the
terminology of acute kidney injury may have added to the inconsistent
classification of the disease process. One commenter stated that, in
2004, the Acute Dialysis Quality Initiative work group provided a
definition and classification system for acute renal failure, described
by the acronym RIFLE (Risk of renal dysfunction, Injury to the kidney,
Failure or Loss of kidney function, and End-stage kidney disease). The
commenter stated that clinical researchers have since applied the RIFLE
system to the clinical evaluation of acute kidney injury. Several
commenters stated that the FY 2009 update to the coding classification
system, which classifies acute kidney injury and acute renal failure
with the same code, may be diluting the patient mix. The commenters
stated that inconsistency in the application of diagnosis code 584.9
results in dilution of the data and an inaccurate reflection of the
severity level for acute renal failure.
Another commenter stated that claims data on diagnosis code 584.9
may be flawed due to the variable terminology used by physicians and
changes in the ICD-9-CM classification. This commenter stated that
physicians often use the terms ``acute renal insufficiency'' and
``acute renal failure'' interchangeably, and that this results in cases
of acute renal insufficiency being classified as acute renal failure.
The commenter also stated that physicians often use the term ``acute
kidney injury'' to mean either acute renal insufficiency or acute renal
failure, and that the term ``acute kidney injury'' is indexed in ICD-9-
CM to diagnosis code 584.9. Therefore, the commenter stated that cases
of acute kidney injury are also being classified as acute renal
failure. The commenter stated that these inconsistencies result in
diagnosis code 584.9 capturing a mix of cases, including both acute
renal insufficiency as well as true acute renal failure cases, and that
this has diluted national data for diagnosis code 584.9 and is an
inaccurate reflection of the severity level for acute renal failure.
The commenters recommended that diagnosis code 584.9 remain an MCC
while CMS works on ways to revise the codes or improve documentation
guidelines.
Response: We agree that diagnosis code 584.9 captures a range of
severity levels. Patients are not consistently at the highest severity
level as shown by our claims data. As discussed above, our claims data
show that patients with this code as a secondary diagnosis are similar
to those who are at a CC level. We do not believe it is appropriate to
defer a decision on reclassification of the severity level of diagnosis
code 584.9 until future coding or guideline modifications can be
considered because our claims data clearly support the proposed change.
Should a new range of codes be developed, we will consider what
severity levels should be applied to each new code and include this
analysis as part of future rulemaking.
Comment: One commenter stated that the definition of conditions
assigned to diagnosis code 584.9 is inadequate as it encompasses
patients with both small and large elevations of creatinine that still
meet the definition of acute kidney injury. Furthermore, the commenter
pointed out that diagnosis code 584.9 does not identify severe cases of
renal failure requiring dialysis. However, the commenter opposed
changing diagnosis code 584.9 from an MCC to a CC as it would penalize
those institutions treating more severe cases of renal failure. The
commenter indicated its plans to contact the National Center for Health
Statistics to request that fifth digits be added to diagnosis code
584.9 to distinguish those in various stages of renal failure. Other
commenters also agreed that diagnosis code 584.9 was vague and
suggested that the code be subdivided to add additional information on
the stages of the renal function. The commenters suggested using
existing standards from the Acute Kidney Injury Network or the National
Kidney Foundation to develop stages for kidney injury that could be
captured with the new codes.
Another commenter agreed that the diagnosis of acute renal failure
should not be used to describe mild dehydration and renal insufficiency
when only minor lab abnormalities are present. The commenter believed
that criteria were needed to better define the stages of acute renal
failure. The commenter stated that appropriate guidelines were needed
for both physicians and coders who are attempting to differentiate
between a mildly dehydrated patient and one with true acute renal
failure. Until such time as these documentation guidelines are
developed, the commenter asked that

[[Page 50118]]

diagnosis code 584.9 not be changed from an MCC to a CC.
Response: We agree that diagnosis code 584.9 captures a wide range
of severity levels. We also agree that the use of this code does not
mean that the patient's renal capacity is so impaired as to require
renal dialysis. As stated earlier, our data indicate that most of these
cases are at a CC severity level, not an MCC. As stated earlier, we do
not believe it is appropriate to defer a decision on reclassification
of the severity level of diagnosis code 584.9 until future coding or
guideline modifications can be considered. Should a new range of codes
be developed, we will consider what severity levels should be applied
to each new code and include this within future rulemaking.
Comment: Several commenters objected to a change of severity levels
for diagnosis code 584.9 from an MCC to a CC because of the financial
impact the change would have on their hospitals. Several hospitals
stated that this change would reduce their annual Medicare payments by
$1.0 to $3.6 million per year. Other commenters stated that this change
could lead to a reduction of 2 percent or more in total Medicare
payments to their facilities. The commenters acknowledged that the code
does not consistently capture patients at the highest severity level
and that there was no clear convention among clinicians for documenting
acute renal insufficiency versus acute renal failure. The commenters
asked that the change not be made because of the payment impact on
their hospitals.
Response: We agree that diagnosis code 584.9 captures patients who
are not consistently at the highest severity level. Classifying these
patients at the highest severity level greatly distorts our national
data. It gives the impression that a large number of patients have an
MCC severity level when they may in fact have only minor renal
symptoms. Our data support that patients with diagnosis code 584.9 are
more appropriately classified at the CC severity level. These acute
renal failure patients captured with this code do not utilize the
resources of other conditions on the MCC list. We believe the data
support changing the code from an MCC to a CC. We believe our claims
data show that this change will lead to more accurate payment, even if
it does reduce some hospital payments. We do not believe it is
appropriate to inflate payments for hospitals that report a higher
incidence of this code, yet are treating patients with a lower severity
level.
Comment: Other commenters who disagreed with the proposed change
from an MCC to a CC, acknowledged that this unspecified code captures a
range of severity levels from those patients with only a minimal
elevation in serum creatinine or simple dehydration to those patients
who are actually in acute renal failure. Some of the commenters stated
that, while the code may currently capture patients with low severity
levels, the patients still need treatment and monitoring to prevent any
worsening in their conditions. The commenters also acknowledged that
there is no clear convention among clinicians for documenting acute
renal insufficiency versus acute renal failure. The commenters stated
that this has been a problematic area on which there have been
consensus conferences and publications from a variety of quality and
renal organizations. The commenters stated that additional work was
needed to develop a clear consensus for documenting acute renal
failure. The commenters urged CMS to pursue greater standardization for
the clinical documentation of acute renal failure. Until such time as
the clinical documentation improves, the commenters recommended that
CMS continue to classify diagnosis code 584.9 as an MCC.
Response: We agree that there is not a consistent use of the term
acute renal failure. As mentioned earlier, this term has been used to
describe a wide range of severity levels. However, our claims data show
that the term is being used predominately to describe those patients
who are not at the highest severity level. The patients are more like
others with a CC severity level. We do not believe that it is
appropriate for CMS to wait for a consensus to build about how to use
and document the term acute renal failure. We believe it is more
appropriate to base our decision on current claims data and clinical
review. Regardless of the different uses of the term ``acute renal
failure'' and the inclusion of a wide range of severity levels, the
current data show that the code is more properly a CC and not an MCC.
As mentioned by a number of commenters, the term ``acute renal
failure'' is being used for a wide variety of patients, most of which
do not have a high severity level. We also point out that we proposed
reclassifying only the unspecified acute renal failure code from an MCC
to a CC. We are leaving the more precise acute renal failure codes as
MCCs. For instance, these more precise acute renal failure codes will
remain on the MCC list:
584.5 (Acute kidney failure with lesion of tubular
necrosis);
584.6 (Acute kidney failure with lesion of renal cortical
necrosis);
584.7 (Acute kidney failure with lesion of renal medullary
[papillary] necrosis); and
584.8 (Acute kidney failure with other specified
pathological lesion in kidney).
We proposed to remove only the code for an unspecified type of
acute kidney failure from the MCC list and to add it to the CC list.
Our data support this reclassification.
After consideration of the public comments we received, we are
finalizing our proposal to change diagnosis code 584.9 (Acute kidney
failure, unspecified) from an MCC to a CC.
Comment: One commenter asked that CMS also examine whether the
following encephalopathy codes should be removed from the MCC list. The
commenter stated that claims analysis may show a justification for
removing these codes from the MCC list.
348.30 Encephalopathy, unspecified
348.31 Metabolic encephalopathy
348.39 Other encephalopathy
349.82 Toxic encephalopathy
Response: We believe this comment is outside the scope of the FY
2011 IPPS/LTCH PPS proposed rule. We did not propose to change the
severity level classification for any of the encephalopathy codes. We
will examine this issue as part of next year's proposed rule.
Therefore, we are not making any changes to the severity level
classifications of the encephalopathy codes mentions above.
Tables 6G and 6H, Additions to and Deletions from the CC Exclusion
List, respectively, which are effective for discharges occurring on or
after October 1, 2010, are not being published in the Addendum to this
final rule because of the length of the two tables. Instead, we are
making them available through the Internet on the CMS Web site at:
http://www.cms.hhs.gov/AcuteInpatientPPS. Each of these principal
diagnoses for which there is a CC exclusion is shown in Tables 6G and
6H in the Addendum to this final rule with an asterisk, and the
conditions that will not count as a CC, are provided in an indented
column immediately following the affected principal diagnosis.
A complete updated MCC, CC, and Non-CC Exclusions List is also
available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS. Beginning with discharges on or
after October 1, 2010, the indented diagnoses will not be

[[Page 50119]]

recognized by the GROUPER as valid CCs for the asterisked principal
diagnosis.
To assist readers in identifying the changes to the MCC and CC
lists that occurred as a result of updates to the ICD-9-CM codes, as
described in Tables 6A, 6C, and 6E of the Addendum to this final rule,
we are providing the following summaries of those MCC and CC changes.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR16AU10.019

[[Page 50120]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.020

[GRAPHIC] [TIFF OMITTED] TR16AU10.021

[[Page 50121]]

BILLING CODE 4120-01-C
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 27.0, is available for
$250.00, which includes shipping and handling. Version 27.0 of the
manual is also available on a CD for $200.00; a combination hard copy
and CD is available for $400.00. Version 28.0 of this manual, which
includes the final FY 2011 MS-DRG changes, will be available in CD only
for $225.00. These manuals may be obtained by writing 3M/HIS at the
following address: 100 Barnes Road, Wallingford, CT 06492; or by
calling (203) 949-0303, or by obtaining an order form at the Web site:
http://www.3MHIS.com. Please specify the revision or revisions
requested.
10. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to change the
procedures assigned among these CMS DRGs. Under the MS-DRGs that we
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These MS-DRGs are intended to capture
atypical cases, that is, those cases not occurring with sufficient
frequency to represent a distinct, recognizable clinical group. MS-DRGs
984 through 986 (previously CMS DRG 476) are assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
60.0, Incision of prostate
60.12, Open biopsy of prostate
60.15, Biopsy of periprostatic tissue
60.18, Other diagnostic procedures on prostate and
periprostatic tissue
60.21, Transurethral prostatectomy
60.29, Other transurethral prostatectomy
60.61, Local excision of lesion of prostate
60.69, Prostatectomy, not elsewhere classified
60.81, Incision of periprostatic tissue
60.82, Excision of periprostatic tissue
60.93, Repair of prostate
60.94, Control of (postoperative) hemorrhage of prostate
60.95, Transurethral balloon dilation of the prostatic
urethra
60.96, Transurethral destruction of prostate tissue by
microwave thermotherapy
60.97, Other transurethral destruction of prostate tissue
by other thermotherapy
60.99, Other operations on prostate
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\3\
---------------------------------------------------------------------------

\3\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962); in FY 2000 (64 FR 41496); in FY 2001 (65
FR 47064); or in FY 2002 (66 FR 39852). In the FY 2003 final rule
(67 FR 49999) we did not move any procedures from DRG 477. However,
we did move procedure codes from DRG 468 and placed them in more
clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365),
we moved several procedures from DRG 468 to DRGs 476 and 477 because
the procedures are nonextensive. In the FY 2005 final rule (69 FR
48950), we moved one procedure from DRG 468 to 477. In addition, we
added several existing procedures to DRGs 476 and 477. In the FY
2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned
it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and
assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, and FY
2010, no procedures were moved, as noted in the FY 2008 final rule
with comment period (72 FR 46241), the FY 2009 final rule (73 FR
48513), and the FY 2010 final rule (74 FR 43796).
---------------------------------------------------------------------------

Our review of MedPAR claims data showed that there were 59 cases in
which procedures related to the prostate were arrayed across 10
different MDCs. None of the 59 cases were cases that should logically
be assigned to any of the other MDCs. For example, there were a total
of 16 cases of other transurethral prostate surgery that occurred in
MDC 5 (Diseases and Disorders of the Circulatory System). In addition,
none of the cases had lengths of stay or average charges that would
indicate that these cases were anything other than some of the expected
irregularities of medical care. Therefore, for FY 2011, we did not
propose to change the procedures assigned among these MS-DRGs.
We did not receive any public comments on our proposal and,
therefore, are adopting it as final.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987
Through 989 Into MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to
principal diagnosis with MCC, with CC, and without CC.MCC,
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move procedure codes out of these MS-DRGs into one of
the surgical MS-DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed in two ways for comparison purposes. We
look at a frequency count of each major operative procedure code. We
also compare procedures across MDCs by volume of procedure codes within
each MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
Our review of claims data showed that there were 4,443 cases in MS-DRGs
981 through 983. These 4,443 cases were arrayed across 18 MDCs. The
single most common procedure was code 00.66 (Percutaneous transluminal
coronary angioplasty [PTCA] of coronary atherectomy), 21 cases, located
in MDC 1 (Diseases and Disorders of the Nervous System). These cases
represent a very small volume of cases that are unlikely to indicate
medical practice trends. In addition, from a clinical coherence
standpoint, we do not believe it benefits the GROUPER system to add
cardiac procedures to the nervous system MDC. The same situation was

[[Page 50122]]

evident in MS-DRGs 987 through 989. There were a total of 1,601 cases
across 17 MDCs and, again, the cases did not represent clinically
coherent examples of medical care that warranted movement of procedure
codes into additional MS-DRGs. Examples of cases that we reviewed
included six cases of bone biopsies in MDC 21 (Injuries, Poisonings and
Toxic Effects of Drugs) and one case of a destruction of a lesion of
the knee in MDC 13 (Diseases and Disorders of the Female Reproductive
System). Again, the volume of these cases is negligible, and clinical
coherence is not demonstrated to the degree that a change in the MS-
DRGs is warranted. Therefore, for FY 2011, we did not propose to remove
any procedures from MS-DRGs 981 through 983 or MS-DRGs 987 through 989
into one of the surgical MS-DRGs for the MDC into which the principal
diagnosis is assigned.
We did not receive any public comments on our proposal and,
therefore, are adopting it as final.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R.
procedure unrelated to principal diagnosis with MCC, with CC, or
without CC/MCC, respectively), and 987 through 989, to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average charges
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
To reiterate, our review of claims data showed that 18 MDCs were
represented in MS-DRGs 981 through 983, for a total of 4,443 cases.
There were 10 MDCs represented in MS-DRGs 984 through 986, which
contained 59 cases. In addition, our review of claims data for MS-DRGs
987 through 989 showed 1,601 cases across 17 MDCs. However, these cases
represent such disparate situations as one case of a large bowel
incision assigned to MDC 1 (Diseases and Disorders of the Nervous
System) and one case of a revision of the femoral component of a hip
replacement assigned to MDC 3 (Diseases and Disorders of the Ear, Nose,
Mouth, and Throat). We do not believe that any of these cases represent
shifts in either treatment practice or reporting practice. As these
types of cases do not represent clinical coherence, we do not believe
that the addition of these procedure codes identified in our review
would positively benefit the overall MS-DRG logic. Therefore, for FY
2011, we did not propose to move any procedure codes among these MS-
DRGs.
We did not receive any public comments on our proposal and,
therefore, are adopting it as final.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on the review of cases in the MDCs as described above in
sections G.10.a. and b., we did not propose to add any diagnosis or
procedure codes to MDCs for FY 2011.
We did not receive any public comments on our proposal and,
therefore, are adopting it as final.
11. Changes to the ICD-9-CM Coding System, Including Discussion of the
Replacement of the ICD-9-CM Coding System With the ICD-10-CM and ICD-
10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
As described in section II.B.1. of the preamble of this final rule,
the ICD-9-CM is a coding system currently used for the reporting of
diagnoses and procedures performed on a patient. In September 1985, the
ICD-9-CM Coordination and Maintenance Committee was formed. This is a
Federal interdepartmental committee, co-chaired by the National Center
for Health Statistics (NCHS), the Centers for Disease Control and
Prevention, and CMS, charged with maintaining and updating the ICD-9-CM
system. The Committee is jointly responsible for approving coding
changes, and developing errata, addenda, and other modifications to the
ICD-9-CM to reflect newly developed procedures and technologies and
newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The Official Version of the ICD-9-CM contains the list of valid
diagnosis and procedure codes. (The Official Version of the ICD-9-CM is
available from the Government Printing Office on CD-ROM for $19.00 by
calling (202) 512-1800.) Complete information on ordering the CD-ROM is
also available at: http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/05_CDROM.asp#TopOfPage. The Official Version of the ICD-9-CM is no
longer available in printed manual form from the Federal Government; it
is only available on CD-ROM. Users who need a paper version are
referred to one of the many products available from publishing houses.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
CMS has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health-related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2011 at a public meeting held on September 16-17,
2009 and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 20, 2009. Those
coding changes are announced in Tables 6A through 6F in the Addendum to
this final rule. The Committee held its 2010 meeting on March 9-10,
2010. New codes for which there was a consensus of public support and
for which complete tabular and indexing changes are made by May 2010
will be included in the October 1, 2010 update to ICD-9-CM. Code
revisions that were discussed at the March 9-10, 2010 Committee meeting
but that could not be finalized in time to include them in the Addendum
to the FY 2011 IPPS/LTCH PPS proposed rule are included in Tables 6A
through 6F of the Addendum to this final rule and are marked with an
asterisk (*).

[[Page 50123]]

Copies of the minutes of the procedure codes discussions at the
Committee's September 16-17, 2009 meeting and March 9-10, 2010 meeting
can be obtained from the CMS Web site at: http://cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 16-17, 2009 meeting and
March 9-10, 2010 meeting are found at: http://www.cdc.gov/nchs/icd.htm.
These Web sites also provide detailed information about the Committee,
including information on requesting a new code, attending a Committee
meeting, and timeline requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-9-CM
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by e-mail to:
dfp4@cdc.gov.
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination
and Maintenance Committee, CMS, Center for Medicare Management,
Hospital and Ambulatory Policy Group, Division of Acute Care, C4-08-06,
7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent
by e-mail to: patricia.brooks2@cms.hhs.gov.
The ICD-9-CM code changes that have been approved will become
effective October 1, 2010. The new ICD-9-CM codes are listed, along
with their MS-DRG classifications, in Tables 6A and 6B (New Diagnosis
Codes and New Procedure Codes, respectively) in the Addendum to this
final rule. As we stated above, the code numbers and their titles were
presented for public comment at the ICD-9-CM Coordination and
Maintenance Committee meetings. Both oral and written comments were
considered before the codes were approved.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23911), we
solicited comments on the proposed classification of these new codes,
which were shown in Tables 6A and 6B of the Addendum to the proposed
rule.
Comment: A few commenters supported our proposals. One commenter,
representing one of the national hospital associations, recommended
that the new codes 488.01 (Influenza due to identified avian influenza
virus with pneumonia) and 488.11 (Influenza due to identified novel
H1N1 influenza virus with pneumonia) be assigned to the pneumonia MS-
DRGs to be consistent with the MS-DRG definitions and classification of
diagnosis code 487.0 (Influenza with pneumonia).
Response: We agree with the commenters. Therefore, both codes
488.01 and 488.11 will be assigned to MS-DRGs 193 through 195 (Simple
Pneumonia with Pleurisy With MCC, Simple Pneumonia with Pleurisy With
CC, and Simple Pneumonia with Pleurisy Without CC/MCC, respectively) as
reflected in Table 6A of this final rule.
Comment: The same commenter representing one of the hospital
associations also questioned the CC designation for two new codes:
780.33 (Post traumatic seizures) and 278.03 (Obesity hypoventilation
syndrome). In the proposed rule (75 FR 24207 through 24208), both codes
were listed as non-CCs in Table 6A. The commenter pointed out that
specific seizures (convulsions) codes such as 780.31 (Febrile
convulsion (simple), unspecified) and 780.32 (Complex febrile
convulsions) are classified as a CC and to be consistent within the
classification system, code 780.33 should also be classified as a CC.
The commenter recommended further analysis for code 278.03 (Obesity
hypoventilation syndrome) to determine if this condition meets the
definition of a CC. The commenter pointed out that obesity
hypoventilation syndrome is a condition where overweight patients
cannot breathe appropriately resulting in low blood oxygen levels and
high blood carbon dioxide levels. This condition puts a strain on the
heart and lungs and may eventually lead to a more serious condition
such as heart failure or respiratory failure. This condition would have
to be closely monitored while the patient is in the hospital and may
require respiratory treatment such as CPAP, BIPAP, or even mechanical
ventilation depending on the severity of the condition. Such services
involve intensive monitoring where, for example, in an intensive care
unit, expensive and technically complex services or extensive care
requiring a greater number of caregivers is required.
Response: Our medical advisors agree with the commenter's
assessment that both codes should be classified as CCs. Therefore, we
are amending the proposed non-CC designation for both codes 788.03 and
278.03 and classifying them as CCs in Table 6A. These changes are
reflected in Table 6A in this final rule.
Comment: Several commenters addressed the MS-DRG placement of new
procedure code 35.97 (Percutaneous mitral valve repair with implant)
that was created for use beginning on October 1, 2010. The commenters
urged CMS to assign this code to the same MS-DRG as open surgery so
that higher payment would result.
Response: In addition to the MitraClip[supreg] device not yet being
FDA approved, we have no claims data on which to evaluate such a MS-DRG
assignment. However, the most important concept for denying these
requests is that the MitraClip[supreg] device is delivered
percutaneously. To assign this percutaneous procedure to MS-DRGs
utilizing an open approach would not conform to the structure of the
MS-DRGs, and disregards the concept of clinical coherence. We have no
evidence-based data with which to justify any other MS-DRG assignment
than those where the current percutaneous valve procedures are now
assigned. Therefore, procedure code 35.97 is assigned to MS-DRGs 246,
247, 248, 249, 250, and 251.
Comment: Two comments urged CMS to assign new procedure code 37.37
(Excision or destruction of other lesion or tissue of heart,
thoracoscopic approach) to MS-DRGs 228, 229, and 230 (Other
Cardiothoracic Procedure with MCC, with CC, and without CC/MCC,
respectively).
Response: CMS' practice has been, where practicable, to assign new
ICD-9-CM codes to the same MS-DRG(s) as their predecessor codes. For
this reason, procedure code 37.37 has been assigned to MS-DRGs 228,
229, and 230, as described above.
For codes that have been replaced by new or expanded codes, the
corresponding new or expanded diagnosis codes are included in Table 6A
in the Addendum to this final rule. New procedure codes are shown in
Table 6B in the Addendum to this final rule. Diagnosis codes that have
been replaced by expanded codes or other codes or have been deleted are
in Table 6C (Invalid Diagnosis Codes) in the Addendum to this final
rule. These invalid diagnosis codes will not be recognized by the
GROUPER beginning with discharges occurring on or after October 1,
2010. Table 6D in the Addendum to this final rule contains invalid
procedure codes. These invalid procedure codes will not be recognized
by the GROUPER beginning with discharges occurring on or after October
1, 2010. Revisions to diagnosis code titles are in Table 6E (Revised
Diagnosis Code Titles) in the Addendum to this final rule, which also
includes the MS-DRG assignments for these revised codes. Table 6F in
the Addendum to

[[Page 50124]]

this final rule includes revised procedure code titles for FY 2011.
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October. As stated previously,
ICD-9-CM codes discussed at the March 9-10, 2010 Committee meeting that
receive consensus and that were finalized by May 2010 are included in
Tables 6A through 6F in the Addendum to this final rule.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) * * * until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-9-CM Coordination and Maintenance Committee holds its
meetings in the spring and fall in order to update the codes and the
applicable payment and reporting systems by October 1 of each year.
Items are placed on the agenda for the ICD-9-CM Coordination and
Maintenance Committee meeting if the request is received at least 2
months prior to the meeting. This requirement allows time for staff to
review and research the coding issues and prepare material for
discussion at the meeting. It also allows time for the topic to be
publicized in meeting announcements in the Federal Register as well as
on the CMS Web site. The public decides whether or not to attend the
meeting based on the topics listed on the agenda. Final decisions on
code title revisions are currently made by March 1 so that these titles
can be included in the IPPS proposed rule. A complete addendum
describing details of all changes to ICD-9-CM, both tabular and index,
is published on the CMS and NCHS Web sites in May of each year.
Publishers of coding books and software use this information to modify
their products that are used by health care providers. This 5-month
time period has proved to be necessary for hospitals and other
providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee minutes. The public agreed that there was a need to hold the
fall meetings earlier, in September or October, in order to meet the
new implementation dates. The public provided comment that additional
time would be needed to update hospital systems and obtain new code
books and coding software. There was considerable concern expressed
about the impact this new April update would have on providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-9-CM
Coordination and Maintenance Committee meeting are considered for an
April 1 update if a strong and convincing case is made by the requester
at the Committee's public meeting. The request must identify the reason
why a new code is needed in April for purposes of the new technology
process. The participants at the meeting and those reviewing the
Committee meeting summary report are provided the opportunity to
comment on this expedited request. All other topics are considered for
the October 1 update. Participants at the Committee meeting are
encouraged to comment on all such requests. There were no requests
approved for an expedited April l, 2010 implementation of an ICD-9-CM
code at the September 16-17, 2009 Committee meeting. Therefore, there
were no new ICD-9-CM codes implemented on April 1, 2010.
Current addendum and code title information is published on the CMS
Web site at: http://www.cms.hhs.gov/icd9ProviderDiagnosticCodes/01_overview.asp#TopofPage. Information on ICD-9-CM diagnosis codes, along
with the Official ICD-9-CM Coding Guidelines, can be found on the Web
site at: http://www.cdc.gov/nchs/icd9.htm. Information on new, revised,
and deleted ICD-9-CM codes is also provided to the AHA for publication
in the Coding Clinic for ICD-9-CM. AHA also distributes information to
publishers and software vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
These same means of disseminating information on new, revised, and
deleted ICD-9-CM codes will be used to notify providers, publishers,
software vendors, contractors, and others of any changes to the ICD-9-
CM codes that are implemented in April. The code titles are adopted as
part of the ICD-9-CM Coordination and Maintenance Committee process.
Thus, although we publish the code titles in the IPPS proposed and
final rules, they are not subject to comment in the proposed or final
rules. We will continue to publish the October code updates in this
manner within the IPPS proposed and final rules. For codes that are
implemented in April, we will assign the new procedure code to the same
MS-DRG in which its predecessor code was assigned so there will be no
MS-DRG impact as far as MS-DRG assignment. Any midyear coding updates
will be available through the Web sites indicated above and through the
Coding Clinic for ICD-9-CM. Publishers and software vendors currently
obtain code changes through these sources in order to update their code
books and software systems. We will strive to have the April 1 updates
available through these Web sites 5 months prior to implementation
(that is, early November of the previous year), as is the case for the
October 1 updates.
b. Code Freeze
The International Classification of Diseases, 10th Revision (ICD-
10) coding system applicable to hospital inpatient

[[Page 50125]]

services will be implemented on October 1, 2013, as described in the
Health Insurance Portability and Accountability Act (HIPAA)
Administrative Simplification: Modifications to Medical Data code Set
Standards to Adopt ICD-10-CM and ICD-10-PCS final rule (74 FR 3328
through 3362, January 16, 2009). The ICD-10 coding system includes the
International Classification of Diseases, 10th Revision, Clinical
Modification (ICD-10-CM) for diagnosis coding and the International
Classification of Diseases, 10th Revision, Procedure Coding System
(ICD-10-PCS) for inpatient hospital procedure coding, as well as the
Official ICD-10-CM and ICM-10-PCS Guidelines for Coding and Reporting.
In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR 3328
through 3362), there was a discussion of the need for a partial or
total freeze in the annual updates to both ICD-9-CM and ICD-10-CM and
ICD-10-PCS codes. The public comment addressed in that final rule
stated that the annual code set updates should cease l year prior to
the implementation of ICD-10. The commenters stated that this freeze of
code updates would allow for instructional and/or coding software
programs to be designed and purchased early, without concern that an
upgrade would take place immediately before the compliance date,
necessitating additional updates and purchases.
We responded to comments in the ICD-10 final rule that the ICD-9-CM
Coordination and Maintenance Committee has jurisdiction over any action
impacting the ICD-9-CM and ICD-10 code sets. Therefore, the issue of
consideration of a moratorium on updates to the ICD-9-CM, ICD-10-CM,
and ICD-10-PCS code sets in anticipation of the adoption of ICD-10-CM
and ICD-10-PCS would be addressed through the Committee at a future
public meeting.
At the March 11-12, 2009 ICD-9-CM Coordination and Maintenance
Committee meeting, the public was notified that there would be a
discussion of whether there was a need to freeze updates to ICD-9-CM
and/or ICD-10-CM and ICD-10-PCS prior to the implementation of ICD-10.
The audience was asked to consider this issue and be prepared to
discuss the topic at the September 16-17, 2009 ICD-9-CM Coordination
and Maintenance Committee meeting. Advance written comments on this
topic were welcomed. The first part of the meeting was devoted to this
topic.
CMS received comments in advance of the meeting. CMS staff
summarized these advanced comments at the meeting as follows:
No ICD-9-CM or ICD-10-CM/PCS updates beginning October 1, 2010 (36
months for implementation activities without annual code updates). This
approach involves updating ICD-9-CM and ICD-10 codes on October 1,
2010, and not updating them again until after ICD-10 implementation on
October 1, 2013. The commenters mentioned the extensive work needed to
prepare for the transition to ICD-10 which will affect vendors, payers,
providers, trainers, clearinghouses, and all claims handling
organizations. The commenters stated that the 36 months between the
last ICD-9-CM and ICD-10 updates on October 1, 2010 and the
implementation of ICD-10 on October 1, 2013, were necessary to prepare
and train for the transition.
No ICD-9-CM or ICD-10-CM/PCS updates beginning October 1, 2011 (24
months for implementation activities without annual code updates). This
approach involves updating ICD-9-CM and ICD-10 codes on October 1,
2011, and not updating them again until after ICD-10 implementation on
October 1, 2013. The commenters raised similar concerns to those
mentioned above. The commenters stated that, if codes continue to
change, the changes would make it difficult for vendors, payers, and
providers to be ready and for coder training to be successful. One
commenter suggested that a provision be developed to perform limited
annual updates to capture new technologies or new diagnoses.
No ICD-10-CM/PCS updates beginning October 1, 2012 but continue
annual updates to ICD-9-CM. This commenter supported annual updates to
ICD-9-CM to capture advances in medical science. However, the commenter
supported a freeze of ICD-10 beginning October 1, 2012, to give the
industry time to update systems and prepare for ICD-10 implementation.
No ICD-10 updates on October 1, 2012, but update ICD-9-CM without
interruption. (No period for implementation activities without annual
code updates.) The commenter recommended no ICD-10 updates on October
1, 2012, but then updating ICD-10 again on October 1, 2013. The
commenter recommended updating ICD-9-CM continuously through a final
update on October 1, 2012. The commenter stated that having a two or
three year gap between updating the code books would lead to a loss of
data. The commenter stated that there is a need to retain the ability
to update the code books to capture conditions such as Swine flu.
Update both ICD-9-CM and ICD-10-CM/PCS annually through October 1,
2013 (no period for implementation activities without annual code
updates). The commenter stated that codes should not be frozen prior to
the implementation of ICD-10. The commenter stated that freezing the
updates would inhibit the recognition of new technologies.
Many of the commenters suggested a resumption of updates to ICD-10-
CM and ICD-10-PCS beginning on October 1, 2014. However, one commenter
suggested annual updates of ICD-10-CM and ICD-10-PCS without
interruptions, including on October 1, 2013.
The topic was then opened for public discussion at the Committee
meeting. CMS received a variety of comments from the participants that
mirrored the advance written comments. These comments ranged from those
supporting a complete freeze for both coding systems to those who
recommended that both coding systems continue to be updated annually
prior to ICD-10 implementation. There were also many comments that
supported a more limited update process beginning on October 1, 2011,
or October 1, 2012, which would allow only a small number of new codes
to capture new technologies or new diseases. A number of commenters
pointed out that section 503(a) of Public Law 108-173 included a
requirement for updating ICD-9-CM codes twice a year to capture new
technologies. The commenters stated that CMS must make a provision to
capture new technologies despite any requests to freeze code updates.
Commenters voiced concerns about the impact on vendors creating new
ICD-10 products when both ICD-9-CM and ICD-10-CM and ICD-10-PCS codes
were extensively updated on an annual basis. Commenters stated that
vendors and educators were reluctant to begin ICD-10 products and
training materials until there was a period of stability without
extensive annual updates. Some commenters stated that it was important
for physician offices to have time to prepare for the implementation of
ICD-10. Reducing the annual ICD-9-CM and ICD-10 annual updates would be
helpful to physician offices.
Other commenters stated that it was important to update codes
annually so that information on new diseases and technologies can be
captured. These commenters stated that vendors, providers, system
maintainers, and coders were used to annual code updates, and that they
should continue.
One commenter requested that ICD-10-CM codes be frozen on October
1,

[[Page 50126]]

2011 so that ICD-10-CM codes could be coordinated with the Diagnostic
and Statistical Manual of Mental Disorders (DSM), Fifth Edition. The
commenter stated that the American Psychiatric Association plans to
publish the fifth edition in 2012. Updates to ICD-10-CM on or after
October 1, 2011, would disrupt those plans.
One commenter suggested an approach that would greatly reduce the
number of updates and provide more stability in the coding systems
during the implementation period. This commenter suggested that the
large, regular code updates on ICD-9-CM be discontinued beginning on
October 1, 2011, or October 1, 2012. The commenter suggested that CMS
and CDC raise the bar for new code requests at that time and only
consider requests for new codes that clearly describe a new technology
or a new disease. The commenter stated that this may lead to the
creation of some new procedure codes which do not ultimately receive
FDA approval, as is the case now.
CMS and CDC have carefully reviewed the comments received at the
ICD-9-CM Coordination and Maintenance Committee meeting as well as the
written comments submitted. Most commenters proposed a limited freeze
on code updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS code
sets, with an exception made for adding codes for new technologies and
diseases. Providing this exception would comply with section 503(a) of
Public Law 108-173, which, as previously stated, includes a requirement
for updating ICD-9-CM codes twice a year to capture new technologies.
There was support for making the last regular update on October 1,
2011. The commenters recommended that the ICD-9-CM Coordination and
Maintenance Committee continue to discuss any new code updates for both
coding systems. However, new codes would only be added to ICD-9-CM or
ICD-10 to capture new technologies, as required by section 503(a) of
Public Law 108-173. Other coding issues raised would be held for
consideration after ICD-10 is implemented.
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23913), we
solicited additional input on this subject, especially in light of the
requirements on hospitals for meaningful use of electronic health
records. We welcomed public comments that explore whether a freeze is
needed to help with adoption of health IT, given other priorities such
as achievement of meaningful use and implementation of ICD-10 by FY
2013. We welcomed input on having the last regular, annual update to
both ICD-9-CM and ICD-10 be made on October 1, 2011. On October 1,
2012, there would be only limited code updates to both the ICD-9-CM and
ICD-10 coding systems to capture new technologies and diseases. On
October 1, 2013, there would be only limited code updates to ICD-10 to
capture new technologies and diagnoses. Any other issues raised would
be considered for implementation in ICD 10 on October 1, 2014, a year
after ICD-10 is implemented. We agree with commenters that there is a
need to provide the provider, payer, and vendor community time to
prepare for the implementation of ICD-10 and the accompanying system
and product updates. The vendor community is especially interested in
providing a more stable code set for ICD-10 while they are developing
new products.
Comment: A number of commenters supported the recommendation that
the last regular update to ICD-9-CM and ICD-10-CM/PCS be implemented on
October 1, 2011, with only limited code updates to both ICD-9-CM and
ICD-10-CM/PCS on October 1, 2012, to capture new technologies and
procedures as well as new diseases. Commenters stated that successful
implementation of ICD-10 will require significant planning, education,
and systems modifications. Continuing regular updates to ICD-9-CM and
ICD-10-CM/PCS would make the implementation of these new coding systems
more costly and complex. The commenters recommended that updates
occurring on October 1, 2012, be limited to proposals for urgently
needed codes. They stated that such proposals should make a ``clear and
convincing'' case to the ICD-9-CM Coordination and Maintenance
Committee, including public comment as to why the proposal cannot wait
for the next regularly scheduled updates. An example of the emergence
of a new disease such as H1N1 influenzas was provided.
Several commenters who supported the limited freeze stated that, by
accommodating the process for the capture of new technologies and
disease during this period, CMS is not only in compliance with section
503(a) of Public Law 108-173 requirements for new technology, but also
anticipates that new diagnosis codes may be needed to capture new
diseases, as we have seen with the Avian and H1N1 influenzas. The
commenters called this a thoughtful approach which should allow the
freeze of code sets while still accommodating new codes for new
technologies and procedures as well as urgent needs to capture new
diseases. Several commenters also stated that most practicing
physicians and their staff have not had sufficient opportunity to
become familiar with ICD-10-CM. They believed that this freeze will
allow physicians and physician specialty groups a better opportunity to
become familiar with the codes common to their specialty prior to the
implementation of ICD-10. Other comments who supported the
recommendations for a limited code freeze recommended that CMS and CDC
develop strict criteria that a code proposal must meet in order to
qualify for the limited update during the freeze period.
Several commenters recommended that there be no updates to ICD-10-
CM/PCS on October 1, 2013, unless absolutely necessary. They indicated
that an example of an urgent need was that of a pandemic that could not
be otherwise reported with existing codes. The commenters stated that
they understood the statutory requirements for add-on payments for new
technology under the inpatient payment system, and urged CMS to
consider alternative solutions to recognize such new technologies.
Other commenters opposed any ICD-10 code updates on October 1, 2013.
The commenters stated that a total freeze was needed on October 1,
2013, to enable users of the classification system the opportunity to
prepare for ICD-10.
One commenter who strongly supported the limited freeze offered an
example of the possible impact of not pursuing a code freeze would have
on its organization. This organization is currently working with
clients to complete the necessary software updates for the adoption of
ICD-10 by early next year. Based on its analysis, the work is not
confined to systems but also involves coding and billing activities for
healthcare claims. The commenter stated that there would be an impact
on physician documentation, problem lists, decision support,
laboratory, emergency department, radiology, nursing, scheduling,
registration management, and other internal systems. The commenter
opined that, by continuing regular code updates without a freeze, they
would have to rework activities and spend cycle time doing maintenance
updates to software and content updates they had already performed to
include additional annual code updates. The ICD-10 updates they make
will need to be tested and maintenance activities performed to build
the necessary reference data to support production adoption of ICD-10.
One commenter strongly opposed the partial freeze for FY 2012. The

[[Page 50127]]

commenter stated that accurate, specific code assignment is a
prerequisite for accurate physician and hospital profiling and value-
based purchasing. The commenter stated that ICD-10-CM is an imperfect
system and that refinements to ICD-9-CM should be carried over to ICD-
10 prior to its implementation date of October 1, 2013. The commenter
urged CMS to continue to work on refining ICD-10. Another commenter
opposed any freeze of ICD-9-CM or ICD-10 codes. The commenter stated
that codes should continue to be updated as usual each year so that
physician and hospital efficiency can be more accurately measured with
accurate codes.
Several commenters supported the limited freeze, but requested that
the last regular code updates be on October 1, 2012, instead of 2011.
The commenters stated that a 3-year freeze from October 1, 2011 through
October 1, 2014 was overly long.
Response: We will review all comments received on the partial
freeze as part of the ICD-9-CM Coordination and Maintenance Committee
process as well as these additional comments received and summarized
above. A final decision on whether or not there will be a partial code
freeze will be announced at the September 15-16, 2010 ICD-9-CM
Coordination and Maintenance Committee. An agenda for this meeting will
be posted on the CMS Web site by mid-August 2010 at http://www.cms.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp.
We believe that this advance notice of a partial code freeze
provides the health care industry ample time to request last major code
updates to ICD-9-CM and ICD-10, which could be discussed at the
September 15-16, 2010 and the March 2011 ICD-9-CM Coordination and
Maintenance Committee meeting. Codes discussed at these two meetings
would be considered for the final major code updates on October 1,
2011. Any code issues raised after that time would be addressed at the
ICD-9-CM Coordination and Maintenance Committee meetings in September
2011 through March 2013 to determine if they represented new
technologies or new diseases. Any new technologies and diseases would
be added during the regular annual updates. Other code requests would
be held for implementation on October 1, 2014.
We welcome additional input on having the last regular code updates
to ICD-9-CM and ICD-10 on October 1, 2011, and to only add codes for
new technologies and diseases on October 1, 2012 and 2013. We also
welcome additional input on having the next regular update to ICD-10
occur again on October 1, 2014.
Information on ICD-10 can be found on the CMS Web site at: http://www.cms.hhs.gov/ICD10. The final ICD-10 version of MS-DRGs would be
adopted under the formal rulemaking process as part of our annual IPPS
updates.
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital
Inpatient Claims
We have received repeated requests from the hospital community to
process all 25 diagnosis codes and 25 procedure codes submitted on
electronic hospital inpatient claims. Hospitals can submit up to 25
diagnoses and 25 procedures; however, CMS' current system limitations
allow for the processing of only the first 9 diagnoses and 6
procedures. While CMS accepts all 25 diagnoses and 25 procedures
submitted on the claims, we do not process all of the codes because of
these system limitations. We recognize that much valuable information
is lost by not processing the additional diagnosis and procedure codes
that are reported by hospitals.
We responded to hospitals' requests that we process up to 25
diagnosis codes and 25 procedure codes in the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43798). In that final rule, we referred readers
to the ICD-10 final rule (74 FR 3328 through 3362) where we discuss the
updating of Medicare systems prior to the implementation of ICD-10 on
October 1, 2013. We mentioned that part of the system updates in
preparation for ICD-10 is the ``expansion of our ability to process
more diagnosis and procedure codes.'' In the FY 2009 IPPS final rule
(73 FR 48433 through 48444), we also responded to multiple requests to
increase the number of codes processed from 9 diagnosis and 6 procedure
codes to 25 diagnosis and 25 procedure codes.
CMS is currently undergoing extensive system updates as part of the
move to 5010, which includes the ability to accept ICD-10 codes. This
complicated transition involves converting many internal systems prior
to October 1, 2013, when ICD-10 will be implemented. One important step
in this planned conversion process is the expansion of our ability to
process additional diagnosis and procedure codes. We are currently
planning to complete the expansion of this internal system capability
so that we are able to process up to 25 diagnoses and 25 procedures on
hospital inpatient claims as part of the HIPPA ASC X12 Technical
Reports Type 3, Version 005010 (Version 5010) standards system update.
CMS will be able to process up to 25 diagnosis codes and 25 procedure
codes when received on the 5010 format starting on January 1, 2011. We
recognize the value of the additional information provided by this
coded data for multiple uses such as for payment, quality measures,
outcome analysis, and other important uses. We will continue to pursue
this additional processing capacity as aggressively as possible in
response to the multiple requests from the hospital industry. We
appreciate the support of the health care community for this extensive
system update process that will allow us to process more of this
important data. Therefore, for claims submitted on the 5010 format
beginning January 1, 2011, we will increase the capacity to process
diagnosis and procedure codes on hospital inpatient claims from the
current 9 diagnoses and 6 procedures up to 25 diagnoses and 25
procedures.
Comment: Several commenters commended CMS on its plans to accept
and process up to 25 diagnoses and 25 procedures on hospital inpatient
claims submitted on the 5010 format beginning January 1, 2011. One
commenter expressed appreciation for CMS' recognition that a complete
picture of patients' clinical conditions and procedures is necessary in
order to accurately measure quality, analyze outcomes, assess severity
of illness, and determine reimbursement.
Response: We appreciate the support for our plan to accept and
process up to 25 diagnoses and 25 procedures on hospital inpatient
claims submitted on the 5010 format beginning January 1, 2011. We will
keep the providers updated on our progress in this activity.
ICD-10 MS-DRGs
We received comments on the creation of the ICD-10 version of the
MS-DRGs, which will be implemented on October 1, 2013 (FY 2014) when we
implement the reporting of ICD-10 codes. While we did not propose an
ICD-10 version of the MS-DRGs, CMS has been actively involved in
converting our current MS-DRGs from ICD-9-CM codes to ICD-10 codes and
sharing this information through the ICD-9-CM Coordination and
Maintenance Committee. CMS undertook this early conversion project to
assist other payers and providers in understanding how to go about
their own conversion projects. We posted ICD-10 MS-DRGs based on V26.0
(FY 2009) of the MS-DRGs. We also posted a paper that describes how CMS
went about completing this project and suggestions for others to
follow. All of this information can be found on our Web site at: http:/
/www.cms.gov/ICD10/

[[Page 50128]]

17--ICD10--MS--DRG--Conversion--Project.asp. We will continue to keep
the public updated on our maintenance efforts for ICD-10-CM and ICD-10-
PCS coding systems as well as the General Equivalence Mappings that
assist in conversion through the ICD-9-CM Coordination and Maintenance
Committee. Information on these committee meetings can be found at:
http://www.cms.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp.
Comment: Several commenters recommended that the ICD-10 MS-DRG
GROUPER logic be available no later than the FY 2013 rulemaking period,
with an extended public comment period in order to allow providers
sufficient time to analyze and model the proposed MS-DRG groupings
prior to its implementation on October 1, 2013.
Response: CMS initiated early efforts to convert the MS-DRGs from
ICD-9-CM codes to ICD-10 codes. As discussed earlier, the public was
informed of this project through the ICD-9-CM Coordination and
Maintenance Committee. Summary reports of those meetings where this
ICD-10 conversion of MS-DRGs took place can be found at http://www.cms.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp. Currently, we
have Version 26.0 of the ICD-10 MS-DRGs posted for public review.
During FY 2011, we will post Version 28.0 of the ICD-10 MS-DRGS based
on the FY 2011 MS-DRGs (Version 28.0) that we are finalizing in this
final rule. This ICD-10 MS-DRG Version 28.0 will also include the CC
Exclusion List, which was not posted with Version 26.0. We will be
discussing this update at the September 15-16, 2010 ICD-9-CM
Coordination and Maintenance Committee Meeting. A complete agenda for
this meeting will be posted in mid-August 2010 at: http://www.cms.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp. The registration site for
the meeting will open on August 13, 2010. We will continue to work with
the public to explain how we are approaching the conversion of MS-DRGs
to ICD-10 and will post drafts of updates as they are developed for
public review. The final version of the ICD-10 MS-DRGs to be
implemented in FY 2014 will be subject to notice and comment
rulemaking. In the meantime, we will provide extensive and detailed
information on this activity through the ICD-9-CM Coordination and
Maintenance Committee.
12. Other Issues Not Addressed in the Proposed Rule
We received a number of public comments on issues that were not
within the scope of the proposals in the FY 2011 IPPS/LTCH PPS proposed
rule.
a. Rechargeable Dual Array Deep Brain Stimulation System
We received a public comment requesting that CMS assign the
combination of procedure codes representing rechargeable systems for
deep brain stimulation therapy, code 02.93 (Implantation or replacement
of intracranial neurostimulator lead(s)), and code 86.98 (Insertion or
replacement of dual array rechargeable neurostimulator pulse generator)
to MS-DRGs 023 and 024 (Craniotomy with Major Device Implant/Acute
Complex CNS PDX with MCC or Chemo Implant and Craniotomy with Major
Device Implant/Acute Complex CNS PDX without MCC, respectively). The
commenter stated that this would allow all full system dual array deep
brain stimulation cases to be appropriately grouped to the same MS-
DRGs. The commenter stated that the procedures to implant the
rechargeable and nonrechargeable dual array systems are similar
clinically and with respect to resource utilization. Currently, codes
02.93 and 86.98 are assigned to MS-DRGs 025 through 027 (Craniotomy and
Endovascular Intracranial Procedures with MCC, Craniotomy and
Endovascular Intracranial Procedures with CC, and Craniotomy and
Endovascular Intracranial Procedures without MCC/CC, respectively).
This comment is outside the scope of the FY 2011 IPPS/LTCH PPS
proposed rule, as we did not propose any changes to MS-DRGs 023 and 024
for rechargeable systems for deep brain stimulation therapy. Therefore,
we are not addressing this issue for FY 2011. As we stated in FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23864), we encourage individuals
with comments about MS-DRG classifications to submit these comments no
later than early December of each year so they can be carefully
considered for possible inclusion in the annual proposed rule and, if
included, may be subject to public review and comment.
b. IntraOperative Electron RadioTherapy (IOERT)
We received a public comment requesting that CMS update the MS-DRG
mapping assignments for procedure code 92.41 (Intra-operative electron
radiation therapy) to ensure the cost of this technology is captured in
each MS-DRG involving tumor removal in the rectum, head/neck, pancreas,
lung, genitourinary, soft tissue, and breast. IntraOperative Electron
RadioTherapy (IOERT) is the direct application of radiation to a tumor
and/or tumor bed while the patient is undergoing surgery for cancer.
Currently, this code is not assigned to a specific MS-DRG.
This comment is outside the scope of the FY 2011 IPPS/LTCH PPS
proposed rule, as we did not propose any changes to the MS-DRG for
IOERT. We refer the commenter to section II.B.2 of the proposed rule
(75 FR 23864) where we discuss the timeline for submission of comments
about MS-DRG classifications.
c. Brachytherapy
We received a public comment requesting that CMS assign procedure
code 92.27 (Implantation or insertion of radioactive elements) to
various MS-DRGs where the use of brachytherapy sources has been
expanded. In addition, it was recommended that appropriate separate
payment for the brachytherapy sources be allowed so that hospitals may
be reimbursed appropriately for the unique source cost per patient.
Brachytherapy, also called seed implantation, involves placing
radioactive sources in or near the tumor either as a permanent or
temporary implant.
This comment is outside the scope of the FY 2011 IPPS/LTCH PPS
proposed rule, as we did not propose any changes to the MS-DRG for
brachytherapy. We refer the commenter to section II.B.2 of the proposed
rule (75 FR 23864) where we discuss the timeline for submission of
comments about MS-DRG classifications.
d. Excisional Debridement
We received a public comment recommending that procedure code 86.22
(Excisional debridement of wound, infection, or burn) be reclassified
from an OR procedure to a non-OR procedure. The commenter stated that
many excisional debridements are not performed in the operating room
setting, but instead are done in wound clinics, physician offices, and
in patient rooms. The commenter interpreted the classification of code
86.22 to be that of a proxy for severity of illness before MS-DRGs were
implemented. With the more serious pressure ulcers, Stages 3 and 4,
being classified as MCCs, according to the commenter, the need to
classify code 86.22 as an OR is no longer necessary.
This comment is outside the scope of the FY 2011 IPPS/LTCH PPS
proposed rule, as we did not propose any changes for excisional
debridement. We refer the commenter to section II.B.2 of the proposed
rule (75 FR 23864) where we discuss the timeline for submission of

[[Page 50129]]

comments about MS-DRG classifications.

H. Recalibration of MS-DRG Weights

As we proposed, in developing the FY 2011 system of weights, we
used two data sources: Claims data and cost report data. As in previous
years, the claims data source is the MedPAR file. This file is based on
fully coded diagnostic and procedure data for all Medicare inpatient
hospital bills. The FY 2009 MedPAR data used in this final rule include
discharges occurring on October 1, 2008, through September 30, 2009,
based on bills received by CMS through March 31, 2010, from all
hospitals subject to the IPPS and short-term, acute care hospitals in
Maryland (which are under a waiver from the IPPS under section
1814(b)(3) of the Act). The FY 2009 MedPAR file used in calculating the
proposed relative weights includes data for approximately 10,898,371
Medicare discharges from IPPS providers. Discharges for Medicare
beneficiaries enrolled in a Medicare Advantage managed care plan are
excluded from this analysis. The data exclude CAHs, including hospitals
that subsequently became CAHs after the period from which the data were
taken. The second data source used in the cost-based relative weighting
methodology is the FY 2008 Medicare cost report data files from HCRIS
(that is, cost reports beginning on or after October 1, 2007, and
before October 1, 2008), which represents the most recent full set of
cost report data available. We used the March 31, 2010 update of the
HCRIS cost report files for FY 2008 in setting the relative cost-based
weights.
The methodology we used to calculate the DRG cost-based relative
weights from the FY 2009 MedPAR claims data and FY 2008 Medicare cost
report data is as follows:
To the extent possible, all the claims were regrouped
using the proposed FY 2011 MS-DRG classifications discussed in sections
II.B. and G. of the preamble of this final rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2009 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 96.1 percent of the providers in the MedPAR file
had charges for 10 of the 15 cost centers. Claims for providers that
did not have charges greater than zero for at least 10 of the 15 cost
centers were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the mean of the log
distribution of both the total charges per case and the total charges
per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the condition was present at the time of inpatient admission) in the
POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), then it is not a HAC, and the hospital is paid for the
higher severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HACs are likely to be higher as well. Thus, if
the higher charges of these HAC claims are grouped into lower severity
MS-DRGs prior to the relative weight-setting process, the relative
weights of these particular MS-DRGs would become artificially inflated,
potentially skewing the relative weights. In addition, we want to
protect the integrity of the budget neutrality process by ensuring
that, in estimating payments, no increase to the standardized amount
occurs as a result of lower overall payments in a previous year that
stem from using weights and case-mix that are based on lower severity
MS-DRG assignments. If this would occur, the anticipated cost savings
from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have a ``N'' or an ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 15 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals in Alaska and Hawaii, the
applicable cost-of-living adjustment. Because hospital charges include
charges for both operating and capital costs, we standardized total
charges to remove the effects of differences in geographic adjustment
factors, cost-of-living adjustments, and DSH payments under the capital
IPPS as well. Charges were then summed by MS-DRG for each of the 15
cost groups so that each MS-DRG had 15 standardized charge totals.
These charges were then adjusted to cost by applying the national
average CCRs developed from the FY 2008 cost report data.
The 15 cost centers that we used in the relative weight calculation
are shown in the following table. The table shows the lines on the cost
report and the corresponding revenue codes that

[[Page 50130]]

we used to create the 15 national cost center CCRs.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR16AU10.022

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[GRAPHIC] [TIFF OMITTED] TR16AU10.024

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[GRAPHIC] [TIFF OMITTED] TR16AU10.028

BILLING CODE 4120-01-C
We developed the national average CCRs as follows:
Taking the FY 2008 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland as we are including their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-4 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-4. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 15 cost centers by the corresponding national average CCR, we
summed the 15 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The new cost-based relative weights were then normalized by an
adjustment factor of 1.57489 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The 15 national average CCRs for FY 2011 are as follows:

------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days.................................................. 0.539
Intensive Days................................................ 0.473
Drugs......................................................... 0.202
Supplies & Equipment.......................................... 0.345
Therapy Services.............................................. 0.403
Laboratory.................................................... 0.155
Operating Room................................................ 0.272
Cardiology.................................................... 0.169
Radiology..................................................... 0.152
Emergency Room................................................ 0.263
Blood and Blood Products...................................... 0.415
Other Services................................................ 0.416
Labor & Delivery.............................................. 0.470
Inhalation Therapy............................................ 0.200
Anesthesia.................................................... 0.128
------------------------------------------------------------------------

Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. In the FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 23922), we proposed to use that same case threshold in
recalibrating the MS-DRG weights for FY 2011. Using the FY 2009 MedPAR
data set, there are 8 MS-DRGs that contain fewer than 10 cases. Under
the MS-DRGs, we have fewer low-volume DRGs than under the CMS DRGs
because we no longer have separate DRGs for patients age 0 to 17 years.
With the exception of newborns, we previously separated some DRGs based
on whether the patient was age 0 to 17 years or age 17 years and older.
Other than the age split, cases grouping to these DRGs are identical.
The DRGs for patients age 0 to 17 years generally have very low volumes
because children are typically ineligible for Medicare. In the past, we
have found that the low volume of cases for the pediatric DRGs could
lead to significant year-to-year instability in their relative weights.
Although we have always encouraged non-Medicare payers to develop
weights applicable to their own patient populations, we have heard
frequent complaints from providers about the use of the Medicare
relative weights in the pediatric population. We believe that
eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2011, because we do not have sufficient MedPAR data to set
accurate and stable cost weights for these low-volume MS-DRGs, we
proposed to compute weights for the low-volume MS-DRGs by adjusting
their FY 2010 weights by the percentage change in the average weight of
the cases in other MS-DRGs. The crosswalk table is shown below:

[[Page 50137]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.029

We did not receive any public comment on this section. Therefore,
we are adopting the national average CCRs as proposed, with the MS-DRG
weights recalibrated based on these CCRs.

I. Add-On Payments for New Services and Technologies

1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, ``based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate.'' We note that
beginning with FY 2008, CMS transitioned from CMS-DRGs to MS-DRGs.
The regulations implementing these provisions specify three
criteria for a new medical service or technology to receive the
additional payment: (1) The medical service or technology must be new;
(2) the medical service or technology must be costly such that the DRG
rate otherwise applicable to discharges involving the medical service
or technology is determined to be inadequate; and (3) the service or
technology must demonstrate a substantial clinical improvement over
existing services or technologies. These three criteria are explained
below in the ensuing paragraphs in further detail.
Under the first criterion, as reflected in 42 CFR 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. Typically,
there is a lag of 2 to 3 years from the point a new medical service or
technology is first introduced on the market (generally on the date
that the technology receives FDA approval/clearance) and when data
reflecting the

[[Page 50138]]

use of the medical service or technology are used to calculate the MS-
DRG weights. For example, data from discharges occurring during FY 2009
are used to calculate the FY 2011 MS-DRG weights in this final rule.
Section 412.87(b)(2) of the regulations therefore provides that ``a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM code assigned to the new medical service or technology
(depending on when a new code is assigned and data on the new medical
service or technology become available for DRG recalibration). After
CMS has recalibrated the MS-DRGs, based on available data to reflect
the costs of an otherwise new medical service or technology, the
medical service or technology will no longer be considered `new' under
the criterion for this section.''
The 2-year to 3-year period during which a medical service or
technology can be considered new would ordinarily begin on the date on
which the medical service or technology received FDA approval or
clearance. (We note that, for purposes of this section of this final
rule, we generally refer to both FDA approval and FDA clearance as FDA
``approval.'') However, in some cases, there may be few to no Medicare
data available for the new service or technology following FDA
approval. For example, the newness period could extend beyond the 2-
year to 3-year period after FDA approval is received in cases where the
product initially was generally unavailable to Medicare patients
following FDA approval, such as in cases of a national noncoverage
determination or a documented delay in bringing the product onto the
market after that approval (for instance, component production or drug
production has been postponed following FDA approval due to shelf life
concerns or manufacturing issues). After the MS-DRGs have been
recalibrated to reflect the costs of an otherwise new medical service
or technology, the medical service or technology is no longer eligible
for special add-on payment for new medical services or technologies (as
specified under Sec. 412.87(b)(2)). For example, an approved new
technology that received FDA approval in October 2008 and entered the
market at that time may be eligible to receive add-on payments as a new
technology for discharges occurring before October 1, 2011 (the start
of FY 2012). Because the FY 2012 MS-DRG weights would be calculated
using FY 2010 MedPAR data, the costs of such a new technology would be
fully reflected in the FY 2012 MS-DRG weights. Therefore, the new
technology would no longer be eligible to receive add-on payments as a
new technology for discharges occurring in FY 2012 and thereafter.
We do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351), we explained our policy
regarding substantial similarity in detail and its relevance for
assessing if the hospital charge data used in the development of the
relative weights for the relevant DRGs reflect the costs of the
technology. In that final rule, we stated that, for determining
substantial similarity, we consider (1) whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, and
(2) whether a product is assigned to the same or a different DRG. We
indicated that both of the above criteria should be met in order for a
technology to be considered ``substantially similar'' to an existing
technology. However, in that same final rule, we also noted that, due
to the complexity of issues regarding the substantial similarity
component of the newness criterion, it may be necessary to exercise
flexibility when considering whether technologies are substantially
similar to one another. Specifically, we stated that we may consider
additional factors, depending on the circumstances specific to each
application.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and
43814), we noted that the discussion of substantial similarity in the
FY 2006 IPPS final rule related to comparing two separate technologies
made by different manufacturers. Nevertheless, we stated that the
criteria discussed in the FY 2006 IPPS final rule also are relevant
when comparing the similarity between a new use and existing uses of
the same technology (or a very similar technology manufactured by the
same manufacturer). In other words, we stated that it is necessary to
establish that the new indication for which the technology has received
FDA approval is not substantially similar to that of the prior
indication. We explained that such a distinction is necessary to
determine the appropriate start date of the newness period in
evaluating whether the technology would qualify for add-on payments
(that is, the date of the ``new'' FDA approval or that of the prior
approval), or whether the technology could qualify for separate new
technology add-on payments under each indication.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43814), we
added a third factor of consideration to our analysis of whether a new
technology is substantially similar to one or more existing
technologies. Specifically, in making a determination of whether a
technology is substantially similar to an existing technology, we will
consider whether the new use of the technology involves the treatment
of the same or similar type of disease and the same or similar patient
population (74 FR 24130), in addition to considering the already
established factors described in the FY 2006 IPPS final rule (that is,
(1) whether a product uses the same or a similar mechanism of action to
achieve a therapeutic outcome; and (2) whether a product is assigned to
the same or a different DRG). As we noted in the FY 2010 IPPS/RY 2010
LTCH PPS final rule, if all three components are present and the new
use is deemed substantially similar to one or more of the existing uses
of the technology (that is beyond the newness period), we would
conclude that the technology is not new and, therefore, is not eligible
for the new technology add-on payment.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases
involving the new technology exceed certain threshold amounts. In the
FY 2004 IPPS final rule (68 FR 45385), we established the threshold at
the geometric mean standardized charge for all cases in the MS-DRG plus
75 percent of 1 standard deviation above the geometric mean
standardized charge (based on the logarithmic values of the charges and
converted back to charges) for all cases in the MS-DRG to which the new
medical service or technology is assigned (or the case-weighted average
of all relevant MS-DRGs, if the new medical service or technology
occurs in more than one MS-DRG).
However, section 503(b)(1) of Public Law 108-173 amended section

[[Page 50139]]

1886(d)(5)(K)(ii)(I) of the Act to provide that, beginning in FY 2005,
CMS will apply ``a threshold * * * that is the lesser of 75 percent of
the standardized amount (increased to reflect the difference between
cost and charges) or 75 percent of one standard deviation for the
diagnosis-related group involved.'' (We refer readers to section IV.D.
of the preamble to the FY 2005 IPPS final rule (69 FR 49084) for a
discussion of the revision of the regulations to incorporate the change
made by section 503(b)(1) of Pub. L. 108-173.) Table 10 that was
included in the IPPS/LTCH PPS final rule published in the Federal
Register on August 27, 2009, contained the final thresholds that we
used to evaluate applications for new technology add-on payments for
the proposed rule for FY 2011 (74 FR 44173). However, we issued a
supplemental proposed rule in the Federal Register on June 2, 2010 (75
FR 30756) that addressed the provisions of the Affordable Care Act that
affected our proposed policies and payment rates for FY 2011 under the
IPPS and the LTCH PPS. In addition, we issued a Federal Register notice
on June 2, 2010 (75 FR 31118) and further instructions that addressed
the provisions of the Affordable Care Act that affected the policies
and payment rates for FY 2010 under the IPPS and the LTCH PPS. In these
documents, we updated Table 10 that was published in the Federal
Register on August 27, 2009 and Table 10 in the Addendum to the FY 2011
IPPS/LTCH PPS proposed rule to reflect the changes made by the
Affordable Care Act.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the HIPAA Privacy Rule at 45 CFR parts 160 and 164
applies to claims information that providers submit with applications
for new technology add-on payments. Specifically, we explained that
health plans, including Medicare, and providers that conduct certain
transactions electronically, including the hospitals that would be
receiving payment under the FY 2001 IPPS final rule, are required to
comply with the HIPAA Privacy Rule. We further explained how such
entities could meet the applicable HIPAA requirements by discussing how
the HIPAA Privacy Rule permitted providers to share with health plans
information needed to ensure correct payment, if they had obtained
consent from the patient to use that patient's data for treatment,
payment, or health care operations. We also explained that, because the
information to be provided within applications for new technology add-
on payment would be needed to ensure correct payment, no additional
consent would be required. The HHS Office for Civil Rights has since
amended the HIPAA Privacy Rule, but the results remain. The HIPAA
Privacy Rule does not require a covered entity to obtain consent from
patients to use or disclose protected health information for the
covered entity's treatment, payment, or health care operations
purposes, and expressly permits such entities to use or to disclose
protected health information for these purposes and for the treatment
purposes of another health care provider and the payment purposes of
another covered entity or health care provider. (We refer readers to 45
CFR 164.502(a)(1)(ii) and 164.506(c)(1) and (c)(3) and the Standards
for Privacy of Individually Identifiable Health Information published
in the Federal Register (67 FR 53208 through 53214) on August 14, 2002,
for a full discussion of consent in the context of the HIPAA Privacy
Rule.)
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a complete discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost to
charge ratios (``CCRs'') as described in Sec. 412.84(h)) exceed the
full DRG payment (including payments for IME and DSH, but excluding
outlier payments), Medicare will make an add-on payment equal to the
lesser of: (1) 50 percent of the estimated costs of the new technology
(if the estimated costs for the case including the new technology
exceed Medicare's payment); or (2) 50 percent of the difference between
the full DRG payment and the hospital's estimated cost for the case.
Unless the discharge qualifies for an outlier payment, Medicare payment
is limited to the full MS-DRG payment plus 50 percent of the estimated
costs of the new technology.
Section 1886(d)(4)(C)(iii) of the Act requires that the adjustments
to annual MS-DRG classifications and relative weights must be made in a
manner that ensures that aggregate payments to hospitals are not more
or less than they were in the prior fiscal year (i.e., they are
``budget neutral''). Therefore, in the past, we accounted for projected
payments under the new medical service and technology provision during
the upcoming fiscal year, while at the same time estimating the payment
effect of changes to the MS-DRG classifications and recalibration. The
impact of additional payments under this provision was then included in
the budget neutrality factor, which was applied to the standardized
amounts and the hospital-specific amounts. However, section 503(d)(2)
of Public Law 108-173 provides that there shall be no reduction or
adjustment in aggregate payments under the IPPS due to add-on payments
for new medical services and technologies. Therefore, in accordance
with section 503(d)(2) of Public Law 108-173, add-on payments for new
medical services or technologies for FY 2005 and later years have not
been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our current practice
of how CMS evaluates the eligibility criteria for new medical service
or technology add-on payment applications. We also amended Sec.
412.87(c) to specify that all applicants for new technology add-on
payments must have FDA approval for their new medical service or
technology by July 1 of each year prior to the beginning of the fiscal
year that the application is being considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Office of

[[Page 50140]]

Clinical Standards and Quality (OCSQ) and the Director of the Center
for Medicare (CM), who is also designated as the CTI's Executive
Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, OCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
CMS plans to continue its Open Door forums with stakeholders who
are interested in CTI's initiatives. In addition, to improve the
understanding of CMS' processes for coverage, coding, and payment and
how to access them, the CTI has developed an ``innovator's guide'' to
these processes. The intent is to consolidate this information, much of
which is already available in a variety of CMS documents and in various
places on the CMS Web site, in a user-friendly format. This guide was
published in August 2008 and is available on the CMS Web site at:
http://www.cms.hhs.gov/CouncilonTechInnov/Downloads/InnovatorsGuide8_25_08.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
CTI@cms.hhs.gov or from the ``Contact Us'' section of the CTI home page
(http://www.cms.hhs.gov/CouncilonTechInnov/).
We note that applicants for add-on payments for new medical
services or technologies for FY 2012 must submit a formal request,
including a full description of the clinical applications of the
medical service or technology and the results of any clinical
evaluations demonstrating that the new medical service or technology
represents a substantial clinical improvement, along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. Complete application information, along
with final deadlines for submitting a full application, will be posted
as it becomes available on our Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/08_newtech.asp. To allow interested parties to
identify the new medical services or technologies under review before
the publication of the proposed rule for FY 2012, the Web site also
will list the tracking forms completed by each applicant.
Comment: A number of commenters addressed topics relating to the
substantial similarity criteria, marginal cost factor for the new
technology add-on payment, the potential implementation of ICD-10-CM,
the use of external data in determining the cost threshold, paying new
technology add-on payments for 2 to 3 years, mapping new technologies
to the appropriate MS-DRG, and the use of the date that a ICD-9-CM code
is assigned to a technology or the FDA approval date (whichever is
later) as the start of the newness period.
Response: We did not request public comments nor propose to make
any changes to any of the issues summarized above. Because these
comments are outside of the scope of the provisions included in the
proposed rule, we are not providing a complete summary of the comments
or responding to them in this final rule.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2011 prior
to publication of the FY 2011 IPPS/RY 2011 LTCH PPS proposed rule, we
published a notice in the Federal Register on November 27, 2009 (74 FR
62339 through 62342), and held a town hall meeting at the CMS
Headquarters Office in Baltimore, MD, on February 19, 2010. In the
announcement notice for the meeting, we stated that the opinions and
alternatives provided during the meeting would assist us in our
evaluations of applications by allowing public discussion of the
substantial clinical improvement criterion for each of the FY 2011 new
medical service and technology add-on payment applications before the
publication of the FY 2011 proposed rule.
Approximately 80 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. Each of the three FY 2011 applicants presented
information on its technology, including a discussion of data
reflecting the substantial clinical improvement aspect of the
technology. We considered each applicant's presentation made at the
town hall meeting, as well as written comments submitted on the
applications, in our evaluation of the new technology add-on
applications for FY 2011 in the FY 2011 proposed rule and this final
rule.

[[Page 50141]]

In response to the published notice and the new technology town
hall meeting, we received 11 written comments regarding applications
for FY 2011 new technology add-on payments. We summarized these
comments or, if applicable, indicated that there were no comments
received, at the end of each discussion of the individual applications
in the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23926 and 23927).
3. FY 2011 Status of Technologies Approved for FY 2010 Add-On Payments
a. Spiration[supreg] IBV[supreg] Valve System
Spiration, Inc. submitted an application for new technology add-on
payments for the Spiration[supreg] IBV[supreg] Valve System
(Spiration[supreg] IBV[supreg]). The Spiration[supreg] IBV[supreg] is a
device that is used to place, via bronchoscopy, small, one-way valves
into selected small airways in the lung in order to limit airflow into
selected portions of lung tissue that have prolonged air leaks
following surgery while still allowing mucus, fluids, and air to exit,
thereby reducing the amount of air that enters the pleural space. The
device is intended to control prolonged air leaks following three
specific surgical procedures: lobectomy; segmentectomy; or lung volume
reduction surgery (LVRS). According to the applicant, an air leak that
is present on postoperative day 7 is considered ``prolonged'' unless
present only during forced exhalation or cough. In order to help
prevent valve migration, there are five anchors with tips that secure
the valve to the airway. The implanted valves are intended to be
removed no later than 6 weeks after implantation.
With regard to the newness criterion, the Spiration[supreg]
IBV[supreg] received a HDE approval from the FDA on October 24, 2008.
We were unaware of any previously FDA-approved predicate devices, or
otherwise similar devices, that could be considered substantially
similar to the Spiration[supreg] IBV[supreg]. However, the applicant
asserted that the FDA had precluded the device from being used in the
treatment of any patients until the Institutional Review Board (IRB)
granted approvals regarding its study sites. Therefore, the
Spiration[supreg] IBV[supreg] met the newness criterion once it
obtained at least one IRB approval because the device would then be
available on the market to treat Medicare beneficiaries.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for the
Spiration[supreg] IBV[supreg] and consideration of the public comments
we received on the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule,
including the additional analysis of clinical data and supporting
information submitted by the applicant, we approved the
Spiration[supreg] IBV[supreg] for new technology add-on payments for FY
2010. In that final rule, we noted that the Spiration[supreg]
IBV[supreg] was the only device currently approved for the purpose of
treating prolonged air leaks following lobectomy, segmentectomy, and
LVRS patients in the United States. We stated that without the
availability of this device, patients with prolonged air leaks
(following lobectomy, segmentectomy, and LVRS) might otherwise remain
inpatients in the hospital (and have a longer length of stay than they
might otherwise have without the Spiration[supreg] IBV[supreg]) or
might even require additional invasive surgeries to resolve the air
leak. We also noted that use of the Spiration[supreg] IBV[supreg] may
lead to more rapid beneficial resolution of prolonged air leaks and
reduce recovery time following the three lung surgeries mentioned
above.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43823), we
indicated that we remained interested in seeing whether the clinical
evidence continues to find it to be effective. This approval was on the
basis of using the Spiration[supreg] IBV[supreg] consistent with the
FDA approval (HDE). Accordingly, we emphasized the need for appropriate
patient selection. Therefore, we limited the add-on payment to cases
involving prolonged air leaks following lobectomy, segmentectomy, and
LVRS in MS-DRGs 163, 164, and 165. In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43823), we stated that cases involving the
Spiration[supreg] IBV[supreg] that are eligible for the new technology
add-on payment are identified by assignment to MS-DRGs 163, 164, and
165 with procedure code 33.71 or 33.73 in combination with one of the
following procedure codes: 32.22, 32.30, 32.39, 32.41, or 32.49.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we stated that the
average cost of the Spiration[supreg] IBV[supreg] is reported as
$2,750. Based on data from the FY 2010 application, the average amount
of valves per case is 2.5. Therefore, the total maximum cost for the
Spiration[supreg] IBV[supreg] was expected to be $6,875 per case
($2,750 x 2.5). Under Sec. 412.88(a)(2) of our regulations, new
technology add-on payments are limited to the lesser of 50 percent of
the average cost of the device or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we finalized a maximum
add-on payment for a case involving the Spiration[supreg] IBV[supreg]
as $3,437.50.
In the FY 2011 IPPS/LTCH PPS proposed rule, we did not propose any
changes to the new technology add-on payments for the Spiration[supreg]
IBV[supreg]. We did not receive any public comments on whether to
continue or discontinue the new technology add-on payment for the
Spiration[supreg] IBV[supreg] for FY 2011. Therefore, for FY 2011, we
are continuing new technology add-on payments for cases involving the
Spiration[supreg] IBV[supreg] in FY 2011, with a maximum add-on payment
of $3,437.50. However, we did receive one public comment on the MS-DRGs
and codes used to identify which cases involving the Spiration[supreg]
IBV[supreg] are eligible for the new technology add-on payment.
Comment: One commenter, the manufacturer, explained that the coding
requirements described above that identify cases of the
Spiration[supreg] IBV[supreg] for new technology add-on payments do not
account for all cases where a hospital may be using the device to treat
patients with prolonged air leaks following lobectomy, segmentectomy,
and LVRS consistent with the product's HDE approval. These cases occur
when the hospital inserting the Spiration[supreg] IBV[supreg] did not
perform the initial lobectomy, segmentectomy, or LVRS surgery; instead,
the hospital inserting the device received the beneficiary as a
transfer case. The commenter explained that there are instances when a
hospital performs the initial surgery and then determines that
treatment of the patient with the IBV[supreg] valve is appropriate but
the hospital has not been approved to perform the IBV[supreg] valve
insertion procedure under the HDE regulations. Therefore, the hospital
must transfer the patient to an approved facility for treatment with
the IBV[supreg] valve. If it were possible to consider this situation
as one case, the commenter believed that, between the two hospitals,
the new technology payment criteria as specified for FY 2010
(identified by assignment to MS-DRGs 163, 164, and 165 with procedure
code 33.71 or 33.73 in combination with one of the following procedure
codes: 32.22, 32.30, 32.39, 32.41, or 32.49) would be met. However,
because insertion of the IBV[supreg] valve is limited to approved
facilities, the commenter believed that that the hospital receiving
such a patient for treatment for prolonged air leak following
lobectomy, segmentectomy, and LVRS likely reports the case under ICD-9-
CM diagnosis code 512.1 (Iatrogenic pneumothorax) as the principal
diagnosis in the absence of a more specific code for prolonged air leak
and because the second hospital did not perform the initial lobectomy,

[[Page 50142]]

segmentectomy, or LVRS surgery. Such cases would be assigned to MS-DRGs
199, 200, or 201 (Pneumothorax with MCC, with CC, or with CC or MCC,
respectively) based on the principal ICD-9-CM diagnosis code of 512.1
and are therefore ineligible for the new technology add-on payment
based on the specifications finalized in FY 2010. In this situation,
because the transferring hospital that performed the initial surgery
did not insert the IBV[supreg] valve, it would also be ineligible for
the new technology add-on payment. The commenter recommended that CMS
allow an add-on payment in such cases by linking transfer
hospitalizations cases that had an IBV[supreg] valve inserted at the
receiving hospital to a previous claim in the patient's history to
ensure that the patient had previously undergone a lobectomy,
segmentectomy, or LVRS as reported by one of the following procedure
codes: 32.22, 32.30, 32.39, 32.41 or 32.49. This would ensure that the
Spiration[supreg] IBV[supreg] is being used consistent with its FDA
approved indication for the treatment of prolonged air leaks following
lobectomy, segmentectomy, or LVRS.
Response: We thank the commenter for the comments. We agree with
the manufacturer that it is appropriate that all cases in which the
Spiration[supreg] IBV[supreg] Valve is inserted consistent with its HDE
approval be eligible for the approved new technology add-on payment.
For this reason, we are expanding the new technology add-on payment for
the Spiration[supreg] IBV[supreg] Valve to cases that map to MS-DRGs
199, 200, and 201 with an assigned principal diagnosis code of 512.1.
In accordance with the FDA HDE approval, only approved hospital centers
with an Internal Review Board (IRB) may implant the device. According
to the manufacturer, all sites must be approved before the device will
be shipped for use. The approval process includes an evaluation of the
facility, training of physicians, an institutional compliance
agreement, IRB process and documentation, and a purchasing agreement.
The IRB ensures that the patient had a lobectomy, segmentectomy, or
LVRS and had a prolonged air leak and then approves the device to be
implanted in the patient. Therefore, due to the strict requirements
associated with the HDE approval of this technology, even if a patient
was transferred to a hospital for device implantation and the
lobectomy, segmentectomy, or LVRS was not performed at that hospital
(and, therefore, the surgery is not billed on the same claim as the
implantation of the device), we believe our concerns regarding patient
selection are addressed and that the hospital implanting the device is
doing so to treat prolonged post-surgical air leaks. The manufacturer
asserted that, in this transfer situation, the beneficiary's case would
typically be assigned to diagnosis code 512.1, which maps to MS-DRGs
199, 200, and 201. For this reason, we are expanding the new technology
add-on payment for the Spiration[supreg] IBV[supreg] Valve to cases
that map to these MS-DRGs.
We performed an analysis to determine if the technology would still
meet the cost criteria by adding these additional MS-DRGs to the
applicant's cost analysis in the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43820). The cases that map to MS-DRGs 199, 200, and 201 are
small in number and, therefore, have a minimal effect on the case-
weighted average standardized per case and the case-weighted threshold
published in the FY 2010/RY 2010 LTCH PPS final rule. Therefore, the
Spiration[supreg] IBV[supreg] would still meet the cost criteria with
the inclusion of these additional MS-DRGs.
For FY 2011, in addition to making new technology add-on payments
for cases of the Spiration[supreg] IBV[supreg] that map to MS-DRGs 163,
164, and 165 (with procedure code 33.71 or 33.73 in combination with
one of the following procedure codes: 32.22, 32.30, 32.39, 32.41, or
32.49), we will make the new technology add-on payment for cases of the
Spiration[supreg] IBV[supreg] that map to MS-DRGs 199, 200, and 201
with the presence of a diagnosis code of 512.1 in combination with
procedure code 33.71 and 33.73. This determination will ensure that the
hospital implanting the device receives the new technology add-on
payment. We note that, in these cases, the transferring hospital
performing the surgery will be subject to the transfer policy and would
not receive the new technology add-on payment because it did not
implant the device.
b. CardioWest^TM Temporary Total Artificial Heart System
(CardioWest^TM TAH-t)
SynCardia Systems, Inc. submitted an application for approval of
the CardioWest^TM temporary Total Artificial Heart system
(TAH-t) in FY 2009. The TAH-t is a technology that is used as a bridge
to heart transplant device for heart transplant-eligible patients with
end-stage biventricular failure. The TAH-t pumps up to 9.5 liters of
blood per minute. This high level of perfusion helps improve
hemodynamic function in patients, thus making them better heart
transplant candidates.
The TAH-t was approved by the FDA on October 15, 2004, for use as a
bridge to transplant device in cardiac transplant-eligible candidates
at risk of imminent death from biventricular failure. The TAH-t is
intended to be used in hospital inpatients. One of the FDA's post-
approval requirements is that the manufacturer agrees to provide a
post-approval study demonstrating that success of the device at one
center can be reproduced at other centers. The study was to include at
least 50 patients who would be followed up to 1 year, including (but
not limited to) the following endpoints: survival to transplant;
adverse events; and device malfunction.
In the past, Medicare did not cover artificial heart devices,
including the TAH-t. However, on May 1, 2008, CMS issued a final
national coverage determination (NCD) expanding Medicare coverage of
artificial hearts when they are implanted as part of a study that is
approved by the FDA and is determined by CMS to meet CMS' Coverage with
Evidence Development (CED) clinical research criteria. (The final NCD
is available on the CMS Web site at: http://www.cms.hhs.gov/mcd/viewdecisionmemo.asp?id=211.)
We indicated in the FY 2009 IPPS/RY 2009 LTCH PPS final rule (73 FR
48555) that, because Medicare's previous coverage policy with respect
to this device had precluded payment from Medicare, we did not expect
the costs associated with this technology to be currently reflected in
the data used to determine the relative weights of MS-DRGs. As we have
indicated in the past, and as we discussed in the FY 2009 IPPS/RY 2009
LTCH PPS final rule, although we generally believe that the newness
period would begin on the date that FDA approval was granted, in cases
where the applicant can demonstrate a documented delay in market
availability subsequent to FDA approval, we would consider delaying the
start of the newness period. This technology's situation represented
such a case. We also noted that section 1886(d)(5)(K)(ii)(II) of the
Act requires that we provide for the collection of cost data for a new
medical service or technology for a period of at least 2 years and no
more than 3 years ``beginning on the date on which an inpatient
hospital code is issued with respect to the service or technology.''
Furthermore, the statute specifies that the term ``inpatient hospital
code'' means any code that is used with respect to inpatient hospital
services for which payment may be made under the

[[Page 50143]]

IPPS and includes ICD-9-CM codes and any subsequent revisions. Although
the TAH-t has been described by the ICD-9-CM code(s) since the time of
its FDA approval, because the TAH-t had not been covered under the
Medicare program (and, therefore, no Medicare payment had been made for
this technology), this code could not be ``used with respect to
inpatient hospital services for which payment'' is made under the IPPS,
and thus we assumed that none of the costs associated with this
technology would be reflected in the Medicare claims data used to
recalibrate the MS-DRG relative weights for FY 2009. For this reason,
as discussed in the FY 2009 IPPS/RY 2009 LTCH PPS final rule, despite
the FDA approval date of the technology, we determined that TAH-t would
still be eligible to be considered ``new'' for purposes of the new
technology add-on payment because the TAH-t met the newness criterion
on the date that Medicare coverage began, consistent with issuance of
the final NCD, effective on May 1, 2008.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the TAH-t
and consideration of the public comments we received in response to the
FY 2009 IPPS/RY 2009 LTCH PPS proposed rule, we approved the TAH-t for
new technology add-on payments for FY 2009 (73 FR 48557). We indicated
that we believed the TAH-t offered a new treatment option that
previously did not exist for patients with end-stage biventricular
failure. However, we indicated that we recognized that Medicare
coverage of the TAH-t is limited to approved clinical trial settings.
The new technology add-on payment status does not negate the
restrictions under the NCD nor does it obviate the need for continued
monitoring of clinical evidence for the TAH-t. We remain interested in
seeing whether the clinical evidence demonstrates that the TAH-t
continues to be effective. If evidence is found that the TAH-t may no
longer offer a substantial clinical improvement, we reserve the right
to discontinue new technology add-on payments, even within the 2- to 3-
year period that the device may still be considered to be new. We also
continued to make new technology add-on payments for the TAH-t in FY
2010. We welcome public comment regarding whether there is new evidence
that demonstrates that the TAH-T continues to be effective and whether
it should still be considered to be a substantial clinical improvement
for FY 2011.
The new technology add-on payment for the TAH-t for FY 2010 is
triggered by the presence of ICD-9-CM procedure code 37.52
(Implantation of total heart replacement system), condition code 30,
and the diagnosis code reflecting clinical trial--V70.7 (Examination of
participant in clinical trial). For FY 2010, we finalized a maximum
add-on payment of $53,000 (that is, 50 percent of the estimated
operating costs of the device of $106,000) for cases that involve this
technology.
Our practice has been to begin and end new technology add-on
payments on the basis of a fiscal year. In general, we extend add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry on the market occurs in the latter half of the
fiscal year (70 FR 47362). The TAH-t is still eligible to be considered
``new'' for purposes of the new technology add-on payment because the
3-year anniversary date of the TAH-t entry on the market was in the
second half of the fiscal year and the TAH-t met the newness criterion
on the date that Medicare coverage began, consistent with issuance of
the final NCD, effective on May 1, 2008. Therefore, for FY 2011, we
proposed to continue new technology add-on payments for cases involving
the TAH-t in FY 2011 with a maximum add-on payment of $53,000.
Comment: Commenters supported our proposal to continue add-on
payments for the TAH-t. The commenters believed that the TAH-t
continues to represent a substantial clinical improvement for patients
with biventricular heart failure in need of a heart transplant. One
commenter, the manufacturer of the TAH-t, stated that the TAH-t
continues to be the only biventricular replacement device that is
available for patients, Medicare or otherwise, with biventricular
failure. The commenter noted that the device is indicated for use as a
``bridge to transplant'' in cardiac transplant-eligible patients who
are at risk of imminent death. The commenter stated that the device is
approved by the FDA ``* * * for use in-hospital, and, under a currently
approved investigational device exemption (``IDE'') clinical study out
of hospital as well.'' The commenter stated that the TAH-t has been
implanted in over 865 patients worldwide and that between January 1,
2009 and June 11, 2010, there were 15 TAH-t implants in the United
States. Of these 15 patients, 10 were continuing on support, 4 received
heart transplants, and 1 expired; the commenter stated that without the
device, it is likely that all of the patients would have expired. The
commenter asserted that it recently began to employ the use of a ``* *
* smaller, portable driver, known as the ``Freedom Driver'' as part of
the TAH-t system.'' The commenter noted that the Freedom Driver allows
increased patient mobility so that patients may leave the hospital
while waiting for a donor heart and that the Freedom Driver further
demonstrated that the TAH-t was a substantial clinical improvement. The
commenter asserted that the new driver increased the operating cost of
the device from $106,000 to $124,700 and requested that the new
technology add-on payment be increased from $53,000 to $62,350,
accordingly.
Response: We agree with the commenters that, for patients with
biventricular heart failure, the TAH-t continues to represent a
substantial clinical improvement. With respect to the manufacturer's
request for an increase in the new technology add-on payment amount for
FY 2011, we note that the version of the TAH-t that contains the
Freedom Driver is not currently approved to be marketed by the FDA.
Rather, the device is being studied in a clinical trial under an IDE.
The IDE allows the investigational device to be used in a clinical
study in order to collect safety and effectiveness data to support a
Premarket Approval (PMA) application or a Premarket Notification
[510(k)] submission to FDA. An approved IDE permits a device to be
shipped lawfully for the purpose of conducting investigations of the
device without complying with other requirements of the Federal Food,
Drug, and Cosmetic Act that would apply to devices in commercial
distribution. For example, sponsors are not required to have an
approved PMA application or cleared Premarket Notification 510(k),
register their establishment, or list the device while the device is
under investigation. Sponsors of IDEs are also exempt from the Quality
System (QS) Regulation except for the requirements for design control,
if applicable (unless the sponsor states an intention to comply with
these requirements). An IDE does not constitute FDA approval to market
the device. Once the clinical trial conducted under an IDE has been
completed, the device may receive FDA approval or clearance to be
legally marketed. If the modified TAH-t device using the Freedom Driver
does receive FDA approval, we would require that a new technology
application be formally submitted for review for new technology add-on
payments for the TAH-t device using the Freedom Driver at that time.
Because we have not received such an

[[Page 50144]]

application and because the modified device is not yet approved by the
FDA, we are unable to increase the new technology add-on payments for
TAH-T for FY 2011. We would encourage the manufacturer to submit a new
technology add-on payment application if and when it expects to receive
FDA approval for the modified TAH-t with the Freedom Driver.
Therefore, as we proposed, we are continuing new technology add-on
payments for cases involving the TAH-t in FY 2011 with a maximum add-on
payment of $53,000.
4. FY 2011 Applications for New Technology Add-On Payments
We received five applications to be considered for new technology
add-on payment for FY 2011. However, two applicants withdrew their
applications: Nycomed Austria GmbH, which submitted an application for
new technology add-on payments for FY 2011 for TachoSil[reg]; and
Zimmer, which submitted an application for new technology add-on
payments for FY 2011 for the Dynesys Dynamic Stabilization System.
Nycomed Austria GmbH withdrew its application from further review in
January 2010, and Zimmer withdrew its application in February 2010.
Because both applications were withdrawn prior to the town hall meeting
and publication of the FY 2011 IPPS/LTCH PPS proposed rule, we are not
discussing these two applications in this final rule.
A discussion of the remaining three applications is presented
below. At the time the proposed rule was developed, one of the
technologies had not yet received FDA approval. Since that time, that
technology, the LipiScan^TM IVUS, has received FDA approval.
a. Auto Laser Interstitial Thermal Therapy (AutoLITT^TM)
System
Monteris Medical submitted an application for new technology add-on
payments for FY 2011 for the AutoLITT^TM. We note that the
applicant submitted an application for new technology add-on payments
for FY 2010 but withdrew its application prior to the FY 2010 IPPS/RY
2010 LTCH PPS final rule. AutoLITT^TM is a minimally
invasive, MRI-guided laser tipped catheter designed to destroy
malignant brain tumors with interstitial thermal energy causing
immediate coagulation and necrosis of diseased tissue. The technology
can be identified by ICD-9-CM procedure codes 17.61 (Laser interstitial
thermal therapy [LITT] of lesion or tissue of brain under guidance),
and 17.62 (Laser interstitial thermal therapy [LITT] of lesion or
tissue of head and neck under guidance), which became effective on
October 1, 2009.
The applicant asserts that the AutoLITT^TM delivers laser
energy to the lesion with a proprietary 3mm diameter probe that directs
the energy radially (that is, at right angle to the axis of the probe,
or side-firing) toward the targeted tumor tissue in a narrow beam
profile and at the same time, a proprietary probe cooling system
removes heat from tissue not directly in the path of the laser beam,
ostensibly protecting it from thermal damage and enabling the physician
to selectively ablate only targeted tissue. The AutoLITT^TM
received a 510K FDA clearance in May 2009. The AutoLITT^TM is
indicated for use to necrotize or coagulate soft tissue through
interstitial irradiation or thermal therapy in medicine and surgery in
the discipline of neurosurgery with 1064 nm lasers. The
AutoLITT^TM may be used in patients with glioblastoma
multiforme brain (GBM) tumors. The applicant stated in its application
and through supplemental information that, due to required updates, the
technology was actually introduced to the market in December 2009. The
applicant explained that it was necessary to reduce the thermal damage
lines from three to one and complete International Electrotechnical
Commission/Underwriter Laboratory testing, which led to the
introduction of the technology to the market in December 2009, although
the technology was approved by FDA in May 2009. The applicant also
stated through supplementary information to its application that the
first sale of the product took place on March 19, 2010. However,
because the product was already available for use in December 2009, it
appears that the newness date would begin in December 2009. In the FY
2011 IPPS/LTCH PPS proposed rule, we welcomed public comments on this
issue.
With regard to the newness criterion, in the FY 2011 IPPS/LTCH PPS
proposed rule, we expressed concern that the AutoLITT^TM may
be substantially similar to the device that it listed as its predicate
device in its application to the FDA for approval. Specifically, in
making a determination of substantial similarity, we consider the
following: (1) Whether a product uses the same or similar mechanism of
action to achieve a therapeutic action; (2) whether a product is
assigned to the same or different MS-DRG; and (3) whether the new use
of a technology involves the treatment of the same or similar type of
disease and the same or similar patient population. The applicant
identified Visual-ase as its predicate device (which was approved by
the FDA in 2006), which is also used to treat tumors of the head and
neck. The applicant maintains that AutoLITT^TM can be
distinguished from the Visual-ase by its mechanism of action (that is,
side-firing laser versus elliptical firing). Additionally, as mentioned
above, the technology contains a proprietary probe cooling system that
removes heat from tissue not directly in the path of the laser beam. In
the FY 2011 IPPS/LTCH PPS proposed rule, we welcomed comments from the
public regarding whether or not the AutoLITT^TM is
substantially similar to the Visual-ase and if it meets the newness
criteria.
Comment: One commenter described the components of the
AutoLITT^TM that should qualify the AutoLITT^TM as
``new''. Specifically, the commenter noted that the probe uses side-
firing and has a gas-cooled tip. The commenter noted that probe drive
is an MRI-compatible steering device and the software for the device
provides thermal dose reporting in real time. In addition, the
commenter explained that the software is designed to provide real time
feedback to the surgeon and also to provide a discrete line of thermal
dosage at the expanding boundary or isotherm. The commenter further
explained that this isotherm is used by the surgeon to control
treatment in comparison to the delineated pre-defined treatment or
tumor boundary and also provides this information in a volume (that
includes treatment and two axial planes) so that the surgeon can
monitor and plan, in real time, the next heating cycle to complete the
treatment regimen.
Response: We thank the commenter for the additional information on
the AutoLITT^TM. After reviewing all of the information
provided by the applicant and the public, we believe that the
AutoLITT^TM uses a different mechanism of action when
compared to the Visual-ase. We agree with the applicant that the
AutoLITT^TM can be distinguished from the Visual-ase by its
side-firing laser versus elliptical-firing. In addition, the
AutoLITT^TM contains a proprietary probe cooling system that
removes heat from tissue not directly in the path of the laser beam,
while the Visual-ase does not contain this cooling system. Therefore,
we do not believe the AutoLITT^TM is substantially similar to
the Visual-ase. Because the AutoLITT^TM was available on the
market beginning with December 2009 (and is not substantially similar
to its predicate device), the technology is still within the 2 to 3
year newness period.

[[Page 50145]]

In an effort to demonstrate that AutoLITT^TM meets the
cost criterion, the applicant used 2007 Medicare data from the
Healthcare Cost and Utilization Project (HCUP). We first note that the
applicant believes that cases eligible for the AutoLITT^TM
will map to MS-DRG 25 (Craniotomy and Endovascular Intracranial
Procedures with MCC), MS-DRG 26 (Craniotomy and Endovascular
Intracranial Procedures with CC), and MS-DRG 27 (Craniotomy and
Endovascular Intracranial Procedures without CC or MCC). The applicant
explained through supplemental information to its application that most
cases of the AutoLITT^TM would map to MS-DRG 25 in the near-
term. As the technology becomes more widely available, the applicant
asserted that clinicians will use the technology instead of performing
a craniotomy for brain cancer. Additionally, the applicant asserted
that clinicians will expand their use of the technology beyond GBM to
other different types of brain cancers, including metastases, which
would map to other MS-DRGs aside from MS-DRG 25. The applicant further
stated that life expectancy with brain cancer is predicated on the
removal of as much of the cancer as possible and asserted that over
time the AutoLITT^TM will do a better job of removing the
majority of the cancer that is present within the brain tissue compared
to other procedures. The applicant believes that physicians using the
AutoLITT^TM have a better tool to remove more cancer,
necrotize it more precisely, and access parts of the brain that
surgical resection cannot access. Lastly, the applicant believes that
the minimally invasive nature of the procedure will also result in
broader usage to other less complicated procedures (as clinical and
patient awareness expands).
The applicant searched HCUP hospital data for cases potentially
eligible for the AutoLITT^TM that was assigned one of the
following ICD-9-CM primary diagnosis codes: A diagnosis code that
begins with a prefix of 191 (Malignant neoplasm of brain); diagnosis
code 225.0 (Benign neoplasm of brain and other parts of nervous
system); or diagnosis code 239.6 (Neoplasm of the brain of unspecified
nature). The applicant found 41,021 cases and weighted the standardized
charge per case based on the number of cases found within each of the
diagnosis codes listed above rather than the percentage of cases that
would group to different MS-DRGs. Based on this analysis, the applicant
calculated an average standardized charge per case of $57,511. While
the applicant's analysis established a case-weighted average charge per
case in the aggregate, it did not provide a case-weighted average
standardized charge per case by MS-DRG (as required by the
application).
The applicant also noted that their estimate of the case-weighted
average standardized charge per case of $57,511 did not include charges
related to the AutoLITT^TM. Therefore, it is necessary to add
the charges related to the device to the case-weighted average
standardized charge per case in evaluating the cost threshold
criterion. Although the applicant submitted data related to the
estimated cost of the AutoLITT^TM per case, the applicant
stated that the cost of the device was proprietary information. Based
on a study of charge compression data by RTI \4\ and charge master data
from Stanford University and University of California, San Francisco,
the applicant estimates $38,886 in charges related to the
AutoLITT^TM (we note that some of the data used a markup of
294 percent of the costs). Adding the estimated charges related to the
device to the average standardized charge per case resulted in a total
average standardized charge per case of $96,397 ($57,511 plus $38,886).
We note, in the applicant's discussion of substantial clinical
improvement below, the applicant maintains that improved clinical
outcomes using nonfocused LITT included reduced recovery time and a
reduced rate of complications. Therefore, in the FY 2011 IPPS/LTCH PPS
proposed rule, we sought public comment on how reduced recovery time
and a reduced rate of complications would affect the total case-
weighted average standardized charge per case and the average length of
stay (for cases eligible for the AutoLITT^TM).
---------------------------------------------------------------------------

\4\ RTI International, A Study of Charge Compression in
Calculating DRG Relative Weights, RTI Project No. 0207964.012.008;
January 2007.
---------------------------------------------------------------------------

Comment: The applicant submitted supplemental information and noted
that, compared to a craniotomy, surgery involving the
AutoLITT^TM requires an MRI and/or interventional MRI. The
commenter indicated that the addition of the MRI requires additional
resources, namely a MRI technician, at a minimum, and a radiologist, as
needed, to review images. In total, these additions would increase the
level of resources a hospital would use to treat these patients, both
in terms of direct costs (for example, labor, contracted physician
resources, etc.), and fixed and indirect costs (for example, MRI, use
of radiology office space, etc.) The commenter further added that
overall additional time for the procedure (also a cost) is currently
required to conduct an AutoLITT^TM case compared to the
standard of care (that is, craniotomy as asserted by the applicant).
The commenter reported that during the clinical trials, cases of
AutoLITT^TM ranged from 10 to 12 hours (including OR, MRI,
and Anesthesia time as opposed to 4 to 6 hours for a craniotomy). As
efficiencies are gained in the hospitals working with the technology,
the applicant predicts that this time will be reduced to 7 hours within
the next year or so. In addition, the commenter believed that the
updated HCUP analysis, which we discuss below, supports a standardized
charge of $96,947. This supplemental data correlate to 2010 pricing
information that the applicant received from two institutions
demonstrating an approximate charge (not standardized) of $103,000 per
case.
Response: We thank the commenter for providing this information. We
considered this information in our decision (indicated below) on
whether the AutoLITT^TM meets the cost criterion.
As noted above, the applicant's analysis established a case-
weighted average charge per case in the aggregate, but it did not
provide a case-weighted average standardized charge per case by MS-DRG.
However, the applicant explained through supplemental information to
its application that the total average standardized charge per case
significantly exceeds the cost threshold established by CMS for FY 2011
in Table 10 (74 FR 44173) of $84,185 for MS-DRG 25. As noted above, due
to section 3401(a) of the Affordable Care Act which adjusted the FY
2010 applicable percentage increase (thus requiring CMS to revise the
FY 2010 standardized amounts), for this final rule, we used the revised
FY 2011 thresholds as published in the FY 2010 IPPS/RY 2010 LTCH PPS
notice issued in the Federal Register on June 2, 2010 (75 FR 31213) to
determine if the AutoLITT^TM met the cost criterion.
Therefore, using the revised FY 2011 thresholds, the total average
standardized charge per case would also exceed the cost thresholds
established by CMS of $58,591 for MS-DRG 26 and $47,033 for MS-DRG 27.
Because the total average standardized charge per case exceeds the
threshold amount for each individual MS-DRG to which the technology
would map (MS-DRGs 25, 26, and 27), the applicant maintains that the
AutoLITT^TM would meet the cost criterion. In the FY 2011
IPPS/LTCH PPS proposed rule, we invited public comment on whether or
not the

[[Page 50146]]

AutoLITT^TM meets the cost criterion for a new technology
add-on payment for FY 2011.
Comment: In supplemental information provided to CMS, the applicant
noted that, after further reviewing its cost analysis from the HCUP
hospital data that was presented in the FY 2011 IPPS/LTCH PPS proposed
rule, the applicant discovered that it inadvertently used discharges
from all hospitals, including non-Medicare data, instead of only using
Medicare data. Therefore, the applicant updated its analysis from the
proposed rule and filtered the claims data in the HCUP database for
Medicare claims with the same primary diagnosis codes listed above.
Instead of the FY 2007 MedPAR database, the applicant used the most
recent updated MedPAR database on the HCUP Web site, which was the FY
2008 MedPAR file. The applicant found a total of 12,816 cases with an
average standardized charge of $58,061. Similar to above, adding the
estimated charges related to the device to the average standardized
charge per case resulted in a total average standardized charge per
case of $96,947 ($58,061 plus $38,886). As noted above, the analysis
from the HCUP database established a case-weighted average charge per
case in the aggregate, but it did not provide a case-weighted average
standardized charge per case by MS-DRG. Similar to above, the applicant
maintains that the total average standardized charge per case
significantly exceeds the revised cost thresholds established by CMS
for FY 2011 in Table 10 (75 FR 31213) of $84,164 for MS-DRG 25.
Additionally, the applicant maintains that the total average
standardized charge per case would also exceed the cost thresholds
established by CMS of $58,591 for MS-DRG 26 and $47,033 for MS-DRG 27.
Response: Even with the applicant's revised HCUP analysis, the
applicant still did not establish a case-weighted average standardized
charge per case by MS-DRG as required by 42 CFR 412.87(b)(3). To
determine whether the applicant met the cost criterion, we performed an
analysis of MedPAR data. We searched the FY 2009 MedPAR file for cases
with a primary diagnosis that begins with a prefix of 191; diagnosis
code 225.0; or diagnosis code 239.6. We found 1,711 cases (or 34.2
percent of all cases) in MS-DRG 25, 1,587 cases (or 31.7 percent of all
cases) in MS-DRG 26, and 1,702 cases (or 34 percent of all cases) in
MS-DRG 27. The average standardized charge per case was $86,678 for MS-
DRG 25, $63,089 for MS-DRG 26, and $47,033 for MS-DRG 27, equating to a
case-weighted average standardized charge per case of $65,685.
The average standardized charge per case does not include charges
related to the AutoLITT^TM; therefore, it is necessary next
to add the charges related to the device to the average standardized
charge per case to evaluate whether the cost threshold criterion is
met. As noted above, the applicant estimates $38,886 in charges related
to the AutoLITT^TM. Adding the estimated charges related to
the device to the average standardized charge per case (based on the
case distribution from the FY 2009 MedPAR claims data analysis)
resulted in a case-weighted average standardized charge per case of
$104,571 ($65,685 plus $38,886).
Although we have established a case-weighted average standardized
charge per case, the case-weighted average standardized charge per case
above does not take into consideration reduced recovery time and a
reduced rate of complications that would affect the total case-weighted
average standardized charge per case and the average length of stay.
Both would decrease the costs associated with the AutoLITT device.
Therefore, we made the following calculations, taking into
consideration our concerns as stated above, in order to determine if
the AutoLITT^TM meets the cost criteria. The average length
of stay for cases we found in the FY 2009 MedPAR file was 7.4 days.
This results in an average charge per day of $8,824 (the case-weighted
average standardized charge of $65,685 divided by 7.4 days). However,
we note that the first day of an inpatient hospitalization is typically
more expensive than subsequent days in the stay. Nonetheless, absent
specific charge per day data, we are equally dividing charges for
purposes of evaluating the decreased costs associated with the reduced
length of stay using AutoLITT^TM. This should provide us with
a lower charge estimate than what it otherwise would be if we had
actual charge data. That is, if the device meets the cost criterion
based on the lower estimate, it should meet it based on the actual
data, which would be higher. Based on data from the applicant's
clinical trial, the average length of stay for cases with the
AutoLITT^TM was 3.8 days. Using the difference of 3.6 days
(7.4 days minus 3.8 days) from cases in the FY 2009 MedPAR file to the
applicant's clinical trial, we determined it is necessary to deduct a
total of $32,154 in charges (3.6 times $8,824) from the case-weighted
average standardized charge per case of $65,685, as determined above.
This resulted in a reduced case-weighted average standardized charge
per case of $33,531. We then added the estimated charges related to the
device to the reduced average standardized charge per case and
determined a revised case-weighted average standardized charge per case
of $72,417 ($33,531 plus $38,886 (charges related to the
AutoLITT^TM); all calculations above were performed using
unrounded numbers).
Using the revised FY 2010 thresholds published in Table 10 (75 FR
31213), the case-weighted threshold for MS-DRGs 25, 26, and 27 was
$63,408 (again, all calculations above were performed using unrounded
numbers). Based on this analysis, the revised case-weighted average
standardized charge per case for the applicable MS-DRGs exceed the
case-weighted threshold amount. Additionally, we also conducted a
sensitivity test with a majority of cases mapping to MS-DRG 25 (because
the applicant maintained that most patients' conditions would be an MCC
and the case would map to this MS-DRG and because patients with GBM are
more likely to be more severely ill than patients with other types of
tumors) and the remaining cases mapping to MS-DRGs 26 and 27. With a
majority of cases mapping to MS-DRG 25, we used a higher percentage of
charges from MS-DRG 25 to determine the case-weighted threshold and the
case-weighted average standardized charge per case, which would make it
more difficult for the case-weighted average standardized charge per
case to exceed the case-weighted threshold (because the threshold for
MS-DRG 25 is the highest of MS-DRGs 25, 26, and 27). The sensitivity
test demonstrated that even with a majority of cases mapping to MS-DRG
25, the case-weighted standardized charge per case would exceed the
case-weighted threshold.
After reviewing all of the data summarized above, we believe the
applicant has provided a sufficient explanation for the additional
charges associated with the AutoLITT^TM, even with a reduced
recovery time and a reduced rate of complications. Additionally, our
analysis of the FY 2009 MedPAR data demonstrates that the average
standardized charge per case (for cases eligible for the
AutoLITT^TM) does exceed the case-weighted cost threshold
(even with a majority of cases mapping to a MS-DRG). Furthermore, the
applicant did provide charge data from two centers verifying the
expected high charges associated with the cases of the
AutoLITT^TM. Therefore, we believe that the
AutoLITT^TM meets the cost criterion.
With respect to the substantial clinical improvement criterion, the

[[Page 50147]]

applicant maintains that it meets this criterion in its application.
Specifically, the applicant stated that several non-
AutoLITT^TM clinical trials have demonstrated that nonfocused
LITT (and more recently, the use of LITT plus MRI) improved survival,
quality of life, and recovery in patients with advanced GBM tumors and
advanced metastatic brain tumors that cannot be effectively treated
with surgery, radiosurgery, radiation, chemotherapy, or any currently
available clinical procedure. In a number of these patients, nonfocused
LITT was the treatment of last resort, due to either the
unresponsiveness to or inability of these therapies to treat the brain
tumor (due to tumor location, type, or size, among other reasons). The
applicant also maintains that when compared to craniotomy, it offers
improved clinical outcomes using nonfocused LITT, including reduced
recovery time and a reduced rate of complications (that is, infection,
brain edema). The applicant stated that these factors, as discussed in
the FY 2001 final rule (66 FR 46914 through 46915) demonstrate that the
AutoLITT^TM meets the new technology criterion for
substantial clinical improvement.
The applicant further asserts that AutoLITT^TM would
represent a substantial clinical improvement over existing standards of
care for a number of reasons and should build upon less sophisticated,
nonfocused LITT therapies. These clinical improvements cited by the
applicant include: a less invasive method of tumor ablation,
potentially leading to lower complication rates post procedure
(infection, edema); an ability to employ multiple interventions over
shorter periods of time and an ability to be used as a treatment of
last resort (radiosurgery is limited due to radiation dosing and
craniotomy is limited to 1 to 2 procedures); an ability to be used in
hard-to-reach brain tumors (the AutoLITT^TM may be used as a
treatment of last resort); and a shorter recovery time (the possibility
for same day surgery, which has been demonstrated above with nonfocused
LITT).
In the FY 2011 IPPS/LTCH PPS proposed rule, we stated that, while
we recognize the future potential of this interesting therapy, we have
concerns that, to date, the AutoLITT^TM has been used for the
treatment of only a few patients as part of a safety evaluation with no
comparative efficacy data and, therefore, there may not be sufficient
objective clinical evidence to determine if the AutoLITT^TM
meets the substantial clinical improvement criteria. The applicant did
note in its presentation at the new technology town hall meeting that
it is currently conducting a clinical trial with a summary report
expected in the near future. In the FY 2011 IPPS/LTCH PPS proposed
rule, we welcomed additional clinical data to demonstrate whether the
AutoLITT^TM meets the substantial clinical improvement
criterion and invited public comment on whether or not the
AutoLITT^TM meets the substantial clinical improvement
criterion.
Comment: A number of commenters who are physicians agreed with the
applicant that the AutoLITT^TM meets the substantial clinical
improvement criterion. Two commenters (that conducted the clinical
trial) described their experience with the AutoLITT^TM in the
clinical trial for use in patients with recurrent GBM who were
demonstrated to be refractory to other treatment options. (We note that
this clinical trial is also discussed below in a separate comment from
the manufacturer). The commenters treated 10 patients with the
AutoLITT^TM and noted the following: (1) A short recovery
time that allowed patient discharges within 2 to 3 days, compared to 3
to 5 days following a craniotomy; (2) patients were able to ambulate
more quickly, typically within 3 to 4 hours, compared to craniotomy
which often takes 6 or more hours of recovery time prior to becoming
ambulatory (The commenters noted that this is important in the
prevention of venous thrombosis, commonly seen in patients with GBM.);
and (3) adverse events have been minimal and do not exceed those
published for first or second craniotomies for glioblastomas.\5\ The
commenters noted that, over time, adverse events are likely to decrease
as clinical experience is gained with the AutoLITT^TM and
will likely be less than those experienced with craniotomy, due to the
less invasive nature of the AutoLITT^TM.
---------------------------------------------------------------------------

\5\ Chang et al., J. Neurosurg., vol. 98, pp. 1175-1181, 2003.
---------------------------------------------------------------------------

Other commenters who have reviewed the most recent clinical data on
the AutoLITT^TM expressed their support for the clinical
benefits of the AutoLITT^TM. One commenter stated it foresees
using the AutoLITT^TM on deep seated primary tumors for which
total resection would risk a major insult to the brain and/or its
functional structures. The commenter further stated that use of the
AutoLITT^TM would minimize hospitalization, and possibly
reduce complications, such as thromboembolic events, seen with other
therapies. Another commenter added that there are many patients with
metastases to the brain and more than 10 percent of patients who
receive Gamma Knife treatment for such brain metastases have recurrence
of the metastasis at or near the original site. The commenter stated it
would consider the AutoLITT^TM as an alternative to Gamma
Knife treatment in these cases because Gamma Knife treatment
dramatically increases the risk of symptomatic radiation necrosis. All
of these commenters stated that the AutoLITT^TM offers
additional quality of life in patients with GBM due to its reduced
recovery time and its use as a less invasive alternative treatment to
other available treatment options.
Response: We appreciate these comments. Some commenters described
their positive experiences using the AutoLITT^TM which
reduced recovery time for the patient. Other commenters noted that they
would use the AutoLITT^TM as an alternative to other
available treatments because it is less invasive and provides an
improved quality of life for the patient outside the hospital. We
considered the comments above in our determination (indicated below) on
whether the AutoLITT^TM represents a substantial clinical
improvement.
Comment: The manufacturer submitted two public comments that
addressed the substantial clinical improvement criterion. The first
comment reiterated that options available to treat patients with brain
tumors are limited in general, and these limitations are magnified by
the fact that many patients are refractory to currently available
options such as surgical resection via craniotomy and radiotherapy. The
comment further stated that the literature on AutoLITT^TM and
LITT has demonstrated that the AutoLITT^TM offers another
clinically viable option to brain cancer patients, especially after
other options have failed.
Below we highlight some of the results of the clinical studies
cited by the commenter:
Time to progression of disease and survival were longer
for brachytherapy plus LITT compared to brachytherapy;\6\
---------------------------------------------------------------------------

\6\ Sneed, PK et al. (1998). Survival benefit of hyperthermia in
a prospective randomized trial of brachytherapy boost + hyperthermia
for glioblastoma multiforme. International J. Radiation Oncology
Biol. Phys.; 1998: 287-295.
---------------------------------------------------------------------------

Survival time using LITT/MRI therapy was substantially
longer than the natural history of the disease and longer than using
chemotherapy alone. After a short surgeon learning curve, the

[[Page 50148]]

median survival time increase by up to a factor of 4x (p = 0.0267);\7\
---------------------------------------------------------------------------

\7\ Schwarzmaier, HJ et al. (2006). MR guided laser-induced
interstitial thermotherapy of recurrent glioblastoma multiforme:
Preliminary results in 16 patients. Eur. J. Radiology; 59: 208-215.
---------------------------------------------------------------------------

Use of MRI guidance in brain surgery alone has
demonstrated a statistically significant reduction in major
complications versus surgery without MRI guidance (p = 0.019);\8\ and
---------------------------------------------------------------------------

\8\ Paleologos, TS et al. (2000). Clinical Utility and Cost-
Effectiveness of Interactive Image Guided Craniotomy: Clinical
Comparison between Conventional and Image Guided Meningioma Surgery.
Neurosurgery; 47: 40-48.
---------------------------------------------------------------------------

The combination of LITT and MRI guidance for treating
metastatic intracranial tumors has been evaluated for safety and
feasibility \9\ in a study of four patients that were refractory to
other treatments. The patients demonstrated on follow up that in all
cases the procedure was well tolerated without secondary effect and
patients were discharged within 14 hours after the procedure. Upon a
90-day follow up, tumor volume demonstrated a gradual and steady
decrease, with no recurrence within the thermal ablation zones.
---------------------------------------------------------------------------

\9\ Carpentier, A. et al. (2008). Real-Time Magnetic Resonance
Guided Laser Thermal Therapy for Focal Metastatic Brain Tumors.
Neurosurgery; 63: ONS21-ONS29.
---------------------------------------------------------------------------

The commenter concluded that it carefully reviewed the available
literature on LITT and believes that the AutoLITT^TM has
demonstrated the following positive clinical benefits for patients: a
robust and clinical validated integrated platform of clinically useful
technologies (LITT, MRI guidance, real time MR monitoring of thermal
energy applications) that works within the existing clinical frameworks
available at major medical centers; effective abilation of targeted
tumor tissue; short length of stay; ability to ambulate early; and
minimally lasting or late developing side effects. As a result, the
commenter believes that the AutoLITT^TM represents a new,
clinically viable option for brain cancer patients and meets the
substantial clinical improvement criteria.
The other comment from the manufacturer discussed the applicant's
clinical trial. Some of these data were discussed above in the comments
we received from physicians in support of the AutoLITT^TM.
The manufacturer provided more detail about the design of the clinical
study. The manufacturer stated that it conducted a clinical trial of 10
patients with tumors in locations that either made access to the tumor
without risk of complications difficult or made total gross resection
of the entire mass impossible or impractical without significant risk.
All patients treated in the study had first or second GBM tumors with
poor prognosis. The Karnofsky Performance Scale used to measure
functional and mental status was assessed pre- and post-treatment and
remained the same or improved during the post treatment interval.
Finally, as also mentioned in the comments from the physicians in
support of the AutoLITT^TM, all patients in the clinical
study were discharged within 2 to 7 days with a mean of 3.8 days, which
compares favorably to a 12[dash]day average length of stay for cases
that map to MS-DRG 25.
Response: We thank the applicant and all of the commenters for
providing additional clinical data to demonstrate that the
AutoLITT^TM meets the substantial clinical improvement
criteria. With respect to substantial clinical improvement, we
considered all of the case-specific clinical information presented by
the applicant and the public to determine whether there is evidence to
support a conclusion that use of the AutoLITT^TM represents a
substantial clinical improvement. Specifically, we focused our review
on the peer-reviewed medical literature and the results of the clinical
studies. We remain concerned that no prospective comparative data exist
to help understand the benefit of the technology compared to other
modalities.
However, we agree that the AutoLITT^TM can improve
clinical outcomes by providing an alternative treatment for brain
tumors that potentially has a lower risk of adverse events and is less
invasive compared to craniotomy. Also, the comments we received from
the physicians and the manufacturer noted that the
AutoLITT^TM provides a new treatment option in cases where no
existing treatment was available due to the risk of complications or
total gross resection of the entire mass made impossible or impractical
without significant risk. Lastly, we received positive comments from
physicians who indicated that the AutoLITT^TM is a less
invasive treatment than other alternative treatments such as craniotomy
and produced positive clinical outcomes by reducing average length of
stay, quicker ambulation, and a reduction of other adverse events that
occur in cases of first or second craniotomies for glioblastomas.
Although we continue to believe that limited, anecdotal reports from
physicians using a new technology are insufficient to demonstrate
substantial clinical improvement over existing technologies, such
information, when considered together with peer-reviewed medical
literature and results of clinical studies, can help to inform our
decision. Therefore, after reviewing the totality of the evidence, we
have determined that the AutoLITT^TM meets the substantial
clinical improvement criterion.
Accordingly, after consideration of the clinical evidence received,
we are approving the AutoLITT^TM for new technology add-on
payments in FY 2011. Consistent with the applicant's clinical trial,
the add-on payment is intended only for use of the device in cases of
Glioblastoma Multiforme. Therefore, we intend to limit the new
technology add-on payment to cases involving the AutoLITT^TM
in MS-DRGs 25, 26, and 27. Cases involving the AutoLITT^TM
that are eligible for the new technology add-on payment will be
identified by assignment to MS-DRGs 25, 26, and 27 with a procedure
code of 17.61 in combination with a primary diagnosis codes that begins
with a prefix of 191. We note that using the procedure and diagnosis
codes above and restricting the add-on payment to cases that map to MS-
DRGs 25, 26, and 27 is consistent with information provided by the
applicant, which demonstrated that cases of the AutoLITT^TM
would only map to MS-DRGs 25, 26, and 27. Procedure code 17.62 does not
map to MS-DRGs 25, 26, or 27 under the GROUPER software and, therefore,
is ineligible for new technology add-on payment.
The average cost of the AutoLITT^TM is reported as
$10,600 per case. Under Sec. 412.88(a)(2) of the regulations, new
technology add-on payments are limited to the lesser of 50 percent of
the average cost of the device or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, the maximum add-on
payment for a case involving the AutoLITT^TM is $5,300.
b. LipiScan^TM Coronary Imaging System
InfraReDx, Inc. submitted an application for new technology add-on
payments for FY 2011 for the LipiScan^TM Coronary Imaging
System (LipiScan^TM). We note that an application was also
submitted for FY 2010, but the application was denied on the grounds
that it did not meet the substantial clinical improvement criterion at
that time. The application for FY 2011 contains some additional
clinical and charge data that were not available at the time that the
FY 2010 new technology add-on payment decisions were made.
The LipiScan^TM device is a diagnostic tool that uses
Intravascular Near Infrared Spectroscopy (INIRS) during an invasive
coronary catheterization to scan the artery wall in order to determine
coronary plaque composition.

[[Page 50149]]

The purpose of the device is to identify lipid-rich areas in the artery
because such areas have been shown to be more prone to rupture. The
procedure does not require flushing or occlusion of the artery. INIRS
identifies the chemical content of plaque by focusing near infrared
light at the vessel wall and measuring reflected light at different
wavelengths (that is, spectroscopy). The LipiScan^TM system
collects approximately 1,000 measurements per 12.5 mm of pullback, with
each measurement interrogating an area of 1 to 2 mm\2\ of lumen surface
perpendicular to the longitudinal axis of the catheter. When the
catheter is in position, the physician activates the pullback and
rotation device and the scan is initiated providing 360 degree images
of the length of the artery. The rapid acquisition speed for the image
freezes the motion of the heart and permits scanning of the inside of
the arterial wall in less than 2 minutes. When the catheter pullback is
completed, the console displays the scan results, which are referred to
as a ``chemogram'' image. The chemogram image requires reading by a
trained user, but, according to the applicant, was designed to be
simple to interpret.
With regard to the newness criterion, the LipiScan^TM
received a 510K FDA clearance for a new indication on April 25, 2008,
and was available on the market immediately thereafter. On June 23,
2006, InfraReDx, Inc. was granted a 510K FDA clearance for the
``InfraReDx Near Infrared (NIR) Imaging System.'' Both devices are
under the common name of ``Near Infrared Imaging System'' according to
the 510K summary document from the FDA. However, the InfraReDx NIR
Imaging System device that was approved by the FDA in 2006 was approved
``for the near infrared imaging of the coronary arteries,'' whereas the
Lipiscan^TM device cleared by the FDA in 2008 is for a
modified indication. The modified indication specified that
Lipiscan^TM is ``intended for the near-infrared examination
of coronary arteries * * *, the detection of lipid-core-containing
plaques of interest * * * [and] for the assessment of coronary artery
lipid core burden.'' In the FY 2010 IPPS/RY 201 LTCH PPS proposed rule
(74 FR 24132 through 24134), we noted that we had concerns with whether
Lipiscan^TM was substantially similar to its predicate device
that was approved by the FDA in 2006. However, those concerns were
addressed by the manufacturer during the comment period. Specifically,
the manufacturer stated that there were technical problems with the
original device and that LipiScan^TM had to be modified in
the following ways:

------------------------------------------------------------------------
Marketed 2008
2006 NIRS device LipiScan
------------------------------------------------------------------------
Console..................... No display of Results displayed
results of scan. immediately.
Catheter.................... Saline-filled with Air-filled with no
microbubble problem microbubble
obscuring many problem.
scans.
Algorithm................... No algorithmic Algorithm validated
processing of NIR in over 1,000
signals--no means autopsy
of certifying that measurements
lipid core plaque proving that NIRS
is present. can detect lipid
core plaque, and
providing diagnosis
of lipid core
plaque to the MD
during the case.
------------------------------------------------------------------------

The problems with the LipiScan^TM device that was
approved in 2006 were addressed in the second device that was granted
FDA approval in April 2008. The LipiScan^TM device was not
marketed until after its second FDA clearance. Therefore, we no longer
needed to make a determination as to whether the newer device was
substantially similar to the predicate device and we determined in the
FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43815) that
Lipiscan^TM would be considered to be ``new'' to the market
as of the date of its FDA approval in April 2008. Because a technology
may be considered new for a period of up to 3 years if, during the
third year, the technology is new for more than 6 months of the fiscal
year, it appears that the technology would still be in the newness
period for FY 2011. In the FY 2011 IPPS/LTCH PPS proposed rule, we
welcomed public comment on whether Lipiscan^TM meets the
newness criterion.
Comment: One commenter, the manufacturer, stated that the
LipiScan^TM met the newness criterion based on its FDA
approval date.
Response: We agree that the LipiScan^TM is new as of the
date of its supplemental FDA approval, April 25, 2008, because the
manufacturer provided information to us to show that the device was not
marketed until after the supplemental FDA approval. Accordingly,
Lipiscan^TM meets the newness criterion.
We note that the Lipiscan^TM technology is identified by
ICD-9-CM procedure code 38.23 (Intravascular spectroscopy), which
became effective October 1, 2008, and cases involving the use of this
device generally map to MS-DRG 246 (Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s) with MCC or 4+ Vessels/Stents);
MS-DRG 247 (Percutaneous Cardiovascular Procedures with Drug-Eluting
Stent(s) without MCC); MS-DRG 248 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent(s) with MCC or 4+ Vessels/
Stents); MS-DRG 249 (Percutaneous Cardiovascular Procedures with Non-
Drug-Eluting Stent(s) without MCC); MS-DRG 250 (Percutaneous
Cardiovascular Procedures without Coronary Artery Stent with MCC); and
MS-DRG 251 (Percutaneous Cardiovascular Procedures without Coronary
Artery Stent without MCC).
In an effort to demonstrate that the technology meets the cost
criterion, the applicant used the FY 2010 IPPS/RY 2010 LTCH PPS final
rule After Outliers Removed (AOR) file (posted on the CMS Web site) to
identify cases potentially eligible for Lipiscan^TM. The
applicant believes that every case within MS-DRGs 246, 247, 248, 249,
250, and 251 is eligible for Lipiscan^TM. In addition, the
applicant believes that Lipiscan^TM will be evenly
distributed across patients in each of those six MS-DRGs (16.7 percent
within each MS-DRG). Using data from the AOR file, the applicant found
the average standardized charge per case for MS-DRGs 246, 247, 248,
249, 250, and 251 was $67,531, $44,485, $62,936, $40,149, $59,416, and
$38,864, respectively, equating to a case-weighted average standardized
charge per case of $52,230 (calculation performed using unrounded
numbers). The applicant indicated that the case-weighted average
standardized charge per case does not include charges related to
Lipiscan^TM; therefore, it is necessary to add the charges
related to the device to the average case-weighted standardized charge
per case to evaluate the cost threshold criterion. Although the
applicant submitted data related to the estimated cost per case of
Lipiscan^TM, the applicant stated that the cost of the device
is proprietary information. Based on a sampling of all 10 non-Veterans
Administration

[[Page 50150]]

hospitals that are actively using the device, the applicant determined
that the average charge for the device was $7,497. Adding the estimated
average charge related for the device to the case-weighted standardized
charge per case (based on the case distribution from the applicant's FY
2010 AOR analysis) results in a total case-weighted average
standardized charge per case of $59,727 ($52,230 plus $7,497). In the
FY 2011 IPPS/LTCH PPS proposed rule, we used the FY 2011 thresholds
published in Table 10 of the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 44173) to determine if the Lipiscan^TM met the cost
criterion. For this final rule, due to the provisions of section
3401(a) of the Affordable Care Act which adjusted the FY 2010
applicable percentage increase (thus requiring CMS to revise the FY
2010 standardized amounts), we used the revised FY 2011 thresholds as
published in the FY 2010 IPPS/RY 2010 LTCH PPS notice issued in the
Federal Register on June 2, 2010 (75 FR 31213) to determine if the
Lipiscan^TM meet the cost criterion. Based on the revised FY
2011 Table 10 thresholds, the case-weighted threshold for MS-DRGs 246,
247, 248, 249, 250, and 251 is $56,466 (all calculations above were
performed using unrounded numbers). Because the applicant's calculation
of the total case-weighted average standardized charge per case for the
applicable MS-DRGs exceeds the case-weighted threshold amount, the
applicant maintains that Lipiscan^TM meets the cost
criterion.
We note that in the applicant's analysis of the cost criterion,
instead of determining the case-weighted average standardized charge
per case and the case-weighted threshold amount based on the actual
number of cases from the FY 2010 AOR file in the applicable MS-DRGs
that are eligible for the Lipiscan^TM, the applicant's
analysis assumed an even distribution of patients in the applicable MS-
DRGs. However, the data from the FY 2010 AOR file shows a varied
distribution of cases in each of the applicable MS-DRGs. We believe the
more appropriate way to determine the case-weighted average
standardized charge per case and the case-weighted threshold amount for
evaluating the cost criterion is to use the actual distribution of
cases in the applicable MS-DRGs based on the number of cases from the
AOR file because this would more accurately reflect the number and type
of Medicare cases typically treated in the applicable MS-DRGs.
Moreover, this would better conform to the applicant's assertion that
the probability of use of Lipiscan^TM is the same in each of
those six MS-DRGs. Using data from the FY 2011 AOR file (in the
proposed rule, we used the FY 2010 AOR file; however, for this final
rule, we used the most recent data available, which is the FY 2011 AOR
file), for MS-DRGs 246, 247, 248, 249, 250, and 251, there were 30,663,
141,780, 14,281, 46,037, 7,591, and 36,059 cases, respectively. Using
this case distribution and the average standardized charge per case for
MS-DRGs 246, 247, 248, 249, 250, and 251 (that is, $73,006, $48,275,
$67,954, $44,336, $65,238, and $44,504, respectively, as stated above),
we calculated that the case-weighted average standardized charge per
case is $51,353. As the applicant indicated above, the case-weighted
average standardized charge per case does not include charges related
to Lipiscan^TM. Therefore, it is necessary to add the average
charge of $7,497 related to the device to the case-weighted
standardized charge per case to evaluate the cost threshold criterion.
Adding the estimated charges related to the device to the case-weighted
average standardized charge per case (based on the case distribution
from the FY 2011 AOR final rule file) results in a total case-weighted
average standardized charge per case of $58,850 ($51,353 plus $7,497).
Using the revised FY 2011 thresholds published in Table 10 of the FY
2010 IPPS/RY 2010 LTCH PPS notice (75 FR 31213) and the actual case
distribution from the FY 2011 AOR file, the case-weighted threshold for
MS-DRGs 246, 247, 248, 249, 250, and 251 is $52,940 (all calculations
above were performed using unrounded numbers). Because this alternative
calculation of total case-weighted average standardized charge per case
for the applicable MS-DRGs also exceeds the case-weighted threshold
amount, it appears that Lipiscan^TM would meet the cost
criterion. In the FY 2011 IPPS/LTCH PPS proposed rule, we invited
public comment on whether or not Lipiscan^TM meets the cost
criterion. We did not receive any public comments on whether or not
Lipiscan^TM meets the cost criterion. Therefore, for FY 2011,
we have determined that Lipiscan^TM meets the cost criterion.
With regard to substantial clinical improvement, we determined that
the FY 2010 new technology add-on payment application for
Lipiscan^TM did not meet the substantial clinical improvement
criterion because the evidence and information available at the time
the new technology decisions were made did not allow CMS to determine
that the application represented a substantial clinical improvement
over existing technologies. Specifically, we found that there was a
lack of evidence that demonstrated that Lipiscan^TM affected
the medical management of patients in which the device was used.
The applicant maintains that the device meets this criterion for
the following reasons. The applicant noted that from November 2008 to
2009, the number of patients in whom Lipiscan^TM has been
used for clinical purposes has increased from 100 to 500 and during the
same period, the number of hospitals using the product has increased
from 6 to 16. In addition, the applicant asserts that ``during the past
year, two Lipiscan^TM publications demonstrate that dilation
of a lipid core plaque is responsible for slow or no reflow and
myocardial infarction during the procedure.'' The applicant noted that
this is important because ``several treatments are available that could
prevent this stenting complication.'' The applicant referenced the
``700 patient PROSPECT Study'' which was presented at the Transcatheter
Cardiovascular Therapeutics Conference in September 2009 and found that
20.4 percent of patients experience a new event in the 3.4 years
following stenting. The applicant pointed to that finding as evidence
that there is a need for improved safety and efficacy of stenting and
maintained that Lipiscan^TM offers clinicians the ability to
make decisions that result in such improvements.
The PROSPECT (Providing Regional Observations to Study Predictors
of Events in the Coronary Tree) study is a cohort study of patients
with acute coronary syndrome who underwent percutaneous coronary
angioplasty and stenting (percutaneous coronary intervention).
Following the procedure, angiography and intravascular ultrasound
(IVUS) were performed. If a patient had a subsequent event, a new
angiogram and IVUS image were obtained and compared to the original
results. The investigators reported that ``angiographically mild
lesions with certain morphologic features on grayscale and IVUS present
with a 3 year cardiac event rate of 17%, versus other morphologies
(indistinguishable by conventional angiograms) with three year event
risks of less than 1%.'' We are concerned that with this type of study
design, it is not possible to determine whether the information for the
IVUS image would have altered the angioplasty and stenting procedures
since the images were collected after the procedure. The results are
suggestive, but a prospective study is needed to determine the clinical
utility of IVUS

[[Page 50151]]

and whether use of IVUS leads to changes in clinical practice or
improvements in health outcomes. The PROSPECT study generated a
hypothesis that use of IVUS may help determine which plaques are
vulnerable to future events but further clinical research is needed to
confirm this hypothesis. We note that the PROSPECT study was presented
at the Transcatheter Cardiovascular Therapeutics Conference in
September 2009, but that the study results have yet to be published in
a peer-reviewed journal. We also note that methods and conclusions from
a study may change from what was verbally presented during the peer
review process that is required to publish the study results.
As it did in its prior application, the applicant noted that the
September 1, 2001 final rule states that one facet of the criterion for
substantial clinical improvement is ``the device offers the ability to
diagnose a medical condition in a patient population where the medical
condition is currently undetectable or offers the ability to diagnose a
medical condition earlier in a patient population than allowed by
currently available methods. There must also be evidence that use of
the device to make a diagnosis affects the management of the patient''
(66 FR 46914). The applicant believes that Lipiscan^TM meets
all facets of this criterion. The applicant asserted that the device is
able to detect a condition that is not currently detectable. The
applicant explained that LipiScan^TM is the first device of
its kind to be able to detect lipid-core-containing plaques of interest
and to assess of coronary artery lipid core burden. The applicant
further noted that FDA, in its approval documentation, has indicated
that ``This is the first device that can help assess the chemical
makeup of coronary artery plaques and help doctors identify those of
particular concern.''
In addition, the applicant stated that the LipiScan^TM
chemogram permits a clinician to detect lipid-core-containing plaques
in the coronary arteries compared to other currently available devices
that do not have this ability. The applicant explained that the
angiogram, the conventional test for coronary atherosclerosis, shows
only minimal coronary narrowing. However, the applicant indicated that
the LipiScan^TM chemogram has the ability to reveal when an
artery contains extensive lipid-core-containing plaque at an earlier
stage.
The applicant also noted that the device has the ability to make a
diagnosis that better affects the management of the patient.
Specifically, the applicant asserted that LipiScan^TM ``is
currently used in the management of patients undergoing coronary
stenting to improve the safety and efficacy of the procedure'' and that
while stenting has steadily improved, its results are not optimal in
approximately 30 percent of cases due to 3 problems: (1) Peri-stenting
MI due to embolization of lipid core contents and side branch
occlusion; (2) major adverse coronary events (MACE) post stenting from
difficulties at the stented site; and (3) MACE post stenting for non-
stented vulnerable sites. We note that in order to demonstrate that the
technology represents a substantial clinical improvement, there must be
evidence that use of the device to make a diagnosis affects the medical
management of the patient and leads to improved clinical outcomes.
The applicant described three case studies where each of the above
problems was addressed by use of the LipiScan^TM. In
addition, the applicant asserts that the chemogram results are
available to the interventional cardiologist during the PCI procedure,
and have been found to be useful in decision-making. According to the
applicant, physicians have reported changes in therapy based on
LipiScan^TM findings in 20 to 50 percent of patients in which
the device has been used. According to the applicant, the most common
use of LipiScan^TM results has been by physicians for
selection of the length of artery to be stented. In some cases a longer
stent has been used when there is a lipid-core-containing plaque
adjacent to the area that is being stented because a flow-limiting
stenosis is present. The applicant also noted that, in some cases,
physicians have chosen to use down-stream protective devices during
stenting procedures on the basis of information gathered by use of
Lipiscan^TM in several patients, and that this has directly
impacted their outcome by capturing emboli and preventing further
cardiac damage. Therefore, the applicant contends that the use of
LipiScan^TM by clinicians to select the length of artery to
be stented and as an aid in selection of intensity of lipid-altering
therapy, demonstrates that LipiScan^TM affects the management
of patients.
In the proposed rule, we stated that while we recognized that the
identification of lipid-rich plaques in the coronary vasculature holds
promise in the management of coronary artery disease, we were concerned
that statements in the FDA approval documents, as well as statements
made by investigators in the literature, suggest that the clinical
implications of identifying these lipid-rich plaques are not yet
certain and that further studies need to be done to understand the
clinical implications of obtaining this information.
The applicant also submitted commentary from a group of
interventional cardiologists who currently utilize the
LipiScan^TM device explaining the clinical benefits of the
device. The applicant further noted that the device may have other
potential uses that would be of clinical benefit, and studies are
currently being conducted to investigate these other potential uses.
The applicant explained that LipiScan^TM offers promise as a
means to enhance progress against the two leading problems in coronary
disease management: (1) The high rate of second events that occur even
after catheterization, revascularization, and the institution of
optimal medical therapy; and (2) the failure to diagnose coronary
disease early, which results in sudden death or MI being the first sign
of the disease in most patients. The applicant further stated that the
identification of coronary lipid-core-containing plaques, which can
most readily be done in those already undergoing catheterization, is
likely to be of benefit in the prevention of second events. In the
longer term, the applicant stated that the identification of lipid-
core-containing plaques by LipiScan^TM may contribute to the
important goal of primary prevention of coronary events, which, in the
absence of adequate diagnostic methods, continue to cause extensive
morbidity, mortality and health care expenditures in Medicare
beneficiaries and the general population.
In the FY 2011 IPPS/LTCH PPS proposed rule, we welcomed public
comment regarding whether or not the LipiScan^TM technology
represents a substantial clinical improvement for the Medicare
population.
Comment: One commenter, a trade association for interventional
cardiologists, stated that it appreciated CMS' clarification in the
proposed rule that ``a new diagnostic technology can meet the
substantial clinical improvement criterion not just by demonstrating
improvement in clinical outcomes, but also on the basis of evidence
showing changes in the management of the patient.'' This commenter
stated that, in light of the ``clarification,'' it supported the
approval of the LipiScan^TM for new technology add-on
payments.
Response: This comment mischaracterizes CMS' position regarding the
required showing for a diagnostic technology to meet the

[[Page 50152]]

substantial clinical improvement criterion. CMS has not stated that a
new diagnostic technology can meet the substantial clinical improvement
criterion not just by demonstrating improvement in clinical outcomes,
but also on the basis of evidence showing changes in the management of
the patient. As we stated in the September 7, 2001 Federal Register, we
follow certain guidelines to determine whether a technology represents
a substantial clinical improvement. For a diagnostic technology, we
make this determination by judging whether the technology ``offers the
ability to diagnose a medical condition in a patient population where
that medical condition is currently undetectable or offers the ability
to diagnose a medical condition earlier in a patient population than
allowed by currently available methods. There must also be evidence
that use of the device to make a diagnosis affects the management of
the patient.'' (66 FR 46914)
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43818), we
further discussed what evidence an applicant must show in order to meet
the substantial clinical improvement criterion for diagnostic
technologies. We continue to believe that it would not be appropriate
to provide additional payments for new diagnostic tools that fail to
significantly change the management of patients, thereby improving
clinical outcomes.
Comment: Commenters supported deeming the Lipiscan^TM to
be a substantial clinical improvement over currently available
technologies. The manufacturer stated that the use of
LipiScan^TM increased from 100 cases in late 2008 to 900
cases by June 2010, and that the number of hospitals using the
technology has increased from 16 to 22. Additionally, over 350 patients
are enrolled in the manufacturer's registry of cases involving
LipiScan^TM, COLOR. The manufacturer asserted that the data
now available clearly identify three specific clinical implications of
the detection of lipid core plaque: (1) To predict and minimize the
occurrence of peri-stenting MI; (2) to identify the length of artery to
be stented; and (3) to assist in selection of the intensity of
pharmacologic therapy following stenting.
The manufacturer submitted the chemogram images of 44 stabilized
patients who were stented and in whom enzymes are available to
determine if an MI occurred during stenting. Some of the 44 patients
had the presence of large lipid core plaque; others did not. Eight of
these patients were found to have experienced an MI during stenting (as
identified by a cardiac enzyme elevation of greater than or equal to 3x
ULN).
With respect to LipiScan^TM's ability to predict and
minimize the occurrence of peri-stenting MI, the manufacturer
referenced a doctor who had used filters or embolic protection during
stenting. That doctor's summary is presented is the next paragraph.
With respect to identifying the length of artery to be stented, the
manufacturer stated that ``a case has now been observed in which acute
stent thrombosis occurred when a stent * * * ended in a lipid core
plaque, as documented in vivo by LipiScan^TM.'' The
manufacturer asserted that the evidence linking stent thrombosis to
termination of a stent in a lipid core plaque has led physicians to use
the image provided by LipiScan^TM as a factor determining the
length of artery to be stented. With respect to LipiScan^TM
assisting in the selection of the intensity of medical therapy post-
stenting, the manufacturer maintained that ``the development of
[LipiScan^TM] now makes it possible to perform in vivo
assessment of the relationship between the presence of lipid core
plaque and coronary event.'' The manufacturer submitted before and
after chemograms in which the baseline chemogram did not show lipid
core plaque. In subsequent days, ranging from 42 to 316 days, the
manufacturer added, the patients still had no lipid rich plaque. The
manufacturer asserted that these cases ``correctly predicted the
continued patency of the artery and the absence of a coronary event
related to that artery.'' The manufacturer showed a baseline and 325
day follow-up of a patient who did have lipid rich plaque at baseline
and had a re-stenosis of the lipid rich area 325 later.
The commenters who supported this technology generally made
anecdotal assertions in which the information provided by
LipiScan^TM was useful to them in managing their patients.
One commenter, a physician, stated that he had used the identification
of lipid core plaque (as identified by LipiScan^TM) in an
attempt to protect patient from the high risk of peri-stenting MI by
``placing a distal protection filter beyond the lipid core stenosis to
be dilated.'' This commenter asserted that such filters are used in
dilation of saphenous vein grafts which have rates of periprocedural MI
that can be reduced by approximately 40 percent if embolic protection
is used. The commenter used protection devices before stenting in the
native coronary arteries seven patients with large lipid core plaque as
assessed by LipiScan^TM. A filter was used in six patients
and a proximal embolic protection was used in one patient. The
commenter stated that he believed that the rate of infarction was lower
in these seven patients than it would have been had embolic protection
devices not been utilized, and that the two infarctions that did occur
were smaller than they would have been if the full load of debris
mobilized by balloon inflation--included the debris collected in the
first basket--would have lodged in the distal vessels.
Another physician stated that there ``have been anecdotal cases by
multiple operators of the catastrophic no reflow phenomenon in patients
who underwent angioplasty of a lipid rich stenosis
[LipiScan^TM] imaging may be able to identify these patients
and hopefully prevent this catastrophic complication'' The same
commenter stated that the diagnostic information provided by the
LipiScan^TM chemogram ``can be combined with well-established
treatments * * * as a means to reduce stenting complications and peri-
stenting MI.'' Some commenters believed they could reduce the incidence
of heart attacks that occur during stenting by using a filter to remove
the lipid-rich plaque.
Another commenter stated that, although he does not perform
interventional cardiology procedures, he was interested in how the
information provided by LipiScan^TM could contribute to the
prevention of initial and secondary coronary events. He described an
asymptomatic man who participated in a clinical research study designed
to evaluate the noninvasive identification of patients at increased
risk of coronary events. He stated that the patient had a ``noninvasive
CTA'' and that positive results led to a cardiac catherization in which
LipiScan^TM was used. Based on the chemogram, which showed
extensive lipid core plaque, the clinicians decided to treat this
patient with intensive lipid altering therapy. The commenter did not
describe any followup for that patient.
Another commenter, a physician, stated that he performed
approximately 70 procedures with the LipiScan^TM since 2008.
The commenter asserted that in roughly 75 percent of these procedures,
the ``lesion characterization information provided by the Lipiscan
image affected [his] diagnosis of the patient's condition.'' In
approximately 50 percent of the procedures, the commenter stated that
the imaging information affected his treatment of the patient's
condition. The commenter further stated that the most significant
changes involved his decisions about which segments of the artery
required treatment, the length of stent to employ, and the type of
stent he chose to

[[Page 50153]]

employ. The commenter provided information on three specific cases in
which he used LipiScan^TM. In two of the cases, he indicated
that he was better able to choose the length of stent and in one case,
the use of LipiScan^TM helped guide the selection of the type
of stent to be used; although the patient did suffer a heart attack,
the stenting was able to proceed.
Response: In the case of LipiScan^TM, we note that
existing technologies may not be able to adequately identify lipid-rich
plaques. However, methods exist currently for diagnosing CAD, including
intravascular ultrasound (IVUS) and optical coherence tomography (OCT).
We also reiterate that such diagnostic capability must also be linked
to ``evidence that use of the device to make a diagnosis affects the
management of the patient.'' In this case, the evidence currently
available to CMS consists of anecdotal claims made by the applicant and
one other commenter that the identification of such plaques affects the
management of the patient. A review of the literature yielded no
additional evidence base to support the applicant's claim regarding the
effect of this technology on patient management. Furthermore, as we
stated last year, we continue to believe that the prognostic
implications of detecting lipid-rich plaque are not yet sufficiently
well understood and documented in the peer-reviewed evidence base to
conclude that its identification will lead to widespread and evidence-
based changes in the management of CAD.
We believe that a diagnostic technology must necessarily have
evidence-based, significant, and positive effects on the management of
patients, thereby resulting in improved clinical outcomes generally
accepted by clinicians, in order to meet the threshold of representing
an advance that substantially improves, relative to technologies
previously available, the diagnosis of Medicare beneficiaries.
In response to the comments that the LipiScan, combined with a
filter could reduce the incidence of peri-stenting MI, we note that use
of such a filter in the coronary vasculature is not currently approved
by the FDA and therefore is ``off-label'' to the extent that it is
already being employed by physicians. The most recent article submitted
to us by the applicant (dated 2010), an ``Imaging Vignette'' which does
not appear to have been published yet, concludes: ``Additional studies
are needed to quantitate the ability of NIRS to predict the occurrence
of peri-stenting infarction and to test, in a randomized trial, the
strategy of NIRS guided use of a distal protection device'' (Goldstein,
et al). We agree with the commenters that use of such filter may
ultimately reduce the incidence of peri-stenting MI to the extent that
it aides the physician in placing the stent such that it does not cause
the lipid core plaque to rupture. However, absent FDA approval for this
indication, we do not believe it is appropriate to consider this use as
part of our evaluation of substantial clinical improvement for the
LipiScan^TM. We also agree with the vignette's conclusion
that additional clinical studies are needed to evaluate this claim.
Therefore, while we recognize that Lipiscan^TM provides
the ability to detect lipid-rich plaque which is currently undetectable
by any other means, we are nonetheless still concerned that there is
significant uncertainty within the clinical community regarding the
prognostic implications of obtaining this information. We believe the
evidence supplied by the applicant and the commenters that the device
is affecting the management of the patient is not able to be validated
broadly and is still anecdotal. Further, the discussions of the
technology in the scientific studies submitted by the applicant
acknowledge the possible potential of the technology to affect
treatment in the future, but all stated that additional studies are
necessary to determine its actual clinical utility. Specifically, in an
editorial published in 2008, the author wrote, ``In conclusion, further
studies are warranted to determine if detection of [lipid core plaque
of interest] by [near infrared spectroscopy] imaging will contribute to
enhanced prediction of outcomes in patients with known CAD'' (Young,
2008). Also, in a letter to the editor in the Journal of the College of
Cardiology, another author wrote about his experience with three
patients over a period of three weeks to share his ``initial
observations.'' The author wrote that ``* * * preliminary results
suggest that intravascular investigation of chemical composition of a
coronary plaque has become a clinical reality [but] it remains to be
seen whether chemograms would perform better than the ultrasound of
whether they will be able to predict adverse events and faciltate
development of clinically effective strategies for management of
vulnerable plaques before it is too late.'' (Maini, 2008) (emphasis
added).
In addition, we are concerned that there continues to be relatively
few cases in which Lipiscan^TM has been used relative to the
patient population in which it could potentially be used. As we have
previously explained, we do not consider merely anecdotal claims that a
device affects the management of the patient as sufficient evidence to
demonstrate that a new diagnostic device affects the management of the
patient, particularly where the device could be used for a relatively
large patient population. Specifically, the applicant claims that the
device could potentially be used in every patient who undergoes
coronary angiography. To date, the device is only in use in 22
hospitals total and, as noted above, there has been no data published,
or even reported, from the hospitals where the device has been used, to
indicate that management of patients has changed and that patients who
received LipiScan^TM had better clinical outcomes than those
who did not.
We believe that the lack of comparative data from hospitals showing
statistically valid improved outcomes for the patients who received
LipiScan^TM compared to those who did not receive the
technology further supports our previously stated view that the
prognostic implications of detecting lipid-rich plaque are still not
well enough understood and therefore the detection of such plaque
cannot be reasonably assumed to automatically lead to evidence-based,
significant, and positive in the management of patients with CAD
generally accepted by clinicians, much less lead to improved clinical
outcomes. We agree with the commenters and applicant that the
identification of lipid-rich plaques by LipiScan^TM may
potentially hold promise and ultimately lead to changes in the
management of CAD and that Lipiscan^TM has the potential to
provide additional benefits in clinical outcomes of patients with CAD.
However, we do not believe the evidence and information available at
this time allows us to determine that it meets the substantial clinical
improvement criterion.
Accordingly, we are not approving Lipiscan^TM for new
technology add-on payments for FY 2011.
c. LipiScan^TM Coronary Imaging System With Intravascular
Ultrasound (IVUS)
InfraReDx, Inc. submitted an application for new technology add-on
payments for FY 2011 for the LipiScan^TM Coronary Imaging
System with Intravascular Ultrasound (LipiScan^TM IVUS). The
LipiScan^TM IVUS device is a diagnostic device that uses
Intravascular near infrared spectroscopy (INIRS) combined with
intravascular ultrasound (IVUS) during an invasive coronary angiography
to determine the chemical composition of coronary plaques, which is
accomplished using near infrared spectroscopy (INIRS) and to visualize
stents and the structural features of

[[Page 50154]]

coronary lesions, which is accomplished using IVUS. This new technology
combines both capabilities in a single catheter. The IVUS part of the
device utilizes sound to interrogate the artery and, according to the
applicant, provides an image of the size of the plaque, the degree of
stenosis produced by the plaque, the size of the artery and the degree
of expansion of the stent. The device consists of a single-use
catheter, a console and a ``single pullback with the artery.'' The
device is intended to be used in patients already undergoing coronary
stenting.
We note that the LipiScan^TM IVUS device is identified by
ICD-9-CM procedure codes 38.23 (Intravascular spectroscopy) and 00.24
(Intravascular imaging of coronary vessels). Cases involving the use of
this device generally map to MS-DRG 246 (Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s) with MCC or 4+ Vessels/Stents);
MS-DRG 247 (Percutaneous Cardiovascular Procedures with Drug-Eluting
Stent(s) without MCC); MS-DRG 248 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent(s) with MCC or 4+ Vessels/
Stents); MS-DRG 249 (Percutaneous Cardiovascular Procedures with Non-
Drug-Eluting Stent(s) without MCC); MS-DRG 250 (Percutaneous
Cardiovascular Procedures without Coronary Artery Stent with MCC); and
MS-DRG 251 (Percutaneous Cardiovascular Procedures without Coronary
Artery Stent without MCC).
With respect to the newness criterion, we noted in the proposed
rule that this device was not currently approved by the FDA, but the
manufacturer anticipated that FDA approval will be granted in the
second quarter of 2010. We also noted that IVUS has existed for over 20
years. Therefore, IVUS, on its own, would not meet the newness
criterion. The applicant asserted that one difference from the
Lipiscan^TM product, for which it has also submitted an
application for new technology add-on payments, is that the catheter
for the combined product is filled with saline (which is required for
transmission of sound). The manufacturer has also stated that the
combined device only requires the use of one catheter, as opposed to
two separate ones. The manufacturer asserted that the single-use
catheter for the combined technologies is only supplied by InfraReDx
(the manufacturer of LipiScan^TM). However, we noted that a
physician could use LipiScan^TM and IVUS as two separate
products in the same patient (through the use of two catheters) and
still be able to obtain the INIRS image and the ultrasound that are
achieved through the combined product albeit separately.
In the FY 2011 IPPS/LTCH PPS proposed rule, we welcomed public
comments regarding whether the combined LipiScan^TM IVUS
device should be considered to be ``new'' as of the date of the
existing LipiScan^TM device received FDA approval or whether
it should be considered new from the FDA approval date for
LipiScan^TM IVUS (should such an approval be granted). We
also welcomed public comments regarding whether LipiScan^TM
IVUS, as a combined technology, should be considered to be
substantially similar to each individual technology separately as of
the date that each separate technology received FDA approval (or the
date that each technology became available on the market, if either
technology was not available on the market until a date after FDA
approval).
As stated above, in making a determination of substantial
similarity, we consider the following: (1) Whether a product uses the
same or similar mechanism of action to achieve a therapeutic action;
(2) whether a product is assigned to the same or a different DRG; and
(3) whether new use of a technology involves treatment of the same or
similar type of disease and the same or similar patient population. In
the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we stated that ``due to
the complexity of issues regarding the substantial similarity component
of the newness criterion, it may be necessary to exercise flexibility
when considering whether technologies are substantially similar to one
another'' (74 FR 43813).
Comment: One comment, the manufacturer, stated that it agreed with
the proposed rule statement of ``it appears that LipiScan^TM
IVUS meet the newness criterion.'' Additionally, the commenter stated
that should the LipiScan^TM IVUS receive FDA approval, it
should be considered new because LipiScan^TM IVUS provides
the individual benefits of both LipiScan and IVUS, ``plus accurate co-
registration, synergistic benefits, and enhanced safety and ease of use
we believe that the LipiScan^TM IVUS multimodality imaging
catheter should be considered new if and when it receives clearance by
the FDA and is marketed.'' The commenter did not specifically address
the three criteria considered under substantial similarity.
Response: We note that the LipiScan^TM IVUS received a
510(k) approval from the FDA on June 30, 2010, prior to the July 1
deadline that applicants for new technology must meet in order to be
evaluated under the newness criterion. The FDA approval letter did not
provide information that would distinguish the LipiScan^TM
IVUS from its predicate devices. In addition, the manufacturer did not
provide enough information for us to distinguish the
LipiScan^TM IVUS from the LipiScan^TM, which is
what we specifically questioned in the proposed rule. (Indeed, we note
that the uses for both devices appear to be markedly similar.) Also, we
did not state in the proposed rule that the technology meets the
newness criterion, as the commenter suggested. We note that under FDA's
510(k) approval process, there must be at least one predicate device
that is ``substantially equivalent.'' However, as we have stated
previously, we do not believe that a determination of substantial
equivalence by FDA under the 510(k) approval process necessarily means
that a technology is substantially similar to its predicate device(s)
for purposes of the new technology add-on payment.
Moreover, none of the public commenters specifically addressed
whether the LipiScan^TM IVUS was substantially similar to the
LipiScan^TM. Specifically, none of the public commenters,
including the manufacturer, addressed: (1) Whether the products use the
same or similar mechanism of action to achieve a therapeutic action;
(2) whether the products are assigned to the same or a different DRG;
and (3) whether new use of a technology involves treatment of the same
or similar type of disease and the same or similar patient population.
As a result, we do not believe that we have sufficient information to
make an affirmative decision regarding whether the
LipiScan^TM IVUS is substantially similar to the
LipiScan^TM. Accordingly, we are not making a determination
regarding whether the LipiScan^TM IVUS is substantially
similar to its predicate device or the LipiScan^TM in this
final rule. However, we note that whether or not LipiScan^TM
IVUS was substantially similar to LipiScan^TM, the
LipiScan^TM IVUS is still within its newness period for FY
2011 (because the LipiScan^TM was new as of April 2008 and is
still within its ``newness'' window for FY 2011). Accordingly, we
believe that LipiScan^TM IVUS meets the newness criterion for
FY 2011, but we do not have sufficient information regarding whether or
not the start of the newness period began in April 2008 or June 2010.
Therefore, we are not making a determination in this rulemaking
regarding the start of the newness period.

[[Page 50155]]

In an effort to demonstrate that the technology meets the cost
criterion, the applicant used the FY 2010 IPPS/RY 2010 LTCH PPS final
rule AOR file (posted on the CMS Web site) to identify cases
potentially eligible for Lipiscan^TM IVUS. The applicant
believes that every case within MS-DRGs 246, 247, 248, 249, 250, and
251 is eligible for Lipiscan^TM IVUS. In addition, the
applicant believes that Lipiscan^TM IVUS will be evenly
distributed across patients in each of those six MS-DRGs (16.7 percent
within each MS-DRG). Using data from the AOR file, the applicant found
the average standardized charge per case for MS-DRGs 246, 247, 248,
249, 250, and 251 was $67,531, $44,485, $62,936, $40,149, $59,416, and
$38,864 respectively, equating to a case-weighted average standardized
charge per case of $52,230 (calculation performed using unrounded
numbers). The applicant indicated that the case-weighted average
standardized charge per case does not include charges related to
Lipiscan^TM IVUS. Therefore, it is necessary to add the
charges related to the device to the average case-weighted standardized
charge per case to evaluate the cost threshold criterion. Although the
applicant submitted data related to the estimated cost per case of
Lipiscan^TM IVUS, the applicant stated that the cost of the
device is proprietary information. The applicant analyzed Hospital Cost
Report Information System (HCRIS) data from 2008 to determine the
charges related to the device. Specifically, the applicant searched for
the 100 cardiac catheterization labs that had the highest volume of
cases in the United States. Based on the HCRIS data from these 100
laboratories, the applicant determined the mean CCR was 0.188 with a
markup of 532 percent, yielding a charge of $15,960 for
Lipiscan^TM IVUS. (We note that this estimate of charges
related to the Lipiscan^TM IVUS is significantly higher than
the estimate of charges related to the Lipiscan^TM device
derived from a sample of hospitals.) Adding the estimated average
charge related for the device to the case-weighted standardized charge
per case (based on the case distribution from the applicant's FY 2010
AOR analysis) results in a total case-weighted average standardized
charge per case of $68,190 ($52,230 plus $15,960). In the FY 2011 IPPS/
LTCH PPS proposed rule, we used the FY 2011 thresholds published in
Table 10 of the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 44173)
to determine if the Lipiscan^TM IVUS meets the cost
criterion. For this final rule, due to the provisions of section
3401(a) of the Affordable Care Act which adjusted the FY 2010
applicable percentage increase (thus requiring CMS to revise the FY
2010 standardized amounts), we used the revised FY 2011 thresholds as
published in the FY 2010 IPPS/RY 2010 LTCH PPS notice that appeared in
the Federal Register on June 2, 2010 (75 FR 31213) to determine if the
Lipiscan^TM IVUS meets the cost criterion. Based on the
revised FY 2011 Table 10 thresholds, the case-weighted threshold for
MS-DRGs 246, 247, 248, 249, 250, and 251 is $56,466 (all calculations
above were performed using unrounded numbers). Because the applicant's
calculation of the total case-weighted average standardized charge per
case for the applicable MS-DRGs exceeds the case-weighted threshold
amount, the applicant maintains that Lipiscan^TM IVUS meets
the cost criterion.
We note that in the applicant's analysis of the cost criterion,
instead of determining the case-weighted average standardized charge
per case and the case-weighted threshold amount based on the actual
number of cases from the FY 2010 AOR file in the applicable MS-DRGs
that are eligible for the Lipiscan^TM IVUS, the applicant's
analysis assumed an even distribution of patients in the applicable MS-
DRGs. However, the data from the FY 2010 AOR file shows a varied
distribution of cases in each of the applicable MS-DRGs. We believe the
more appropriate way to determine the case-weighted average
standardized charge per case and the case-weighted threshold amount for
evaluating the cost criterion is to use the actual distribution of
cases in the applicable MS-DRGs based on the number of cases from the
AOR file because this would more accurately reflect the number and type
of Medicare cases typically treated in the applicable MS-DRGs.
Moreover, this would better conform to the applicant's assertion that
the probability of use of Lipiscan^TM IVUS is the same in
each of those six MS-DRGs. Using data from the FY 2011 AOR file (in the
proposed rule, we used the FY 2010 AOR file; however, for this final
rule, we used the most recent data available, which are contained in
the FY 2011 AOR file), for MS-DRGs 246, 247, 248, 249, 250, and 251,
there were 30,663, 141,780, 14,281, 46,037, 7,591, and 36,059 cases
respectively. Using this case distribution and the average standardized
charge per case for MS-DRGs 246, 247, 248, 249, 250, and 251 (that is,
$73,006, $48,275, $67,954, $44,336, $65,238, and $44,504, respectively,
as stated above), the case-weighted average standardized charge per
case is $46,949. As the applicant indicated above, the case-weighted
average standardized charge per case does not include charges related
to Lipiscan^TM IVUS. Therefore, it is necessary to add the
average charge of $15,960 related to the device to the case-weighted
standardized charge per case to evaluate the cost threshold criterion.
Adding the estimated charges related to the device to the case-weighted
average standardized charge per case (based on the case distribution
from the FY 2010 AOR final rule file) results in a total case-weighted
average standardized charge per case of $62,909 ($46,949 plus $15,960).
Using the revised FY 2011 thresholds published in Table 10 of the FY
2010 IPPS/RY 2010 LTCH PPS notice (75 FR 31215) and the actual case
distribution from the AOR file, the case-weighted threshold for MS-DRGs
246, 247, 248, 249, 250, and 251 is $52,940 (all calculations above
were performed using unrounded numbers). Because this alternative
calculation of total case-weighted average standardized charge per case
for the applicable MS-DRGs exceeds the case-weighted threshold amount,
it appears that Lipiscan^TM IVUS would meet the cost
criterion.
In addition to the analysis above, the applicant searched the FY
2008 MedPAR file for cases potentially eligible for use of the
Lipiscan^TM IVUS. Because the technology can potentially be
used for all cases within MS-DRGs 246 through 251, the applicant
searched the FY 2008 MedPAR file for all cases within these MS-DRGs.
The applicant found 30,265 cases (or 9.7 percent of all cases) in MS-
DRG 246; 147,695 cases (or 47.4 percent of all cases) in MS-DRG 247;
19,642 cases (or 6.3 percent of all cases) in MS-DRG 248; 67,840 cases
(or 21.8 percent of all cases) in MS-DRG 249; 8,120 cases (or 2.6
percent of all cases) in MS-DRG 250; and 38,022 cases (or 12.2 percent
of all cases) in MS-DRG 251. The average standardized charge per case
was $66,958 for MS-DRG 246, $50,192 for MS-DRG 247, $72,099 for MS-DRG
248, $45,086 for MS-DRG 249, $71,355 for MS-DRG 250, and $46,141 for
MS-DRG 251, equating to a case-weighted average standardized charge per
case of $45,964.
Similar to above, the average standardized charge per case does not
include charges related to the Lipiscan^TM IVUS; therefore,
it is necessary to add the charges related to the device to the average
standardized charge per case in evaluating the cost threshold
criterion. Although the applicant submitted data related to the
estimated cost of Lipiscan^TM IVUS per case, the applicant
noted that the cost of the device was proprietary information. Based on
2008 HCRIS data from the

[[Page 50156]]

cardiac catheterization laboratories for all IPPS hospitals, the
applicant determined a mean cost-to-charge ratio of 0.246 with a markup
of 351 percent, yielding a charge of $10,543 for Lipiscan^TM
IVUS. Assuming that the Lipiscan^TM IVUS device was marked up
351 percent, the total case-weighted average standardized charge per
case for cases involving the use of Lipiscan^TM IVUS would be
$56,507 ($45,964 plus $10,543) across MS-DRGs 246 through 251.
Using the revised FY 2011 thresholds published in Table 10 of the
FY 2010 IPPS/RY 2010 LTCH PPS notice (75 FR 31215), the case-weighted
threshold for MS DRGs 246, 247, 248, 249, 250, and 251 is $52,671 (all
calculations above were performed using unrounded numbers). Because the
applicant's calculation of the total case-weighted average standardized
charge per case for the applicable MS-DRGs exceeds the case-weighted
threshold amount, the applicant maintains that Lipiscan^TM
IVUS meets the cost criterion. In the FY 2011 IPPS/LTCH PPS proposed
rule, we invited public comment on whether or not Lipiscan^TM
IVUS meets the cost criterion. We did not receive any public comments
in this regard. Accordingly, we find that for FY 2011
Lipiscan^TM IVUS meets the cost criterion.
With regard to substantial clinical improvement, the applicant
asserts that LipiScan^TM IVUS lends all the same benefits of
LipiScan^TM by itself (see discussion of
LipiScan^TM with respect to clinical improvement in the above
application analysis) and also gives added benefits of IVUS.
Specifically, the applicant maintains that LipiScan^TM IVUS
is superior to perfusion imaging and coronary angiography because those
procedures only provide information about the lumen, but not the wall
of the vessel. The applicant asserts that it is superior to IVUS (by
itself) because IVUS alone cannot identify plaque composition. The
applicant further maintains that LipiScan^TM IVUS provides a
substantial clinical benefit over Optical Coherence Tomography (OCT)
because OCT cannot be used if blood is present in the field of view and
identification of lipid by OCT is ``time-consuming with a requirement
for expert interpretation.'' In contrast, ``the LipiScan^TM
IVUS signal is available immediately after the coronary pullback and
does not require expert interpretation.''
The applicant also states that LipiScan^TM IVUS makes it
possible to find the lipid core plaques that are strongly associated
with peri-stenting MI and adverse events post-MI that current methods
of diagnosis fail to find.
Finally, the applicant asserts that LipiScan^TM IVUS
affects the management of the patient by improving the safety and
efficacy of stenting. Further, the applicant states that while stenting
has steadily improved, its results are not optimal in approximately 30
percent of cases due to three problems: (1) Peri-stenting MI due to
embolization of lipid core contents and side branch occlusion; (2)
major adverse coronary events (MACE) post stenting from difficulties at
the stented site; and (3) MACE post stenting for non-stented vulnerable
sites.
The applicant described three case studies where each of the above
problems were addressed by use of the LipiScan^TM IVUS.
LipiScan^TM IVUS achieves its utility to differentiate lipid
core plaque from fibrotic plaque, a differentiation that cannot be made
by angiography or grayscale IVUS.
The applicant referenced the ``700 patient PROSPECT Study'' which
was presented at the Transcatheter Cardiovascular Therapeutic
Conference in September 2009 and found that 20.4 percent of patients
experience a new event in the 3.4 years following stenting. The
applicant pointed to that finding as evidence that there is a need for
improved safety and efficacy of stenting and maintained that
Lipiscan^TM offers clinicians the ability to make decisions
that result in such improvements. We note that the applicant did make
this assertion with regard to Lipiscan^TM and not
Lipiscan^TM IVUS.
The PROSPECT (Providing Regional Observations to Study Predictors
of Events in the Coronary Tree) study is a cohort study of patients
with acute coronary syndrome who underwent percutaneous coronary
angioplasty and stenting (percutaneous coronary intervention).
Following the procedure, angiography and IVUS were performed. If a
patient had a subsequent event, a new angiogram and IVUS image were
obtained and compared to the original results. The investigators
reported that ``angiographically mild lesions with certain morphologic
features on grayscale and IVUS present with a 3 year cardiac event rate
of 17%, versus other morphologies (indistinguishable by conventional
angiograms) with three year event risks of less than 1%.'' We are
concerned that with this type of study design, it is not possible to
determine whether the information for the IVUS image would have altered
the angioplasty and stenting procedures since the images were collected
after the procedure. The results are suggestive, but a prospective
study is needed to determine the clinical utility of
LipiScan^TM and whether use of IVUS leads to changes in
clinical practice or improvements in health outcomes. The PROSPECT
study generated a hypothesis that use of IVUS may help determine which
plaques are vulnerable to future events but further clinical research
is needed to confirm this hypothesis. We note that the PROSPECT study
was presented at the Transcatheter Cardiovascular Therapeutics
Conference in 2009, but that the study results have yet to be published
in a peer-reviewed journal. We also note that methods and conclusions
from a study may change from what was verbally presented during the
peer review process that is required to publish the study results.
We are concerned that, in the LipiScan^TM IVUS
application, the applicant has generally repeated the statements made
regarding use of LipiScan^TM alone and has not provided
information that indicates that combined use of LipiScan^TM
plus IVUS offers additional clinical benefit, although the applicant
did maintain that the use of one catheter to co-register of the near
infrared (NIR) mirrors and the ultrasound transducer can enhance the
accuracy of output and can have safety benefits. Indeed, we note that
most of the studies that were presented in an effort to demonstrate
that LipiScan^TM by itself was a substantial clinical
improvement were also included to support the LipiScan^TM
IVUS application. The applicant did not present any published peer-
reviewed journal articles that were specifically related to the
clinical merits of the combined LipiScan^TM IVUS device.
In the FY 2011 IPPS/LTCH PPS proposed rule, we welcomed public
comments on whether the LipiScan^TM IVUS represents a
substantial clinical improvement over existing technologies as well as
public comments on what is the appropriate comparison device for
LipiScan^TM IVUS.
Comment: Many of the commenters who supported the
LipiScan^TM application also stated that, should the
LipiScan^TM IVUS receive FDA approval, they believed that it
would offer similar benefits to the LipiScan^TM. For this
reason, these commenters were supportive of LipiScan^TM IVUS
being approved for the new technology add-on payments. The manufacturer
commented that the LipiScan^TM IVUS ``has been constructed
and used successfully in seven patients in Rotterdam, Netherlands'' and
that it was featured in a live case presentation at ``EuroPCR,'' ``the
leading meeting of interventional cardiologists in Europe.''

[[Page 50157]]

The manufacturer also stated that LipiScan^TM IVUS provides
the benefits of LipiScan^TM and IVUS plus several synergistic
benefits. Specifically, the manufacturer noted the co-registration of
the near infrared (NIR) mirrors and the ultrasound transducer enhances
the accuracy of the output. The IVUS shows the location of the catheter
in the artery while the NIR enhances the interpretation of the
grayscale IVUS image. The manufacturer stated that ``once NIR has
clearly shown that a lipid core is present, it is possible to re-
examine the IVUS image for features such as an estimate of cap
thickness.'' The manufacturer also stated that there are safety
benefits associated with using one catheter to obtain both the NIR
image and the IVUS image and noted that with each insertion of a
catheter comes the risk of an adverse event such as a stroke or
myocardial infarction. Additionally, the manufacturer stated that
combining both technologies into one catheter reduces procedure time,
radiation exposure and contrast utilization. The manufacturer stated
that a peer-reviewed manuscript has been published by Garg, et al.
Response: According to the applicant, there have only been seven
cases in which the LipiScan^TM IVUS has been used, none of
them in the United States (and, ostensibly, none on a Medicare
beneficiary). Despite the applicant's claims that the combined
LipiScan^TM IVUS technology enhances the benefits of either
LipiScan^TM or IVUS alone as well as LipiScan^TM
and IVUS used simultaneously, but with two separate catheters, we do
not believe that there is enough clinical evidence relating to this
technology to support this claim or to demonstrate that the technology
is a substantial clinical improvement over other existing diagnostic
technologies. That is, the evidence available at this time does not
support that the LipiScan^TM IVUS affects the medical
management of the patient which, in turn, leads to improved clinical
outcomes. We also note that we did not believe that there was enough
clinical evidence available at this time to substantiate the claims
that LipiScan^TM by itself is a substantial clinical
improvement. To the extent that the same information was submitted to
support the applicant's LipiScan^TM IVUS application, we also
find, for the reasons discussed above, that the evidence is
insufficient to demonstrate that the LipiScan^TM IVUS
represents a substantial clinical improvement over existing
technologies. The manuscript that the applicant referred to simply
describes what the technology does and how it is used; it does not
provide any details as to how the technology affects the medical
management of patients nor does it provide evidence that use of the
LipiScan^TM IVUS ultimately leads to improved clinical
outcomes for patients. Although we recognize that the combination of
these two existing technologies may ultimately lead to better clinical
outcomes for patients undergoing coronary stenting, no data is
available at this time to support that notion.
Accordingly, we are not approving the LipiScan^TM IVUS
device for new technology add-on payments for FY 2011.

III. Changes to the Hospital Wage Index for Acute Care Hospitals

A. Background

Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary must adjust the standardized amounts ``for area differences
in hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' In
accordance with the broad discretion conferred under the Act, we
currently define hospital labor market areas based on the definitions
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the FY 2011 hospital wage index based on the
statistical areas, including OMB's revised definitions of Metropolitan
Areas, appears under section III.C. of this preamble.
Beginning October 1, 1993, section 1886(d)(3)(E) of the Act
requires that we update the wage index annually. Furthermore, this
section of the Act provides that the Secretary base the update on a
survey of wages and wage-related costs of short-term, acute care
hospitals. The survey must exclude the wages and wage-related costs
incurred in furnishing skilled nursing services. This provision also
requires us to make any updates or adjustments to the wage index in a
manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The adjustment for FY 2011 is
discussed in section II.B. of the Addendum to this final rule.
As discussed below in section III.I. of this preamble, we also take
into account the geographic reclassification of hospitals in accordance
with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating
IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the
Secretary is required to adjust the standardized amounts so as to
ensure that aggregate payments under the IPPS after implementation of
the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the
Act are equal to the aggregate prospective payments that would have
been made absent these provisions. The budget neutrality adjustment for
FY 2011 is discussed in section II.A.4.b. of the Addendum to this final
rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are applying
beginning October 1, 2010 (the FY 2011 wage index) appears under
section III.D. of this preamble.

B. Wage Index Reform

1. Wage Index Study Required Under the MIEA-TRHCA
a. Legislative Requirement
Section 106(b)(1) of the MIEA-TRHCA (Pub. L. 109-432) required
MedPAC to submit to Congress, not later than June 30, 2007, a report on
the Medicare wage index classification system applied under the
Medicare IPPS. Section 106(b) of MIEA-TRHCA required the report to
include any alternatives that MedPAC recommends to the method to
compute the wage index under section 1886(d)(3)(E) of the Act.
In addition, section 106(b)(2) of the MIEA-TRHCA instructed the
Secretary of Health and Human Services, taking into account MedPAC's
recommendations on the Medicare wage index classification system, to
include in the FY 2009 IPPS proposed rule one or more proposals to
revise the wage index adjustment applied under section 1886(d)(3)(E) of
the Act for purposes of the IPPS. The Secretary was also to consider
each of the following:
Problems associated with the definition of labor markets
for the wage index adjustment.
The modification or elimination of geographic
reclassifications and other adjustments.
The use of Bureau of Labor Statistics (BLS) data or other
data or methodologies to calculate relative wages for each geographic
area.
Minimizing variations in wage index adjustments between
and within MSAs and statewide rural areas.

[[Page 50158]]

The feasibility of applying all components of CMS'
proposal to other settings.
Methods to minimize the volatility of wage index
adjustments while maintaining the principle of budget neutrality.
The effect that the implementation of the proposal would
have on health care providers and on each region of the country.
Methods for implementing the proposal(s), including
methods to phase in such implementations.
Issues relating to occupational mix such as staffing
practices and any evidence on quality of care and patient safety
including any recommendation for alternative calculations to the
occupational mix.
In the FY 2009 IPPS final rule (73 FR 48563 through 48567), we
discussed the MedPAC's study and recommendations, the CMS contract with
Acumen, L.L.C. for assistance with impact analysis and study of wage
index reform, and public comments we received on the MedPAC
recommendations and the CMS/Acumen study and analysis.
b. Interim and Final Reports on Results of Acumen's Study
(1) Interim Report on Impact Analysis of Using MedPAC's Recommended
Wage Index
In the FY 2009 IPPS final rule (73 FR 48566 through 48567), we
discussed the analysis conducted by Acumen comparing use of the MedPAC
recommended wage indices to the current CMS wage index. We refer
readers to section III.B.1.e. of that final rule for a full discussion
of the impact analysis as well as to Acumen's interim report available
on the Web site: http://www.acumenllc.com/reports/cms.
(2) Acumen's Final Report on Analysis of the Wage Index Data and
Methodology
Acumen's final report addressing the issues in section 106(b)(2) of
the MIEA-TRHCA is divided into two parts. In the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43824), we provided a description of
Acumen's analyses for both parts. The first part of Acumen's final
report analyzed the strengths and weaknesses of the data sources used
to construct the MedPAC and CMS indexes. The first part of the report
was published on Acumen's Web site after the publication of the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule. In its conclusion, Acumen
suggested that MedPAC's recommended methods for revising the wage index
represented an improvement over the existing methods, and that the BLS
data should be used so that the MedPAC approach can be implemented.
The second part of Acumen's final report focuses on the methodology
of wage index construction and covers issues related to the definition
of wage areas and methods of adjusting for differences among
neighboring wage areas, as well as reasons for differential impacts of
shifting to a new index. Acumen published the second part of its final
report in March 2010 on its Web site at: http://www./acumenllc.com/
reports/cms. In particular, the report analyzes MedPAC's recommended
method of improving upon the definition of the wage areas used in the
current wage index. MedPAC's method first blends MSA and county-level
wages and then implements a ``smoothing'' step that limits differences
in wage index values between adjacent counties to no more than 10
percent. Acumen found MedPAC's method to be an improvement over the
current wage index construct. However, although MedPAC's method
diminishes the size of differences between adjacent areas, Acumen
suggested that MedPAC's method does not guarantee an accurate
representation of a hospital labor market and would not necessarily
eliminate or reduce hospitals' desire to reclassify for a higher wage
index. Acumen recommended further exploration of labor market area
definitions using a wage area framework based on hospital-specific
characteristics, such as commuting times from hospitals to population
centers, to construct a more accurate hospital wage index. Acumen
suggested that such an approach offers the greatest potential for
replacing or greatly reducing the need for hospital reclassifications
and exceptions.
We indicated in the FY 2009 IPPS final rule (73 FR 48566) that, in
developing any proposal(s) for additional wage index reform that may be
included in the FY 2010 IPPS proposed rule, we would consider all of
the public comments on the MedPAC recommendations that we had received
in that proposed rulemaking cycle, along with the interim and final
reports to be submitted to us by Acumen. As Acumen's study was not
complete at the time of issuance of the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule, we did not propose any additional changes to the
hospital wage index for the FY 2010 IPPS. We also did not propose any
additional changes regarding reforming the wage index for the FY 2011
IPPS. We welcomed comments regarding the second part of Acumen's final
report.
Comment: Several commenters addressed the data source for
constructing the wage index. One commenter supported the use of BLS
data and suggested that a simplified, standard dataset will eliminate
unnecessary reclassifications and inconsistencies among Medicare
contractors and create a more valid wage index calculation. Other
commenters reiterated the concerns about the shortcomings of the BLS
data that they expressed in public comments summarized in the FY 2009
IPPS final rule (73 FR 48564). One commenter suggested that CMS use
data that reflect the price of labor rather than the cost of labor in
constructing the wage index. The commenter also suggested that the wage
index include data from SNFs and other postacute care settings because
the wage index is also applied in those Medicare provider payment
systems.
Regarding the methodology for constructing the wage index, several
commenters shared Acumen's concern that MedPAC's blending and smoothing
methodology may not be well suited for the Medicare wage index because
it may mask actual geographic variations in wage levels. However, the
commenters supported MedPAC's suggestion of varying wage indices by
more refined areas, such as counties. Several commenters also expressed
interest in Acumen's suggestion for further exploration of labor market
area definitions based on hospital specific characteristics, such as
the commuting times from hospitals to population centers.
One national hospital association recommended that CMS consider the
following guiding principles as it evaluates options for improving the
wage index system:

``Any new system should--
Be fair and accurately reflect the labor marketplace
for hospitals, e.g., consider only hospital wage and benefit costs
rather than broader labor market costs;
Provide predictable payments;
Be stable;
Be transparent so that the data may be examined and
verified;
Minimize the administrative burden on hospitals;
Utilize the most current information possible;
Define boundaries that capture meaningful relationships
between labor markets, to reduce the need for exceptions and
reclassifications;
Due to the imperfection of any current labor market
definition that we are aware of, provide an exception process for
hospitals with labor costs atypical for areas to which they have
been assigned;
Use consistent definitions, methodologies, rules, and
interpretations

[[Page 50159]]

across the nation for the acquisition and application of data;
Include a transition from the old to the new system
that is not disruptive; it should include a phased-in transition
period if necessary to protect hospitals from abrupt reductions in
payment levels; and
Not let perfection be the enemy of the better.''

Commenters generally urged CMS to move forward cautiously and
ensure a thorough process for evaluating changes to the existing wage
index.
Response: As discussed in section III.B.4. of the preamble in this
final rule, section 3137(b) of the Affordable Care Act requires the
Secretary of Health and Human Services to submit to Congress, not later
than December 31, 2011, a report that includes a plan to reform the
Medicare wage index applied under the Medicare IPPS. We will consider
the MedPAC's and Acumen's reports and findings, along with all of the
public comments and suggestions we have received, as we evaluate ways
for improving the wage index.
2. FY 2009 Policy Changes in Response to Requirements Under Section
106(b) of the MIEA-TRHCA and Subsequent Changes Under Sections 3137(c)
and 3141 of the Affordable Care Act
To implement the requirements of section 106(b) of the MIEA-TRHCA
and respond to MedPAC's recommendations in its June 2007 report to
Congress, in the FY 2009 IPPS final rule (73 FR 48567 through 48574),
we made policy changes to the wage index relating to geographic
reclassification average hourly wage comparison criteria and rural and
imputed floor budget neutrality. (We refer readers to the FY 2009 IPPS
final rule for a full discussion of the basis for the proposals, the
public comments received, and the FY 2009 final policy.) In the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43825), we reiterated these
policy changes, especially as they related to the FY 2010 IPPS.
However, provisions of the Affordable Care Act recently changed the
reclassification average hourly wage comparison criteria and rural and
imputed floor budget neutrality policies that we adopted in FY 2009.
a. Reclassification Average Hourly Wage Comparison Criteria
In the FY 2009 IPPS final rule, we adopted the policy to adjust the
reclassification average hourly wage standard, comparing a
reclassifying hospital's (or county hospital group's) average hourly
wage relative to the average hourly wage of the area to which it seeks
reclassification. (We refer readers to the FY 2009 IPPS final rule for
a full discussion of the basis for the proposals the public comments
received and the FY 2009 final policies.) We provided for a phase-in of
the adjustment over 2 years. For applications for reclassification for
the first transitional year, FY 2010, the average hourly wage standards
were set at 86 percent for urban hospitals and group reclassifications,
and 84 percent for rural hospitals. For applications for
reclassification for FY 2011 (for which the application deadline was
September 1, 2009) and for subsequent fiscal years, the average hourly
wage standards were 88 percent for urban and group reclassifications
and 86 percent for rural hospitals. Sections 412.230, 412.232, and
412.234 of the regulations were revised accordingly. These policies
were adopted in the FY 2009 IPPS final rule and were reflected in the
wage index in the Addendum to the FY 2011 IPPS proposed rule, which
appeared in the Federal Register on May 4, 2010.
However, as we discussed in the supplemental proposed rule to the
FY 2011 IPPS/LTCH PPS proposed rule issued in the Federal Register on
June 2, 2010 (75 FR 30919), the provisions of section 3137(c) of the
Affordable Care Act revised the average hourly wage standards.
Specifically, section 3137(c) restored the average hourly wage
standards that were in place for FY 2008 (that is, 84 percent for urban
hospitals, 85 percent for group reclassifications, and 82 percent for
rural hospitals) for applications for reclassification for FY 2011 and
for each subsequent fiscal year until the first fiscal year beginning
on or after the date that is one year after the Secretary of Health and
Human Services submits a report to Congress on a plan for reforming the
wage index under section 3137(b) of the Affordable Care Act. Section
3137(c) of the Affordable Care Act also requires the revised average
hourly wage standards to be applied in a budget neutral manner. We note
that section 3137(c) of the Affordable Care Act does not provide for
the revised average hourly wage standards to be applied retroactively,
nor does it change the statutory deadline for applications for
reclassification for FY 2011. Under section 1886(d)(10) of the Act, the
Medicare Geographic Classification Review Board (MGCRB) considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify 13 months prior to the start of the fiscal year for which
reclassification is sought (generally by September 1). For
reclassifications for the FY 2011 wage index, the deadline for
applications was September 1, 2009 (74 FR 43838).
As we discussed in the June 2, 2010 FY 2011 supplemental proposed
rule (75 FR 30919 and 30920), in our proposed implementation of section
3137(c) of the Affordable Care Act, we requested the assistance of the
MGCRB in determining, for applications received by September 1, 2009,
whether additional hospitals would qualify for reclassification for FY
2011 based on the revised average hourly wage standards of 84 percent
for urban hospitals, 85 percent for group reclassifications, and 82
percent for rural hospitals restored by section 3137(c). We determined
that 18 additional hospitals would qualify for reclassification for FY
2011. In addition, 5 hospitals, for which the MGCRB granted
reclassifications to their secondary requested areas for FY 2011, would
qualify for reclassifications instead to their primary requested areas
because they now meet the average hourly wage criteria to reclassify to
those areas. Therefore, in accordance with Sec. 412.278 of the
regulations, in which paragraph (c) provides the Administrator
discretionary authority to review any final decision of the MGCRB, we
submitted a letter to the Administrator requesting that she review and
amend the MGCRB's decision and grant the 23 hospitals their requested
reclassifications (or primary reclassifications) for FY 2011. The
proposed wage index in the Addendum to the June 2, 2010 supplemental
proposed rule (75 FR 30984) reflected these changes in hospital
reclassifications, although the Administrator had not issued all of her
decisions by the issuance date of the supplemental proposed rule. We
stated that any changes to the FY 2011 wage index, as a result of the
Administrator's actual decision issued under Sec. 412.278(c), or an
amendment of the Administrator's decision issued under Sec.
412.278(g), would be reflected in the FY 2011 IPPS final rule. As a
result of her review, the Administrator amended the MGCRB's decision
for 22 of the 23 hospitals for the FY 2011 wage index. One hospital had
decided to withdraw its approved reclassification for FYs 2011 through
2013 and, instead, ``fall back'' to its prior reclassification for FYs
2010 through 2012. (We refer readers to 42 CFR 412.273 and the
discussion on withdrawals, terminations, and ``fall back''
reclassifications in section III.I.3.a. of the preamble in this final
rule.)
In the June 2, 2010 supplemental proposed rule (75 FR 30973), we
proposed to amend Sec. Sec. 412.230, 412.232,

[[Page 50160]]

and 412.234 to reflect the average hourly wage reclassification
criteria restored by section 3137(c) of the Affordable Care Act.
Comment: Several commenters urged CMS to use its administrative
discretion to open an additional short window of opportunity for FY
2011 reclassification application. The commenters stated that some
hospitals did not meet the average hourly wage criteria in effect as of
the September 1, 2009 deadline, and, therefore, did not apply for
reclassification for FY 2011; however, they meet the revised criteria
and should be allowed a fair and equitable opportunity to reclassify.
The commenters suggested that only a fairly limited number of hospitals
would apply, so the workloads for CMS and the MGCRB should be
manageable.
Response: As we discussed above, the deadline for application for
reclassification is established through statute, under section
1886(d)(10) of the Act. Therefore, we believe that if the Congress had
intended for hospitals to be afforded another opportunity to apply for
reclassification for FY 2011 due to the revisions made by section
3137(c) of the Affordable Care Act, the Congress also would have
established such opportunity through a provision of the law. We also
believe that the commenters may have underestimated the workload and
time required for the suggested additional window of opportunity and
that such opportunity, instead, would have been very disruptive to the
development and publication of the IPPS proposed and final rates for FY
2011. Given the amount of time it would have taken after the March 23,
2010 enactment date of the law for CMS to (1) Establish and implement a
process for the additional application period, (2) allow hospitals
sufficient time to submit their applications to the MGCRB, and (3)
allow a sufficient period of time for the MGCRB to review the
applications and make its decisions, the additional reclassifications
would not have been determined in time for inclusion in the FY 2011
IPPS/LTCH PPS proposed rule or the supplemental proposed rule, and
there would not be sufficient time to gather and consider comments
regarding the effects of this application period on other
nonreclassified hospitals as well as the hospitals that were able to
take advantage of the second window for application.
We believe that our proposed implementation of section 3137(c) is
the least disruptive and intended approach. Therefore, we are adopting
our proposal as final in this FY 2011 IPPS/LTCH PPS final rule. The
wage index in the Addendum to this final rule reflects the
reclassifications that resulted from the Administrator's reversal of
the MGCRB's decision for 22 hospitals that applied by September 1, 2009
and meet the revised average hourly wage criteria. In addition, we are
adopting as final, without modification, the proposed revisions to
Sec. Sec. 412.230, 412.232, and 412.234 of the regulations to codify
the revised average hourly wage criteria.
b. Budget Neutrality Adjustment for the Rural and Imputed Floors
In the FY 2009 IPPS final rule (73 FR 48574 through 48575), we
adopted State level budget neutrality (rather than the national budget
neutrality adjustment) for the rural and imputed floors, effective
beginning with the FY 2009 wage index and incorporated this policy in
our regulation at Sec. 412.64(e)(4). Specifically, the regulations
specified that CMS makes an adjustment to the wage index to ensure that
aggregate payments after implementation of the rural floor under
section 4410 of the Balanced Budget Act of 1997 (Pub. L. 105-33) and
the imputed floor under Sec. 412.64(h)(4) are made in a manner that
ensures that aggregate payments to hospitals are not affected and that,
beginning October 1, 2008, we would transition from a nationwide
adjustment to a statewide adjustment, with a statewide adjustment fully
in place by October 1, 2010.
These policies for the rural and imputed floors were adopted in the
FY 2009 IPPS final rule and were reflected in the proposed wage index
in the Addendum to the FY 2011 IPPS/LTCH PPS proposed rule, published
in the Federal Register on May 4, 2010 (75 FR 23937 and 23938).
However, as we discussed in the June 2, 2010 supplemental FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 30920), these policies were recently
changed by the provisions of section 3141 of the Affordable Care Act.
Specifically, section 3141 of the Affordable Care Act rescinded our
policy that established a statewide budget neutrality adjustment for
the rural and imputed floors and, instead, restored a uniform, national
adjustment to the area wage index, beginning with the FY 2011 wage
index.
In addition, we note that the imputed floor is set to expire on
September 30, 2011. As we indicated in the supplemental proposed rule,
we are not reading the language of section 3141 of the Affordable Care
Act as altering this expiration date. Section 3141 of the Affordable
Care Act requires that the Secretary ``administer subsection (b) of
such section 4410 and paragraph (e) of * * * section 412.64 in the same
manner as the Secretary administered such subsection (b) and paragraph
(e) for discharges occurring during fiscal year 2008 (through a
uniform, national adjustment to the area wage index).'' Thus, section
3141 of the Affordable Care Act is governing how we apply budget
neutrality, under the authorities of Sec. 412.64(e) and section
4410(b) of the Balanced Budget Act, but it does not alter Sec.
412.64(h) of our regulations (which includes the imputed floor and its
expiration date). To the extent there is an imputed floor, section 3141
of the Affordable Care Act governs budget neutrality for that floor,
but it does not continue the imputed floor beyond the expiration date
already included in our regulations.
In the FY 2011 IPPS/LTCH PPS supplemental proposed rule issued in
the Federal Register on June 2, 2010, we proposed to revised the
regulations at Sec. 412.64(e) to reflect the changes made by section
3141 of the Affordable Care Act that restored a uniform, national
adjustment to the area wage index, beginning with the FY 2011 wage
index. We did not propose any other special rules or procedures for
implementing the provisions of section 3141.
Comment: A few commenters favored the provision of section 3141 to
restore the national adjustment to the wage index; other commenters
objected to the provision.
Response: We appreciate the support of the commenters. Regarding
the comment objecting to the provision, we are obligated to implement
the provisions of the law.
In accordance with the law, we are adopting as a final policy in
this final rule, a uniform, national budget neutrality adjustment for
the rural and imputed floors, which, for FY 2011, is a factor of
0.996641. The wage index in the Addendum to this final rule reflects
this policy. In addition, we are adopting as final, without
modification, the proposed changes to Sec. 412.64(e) of the
regulations to incorporate the restoration provisions of section 3141
of the Affordable Care Act.
3. Floor for Area Wage Index for Hospitals in Frontier States
Section 10324(a)(1) of the Affordable Care Act amended section
1886(d)(3)(E) of the Act by adding a provision under new subsection
(iii) to establish an adjustment to create a wage index floor of 1.00
for all hospitals located in States determined to be ``frontier
States,'' beginning in FY 2011. The new section 1886(d)(3)(E)(iii)(II)
of the Act defines a ``frontier State'' as a State in which at least 50
percent of the counties in the State are determined to be ``frontier

[[Page 50161]]

counties.'' The new section 1886(d)(3)(E)(iii)(III) of the Act defines
a ``frontier county'' as a county in which the population per square
mile is less than 6 persons. The new section 1886(d)(3)(E)(iii)(IV) of
the Act specifies that this provision for the frontier State floor
shall not apply to hospitals that are receiving a nonlabor-related
share adjustment under section 1886(d)(5)(H) of the Act, that is,
hospitals in Alaska or Hawaii.
To implement the provision for the frontier State floor adjustment,
in the FY 2011 IPPS/LTCH PPS supplemental proposed rule published in
the Federal Register on June 2, 2010 (75 FR 30920), we proposed to
identify frontier Counties by analyzing population data and county
definitions based upon the most recent annual Population Estimates
published by the U.S. Census Bureau. We proposed to divide each
county's population total by each county's reported land area
(according to the decennial census) in square miles to establish
population density. We also proposed to update this analysis from time
to time, such as upon publication of a subsequent decennial census and,
if necessary, add or remove qualifying States from the list of frontier
States based on the updated analysis.
In accordance with section 1886(d)(3)(E)(iii) of the Act, as added
by section 10324(a)(1) of the Affordable Care Act, all PPS hospitals
located within a State that qualifies as a frontier State will receive
either the higher of its post-reclassification wage index rate, or a
wage index with a minimum value of 1.00. In the June 2, 2010
supplemental proposed rule, we proposed that, for a hospital that is
geographically located in a frontier State and is reclassified under
section 1886(d)(10) of the Act to a CBSA in a non-frontier State, the
hospital would receive a wage index that is the higher of the
reclassified area wage index or the minimum wage index of 1.00. In
accordance with section 10324(a)(2) of the Affordable Care Act, the
frontier State adjustment will not be subject to budget neutrality
under section 1886(d)(3)(E) of the Act, and will only be extended to
hospitals geographically located within a Frontier State. In the June
2, 2010 supplemental proposed rule, we proposed to calculate and apply
the frontier State floor adjustments after rural and imputed floor
budget neutrality adjustments are calculated for all labor market
areas, so as to ensure that no hospital in a Frontier State will
receive a wage index of less than 1.00 due to the rural and imputed
floor adjustment. We invited public comment on these proposals
regarding our methods for determining frontier States, and for
calculation and application of the adjustment.
In the June 2, 2010 supplemental proposed rule (75 FR 30971), we
proposed to establish a new paragraph (m) under Sec. 412.64 to
incorporate the provisions of section 1886(d)(3)(E)(iii) of the Act, as
added by section 10324(a)(1) of the Affordable Care Act.
Comment: Commenters supported the proposed methods for
implementation of the frontier States floor adjustment to the area wage
index provided for under section 1886(d)(3)(E)(iii) of the Act.
Response: We appreciate the commenters' support.
In this final rule, we are implementing the frontier State floor
adjustment using the criteria described above that we are finalizing in
this final rule. For the final FY 2011 IPPS wage indices, based on the
criteria described above, we identified the following frontier States
that will receive the floor adjustment for FY 2011. These frontier
States also are identified by a footnote in Table 4D-2 of the Addendum
to this final rule.

Frontier States Identified for the FY 2011 Wage Index Floor Adjustment
Under Section 10324(a) of the Affordable Care Act
------------------------------------------------------------------------
Percent of
Total Frontier counties
State counties counties identified
as frontier
------------------------------------------------------------------------
Montana.......................... 56 45 80
Wyoming.......................... 23 17 74
North Dakota..................... 53 36 68
Nevada........................... 17 11 65
South Dakota..................... 66 34 52
------------------------------------------------------------------------
Figures in table based on:
--Population Data set available at: http://www.census.gov/popest/estimates.html (2009 County Total Population Estimates).
--Land Area Dataset available at: http://factfinder.census.gov/
(Decennial Census Geographic Comparison Tables: ``United States--
County by State and for Puerto Rico'').

After consideration of the public comments we received, we are
adopting as final, without modification, the proposed addition of new
paragraph (m) under Sec. 412.64 of the regulations to incorporate the
provisions of section 1886(d)(3)(E)(iii) of the Act, as added by
section 10324(a)(1) of the Affordable Care Act, by specifying the
criteria for adjusting the wage index to account for the frontier State
floor adjustment, the amount of the wage index adjustment, and our
process for determining and posting the wage index adjustments.
4. Plan for Reforming the Wage Index Under Section 3137(b) of
Affordable Care Act
As we discussed in the June 2, 2010 supplemental proposed rule (75
FR 30919), section 3137(b) of the Affordable Care Act requires the
Secretary of Health and Human Services to submit to Congress, not later
than December 31, 2011, a report that includes a plan to reform the
Medicare wage index applied under the Medicare IPPS. In developing the
plan, the Secretary of Health and Human Services must take into
consideration the goals for reforming the wage index that were set
forth by MedPAC in its June 2007 report entitled, ``Report to Congress:
Promoting Greater Efficiency in Medicare'', including establishing a
new system that--
Uses Bureau of Labor of Statistics (BLS) data, or other
data or methodologies, to calculate relative wages for each geographic
area;
Minimizes wage index adjustments between and within MSAs
and statewide rural areas;
Includes methods to minimize the volatility of wage index
adjustments while maintaining budget neutrality in applying such
adjustments;
Takes into account the effect that implementation of the
system would

[[Page 50162]]

have on health care providers and on each region of the country;
Addresses issues related to occupational mix, such as
staffing practices and ratios, and any evidence on the effect on
quality of care or patient safety as a result of the implementation of
the system; and
Provides for a transition.
In addition, section 3137(b)(3) of the Affordable Care Act requires
the Secretary of Health and Human Services to consult with relevant
affected parties in developing the plan. Although the provisions of
section 3137(b) of the Affordable Care Act will not have an actual
impact on the FY 2011 wage index, we notified the public of the
provisions in the supplemental proposed rule so that they would have an
opportunity to provide comments and suggestions on how they may
participate in developing the plan.
Comment: A few commenters encouraged CMS to involve the industry in
the process. One commenter in particular suggested that CMS should
adopt an advisory commission approach in addressing future changes to
the wage index.
Response: We will consider these suggestions in developing our plan
for meeting the requirements of section 3137(b) of the Affordable Care
Act.

C. Core-Based Statistical Areas for the Hospital Wage Index

The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. In
accordance with the broad discretion under section 1886(d)(3)(E) of the
Act, beginning with FY 2005, we define hospital labor market areas
based on the Core-Based Statistical Areas (CBSAs) established by OMB
and announced in December 2003 (69 FR 49027). For a discussion of OMB's
revised definitions of CBSAs and our implementation of the CBSA
definitions, we refer readers to the preamble of the FY 2005 IPPS final
rule (69 FR 49026 through 49032).
As with the FY 2010 final rule, in the FY 2011 proposed rule, we
proposed to provide that hospitals receive 100 percent of their wage
index based upon the CBSA configurations. Specifically, for each
hospital, we proposed to determine a wage index for FY 2011 employing
wage index data from hospital cost reports for cost reporting periods
beginning during FY 2007 and using the CBSA labor market definitions.
We consider CBSAs that are MSAs to be urban, and CBSAs that are
Micropolitan Statistical Areas as well as areas outside of CBSAs to be
rural. In addition, it has been our longstanding policy that where an
MSA has been divided into Metropolitan Divisions, we consider the
Metropolitan Division to comprise the labor market areas for purposes
of calculating the wage index (69 FR 49029) (regulations at Sec.
412.64(b)(1)(ii)(A)).
On December 1, 2009, OMB announced changes to the principal cities
and, if applicable, titles of a number of CBSAs and Metropolitan
Divisions (OMB Bulletin No. 10-2). The changes to the principal cities
and titles are as follows:
San Marcos, TX qualifies as a new principal city of the
Austin-Round Rock, TX CBSA. The new title is Austin-Round Rock-San
Marcos, TX CBSA.
Delano, CA qualifies as a new principal city of the
Bakersfield, CA CBSA. The new title: Bakersfield-Delano, CA CBSA.
Conroe, TX qualifies as a new principal city of the
Houston-Sugar Land-Baytown, TX CBSA. The CBSA title is unchanged.
North Port, FL qualifies as a new principal city of the
Bradenton-Sarasota-Venice, FL CBSA. The new title is North Port-
Bradenton-Sarasota, FL CBSA. The new code is CBSA 35840.
Sanford, FL qualifies as a new principal city of the
Orlando-Kissimmee, FL CBSA. The new title is Orlando-Kissimmee-Sanford,
FL CBSA.
Glendale, AZ qualifies as a new principal city of the
Phoenix-Mesa-Scottsdale, AZ CBSA. The new title is Phoenix-Mesa-
Glendale, AZ CBSA.
Palm Desert, CA qualifies as a new principal city of the
Riverside-San Bernardino-Ontario, CA CBSA. The CBSA title is unchanged.
New Braunfels, TX qualifies as a new principal city of the
San Antonio, TX CBSA. The new title is San Antonio-New Braunfels, TX
CBSA.
Auburn, WA qualifies as a new principal city of the
Seattle-Tacoma-Bellevue, WA CBSA. The CBSA title is unchanged.
The changes to titles resulting from changes to the order of
principal cities based on population are as follows:
Rockville, MD replaces Frederick, MD as the second most
populous principal city in the Bethesda-Frederick-Rockville, MD
Metropolitan Division. The new title is Bethesda-Rockville-Frederick,
MD Metropolitan Division.
Rock Hill, SC replaces Concord, NC as the third most
populous principal city in the Charlotte-Gastonia-Concord, NC[dash]SC
CBSA. The new title is Charlotte-Gastonia-Rock Hill, NC[dash]SC CBSA.
Joliet, IL replaces Naperville, IL as the second most
populous principal city in the Chicago-Naperville-Joliet, IL
Metropolitan Division. The new title is Chicago-Joliet-Naperville, IL
Metropolitan Division.
Crestview, FL replaces Fort Walton Beach, FL as the most
populous principal city in the Fort Walton Beach-Crestview-Destin, FL
CBSA. The new title is Crestview-Fort Walton Beach-Destin, FL CBSA. The
new code is 18880.
Hillsboro, OR replaces Beaverton, OR as the third most
populous principal city in the Portland-Vancouver-Beaverton, OR[dash]WA
CBSA. The new title is Portland-Vancouver-Hillsboro, OR[dash]WA CBSA.
Steubenville, OH replaces Weirton, WV as the most populous
principal city in the Weirton-Steubenville, WV[dash]OH CBSA. The new
title is Steubenville-Weirton, OH[dash]WV CBSA. The new CBSA code is
44600.
The OMB bulletin is available on the OMB Web site at http://www.whitehouse.gov/OMB--go to ``Agency Information'' and click on
``Bulletins''.
We received one public comment on the proposed rule that commended
CMS for continuing to incorporate OMB changes to the geographic area
definitions used under the IPPS. CMS will apply these changes to the
IPPS beginning October 1, 2010.

D. Occupational Mix Adjustment to the FY 2011 Wage Index

As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the FY 2011 Occupational Mix Adjustment
Based on the 2007-2008 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute

[[Page 50163]]

care hospital participating in the Medicare program.
For the FY 2010 hospital wage index, we used occupational mix data
collected on a revised 2007-2008 Medicare Wage Index Occupational Mix
Survey (the 2007-2008 survey) to compute the occupational mix
adjustment for FY 2010. (We refer readers to the FY 2010 IPPS final
rule (74 FR 43827) for a detailed discussion of the 2007-2008 survey.)
Again, for the FY 2011 hospital wage index, we used data from the 2007-
2008 survey (including revised data for 45 hospitals) to compute the FY
2011 adjustment.
2. New 2010 Occupational Mix Survey for the FY 2013 Wage Index
As stated earlier, section 304(c) of Public Law 106-554 amended
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3
years on the occupational mix of employees for each short-term, acute
care hospital participating in the Medicare program. We used
occupational mix data collected on the 2007-2008 survey to compute the
occupational mix adjustment for FY 2010 and the FY 2011 wage index in
this final rule. We also plan to use the 2007-2008 survey data for the
FY 2012 wage index. Therefore, a new measurement of occupational mix
will be required for FY 2013.
Since we implemented the 2007-2008 survey, we received several
public comments suggesting further improvements to the occupational mix
survey. Specifically, commenters recommended that CMS use the calendar
year (that is, January 1 through December 31) as the 1-year reporting
period instead of July 1 through June 30. Commenters also requested
that CMS allow for a 6-month period after the end of the survey
reporting period for hospitals to complete and submit their data to
their Medicare fiscal intermediaries and MACs. The commenters suggested
that these changes will allow hospitals more time to develop their
occupational mix data before submitting the data to the Medicare
contractors and CMS for use in development of the wage index. Based on
these comments, we revised the occupational mix survey. The new 2010
survey (Form CMS-10079 (2010)) will provide for the collection of
hospital-specific wages and hours data for calendar year 2010 (that is,
payroll periods ending between January 1, 2010 and December 31, 2010)
and will be applied beginning with the FY 2013 wage index.
On September 4, 2009, we published in the Federal Register a notice
soliciting comments on the proposed 2010 survey (74 FR 45860). The
comment period for the notice ended on November 3, 2009. After
considering the comments we received, we made a few minor editorial
changes and published the final 2010 survey in the Federal Register on
January 15, 2010 (75 FR 2548). The survey was approved by OMB on
February 26, 2010 (OMB control number 0938-0907) and is available on
the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage, and through the fiscal intermediaries/MACs.
Hospitals are required to submit their completed 2010 surveys to their
fiscal intermediaries/MACs by July 1, 2011. The preliminary, unaudited
2010 survey data will be released in early October 2011, along with the
FY 2009 Worksheet S-3 wage data, for the FY 2013 wage index review and
correction process.
Although, in the FY 2011 proposed rule, we did not propose any
changes or solicit comments pertaining to the 2010 occupational mix
survey, we received one comment that commended CMS for its decision to
provide for a calendar year reporting period and a submission deadline
that is 6 months after the end of the reporting period. The commenter
believed that this timeframe will increase both the survey's accuracy
and submission rate.
3. Calculation of the Occupational Mix Adjustment for FY 2011
For FY 2011 (as we did for FY 2010), we calculated the occupational
mix adjustment factor using the following steps:
Step 1--For each hospital, determine the percentage of the total
nursing category attributable to a nursing subcategory by dividing the
nursing subcategory hours by the total nursing category's hours. Repeat
this computation for each of the four nursing subcategories: Registered
nurses; licensed practical nurses; nursing aides, orderlies, and
attendants; and medical assistants.
Step 2--Determine a national average hourly rate for each nursing
subcategory by dividing a subcategory's total salaries for all
hospitals in the occupational mix survey database by the subcategory's
total hours for all hospitals in the occupational mix survey database.
Step 3--For each hospital, determine an adjusted average hourly
rate for each nursing subcategory by multiplying the percentage of the
total nursing category (from Step 1) by the national average hourly
rate for that nursing subcategory (from Step 2). Repeat this
calculation for each of the four nursing subcategories.
Step 4--For each hospital, determine the adjusted average hourly
rate for the total nursing category by summing the adjusted average
hourly rate (from Step 3) for each of the nursing subcategories.
Step 5--Determine the national average hourly rate for the total
nursing category by dividing total nursing category salaries for all
hospitals in the occupational mix survey database by total nursing
category hours for all hospitals in the occupational mix survey
database.
Step 6--For each hospital, compute the occupational mix adjustment
factor for the total nursing category by dividing the national average
hourly rate for the total nursing category (from Step 5) by the
hospital's adjusted average hourly rate for the total nursing category
(from Step 4).
If the hospital's adjusted average hourly rate is less than the
national average hourly rate (indicating the hospital employs a less
costly mix of nursing employees), the occupational mix adjustment
factor is greater than 1.0000. If the hospital's adjusted average
hourly rate is greater than the national average hourly rate, the
occupational mix adjustment factor is less than 1.0000.
Step 7--For each hospital, calculate the occupational mix adjusted
salaries and wage-related costs for the total nursing category by
multiplying the hospital's total salaries and wage-related costs (from
Step 5 of the unadjusted wage index calculation in section III.G. of
this preamble) by the percentage of the hospital's total workers
attributable to the total nursing category (using the occupational mix
survey data, this percentage is determined by dividing the hospital's
total nursing category salaries by the hospital's total salaries for
``nursing and all other'') and by the total nursing category's
occupational mix adjustment factor (from Step 6 above).
The remaining portion of the hospital's total salaries and wage-
related costs that is attributable to all other employees of the
hospital is not adjusted by the occupational mix. A hospital's all
other portion is determined by subtracting the hospital's nursing
category percentage from 100 percent.
Step 8--For each hospital, calculate the total occupational mix
adjusted salaries and wage-related costs for a hospital by summing the
occupational mix adjusted salaries and wage-related costs for the total
nursing category (from Step 7) and the portion of the hospital's
salaries and wage-related costs for all other employees (from Step 7).

[[Page 50164]]

To compute a hospital's occupational mix adjusted average hourly
wage, divide the hospital's total occupational mix adjusted salaries
and wage-related costs by the hospital's total hours (from Step 4 of
the unadjusted wage index calculation in section III.G. of this
preamble).
Step 9--To compute the occupational mix adjusted average hourly
wage for an urban or rural area, sum the total occupational mix
adjusted salaries and wage-related costs for all hospitals in the area,
then sum the total hours for all hospitals in the area. Next, divide
the area's occupational mix adjusted salaries and wage-related costs by
the area's hours.
Step 10--To compute the national occupational mix adjusted average
hourly wage, sum the total occupational mix adjusted salaries and wage-
related costs for all hospitals in the Nation, then sum the total hours
for all hospitals in the Nation. Next, divide the national occupational
mix adjusted salaries and wage-related costs by the national hours. The
FY 2011 occupational mix adjusted national average hourly wage is
$34.9664.
Step 11--To compute the occupational mix adjusted wage index,
divide each area's occupational mix adjusted average hourly wage (Step
9) by the national occupational mix adjusted average hourly wage (Step
10).
Step 12--To compute the Puerto Rico specific occupational mix
adjusted wage index, follow Steps 1 through 11 above. The FY 2011
occupational mix adjusted Puerto Rico-specific average hourly wage is
$14.7620.
The table below is an illustrative example of the occupational mix
adjustment.
BILLING CODE 4120-01-P

[[Page 50165]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.030

[[Page 50166]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.031

BILLING CODE 4120-01-C
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that

[[Page 50167]]

would be subject to the IPPS if not granted a waiver, must complete the
occupational mix survey, unless the hospital has no associated cost
report wage data that are included in the FY 2011 wage index. For the
FY 2007-2008 survey, the response rate was 91.1 percent.
In computing the FY 2011 wage index, if a hospital did not respond
to the occupational mix survey, or if we determined that a hospital's
submitted data were too erroneous to include in the wage index, we
assigned the hospital the average occupational mix adjustment for the
labor market area. This method has the least impact on the wage index
for other hospitals in the area. For areas where no hospital submitted
data for purposes of calculating the occupational mix adjustment, we
applied the national occupational mix factor of 1.0000 in calculating
the area's FY 2011 occupational mix adjusted wage index. In addition,
if a hospital submitted a survey, but that survey data could not be
used because we determine it to be aberrant, we also assigned the
hospital the average occupational mix adjustment for its labor market
area. For example, if a hospital's individual nurse category average
hourly wages were out of range (that is, unusually high or low), and
the hospital did not provide sufficient documentation to explain the
aberrancy, or the hospital did not submit any registered nurse salaries
or hours data, we assigned the hospital the average occupational mix
adjustment for the labor market area in which it is located.
In calculating the average occupational mix adjustment factor for a
labor market area, we replicated Steps 1 through 6 of the calculation
for the occupational mix adjustment. However, instead of performing
these steps at the hospital level, we aggregated the data at the labor
market area level. In following these steps, for example, for CBSAs
that contain providers that did not submit occupational mix survey
data, the occupational mix adjustment factor ranged from a low of
0.9249 (CBSA 17780, College Station-Bryan, TX), to a high of 1.1196
(CBSA 40980, Saginaw-Saginaw Township North, MI). Also, in computing a
hospital's occupational mix adjusted salaries and wage-related costs
for nursing employees (Step 7 of the calculation), in the absence of
occupational mix survey data, we multiplied the hospital's total
salaries and wage-related costs by the percentage of the area's total
workers attributable to the area's total nursing category. For FY 2011,
there are five CBSAs (that include six hospitals) for which we did not
have occupational mix data for any of its hospitals. The CBSAs are:
CBSA 21940 Fajardo, PR (one hospital)
CBSA 22140 Farmington, NM (one hospital)
CBSA 36140 Ocean City, NJ (one hospital)
CBSA 41900 San German-Cabo Rojo, PR (two hospitals)
CBSA 49500 Yauco, PR (one hospital)
Since the FY 2007 IPPS final rule, we have periodically discussed
applying a hospital-specific penalty to hospitals that fail to submit
occupational mix survey data. (See 71 FR 48013 through 48014; 72 FR
47314 through 47315; 73 FR 48580; and 74 FR 43832.) During the FY 2008
rulemaking cycle, some commenters suggested a penalty equal to a 1- to
2-percent reduction in the hospital's wage index value or a set
percentage of the standardized amount. During the FY 2009 and FY 2010
rulemaking cycles, several commenters reiterated their view that full
participation in the occupational mix survey is critical, and that CMS
should develop a methodology that encourages hospitals to report
occupational mix survey data but does not unfairly penalize neighboring
hospitals. We indicated in the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule that, while we were not proposing a penalty at that time, we would
consider the public comments we previously received, as well as any
public comments on the proposed rule, as we develop the proposed FY
2011 wage index.
In the FY 2011 proposed rule, we stated that, in order to gain a
better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement will be effective beginning with the new 2010 occupational
mix survey (the 2010 survey is discussed in section III.D.2. of this
preamble). We will instruct fiscal intermediaries/MACs to begin
gathering this information as part of the FY 2013 wage index desk
review process. We note that we reserve the right to apply a different
approach in future years, including potentially penalizing
nonresponsive hospitals.
Comment: One commenter stated that it is unfair that some hospitals
do not submit occupational mix data, while others consistently submit
their data. The commenter also stated that there are presently no
incentives for hospitals to submit occupational mix data, but praised
CMS for beginning to take steps to address the issue by proposing to
require hospitals that do not submit the data to provide an explanation
for their noncompliance. The commenter suggested that CMS should still
implement some kind of penalty in the form of a negative percentage
adjustment to hospitals that do not submit occupational mix data,
similar to what is done with hospitals that fail to submit quality
data, in order to provide a greater motivation for hospitals to submit
their occupational mix data.
Response: We appreciate this comment and will consider it as we
continue to monitor and assess how to address hospitals' failure to
submit occupational mix data for the wage index.

E. Worksheet S-3 Wage Data for the FY 2011 Wage Index

The final FY 2011 wage index values are based on the data collected
from the Medicare cost reports submitted by hospitals for cost
reporting periods beginning in FY 2007 (the FY 2010 wage index was
based on data from cost reporting periods beginning during FY 2006).
1. Included Categories of Costs
The final FY 2011 wage index includes the following categories of
data associated with costs paid under the IPPS (as well as outpatient
costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty)
Home office costs and hours
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315))
Wage-related costs, including pensions and other deferred
compensation costs. We note that, for developing pension and deferred
compensation costs for purposes of the wage index, CMS requires
hospitals to comply with the requirements in 42 CFR 413.100, the
Provider Reimbursement Manual (PRM), Part I, Sections 2140, 2141, and
2142, and related Medicare program instructions, as discussed in the
cost reporting instructions (PRM, Part II, section 3605.2) for
Worksheet S-3, Part II, Lines 13 through 20, and in the FY 2006 IPPS
final rule (70 FR 47369). On March 28, 2008, CMS published Revision
436, a technical clarification to the PRM, Part I policies for pension
and deferred compensation costs. In addition, in

[[Page 50168]]

November 2009, CMS released, through a Joint Signature Memorandum,
instructions and a spreadsheet to assist hospitals and Medicare
contractors in determining the annual allowable defined benefit pension
cost for the FY 2011 wage index (JSM/TDL-10061, 11-20-09, December 3,
2009). These instructions and spreadsheet crosswalk the current
interest, liability, and normal cost terminology found in the Medicare
reimbursement policies under Section 2142 of the PRM, Part I to the new
terminology applicable under the Pension Protection Act of 2006. The
spreadsheet and instructions can be downloaded from the CMS Web site at
http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/itemdetail.asp?filterType=none&filterByDID=0&sortByDID=3&sortOrder=descending&itemID=CMS1231035&intNumPerPage=10.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2010, the final
wage index for FY 2011 also excludes the direct and overhead salaries
and hours for services not subject to IPPS payment, such as SNF
services, home health services, costs related to GME (teaching
physicians and residents) and certified registered nurse anesthetists
(CRNAs), and other subprovider components that are not paid under the
IPPS. The final FY 2011 wage index also excludes the salaries, hours,
and wage-related costs of hospital-based rural health clinics (RHCs),
and Federally qualified health centers (FQHCs) because Medicare pays
for these costs outside of the IPPS (68 FR 45395). In addition,
salaries, hours, and wage-related costs of CAHs are excluded from the
wage index, for the reasons explained in the FY 2004 IPPS final rule
(68 FR 45397).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
Under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indices applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indices for non-IPPS providers, other
than for LTCHs. Such comments should be made in response to separate
proposed rules for those providers.

F. Verification of Worksheet S-3 Wage Data

The wage data for the final FY 2011 wage index were obtained from
Worksheet S-3, Parts II and III of the Medicare cost report for cost
reporting periods beginning on or after October 1, 2006, and before
October 1, 2007. For wage index purposes, we refer to cost reports
during this period as the ``FY 2007 cost report,'' the ``FY 2007 wage
data,'' or the ``FY 2007 data.'' Instructions for completing Worksheet
S-3, Parts II and III are in the Provider Reimbursement Manual (PRM),
Part II, sections 3605.2 and 3605.3. The data file used to construct
the wage index includes FY 2007 data submitted to us as of June 22,
2010. As in past years, we performed an intensive review of the wage
data, mostly through the use of edits designed to identify aberrant
data.
We asked our fiscal intermediaries/MACs to revise or verify data
elements that resulted in specific edit failures. For the proposed FY
2011 wage index, we identified and excluded 14 providers with data that
was too aberrant to include in the proposed wage index, although if
data elements for some of these providers are corrected, we intended to
include some of these providers in the FY 2011 final wage index. We
instructed fiscal intermediaries/MACs to complete their data
verification of questionable data elements and to transmit any changes
to the wage data no later than April 14, 2010. The data for none of the
hospitals identified in the proposed rule were resolved. However, the
data for three additional hospitals were identified as too aberrant to
include in the final wage index. Therefore, we determined that the data
for 17 hospitals (that is, 14+3=17) should not be included in the FY
2011 final wage index.
In constructing the final FY 2011 wage index, we included the wage
data for facilities that were IPPS hospitals in FY 2007, inclusive of
those facilities that have since terminated their participation in the
program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397). For this final rule, we removed
11 hospitals that converted to CAH status between February 16, 2009,
the cut-off date for CAH exclusion from the FY 2010 wage index, and
February 15, 2010, the cut-off date for CAH exclusion from the FY 2011
wage index. After removing hospitals with aberrant data and hospitals
that converted to CAH status, the final FY 2011 wage index is
calculated based on 3,511 hospitals.
In the FY 2008 final rule with comment period (72 FR 47317) and the
FY 2009 IPPS final rule (73 FR 48582), we discussed our policy for
allocating a multicampus hospital's wages and hours data, by full-time
equivalent (FTE) staff, among the different labor market areas where
its campuses are located. During the FY 2011 wage index desk review
process, we requested fiscal intermediaries/MACs to contact multicampus
hospitals that had campuses in different labor market areas to collect
the data for the allocation. The FY 2011 wage index in this final rule
includes separate wage data for campuses of three multicampus
hospitals.
For FY 2011, we are again allowing hospitals to use FTE or
discharge data for the allocation of a multicampus hospital's wage data
among the different labor market areas where its campuses are located.
The Medicare cost report was updated in May 2008 to provide for the
reporting of FTE data by campus for multicampus hospitals. Because the
data from cost reporting periods that begin in FY 2008 will not be used
in calculating the wage index until FY 2012, a multicampus hospital
will still have the option, through the FY 2011 wage index, to use
either FTE or discharge data for allocating wage data among its
campuses by providing the information from the applicable cost
reporting period to CMS through its fiscal intermediary/MAC. Two of the
three multicampus hospitals chose to have their wage data allocated by
their Medicare discharge data for the FY 2011 wage index. One of the
hospitals provided FTE staff data for the allocation. The average
hourly wage associated with each geographical location of a multicampus
hospital is reflected in Table 2 of the Addendum to this final rule.

G. Method for Computing the Final FY 2011 Unadjusted Wage Index

The method used to compute the FY 2011 wage index without an
occupational mix adjustment follows:
Step 1--As noted above, we are basing the final FY 2011 wage index
on wage data reported on the FY 2007 Medicare cost reports. We gathered
data from each of the non-Federal, short-

[[Page 50169]]

term, acute care hospitals for which data were reported on the
Worksheet S-3, Parts II and III of the Medicare cost report for the
hospital's cost reporting period beginning on or after October 1, 2006,
and before October 1, 2007. In addition, we included data from some
hospitals that had cost reporting periods beginning before October 2006
and reported a cost reporting period covering all of FY 2007. These
data are included because no other data from these hospitals would be
available for the cost reporting period described above, and because
particular labor market areas might be affected due to the omission of
these hospitals. However, we generally describe these wage data as FY
2007 data. We note that, if a hospital had more than one cost reporting
period beginning during FY 2007 (for example, a hospital had two short
cost reporting periods beginning on or after October 1, 2006, and
before October 1, 2007), we included wage data from only one of the
cost reporting periods, the longer, in the wage index calculation. If
there was more than one cost reporting period and the periods were
equal in length, we included the wage data from the later period in the
wage index calculation.
Step 2--Salaries--The method used to compute a hospital's average
hourly wage excludes certain costs that are not paid under the IPPS.
(We note that, beginning with FY 2008 (72 FR 47315), we include Lines
22.01, 26.01, and 27.01 of Worksheet S-3, Part II for overhead services
in the wage index. However, we note that the wages and hours on these
lines are not incorporated into Line 101, Column 1 of Worksheet A,
which, through the electronic cost reporting software, flows directly
to Line 1 of Worksheet S-3, Part II. Therefore, the first step in the
wage index calculation for FY 2011 is to compute a ``revised'' Line 1,
by adding to the Line 1 on Worksheet S-3, Part II (for wages and hours
respectively) the amounts on Lines 22.01, 26.01, and 27.01.) In
calculating a hospital's average salaries plus wage-related costs, we
subtract from Line 1 (total salaries) the GME and CRNA costs reported
on Lines 2, 4.01, 6, and 6.01, the Part B salaries reported on Lines 3,
5 and 5.01, home office salaries reported on Line 7, and exclude
salaries reported on Lines 8 and 8.01 (that is, direct salaries
attributable to SNF services, home health services, and other
subprovider components not subject to the IPPS). We also subtract from
Line 1 the salaries for which no hours were reported. To determine
total salaries plus wage-related costs, we add to the net hospital
salaries the costs of contract labor for direct patient care, certain
top management, pharmacy, laboratory, and nonteaching physician Part A
services (Lines 9 and 10), home office salaries and wage-related costs
reported by the hospital on Lines 11 and 12, and nonexcluded area wage-
related costs (Lines 13, 14, and 18).
We note that contract labor and home office salaries for which no
corresponding hours are reported are not included. In addition, wage-
related costs for nonteaching physician Part A employees (Line 18) are
excluded if no corresponding salaries are reported for those employees
on Line 4.
Step 3--Hours--With the exception of wage-related costs, for which
there are no associated hours, we compute total hours using the same
methods as described for salaries in Step 2.
Step 4--For each hospital reporting both total overhead salaries
and total overhead hours greater than zero, we then allocate overhead
costs to areas of the hospital excluded from the wage index
calculation. First, we determine the ratio of excluded area hours (sum
of Lines 8 and 8.01 of Worksheet S-3, Part II) to revised total hours
(Line 1 minus the sum of Part II, Lines 2, 3, 4.01, 5, 5.01, 6, 6.01,
7, and Part III, Line 13 of Worksheet S-3). We then compute the amounts
of overhead salaries and hours to be allocated to excluded areas by
multiplying the above ratio by the total overhead salaries and hours
reported on Line 13 of Worksheet S-3, Part III. Next, we compute the
amounts of overhead wage-related costs to be allocated to excluded
areas using three steps: (1) We determine the ratio of overhead hours
(Part III, Line 13 minus the sum of lines 22.01, 26.01, and 27.01) to
revised hours excluding the sum of lines 22.01, 26.01, and 27.01 (Line
1 minus the sum of Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, 8, 8.01,
22.01, 26.01, and 27.01). (We note that for the FY 2008 and subsequent
wage index calculations, we are excluding the sum of lines 22.01,
26.01, and 27.01 from the determination of the ratio of overhead hours
to revised hours because hospitals typically do not provide fringe
benefits (wage-related costs) to contract personnel. Therefore, it is
not necessary for the wage index calculation to exclude overhead wage-
related costs for contract personnel. Further, if a hospital does
contribute to wage-related costs for contracted personnel, the
instructions for Lines 22.01, 26.01, and 27.01 require that associated
wage-related costs be combined with wages on the respective contract
labor lines.); (2) we compute overhead wage-related costs by
multiplying the overhead hours ratio by wage-related costs reported on
Part II, Lines 13, 14, and 18; and (3) we multiply the computed
overhead wage-related costs by the above excluded area hours ratio.
Finally, we subtract the computed overhead salaries, wage-related
costs, and hours associated with excluded areas from the total salaries
(plus wage-related costs) and hours derived in Steps 2 and 3.
Step 5--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries
plus wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2004, through April 15,
2006, for private industry hospital workers from the BLS' Compensation
and Working Conditions. We use the ECI because it reflects the price
increase associated with total compensation (salaries plus fringes)
rather than just the increase in salaries. In addition, the ECI
includes managers as well as other hospital workers. This methodology
to compute the monthly update factors uses actual quarterly ECI data
and assures that the update factors match the actual quarterly and
annual percent changes. We also note that, since April 2006 with the
publication of March 2006 data, the BLS' ECI uses a different
classification system, the North American Industrial Classification
System (NAICS), instead of the Standard Industrial Codes (SICs), which
no longer exist. We have consistently used the ECI as the data source
for our wages and salaries and other price proxies in the IPPS market
basket, and we are not making any changes to the usage for FY 2011. The
factors used to adjust the hospital's data were based on the midpoint
of the cost reporting period, as indicated below.

Midpoint of Cost Reporting Period
------------------------------------------------------------------------
After Before Adjustment factor
------------------------------------------------------------------------
10/14/2006 11/15/2006 1.04377
11/14/2006 12/15/2006 1.04077

[[Page 50170]]

12/14/2006 01/15/2007 1.03786
01/14/2007 02/15/2007 1.03508
02/14/2007 03/15/2007 1.03243
03/14/2007 04/15/2007 1.02981
04/14/2007 05/15/2007 1.02709
05/14/2007 06/15/2007 1.02430
06/14/2007 07/15/2007 1.02153
07/14/2007 08/15/2007 1.01891
08/14/2007 09/15/2007 1.01643
09/14/2007 10/15/2007 1.01394
10/14/2007 11/15/2007 1.01127
11/14/2007 12/15/2007 1.00844
12/14/2007 01/15/2008 1.00556
01/14/2008 02/15/2008 1.00275
02/14/2008 03/15/2008 1.00000
03/14/2008 04/15/2008 0.99732
------------------------------------------------------------------------

For example, the midpoint of a cost reporting period beginning
January 1, 2007, and ending December 31, 2007, is June 30, 2007. An
adjustment factor of 1.02153 would be applied to the wages of a
hospital with such a cost reporting period. In addition, for the data
for any cost reporting period that began in FY 2007 and covered a
period of less than 360 days or more than 370 days, we annualize the
data to reflect a 1-year cost report. Dividing the data by the number
of days in the cost report and then multiplying the results by 365
accomplishes annualization.
Step 6--Each hospital is assigned to its appropriate urban or rural
labor market area before any reclassifications under section
1886(d)(8)(B), section 1886(d)(8)(E), or section 1886(d)(10) of the
Act. Within each urban or rural labor market area, we add the total
adjusted salaries plus wage-related costs obtained in Step 5 for all
hospitals in that area to determine the total adjusted salaries plus
wage-related costs for the labor market area.
Step 7--We divide the total adjusted salaries plus wage-related
costs obtained under both methods in Step 6 by the sum of the
corresponding total hours (from Step 4) for all hospitals in each labor
market area to determine an average hourly wage for the area.
Step 8--We add the total adjusted salaries plus wage-related costs
obtained in Step 5 for all hospitals in the Nation and then divide the
sum by the national sum of total hours from Step 4 to arrive at a
national average hourly wage. Using the data as described above, the
final national average hourly wage (unadjusted for occupational mix) is
$34.9895.
Step 9--For each urban or rural labor market area, we calculate the
hospital wage index value, unadjusted for occupational mix, by dividing
the area average hourly wage obtained in Step 7 by the national average
hourly wage computed in Step 8.
Step 10--Following the process set forth above, we develop a
separate Puerto Rico-specific wage index for purposes of adjusting the
Puerto Rico standardized amounts. (The national Puerto Rico
standardized amount is adjusted by a wage index calculated for all
Puerto Rico labor market areas based on the national average hourly
wage as described above.) We add the total adjusted salaries plus wage-
related costs (as calculated in Step 5) for all hospitals in Puerto
Rico and divide the sum by the total hours for Puerto Rico (as
calculated in Step 4) to arrive at an overall final average hourly wage
(unadjusted for occupational mix) of $14.7404 for Puerto Rico. For each
labor market area in Puerto Rico, we calculate the Puerto Rico-specific
wage index value by dividing the area average hourly wage (as
calculated in Step 7) by the overall Puerto Rico average hourly wage.
Step 11--Section 4410 of Public Law 105-33 provides that, for
discharges on or after October 1, 1997, the area wage index applicable
to any hospital that is located in an urban area of a State may not be
less than the area wage index applicable to hospitals located in rural
areas in that State. The areas affected by this provision are
identified in Table 4D-2 of the Addendum to this final rule.
In the FY 2005 IPPS final rule (69 FR 49109), we adopted the
``imputed'' floor as a temporary 3-year measure to address a concern by
some individuals that hospitals in all-urban States were disadvantaged
by the absence of rural hospitals to set a wage index floor in those
States. The imputed floor was originally set to expire in FY 2007, but
we extended it an additional year in the FY 2008 IPPS final rule with
comment period (72 FR 47321). In the FY 2009 IPPS final rule (73 FR
48570 through 48574 and 48584), we extended the imputed floor for an
additional 3 years, through FY 2011.

H. Analysis and Implementation of the Final Occupational Mix Adjustment
and the Final FY 2011 Occupational Mix Adjusted Wage Index

As discussed in section III.D. of this preamble, for FY 2011, we
are applying the occupational mix adjustment to 100 percent of the
final FY 2011 wage index. We calculated the final occupational mix
adjustment using data from the 2007-2008 occupational mix survey data,
using the methodology described in section III.D.3. of this preamble.
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the final FY 2011 wage
index results in a final national average hourly wage of $34.9664 and a
final Puerto Rico-specific average hourly wage of $14.7620. After
excluding data of hospitals that either submitted aberrant data that
failed critical edits, or that do not have FY 2007 Worksheet S-3 cost
report data for use in calculating the final FY 2011 wage index, we
calculated the final FY 2011 wage index using the occupational mix
survey data from 3,197 hospitals. Using the Worksheet S-3 cost report
data of 3,511 hospitals and occupational mix survey data from 3,197
hospitals represents a 91.1 percent survey response rate. The final FY
2011 national average hourly wages for each occupational mix nursing
subcategory as calculated in Step 2 of the occupational mix calculation
are as follows:

[[Page 50171]]

------------------------------------------------------------------------
Average hourly
Occupational mix nursing subcategory wage
------------------------------------------------------------------------
National RN........................................... $36.073112086
National LPN and Surgical Technician.................. 20.866432497
National Nurse Aide, Orderly, and Attendant........... 14.619357374
National Medical Assistant............................ 16.479254498
National Nurse Category............................... 30.47379669
------------------------------------------------------------------------

The final national average hourly wage for the entire nurse
category as computed in Step 5 of the occupational mix calculation is
$30.47379669. Hospitals with a nurse category average hourly wage (as
calculated in Step 4) of greater than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of less than 1.0. Hospitals with a nurse category
average hourly wage (as calculated in Step 4) of less than the national
nurse category average hourly wage receive an occupational mix
adjustment factor (as calculated in Step 6) of greater than 1.0.
Based on the 2007-2008 occupational mix survey data, we determined
(in Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 44.29
percent, and the national percentage of hospital employees in the all
other occupations category is 55.71 percent. At the CBSA level, the
percentage of hospital employees in the nurse category ranged from a
low of 29.08 percent in one CBSA, to a high of 70.76 percent in another
CBSA.
We compared the final FY 2011 occupational mix adjusted wage
indices for each CBSA to the final unadjusted wage indices for each
CBSA. As a result of applying the occupational mix adjustment to the
wage data, the final wage index values for 206 (52.7 percent) urban
areas and 32 (68.1 percent) rural areas would increase. One hundred six
(27.1 percent) urban areas would increase by 1 percent or more, and 6
(1.5 percent) urban areas would increase by 5 percent or more. Eighteen
(38.3 percent) rural areas would increase by 1 percent or more, and no
rural areas would increase by 5 percent or more. However, the wage
index values for 185 (47.3 percent) urban areas and 15 (31.9 percent)
rural areas would decrease. Eighty nine (22.8 percent) urban areas
would decrease by 1 percent or more, and no urban area would decrease
by 5 percent or more. Seven (14.9 percent) rural areas would decrease
by 1 percent or more, and no rural areas will decrease by 5 percent or
more. The largest positive impacts are 7.81 percent for an urban area
and 2.97 percent for a rural area. The largest negative impacts are
3.97 percent for an urban area and 2.41 percent for a rural area. No
urban or rural areas are unaffected. These results indicate that a
larger percentage of rural areas (68.1 percent) benefit from the
occupational mix adjustment than do urban areas (52.7 percent). While
these results are more positive overall for rural areas than under the
previous occupational mix adjustment that used survey data from 2006,
approximately one-third (31.9 percent) of rural CBSAs will still
experience a decrease in their wage indices as a result of the
occupational mix adjustment.
The final wage index values for FY 2011 (except those for hospitals
receiving wage index adjustments under section 1886(d)(13) of the Act)
included in Tables 4A, 4B, 4C, and 4F of the Addendum to this final
rule include the final occupational mix adjustment.
Tables 3A and 3B in the Addendum to this final rule list the 3-year
average hourly wage for each labor market area before the redesignation
or reclassification of hospitals based on FYs 2009, 2010, and 2011 cost
reporting periods. Table 3A lists these data for urban areas and Table
3B lists these data for rural areas. In addition, Table 2 in the
Addendum to this final rule includes the adjusted average hourly wage
for each hospital from the FY 2005 and FY 2006 cost reporting periods,
as well as the FY 2007 period used to calculate the final FY 2011 wage
index. The 3-year averages are calculated by dividing the sum of the
dollars (adjusted to a common reporting period using the method
described previously) across all 3 years, by the sum of the hours. If a
hospital is missing data for any of the previous years, its average
hourly wage for the 3-year period is calculated based on the data
available during that period. The final average hourly wages in Tables
2, 3A, and 3B in the Addendum to this final rule include the final
occupational mix adjustment. The final wage index values in Tables 4A,
4B, and 4C also include the final State-specific rural floor and
imputed floor budget neutrality adjustments. (We note that Table 4D-1,
Rural Floor Budget Neutrality Factors for Acute Care Hospitals, was
included in the Addendum to the FY 2011 IPPS/LTCH PPS proposed rule.
However, we are not including it in this final rule because section
3141 of the Affordable Care Act restores rural floor and imputed floor
budget neutrality to a uniform national adjustment.)

I. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications

1. General
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify 13 months prior to the start of the fiscal year for which
reclassification is sought (generally by September 1). Generally,
hospitals must be proximate to the labor market area to which they are
seeking reclassification and must demonstrate characteristics similar
to hospitals located in that area. The MGCRB issues its decisions by
the end of February for reclassifications that become effective for the
following fiscal year (beginning October 1). The regulations applicable
to reclassifications by the MGCRB are located in 42 CFR 412.230 through
412.280.
Section 1886(d)(10)(D)(v) of the Act provides that, beginning with
FY 2001, a MGCRB decision on a hospital reclassification for purposes
of the wage index is effective for 3 fiscal years, unless the hospital
elects to terminate the reclassification. Section 1886(d)(10)(D)(vi) of
the Act provides that the MGCRB must use average hourly wage data from
the 3 most recently published hospital wage surveys in evaluating a
hospital's reclassification application for FY 2003 and any succeeding
fiscal year.
Section 304(b) of Public Law 106-554 provides that the Secretary
must establish a mechanism under which a statewide entity may apply to
have all of the geographic areas in the State treated as a single
geographic area for purposes of computing and applying a single wage
index, for reclassifications beginning in FY 2003. The implementing
regulations for this provision are located at 42 CFR 412.235.
Section 1886(d)(8)(B) of the Act requires the Secretary to treat a
hospital located in a rural county adjacent to one

[[Page 50172]]

or more urban areas as being located in the labor market area to which
the greatest number of workers in the county commute, if the rural
county would otherwise be considered part of an urban area under the
standards for designating MSAs and if the commuting rates used in
determining outlying counties were determined on the basis of the
aggregate number of resident workers who commute to (and, if applicable
under the standards, from) the central county or counties of all
contiguous MSAs. In light of the CBSA definitions and the Census 2000
data that we implemented for FY 2005 (69 FR 49027), we undertook to
identify those counties meeting these criteria. Eligible counties are
discussed and identified under section III.I.5. of this preamble.
2. Effects of Reclassification/Redesignation
Section 1886(d)(8)(C) of the Act provides that the application of
the wage index to redesignated hospitals is dependent on the
hypothetical impact that the wage data from these hospitals would have
on the wage index value for the area to which they have been
redesignated. These requirements for determining the wage index values
for redesignated hospitals are applicable both to the hospitals deemed
urban under section 1886(d)(8)(B) of the Act and hospitals that were
reclassified as a result of the MGCRB decisions under section
1886(d)(10) of the Act. Therefore, as provided in section 1886(d)(8)(C)
of the Act, the wage index values were determined by considering the
following:
If including the wage data for the redesignated hospitals
would reduce the wage index value for the area to which the hospitals
are redesignated by 1 percentage point or less, the area wage index
value determined exclusive of the wage data for the redesignated
hospitals applies to the redesignated hospitals.
If including the wage data for the redesignated hospitals
reduces the wage index value for the area to which the hospitals are
redesignated by more than 1 percentage point, the area wage index
determined inclusive of the wage data for the redesignated hospitals
(the combined wage index value) applies to the redesignated hospitals.
If including the wage data for the redesignated hospitals
increases the wage index value for the urban area to which the
hospitals are redesignated, both the area and the redesignated
hospitals receive the combined wage index value. Otherwise, the
hospitals located in the urban area receive a wage index excluding the
wage data of hospitals redesignated into the area.
Rural areas whose wage index values would be reduced by excluding
the wage data for hospitals that have been redesignated to another area
continue to have their wage index values calculated as if no
redesignation had occurred (otherwise, redesignated rural hospitals are
excluded from the calculation of the rural wage index). The wage index
value for a redesignated rural hospital cannot be reduced below the
wage index value for the rural areas of the State in which the hospital
is located.
CMS also has adopted the following policies:
The wage data for a reclassified urban hospital is
included in both the wage index calculation of the urban area to which
the hospital is reclassified (subject to the rules described above) and
the wage index calculation of the urban area where the hospital is
physically located.
In cases where hospitals have reclassified to rural areas,
such as urban hospitals reclassifying to rural areas under 42 CFR
412.103, the hospital's wage data are: (a) Included in the rural wage
index calculation, unless doing so would reduce the rural wage index;
and (b) included in the urban area where the hospital is physically
located. The effect of this policy, in combination with the statutory
requirement at section 1886(d)(8)(C)(ii) of the Act, is that rural
areas may receive a wage index based upon the highest of: (1) Wage data
from hospitals geographically located in the rural area; (2) wage data
from hospitals geographically located in the rural area, but excluding
all data associated with hospitals reclassifying out of the rural area
under section 1886(d)(8)(B) or section 1886(d)(10) of the Act; or (3)
wage data associated with hospitals geographically located in the area
plus all hospitals reclassified into the rural area.
In addition, in accordance with the statutory language referring to
``hospitals'' in the plural under sections 1886(d)(8)(C)(i) and
1886(d)(8)(C)(ii) of the Act, our longstanding policy is to consider
reclassified hospitals as a group when deciding whether to include or
exclude them from both urban and rural wage index calculations.
Comment: One commenter opposed CMS' longstanding methodology for
calculating the wage index for reclassified hospitals, and suggested
that CMS calculate a separate reclassified wage index for those
hospitals that meet the reclassification proximate requirement and
another wage index for those hospitals that do not meet the
requirement. In addition, the commenter suggested another option which
would provide for calculation of the reclassified wage index based on
the hospitals physically located in the CBSA and each individual
hospital, instead of combining all reclassified hospitals as a group.
Response: We did not include any proposals in the FY 2011 proposed
rule to change our longstanding methodology for calculating the wage
index for reclassified hospitals. We believe that this methodology
continues to be appropriate in order to calculate the wage index for
hospitals for Medicare payment purposes.
3. FY 2011 MGCRB Reclassifications
a. FY 2011 Reclassifications Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in 42 CFR
412.230 through 412.280.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2011 reclassification requests. Based on
such reviews, there were 285 hospitals approved for wage index
reclassifications by the MGCRB for FY 2011. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2011, hospitals
reclassified during FY 2009 or FY 2010 are eligible to continue to be
reclassified to a particular labor market area based on such prior
reclassifications. There were 247 hospitals approved for wage index
reclassifications in FY 2009 and 251 hospitals approved for wage index
reclassifications in FY 2010. Of all of the hospitals approved for
reclassification for FY 2009, FY 2010, and FY 2011, based upon the
review at the time of this final rule, 823 hospitals are in a
reclassification status for FY 2011.
Under 42 CFR 412.273, hospitals that have been reclassified by the
MGCRB are permitted to withdraw their applications within 45 days of
the publication of a proposed rule. Generally stated, the request for
withdrawal of an application for reclassification or termination of an
existing 3-year reclassification that would be effective in FY 2011 had
to be received by the MGCRB within 45 days of the publication of the FY
2011 proposed rule. Hospitals also could cancel prior reclassification
withdrawals or terminations in certain circumstances. For further
information

[[Page 50173]]

about withdrawing, terminating, or canceling a previous withdrawal or
termination of a 3-year reclassification for wage index purposes, we
refer the reader to 42 CFR 412.273, as well as the FY 2002 IPPS final
rule (66 FR 39887) and the FY 2003 IPPS final rule (67 FR 50065).
Additional discussion on withdrawals and terminations, and
clarifications regarding reinstating reclassifications and ``fallback''
reclassifications, were included in the FY 2008 IPPS final rule (72 FR
47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2011 are incorporated
into the wage index values published in this FY 2011 IPPS/LTCH PPS
final rule. These changes affect not only the wage index value for
specific geographic areas, but also the wage index value redesignated/
reclassified hospitals receive; that is, whether they receive the wage
index that includes the data for both the hospitals already in the area
and the redesignated/reclassified hospitals. Further, the wage index
value for the area from which the hospitals are redesignated/
reclassified may be affected.
b. Applications for Reclassifications for FY 2012
Applications for FY 2012 reclassifications are due to the MGCRB by
September 1, 2010. We note that this is also the deadline for canceling
a previous wage index reclassification withdrawal or termination under
42 CFR 412.273(d). Applications and other information about MGCRB
reclassifications may be obtained, beginning in mid-July 2010, via the
CMS Internet Web site at: http://cms.hhs.gov/MGCRB/02_instructions_and_applications.asp, or by calling the MGCRB at (410) 786-1174. The
mailing address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L,
Baltimore, MD 21244-2670.
c. Appeals of MGCRB Denials of Withdrawals and Terminations
Section 412.278 of the regulations permits a hospital or a group of
hospitals dissatisfied with the MGCRB's decision regarding its
geographic designation to request the Administrator's review of the
decision. Section 412.273(e) permits a hospital to file an appeal to
the Administrator regarding the MGCRB's denial of the hospital's
request for withdrawal of an application. However, this section of the
regulations did not address Administrator review of the MGCRB's denial
of a hospital's request for termination; that is, ``terminations'' not
specified in the regulations at Sec. 412.273(e).
In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23949), we
proposed to revise the regulations to specify the availability of
Administrator review of MGCRB decisions regarding withdrawals and
terminations, as well as cancellations of withdrawals or terminations.
Because reclassifications are considered budget neutral actions, we
stated our belief that these proposed revisions would have no impact on
total IPPS payments.
In addition, during our review of Sec. 412.273, we determined that
some of the existing language in the section could be clarified to make
it more easily understood and proposed to revise the provision
accordingly.
We did not receive any public comments regarding our proposed
changes to the regulations at Sec. 412.273. Therefore, in this final
rule, we are adopting as final, without modification, the proposed
changes to Sec. 412.273.
4. Redesignations of Hospitals Under Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B) of the Act requires us to treat a hospital
located in a rural county adjacent to one or more urban areas as being
located in the MSA if certain criteria are met. Effective beginning FY
2005, we use OMB's 2000 CBSA standards and the Census 2000 data to
identify counties in which hospitals qualify under section
1886(d)(8)(B) of the Act to receive the wage index of the urban area.
Hospitals located in these counties have been known as ``Lugar''
hospitals and the counties themselves are often referred to as
``Lugar'' counties. We provide the FY 2011 chart below with the listing
of the rural counties containing the hospitals designated as urban
under section 1886(d)(8)(B) of the Act. For discharges occurring on or
after October 1, 2010, hospitals located in the rural county in the
first column of this chart will be redesignated for purposes of using
the wage index of the urban area listed in the second column.
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BILLING CODE 4120-01-C
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Affected hospitals were permitted to compare the
reclassified wage index for the labor market area in Table 4C in the
Addendum to the proposed rule into which they would be reclassified by
the MGCRB to the wage index for the area to which they are redesignated
under section 1886(d)(8)(B) of the Act. Hospitals could have withdrawn
from an MGCRB reclassification within 45 days of the publication of the
FY 2011 proposed rule.
5. Reclassifications Under Section 1886(d)(8)(B) of the Act
As discussed in the FY 2009 IPPS final rule (73 FR 48588), Lugar
hospitals are treated like reclassified hospitals for purposes of
determining their applicable wage index and receive the reclassified
wage index for the urban area to which they have been redesignated.
Because Lugar hospitals are treated like reclassified hospitals, when
they are seeking reclassification by the MGCRB, they are subject to the
rural reclassification rules set forth at 42 CFR 412.230. The
procedural rules set forth at Sec. 412.230 list the criteria that a
hospital must meet in order to reclassify as a rural hospital. Lugar
hospitals are subject to the proximity criteria and payment thresholds
that apply to rural hospitals. Specifically, the hospital must be no
more than 35 miles from the area to which it seeks reclassification
(Sec. 412.230(b)(1)); and the hospital must show that its average
hourly wage is at least 106 percent of the average hourly wage of all
other hospitals in the area in which the hospital is located (Sec.
412.230(d)(1)(iii)(C)). In accordance with the requirements of section
3137(c) of the Affordable Care Act, as discussed in section III.B.2.a
of the preamble in this final rule, beginning with reclassifications
for the FY 2011 wage index, a Lugar hospital must also demonstrate that
its average hourly wage is equal to at least 82 percent of the average
hourly wage of hospitals in the area to which it seeks redesignation
(Sec. 412.230(d)(1)(iv)(C)).
Hospitals not located in a Lugar county seeking reclassification to
the urban area where the Lugar hospitals have been redesignated are not
permitted to measure to the Lugar county to demonstrate proximity (no
more than 15 miles for an urban hospital, and no more than 35 miles for
a rural hospital or the closest urban or rural area for RRCs or SCHs)
in order to be reclassified to such urban area. These hospitals must
measure to the urban area exclusive of the Lugar County to meet the
proximity or nearest urban or rural area requirement. We treat New
England deemed counties in a manner consistent with how we treat Lugar
counties. (We refer readers to FY 2008 IPPS final rule with comment
period (72 FR 47337) for a discussion of this policy.)
6. Reclassifications Under Section 508 of Public Law 108-173
Section 508 of Public Law 108-173 allowed certain qualifying
hospitals to receive wage index reclassifications and assignments that
they otherwise would not have been eligible to receive under the law.
Although section 508 originally was scheduled to expire after a 3-year
period, Congress extended the provision several times, as well as
certain special exceptions that would have otherwise expired. For a
discussion of the original section 508 provision and its various
extensions, we refer readers to the FY 2010 notice issued in the
Federal Register on June 2, 2010 (75 FR 31118). Prior to the enactment
of the Afforable Care Act, the extension of the 508 provision was
included in section 124 of Public Law 110-275 (MIPPA). Section 124
extended, through FY 2009, section 508 reclassifications as well as
certain special exceptions. The most recent extension of the provision
was included in sections 3137(a) and 10317 of Affordable Care Act, as
amended. Section 3137(a) of the Affordable Care Act, as amended by
section 10317, extended, through FY 2010, section 508 reclassifications
as well as certain special exceptions. Because the latest extension of
these provisions expires on September 30, 2010, and will not be
applicable in FY 2011, we are not making any changes related to these
provisions in this final rule.

J. FY 2011 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees

In accordance with the broad discretion under section 1886(d)(13)
of the Act, as added by section 505 of Public Law 108-173, beginning
with FY 2005, we established a process to make adjustments to the
hospital wage index based on commuting patterns of hospital employees
(the ``out-migration'' adjustment). The process, outlined in the FY
2005 IPPS final rule (69 FR 49061), provides for an increase in the
wage index for hospitals located in certain counties that have a
relatively high percentage of hospital employees who reside in the
county but work in a different county (or counties) with a higher wage
index. Such adjustments to the wage index are effective for 3 years,
unless a hospital requests to waive the application of the adjustment.
A county will not lose its status as a qualifying county due to wage
index changes during the 3-year period, and counties will receive the
same wage index increase for those 3 years. However, a county that
qualifies in any given year

[[Page 50177]]

may no longer qualify after the 3-year period, or it may qualify but
receive a different adjustment to the wage index level. Hospitals that
receive this adjustment to their wage index are not eligible for
reclassification under section 1886(d)(8) or section 1886(d)(10) of the
Act. Adjustments under this provision are not subject to the budget
neutrality requirements under section 1886(d)(3)(E) of the Act.
Hospitals located in counties that qualify for the wage index
adjustment are to receive an increase in the wage index that is equal
to the average of the differences between the wage indices of the labor
market area(s) with higher wage indices and the wage index of the
resident county, weighted by the overall percentage of hospital workers
residing in the qualifying county who are employed in any labor market
area with a higher wage index. Beginning with the FY 2008 wage index,
we use post-reclassified wage indices when determining the out-
migration adjustment (72 FR 47339).
For the final FY 2011 wage index, we calculated the out-migration
adjustment using the same formula described in the FY 2005 IPPS final
rule (69 FR 49064), with the addition of using the post-reclassified
wage indices, to calculate the out-migration adjustment. This
adjustment is calculated as follows:
Step 1--Subtract the wage index for the qualifying county from the
wage index of each of the higher wage area(s) to which hospital workers
commute.
Step 2--Divide the number of hospital employees residing in the
qualifying county who are employed in such higher wage index area by
the total number of hospital employees residing in the qualifying
county who are employed in any higher wage index area. For each of the
higher wage index areas, multiply this result by the result obtained in
Step 1.
Step 3--Sum the products resulting from Step 2 (if the qualifying
county has workers commuting to more than one higher wage index area).
Step 4--Multiply the result from Step 3 by the percentage of
hospital employees who are residing in the qualifying county and who
are employed in any higher wage index area.
These adjustments will be effective for each county for a period of
3 fiscal years. For example, hospitals that received the adjustment for
the first time in FY 2010 will be eligible to retain the adjustment for
FY 2011. For hospitals in newly qualified counties, adjustments to the
wage index are effective for 3 years, beginning with discharges
occurring on or after October 1, 2010.
Hospitals receiving the wage index adjustment under section
1886(d)(13)(F) of the Act are not eligible for reclassification under
sections 1886(d)(8) or (d)(10) of the Act unless they waive the out-
migration adjustment. Consistent with our FYs 2005 through 2010 IPPS
final rules, we are specifying that hospitals redesignated under
section 1886(d)(8) of the Act or reclassified under section 1886(d)(10)
of the Act are deemed to have chosen to retain their redesignation or
reclassification. Section 1886(d)(10) hospitals that wished to receive
the out-migration adjustment, rather than their reclassification
adjustment, were instructed to follow the termination/withdrawal
procedures specified in 42 CFR 412.273 and section III.I.3. of the
preamble of the FY 2011 proposed rule. Otherwise, they were deemed to
have waived the out-migration adjustment. Hospitals redesignated under
section 1886(d)(8) of the Act were deemed to have waived the out-
migration adjustment unless they explicitly notified CMS within 45 days
from the publication of the FY 2011 proposed rule that they elected to
receive the out-migration adjustment instead.
Table 4J in the Addendum to this final rule lists the out-migration
wage index adjustments for FY 2011. Hospitals that are not otherwise
reclassified or redesignated under section 1886(d)(8) or section
1886(d)(10) of the Act automatically receive the listed adjustment. In
accordance with the procedures discussed above, redesignated/
reclassified hospitals were deemed to have waived the out-migration
adjustment unless CMS was otherwise notified within the necessary
timeframe. In addition, hospitals eligible to receive the out-migration
wage index adjustment and that withdrew their application for
reclassification will automatically receive the wage index adjustment
listed in Table 4J in the Addendum to this final rule. The wage index
is updated annually and, as such, hospitals that wish to waive their
Lugar redesignation in order to receive their home area wage index plus
the out-migration adjustment must request the waiver annually.
Comment: A few commenters opposed our existing policy that
hospitals waiving their Lugar redesignation in order to receive their
home area wage index plus the out-migration adjustment must request
such waiver annually.
Response: We did not propose to change this policy and continue to
believe the existing policy is appropriate for designation of the out-
migration adjustment annually. We addressed this comment in the FY 2010
IPPS/RY 2010 LTCH PPS final rule and refer readers to that discussion
(74 FR 43840).

K. Process for Requests for Wage Index Data Corrections

The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2011 wage index were made
available on October 5, 2009, through the Internet on the CMS Web site
at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this new file does
not alter the current wage index process or schedule. We notified the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encouraged hospitals to sign up for automatic notifications
of information about hospital issues and the scheduling of the Hospital
Open Door forums at: http://www.cms.hhs.gov/OpenDoorForums/.
In a memorandum dated October 21, 2009, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service of the
availability of the wage index data files and the process and timeframe
for requesting revisions (including the specific deadlines listed
below). We also instructed the fiscal intermediaries/MACs to advise
hospitals that these data were also made available directly through
their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the October 5, 2009 wage and occupational mix data files, the hospital
was to submit corrections along with complete, detailed supporting
documentation to its fiscal intermediary/MAC by December 7, 2009.
Hospitals were notified of this deadline and of all other possible
deadlines and requirements, including the requirement to review and
verify their data as posted on the preliminary wage index data files on
the Internet, through the October 21, 2009 memorandum referenced above.

[[Page 50178]]

In the October 21, 2009 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2007-2008 occupational mix
preliminary files posted to our Web site in October, highlight the
revised cells on its spreadsheet, and submit its spreadsheet(s) and
complete documentation to its fiscal intermediary/MAC no later than
December 7, 2009.
The fiscal intermediaries/MACs notified the hospitals by mid-
February 2010 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' early-December
revision requests. The fiscal intermediaries/MACs also submitted the
revised data to CMS by mid-February 2010. CMS published the proposed
wage index public use files that included hospitals' revised wage index
data on February 22, 2010. Hospitals had until March 8, 2010, to submit
requests to the fiscal intermediaries/MACs for reconsideration of
adjustments made by the fiscal intermediaries/MACs as a result of the
desk review, and to correct errors due to CMS's or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the wage
index data. Hospitals also were required to submit sufficient
documentation to support their requests.
After reviewing requested changes submitted by hospitals, fiscal
intermediaries/MACs were required to transmit any additional revisions
resulting from the hospitals' reconsideration requests by April 14,
2010. The deadline for a hospital to request CMS intervention in cases
where the hospital disagrees with the fiscal intermediary's (or, if
applicable, the MAC's) policy interpretations was April 21, 2010.
Hospitals were given the opportunity to examine Table 2 in the
Addendum to the proposed rule. Table 2 in the Addendum to the proposed
rule contained each hospital's adjusted average hourly wage used to
construct the wage index values for the past 3 years, including the FY
2007 data used to construct the proposed FY 2011 wage index. We noted
that the hospital average hourly wages shown in Table 2 only reflected
changes made to a hospital's data and transmitted to CMS by March 2010.
We released the final wage index data public use files in early May
2010 on the Internet at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage. The May 2010 public use files were made available
solely for the limited purpose of identifying any potential errors made
by CMS or the fiscal intermediary/MAC in the entry of the final wage
index data that resulted from the correction process described above
(revisions submitted to CMS by the fiscal intermediaries/MACs by April
14, 2010). If, after reviewing the May 2010 final files, a hospital
believed that its wage or occupational mix data were incorrect due to a
fiscal intermediary/MAC or CMS error in the entry or tabulation of the
final data, the hospital had to send a letter to both its fiscal
intermediary/MAC and CMS that outlined why the hospital believed an
error exists and provided all supporting information, including
relevant dates (for example, when it first became aware of the error).
CMS and the fiscal intermediaries (or, if applicable, the MACs) had to
receive these requests no later than June 7, 2010.
Each request also had to be sent to the fiscal intermediary/MAC.
The fiscal intermediary/MAC reviewed requests upon receipt and
contacted CMS immediately to discuss any findings.
At this point in the process, that is, after the release of the May
2010 wage index data files, changes to the wage and occupational mix
data were only made in those very limited situations involving an error
by the fiscal intermediary/MAC or CMS that the hospital could not have
known about before its review of the final wage index data files.
Specifically, neither the fiscal intermediary/MAC nor CMS approved the
following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by
fiscal intermediaries or the MACs on or before April 21, 2010.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 22,
2010 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the fiscal intermediary or the MAC or CMS
during the wage index data correction process.
Verified corrections to the wage index data received timely by CMS
and the fiscal intermediaries or the MACs (that is, by June 7, 2010)
were incorporated into the final wage index in this FY 2011 IPPS/LTCH
PPS final rule, which will be effective October 1, 2010.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2011 payment rates. Accordingly,
hospitals that did not meet the procedural deadlines set forth above
will not be afforded a later opportunity to submit wage index data
corrections or to dispute the fiscal intermediary's (or, if applicable,
the MAC's) decision with respect to requested changes. Specifically,
our policy is that hospitals that do not meet the procedural deadlines
set forth above will not be permitted to challenge later, before the
Provider Reimbursement Review Board, the failure of CMS to make a
requested data revision. (See W. A. Foote Memorial Hospital v. Shalala,
No. 99-CV-75202-DT (E.D. Mich. 2001) and Palisades General Hospital v.
Thompson, No. 99-1230 (D.D.C. 2003).) We refer readers also to the FY
2000 IPPS final rule (64 FR 41513) for a discussion of the parameters
for appealing to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the fiscal intermediary's (or,
if applicable, the MAC's) attention. Moreover, because hospitals have
access to the final wage index data by early May 2010, they have the
opportunity to detect any data entry or tabulation errors made by the
fiscal intermediary or the MAC or CMS before the development and
publication of the final FY 2011 wage index by August 2010, and the
implementation of the FY 2011 wage index on October 1, 2010. If
hospitals availed themselves of the opportunities afforded to provide
and make corrections to the wage and occupational mix data, the wage
index implemented on October 1 should be accurate. Nevertheless, in the
event that errors are identified by hospitals and brought to our
attention after June 7, 2010, we retain the right to make midyear
changes to the wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) The fiscal intermediary
or the MAC or CMS made an error in tabulating its data; and (2) the
requesting hospital could not have known about the error or did not
have an opportunity to correct the error, before the beginning of the
fiscal year. For purposes of this provision, ``before the beginning of
the fiscal year'' means by the June 7 deadline for making corrections
to the wage data for the following fiscal year's wage index. This
provision is not available to a hospital seeking to revise another
hospital's data that may be affecting the requesting hospital's wage
index for the labor market area. As indicated earlier,

[[Page 50179]]

because CMS makes the wage index data available to hospitals on the CMS
Web site prior to publishing both the proposed and final IPPS rules,
and the fiscal intermediaries or the MACs notify hospitals directly of
any wage index data changes after completing their desk reviews, we do
not expect that midyear corrections will be necessary. However, under
our current policy, if the correction of a data error changes the wage
index value for an area, the revised wage index value will be effective
prospectively from the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385), we revised 42 CFR
412.64(k)(2) to specify that, effective on October 1, 2005, that is,
beginning with the FY 2006 wage index, a change to the wage index can
be made retroactive to the beginning of the Federal fiscal year only
when: (1) The fiscal intermediary (or, if applicable, the MAC) or CMS
made an error in tabulating data used for the wage index calculation;
(2) the hospital knew about the error and requested that the fiscal
intermediary (or, if applicable, the MAC) and CMS correct the error
using the established process and within the established schedule for
requesting corrections to the wage index data, before the beginning of
the fiscal year for the applicable IPPS update (that is, by the June 7,
2010 deadline for the FY 2011 wage index); and (3) CMS agreed that the
fiscal intermediary (or, if applicable, the MAC) or CMS made an error
in tabulating the hospital's wage index data and the wage index should
be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 7, 2010 deadline), and CMS acknowledges that the error
in the hospital's wage index data was caused by CMS' or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the data,
we believe that the hospital should not be penalized by our delay in
publishing or implementing the correction. As with our current policy,
we indicated that the provision is not available to a hospital seeking
to revise another hospital's data. In addition, the provision cannot be
used to correct prior years' wage index data; and it can only be used
for the current Federal fiscal year. In other situations where our
policies would allow midyear corrections, we continue to believe that
it is appropriate to make prospective-only corrections to the wage
index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a judicial decision reverses a CMS denial of a
hospital's wage index data revision request.

L. Labor-Related Share for the FY 2011 Wage Index

Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion (as estimated by the Secretary from time to
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates * * * '' We refer to
the portion of hospital costs attributable to wages and wage-related
costs as the labor-related share. The labor-related share of the
prospective payment rate is adjusted by an index of relative labor
costs, which is referred to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this ``would result in lower payments to a
hospital than would otherwise be made.'' However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate ``from time to time'' the proportion of hospitals'
costs that are ``attributable to wages and wage-related costs.'' We
believe that this reflected Congressional intent that hospitals receive
payment based on either a 62-percent labor-related share, or the labor-
related share estimated from time to time by the Secretary, depending
on which labor-related share resulted in a higher payment.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43856), we rebased and revised the hospital market basket for
operating costs. We established a FY-2006-based IPPS hospital market
basket to replace the FY 2002-based IPPS hospital market basket,
effective October 1, 2009. In that final rule, we presented our
analysis and conclusions regarding the frequency and methodology for
updating the labor-related share for FY 2010. We also recalculated a
labor-related share of 68.8 percent, using the FY 2006-based IPPS
market basket, for discharges occurring on or after October 1, 2009. In
addition, we implemented this revised and rebased labor-related share
in a budget neutral manner, but consistent with section 1886(d)(3)(E)
of the Act, we did not take into account the additional payments that
would be made as a result of hospitals with a wage index less than or
equal to 1.0 being paid using a labor-related share lower than the
labor-related share of hospitals with a wage index greater than 1.0.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. In the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23955), we
did not propose to make any further changes to the national average
proportion of operating costs that are attributable to wages and
salaries, fringe benefits, contract labor, the labor-related portion of
professional fees, administrative and business support services, and
all other labor-related services (previously referred to in the FY
2002-based IPPS market basket as labor-intensive).
We did not receive any public comments on this policy. Therefore,
for FY 2011, we are continuing to use a labor-related share of 68.8
percent for discharges occurring on or after October 1, 2010. Tables 1A
and 1B in the Addendum to this final rule reflects this labor-related
share. We note that section 403 of Public Law 108-173 amended sections
1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act to provide that the
Secretary must employ 62 percent as the labor-related share unless this
employment ``would result in lower payments to a hospital than would
otherwise be made.'' Therefore, for all IPPS hospitals whose wage
indices are less than 1.0000, we are applying the wage index to a
labor-related share of 62 percent of the national standardized amount.
For all IPPS hospitals whose wage indices are greater than 1.0000, we
are applying the wage index to a labor-related share of 68.8 percent of
the national standardized amount.
For Puerto Rico hospitals, the national labor-related share will
always be 62 percent because the national wage index for all Puerto
Rico hospitals is less than 1.0. As we proposed, in this final rule, we
are continuing to use a labor-related share for the Puerto Rico-
specific standardized amounts of 62.1 percent for discharges occurring
on or after October 1, 2010. This Puerto Rico labor-related share of
62.1 percent was also adopted in the FY 2010 IPPS/LTCH PPS final rule
(74 FR 43857) at the time the FY 2006-based hospital market basket was
established, effective October 1, 2009. Consistent with our methodology
for determining the national labor-

[[Page 50180]]

related share, we added the Puerto Rico-specific relative weights for
wages and salaries, fringe benefits, contract labor, the labor-related
portion of professional fees, administrative and business support
services, and all other labor-related services (previously referred to
in the FY 2002-based IPPS market basket as labor-intensive) to
determine the labor-related share. Puerto Rico hospitals are paid based
on 75 percent of the national standardized amounts and 25 percent of
the Puerto Rico-specific standardized amounts. The labor-related share
of a hospital's Puerto Rico-specific rate will be either the Puerto
Rico-specific labor-related share of 62.1 percent or 62 percent,
depending on which results in higher payments to the hospital. If the
hospital has a Puerto Rico-specific wage index of greater than 1.0, we
will set the hospital's rates using a labor-related share of 62.1
percent for the 25 percent portion of the hospital's payment determined
by the Puerto Rico standardized amounts because this amount will result
in higher payments. Conversely, a hospital with a Puerto Rico-specific
wage index of less than 1.0 will be paid using the Puerto Rico-specific
labor-related share of 62 percent of the Puerto Rico-specific rates
because the lower labor-related share will result in higher payments.
We did not receive any public comments on the Puerto Rico-specific
labor-related share. The Puerto Rico labor-related share of 62.1
percent for FY 2011 is reflected in the Table 1C of the Addendum to
this final rule.

IV. Other Decisions and Changes to the IPPS for Operating Costs and GME
Costs

A. Reporting of Hospital Quality Data for Annual Hospital Payment
Update

1. Background
a. Overview
CMS is seeking to promote higher quality and more efficient health
care for Medicare beneficiaries. This effort is supported by the
adoption of an increasing number of widely-agreed upon quality
measures. CMS has worked with relevant stakeholders to define measures
of quality in almost every setting and currently measures some aspect
of care for almost all Medicare beneficiaries. These measures assess
structural aspects of care, clinical processes, patient experiences
with care, and, increasingly, outcomes.
CMS has implemented quality measure reporting programs for multiple
settings of care. To measure the quality of hospital inpatient
services, CMS implemented the Reporting Hospital Quality Data for
Annual Payment Update (RHQDAPU) program. In addition, CMS has
implemented quality reporting programs for hospital outpatient
services, the Hospital Outpatient Quality Data Reporting Program (HOP
QDRP), and for physicians and other eligible professionals, the
Physician Quality Reporting Initiative (PQRI). CMS has also implemented
quality reporting programs for home health agencies and skilled nursing
facilities that are based on conditions of participation, and an end-
stage renal disease quality reporting program that is based on
conditions for coverage. In implementing RHQDAPU and other quality
reporting programs, CMS has focused on measures that have high impact
and support CMS and HHS priorities for improved quality and efficiency
of care for Medicare beneficiaries. Our goal for the future is to align
the clinical quality measure requirements of RHQDAPU and various other
programs including HITECH so that burden for reporting would be
reduced.
Comment: Some commenters commended CMS' commitment to raise
quality, transparency, and efficiency in the health care world and
applauded its efforts to integrate with other programs and initiatives.
Response: We thank these comments regarding our implementation of
the RHQDAPU program.
Comment: A commenter noted that the proposed rule did not reference
the quality-related provisions of the Affordable Care Act (Pub. L. 111-
148) and the Health Care and Education Reconciliation Act of 2010
(HCERA) (Pub. L. 111-152). The Affordable Care Act requires the
Secretary to establish a national quality strategy to include
priorities and goals for quality improvement with input from
stakeholders, such as the NQF.
Response: The timing of the FY 2011 IPPS/LTCH PPS proposed rule did
not allow us to address the many quality-related provisions of the
Affordable Care Act. The Affordable Care Act modified the RHQDAPU
statutory provisions, authorized the Secretary to implement quality-
related programs for various settings of care, and also added new
requirements for collaborative goal setting regarding quality (as noted
by the commenter). The focus of this specific section of this final
rule is the RHQDAPU program, and we are addressing changes to the
RHQDAPU program under the Affordable Care Act in this final rule. We
plan to propose requirements for the Hospital Value-Based Purchasing
(HVBP) program (section 3001 of Affordable Care Act) and other quality-
related Affordable Care Act provisions through future rulemaking.
Additionally, section 3011 of the Affordable Care Act requires the
Secretary to establish and update a national strategy to improve the
delivery of health care services, patient health outcomes and
population health. The initial submission of the national strategy to
Congress must be no later than January 1, 2011. The national strategy
as directed by section 3011 is broader in scope than hospital inpatient
services, which are the focus of the RHQDAPU program. However, the
national strategy may include guidance for future RHQDAPU program
implementation.
b. Hospital Quality Data Reporting Under Section 501(b) of Public Law
108-173
Section 501(b) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), Public Law 108-173, added section
1886(b)(3)(B)(vii) to the Act. This section established the authority
for the RHQDAPU program and revised the mechanism used to update the
standardized payment amount for inpatient hospital operating costs.
Specifically, section 1886(b)(3)(B)(vii)(I) of the Act, before it was
amended by section 5001(a) of Public Law 109-171, provided for a
reduction of 0.4 percentage points to the update percentage increase
(also known as the market basket update) for FY 2005 through FY 2007
for any subsection (d) hospital that did not submit data on a set of 10
quality indicators established by the Secretary as of November 1, 2003.
It also provides that any reduction would apply only to the fiscal year
involved, and would not be taken into account in computing the
applicable percentage increase for a subsequent fiscal year. The
statute thereby established an incentive for IPPS hospitals to submit
data on the quality measures established by the Secretary, and also
built upon the previously established Voluntary Hospital Quality Data
Reporting Program that we described in the FY 2009 IPPS final rule (73
FR 48598).
We implemented section 1886(b)(3)(B)(vii) of the Act in the FY 2005
IPPS final rule (69 FR 49078) and codified the applicable percentage
change in Sec. 412.64(d) of our regulations. We adopted additional
requirements under the RHQDAPU program in the FY 2006 IPPS final rule
(70 FR 47420).

[[Page 50181]]

c. Hospital Quality Data Reporting Under Section 5001(a) of Public Law
109-171
Section 5001(a) of the Deficit Reduction Act of 2005 (DRA), Public
Law 109-171, further amended section 1886(b)(3)(B) of the Act to revise
the mechanism used to update the standardized payment amount for
hospital inpatient operating costs, in particular, by adding new
section 1886(b)(3)(B)(viii) to the Act. Specifically, sections
1886(b)(3)(B)(viii)(I) and (II) of the Act as added by the DRA provide
that the payment update for FY 2007 and each subsequent fiscal year be
reduced by 2.0 percentage points for any subsection (d) hospital that
does not submit quality data in a form and manner, and at a time,
specified by the Secretary. (Section 4102(b)(1)(A) of the American
Recovery and Reinvestment Act of 2009 (Public Law 111-5) and section
3401(a)(2) of the Affordable Care Act (Public Law 111-148) amended
section 1886(b)(3)(B)(viii)(I) of the Act to provide that, beginning in
FY 2015, the reduction will be by one-quarter of such applicable
percentage increase (determined without regard to reductions under
sections 1886(b)(3)(B)(ix), (xi), or (xii) of the Act).) Section
1886(b)(3)(B)(viii)(I) of the Act also provides that any reduction in a
hospital's payment update will apply only with respect to the fiscal
year involved, and will not be taken into account for computing the
applicable percentage increase for a subsequent fiscal year. In the FY
2007 IPPS final rule (71 FR 48045), we amended our regulations at Sec.
412.64(d)(2) to reflect the 2.0 percentage point reduction in the
payment update for FY 2007 and subsequent fiscal years for subsection
(d) hospitals that do not comply with requirements for reporting
quality data, as provided for under section 1886(b)(3)(B)(viii) of the
Act before it was amended by the American Recovery and Reinvestment Act
and the Affordable Care Act.
d. Hospital Quality Data Reporting Under Sections 3001(a)(2) and
3401(a)(2) of Public Law 111-148
Section 3001(a)(2) of the Affordable Care Act, Public Law 111-148,
amended section 1886(b)(3)(B)(viii) of the Act. Specifically, section
3001(a)(2)(A) of the Affordable Care Act amended section
1886(b)(3)(B)(viii)(II) of the Act to state that the Secretary may
require hospitals to submit data on measures that are not used for the
determination of value-based incentive payments under the HVBP program.
Section 3001(a)(2)(C) of the Affordable Care Act amended section
1886(b)(3)(B)(viii)(VII) of the Act to require that the Secretary
establish procedures for making information regarding measures
submitted (instead of data submitted) available to the public. In
addition, section 3001(a)(2)(B) of the Affordable Care Act amended
section 1886(b)(3)(B)(viii)(V) of the Act to limit the requirement that
measures added by the Secretary reflect consensus among affected
parties and, to the extent feasible and practicable, include measures
set forth by one or more national consensus building entities to
payments for FYs 2008 through 2012.
Section 3001(a)(2)(D) of the Affordable Care Act added section
1886(b)(3)(B)(viii)(IX) of the Act to require, for payments beginning
with FY 2013, each measure specified by the Secretary under section
1886(b)(3)(B)(viii) of the Act to be endorsed by the entity with a
contract under section 1890(a) regarding consensus entities (the
``consensus entity'') except, 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 consensus
entity, the Secretary may specify a measure that is not endorsed so
long as due consideration is given to measures that have been endorsed
or adopted by a consensus organization identified by the Secretary.
Section 3001(a)(2)(D) of the Affordable Care Act also added new
sections 1886(b)(3)(B)(viii)(VIII), 1886(b)(3)(B)(viii)(X) and
1886(b)(3)(B)(viii)(XI) to the Act, which require the Secretary to do
the following, respectively: (1) Provide for such risk adjustment as
the Secretary determines appropriate to maintain incentives for
hospitals to treat patients with severe illnesses or conditions with
respect to quality measures for outcomes of care effective for payments
beginning with FY 2013; (2) to the extent practicable and with input
from consensus organizations and other stakeholders, take steps to
ensure that the measures specified by the Secretary under
1886(b)(3)(B)(viii) of the Act are coordinated and aligned with quality
measures applicable to physicians under section 1848(k) of the Act and
other providers of services and suppliers under Medicare; and (3)
establish a process to validate measures specified under section
1886(b)(3)(B)(viii) of the Act, which includes the auditing of a number
of randomly selected hospitals sufficient to ensure validity of the
reporting program under this clause as a whole and shall provide a
hospital with an opportunity to appeal the validation of measures
reported by such hospital.
Additionally, section 3401(a)(2) of the Affordable Care Act amended
section 1886(b)(3)(B)(viii)(I) of the Act by adding the phrase ``of
such applicable percentage increase (determined without regard to
clause (ix), (xi), or (xii))'' after the word ``one-quarter'' so that,
beginning in FY 2015, the reduction under the RHQDAPU program will be
by one-quarter of such applicable percentage increase determined
without regard to other reductions in the annual payment update set
forth in sections 1886(b)(3)(B)](ix), (xi), or (xii) of the Act.
e. Quality Measures
Section 1886(b)(3)(B)(viii)(III) of the Act requires that the
Secretary expand the ``starter set'' of 10 quality measures that was
established by the Secretary as of November 1, 2003, as the Secretary
determines to be appropriate for the measurement of the quality of care
furnished by a hospital in inpatient settings. In expanding this set of
measures, section 1886(b)(3)(B)(viii)(IV) of the Act requires that,
effective for payments beginning with FY 2007, the Secretary begin to
adopt the baseline set of performance measures as set forth in a report
issued by the Institute of Medicine (IOM) of the National Academy of
Sciences under section 238(b) of Public Law 108-173.\10\
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\10\ Institute of Medicine, ``Performance Measurement:
Accelerating Improvement,'' December 1, 2005, available at: http://www.iom.edu/CMS/3809/19805/31310.aspx. IOM set forth these baseline
measures in a November 2005 report. However, the IOM report was not
released until December 1, 2005 on the IOM Web site.
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Section 1886(b)(3)(B)(viii)(V) of the Act, as amended by section
3001(a)(2)(B) of the Affordable Care Act, requires that, effective for
payments for FYs 2008 through 2012, the Secretary add other quality
measures that reflect consensus among affected parties, and to the
extent feasible and practicable, have been set forth by one or more
national consensus building entities. The NQF is a voluntary consensus
standard-setting organization with a diverse representation of
consumer, purchaser, provider, academic, clinical, and other health
care stakeholder organizations. The NQF was established to standardize
health care quality measurement and reporting through its consensus
development process. We have generally adopted NQF-endorsed measures.
However, we believe that consensus among affected parties also can be
reflected by other means,

[[Page 50182]]

including consensus achieved during the measure development process,
consensus shown through broad acceptance and use of measures, and
consensus through public comment.
As discussed previously, section 3001(a)(2) of the Affordable Care
Act amended section 1886(b)(3)(B)(viii) of the Act to provide a
different standard for quality measures included in the RHQDAPU program
for payments beginning with FY 2013. Under section
1886(b)(3)(B)(viii)(IX) of the Act, for payments beginning with FY
2013, each measure specified by the Secretary must be endorsed by a
consensus entity, currently NQF, except in certain circumstances.
Specifically, 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 consensus entity, the
Secretary may specify a measure that is not endorsed by the consensus
entity if due consideration is given to measures that have been
endorsed or adopted by a consensus organization identified by the
Secretary.
Section 1886(b)(3)(B)(viii)(VI) of the Act authorizes the Secretary
to replace any quality measures or indicators in appropriate cases,
such as where all hospitals are effectively in compliance with a
measure, or the measures or indicators have been subsequently shown to
not represent the best clinical practice. Thus, the Secretary is
granted broad discretion to replace measures that are no longer
appropriate for the RHQDAPU program.
In the FY 2007 IPPS final rule, we began to expand the RHQDAPU
program measures by adding 11 quality measures to the 10-measure
starter set to establish an expanded set of 21 quality measures for the
FY 2007 payment determination (71 FR 48033 through 48037, 48045).
In the CY 2007 OPPS/ASC final rule (71 FR 68201), we adopted 6
additional quality measures for the FY 2008 payment determination, for
a total of 27 measures. Two of these measures (30-Day Risk Standardized
Mortality Rates for Heart Failure and 30-Day Risk Standardized
Mortality Rates for AMI) were calculated using existing administrative
Medicare claims data; thus, no additional data submission by hospitals
was required for these two measures. The measures used for the FY 2008
payment determination included, for the first time, the HCAHPS patient
experience of care survey.
In the FY 2008 IPPS final rule (72 FR 47348 through 47358) and the
CY 2008 OPPS/ASC final rule with comment period (72 FR 66875 through
66877), we added three additional process measures to the RHQDAPU
program measure set. (These three measures are SCIP-Infection-4:
Cardiac Surgery Patients with Controlled 6AM Postoperative Serum
Glucose, SCIP-Infection-6: Surgery Patients with Appropriate Hair
Removal, and Pneumonia 30-day mortality (Medicare patients).) The
addition of these 3 measures brought the total number of RHQDAPU
program measures to be used for the FY 2009 payment determination to 30
(72 FR 66876). The 30 measures used for the FY 2009 annual payment
determination are listed in the FY 2009 IPPS final rule (73 FR 48600
through 48601).
For the FY 2010 payment determination, we added 15 new measures to
the RHQDAPU program measure set and retired 1 measure from the program
(PN-1: Oxygenation Assessment). Of the new measures, 13 were adopted in
the FY 2009 IPPS final rule (73 FR 48602 through 48611) and 2
additional measures were finalized in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68780 through 68781). This resulted in an
expansion of the RHQDAPU program measures from 30 measures for the FY
2009 payment determination to 44 measures for the FY 2010 payment
determination. The RHQDAPU program measures for the FY 2010 payment
determination consist of: 26 chart-abstracted process measures, which
measure quality of care provided for Acute Myocardial Infarction (AMI),
Heart Failure (HF), Pneumonia (PN), and Surgical Care Improvement
(SCIP); 6 claims-based measures, which evaluate 30-day mortality and
30-day readmission rates for AMI, HF, or PN; 9 claims-based AHRQ
patient safety indicators and inpatient quality indicators; 1 claims-
based nursing sensitive measure; 1 structural measure that assesses
participation in a systematic database for cardiac surgery; and the
HCAHPS patient experience of care survey. The measures are listed in
the FY 2009 IPPS final rule (73 FR 46809) and in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68781).
On December 31, 2008, we advised hospitals that they would no
longer be required to submit data for the RHQDAPU program measure AMI-
6-Beta blocker at arrival, beginning with discharges occurring on April
1, 2009. This change was based on the evolving evidence regarding AMI
patient care, as well as changes in the American College of Cardiology/
American Heart Association (ACC/AHA) practice guidelines for ST-segment
elevation myocardial infarction and non-ST segment elevation myocardial
infarction, upon which AMI-6 is based. We took action to remove the
measure from reporting initiatives based on the lack of support by the
measure developer and the clinical and scientific considerations
described in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43863).
We had previously discussed considerations relating to retiring or
replacing measures in the FY 2008 IPPS final rule with comment period
and the FY 2009 IPPS final rule, including the ``topping out'' of
hospitals' performance under a measure (72 FR 47358 through 47359 and
73 FR 48603 through 48604, respectively). However, in this instance,
the measure no longer ``represent[s] the best clinical practice,'' an
additional basis under section 1886(b)(3)(B)(viii)(VI) of the Act for
retiring a measure. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we
formally retired the AMI-6 measure from the RHQDAPU program for the FY
2011 payment determination and subsequent payment determinations.
For the FY 2011 payment determination, we retained 41 of the FY
2010 quality measures; harmonized 2 FY 2010 RHQDAPU program quality
measures (combining PSI 04--Death among surgical patients with
treatable serious complications; and Nursing Sensitive--Failure to
rescue into a single measure (Death among surgical inpatients with
serious, treatable complications); added 2chart-abstracted measures
(SCIP-Infection-9: Postoperative Urinary Catheter Removal on Post
Operative Day 1 or 2 and SCIP-Infection-10: Perioperative Temperature
Management); and added 2 structural measures: (1) Participation in a
Systematic Clinical Database Registry for Stroke Care; and (2)
Participation in a Systematic Clinical Database Registry for Nursing
Sensitive Care) (74 FR 43868 through 43873). The 46 measures we adopted
for the FY 2011 payment determination are:
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[GRAPHIC] [TIFF OMITTED] TR16AU10.036

BILLING CODE 4120-01-C
f. Maintenance of Technical Specifications for Quality Measures
The technical specifications for the RHQDAPU program measures, or
links to Web sites hosting technical specifications, are contained in
the CMS/The Joint Commission Specifications Manual for National
Hospital Inpatient Quality Measures (Specifications Manual). This
Specifications Manual is posted on the CMS QualityNet Web site at
https://www.QualityNet.org/. We maintain the technical specifications
by updating this Specifications Manual semiannually, or more frequently
in unusual cases, and include detailed instructions and calculation
algorithms for hospitals to use when collecting and submitting data on
required measures. These semiannual updates are accompanied by
notifications to users, providing sufficient time between the change
and the effective date in order to allow users to incorporate changes
and updates to the specifications into data collection systems.
We did not receive any public comments on this section and we will
continue to use this process to maintain the technical specifications
for the RHQDAPU program measures.
g. Public Display of Quality Measures
Section 1886(b)(3)(B)(viii)(VII) of the Act, as amended by section
3001(a)(2) of the Affordable Care Act, requires that the Secretary
establish procedures for making information regarding measures
submitted available to the public after ensuring that a hospital has
the opportunity to review its data before they are made public. To meet
this requirement, data from the RHQDAPU program are typically displayed
on CMS Web sites such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov after a 30-day preview period. An
interactive Web tool, this Web site assists beneficiaries by providing
information on hospital quality of care to those who need to select a
hospital. It further serves to encourage beneficiaries to work with
their doctors and hospitals to discuss the quality of care hospitals
provide to patients, thereby providing an additional incentive to
hospitals to improve the quality of care that they furnish. The RHQDAPU
program currently includes process of care measures, risk-adjusted
outcome measures, the HCAHPS patient experience-of-care survey, and

[[Page 50185]]

structural measures, all of which are featured on the Hospital Compare
Web site.
However, information that may not be relevant to or understood by
beneficiaries and information for which there are unresolved display
issues or design considerations for inclusion on Hospital Compare may
be made available on other CMS Web sites that are not intended to be
used as an interactive Web tool, such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the information in this
manner, though not on the Hospital Compare Web site, allows CMS to meet
the requirement under section 1886(b)(3)(B)(viii)(VII) of the Act for
establishing procedures to make quality data used for RHQDAPU payment
determinations available to the public following a preview period. In
such circumstances, affected parties are notified via CMS listservs,
CMS e-mail blasts, national provider calls, and QualityNet
announcements regarding the release of preview reports followed by the
posting of data on a Web site other than Hospital Compare.
Comment: One commenter supported CMS' current policy of identifying
quality measures rates based on fewer than 25 cases as potentially
unreliable for judging a hospital's performance when displaying data on
Hospital Compare. The commenter indicated that this is currently
accomplished by footnoting the data but it would be better to simply
not display the rates that are based on fewer than 25 cases.
Response: We thank the commenter for the suggestion. Although data
display and Web site design issues are not subject to the rulemaking
process, we will take this suggestion under consideration for future
releases of the Hospital Compare Web site.
Comment: One commenter requested that CMS describe in greater
detail the rationale for publicly reporting measures on CMS Web sites
other than Hospital Compare on a case-by-case basis.
Response: Section 1886(b)(3)(B)(viii)(VII) of the Act requires that
the Secretary establish procedures for making information regarding
measures submitted for the RHQDAPU payment determinations available to
the public after ensuring that a hospital has the opportunity to review
its data before they are made public. While we strive to make as much
of this information available on the Hospital Compare Web site, there
are instances where we need further time to develop a method of
displaying the information so that it does not confuse or mislead
consumers intending to use the data in healthcare decision making. To
satisfy the statutory requirement for transparency of the information
used to make RHQDAPU payment determinations available to the public, we
would display the data on another CMS Web site such as http://www.cms.gov, but not on the Hospital Compare Web site, which is meant
to be a consumer oriented decision tool. Once an appropriate display
mechanism has been determined, the information would be added to the
Hospital Compare Web site.
We will continue to use this public display process for the RHQDAPU
program.
2. Retirement of RHQDAPU Program Measures
a. Considerations in Retiring Quality Measures From the RHQDAPU Program
Unless stated otherwise, we generally retain measures from the
current year's RHQDAPU program measure set for subsequent years'
measure sets. We have previously retired one measure, PN-1: Oxygenation
Assessment for Pneumonia, from the RHQDAPU program on the basis of high
unvarying performance among hospitals, as measures with very high
performance among hospitals present little opportunity for improvement,
and do not provide meaningful distinctions in performance for
consumers. We also have retired one measure from the program because it
no longer ``represent[ed] the best clinical practice,'' as stated under
section 1886(b)(3)(B)(viii)(VI) of the Act. In this latter situation,
we stated that when there is reason to believe that the continued
collection of a measure as it is currently specified raises potential
patient safety concerns that it is appropriate for CMS to take
immediate action to remove a measure from the RHQDAPU program and not
wait for the annual rulemaking cycle. Therefore, in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43864 and 43865), we stated that we
would promptly retire such measures followed by subsequent confirmation
of the retirement in the next IPPS rulemaking. When we do so, we will
notify hospitals and the public through the usual hospital and QIO
communication channels used for the RHQDAPU program, which include memo
and e-mail notification and QualityNet Web site articles and postings.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we invited
public comment regarding additional RHQDAPU program measures that
should be considered for retirement along with criteria that should be
used for retiring measures. In the FY 2010 IPPS/RY 2010 LTCH PPS final
rule, commenters recommended 11 RHQDAPU program measures for retirement
for various reasons (74 FR 43865). Among the criteria suggested by
commenters that CMS should consider when determining whether to retire
RHQDAPU program measures were: (1) Measure performance among hospitals
is so high and unvarying that meaningful distinctions and improvements
in performance can no longer be made; (2) performance or improvement on
a measure does not result in better patient outcomes; (3) a measure
does not align with current clinical guidelines or practice; (4) the
availability of a more broadly applicable (across settings,
populations, or conditions) quality measure for the topic; (5) the
availability of a measure that is more proximal in time to desired
patient outcomes for the particular topic; (6) the availability of a
measure that is more strongly associated with desired patient outcomes
for the particular topic; (7) collection and/or public reporting of a
measure leads to negative unintended consequences other than patient
harm. We agreed with commenters that these criteria should be among
those considered in evaluating current RHQDAPU program measures for
retirement. We again invited commenters to submit suggestions for
additional measure retirement criteria for CMS to consider.
Comment: One commenter asked for the CMS definition of
``retirement'' and the relationship of retired measures to the RHQDAPU
program.
Response: Retirement of a measure from the RHQDAPU program
constitutes permanent removal of a measure from the RHQDAPU program
measurement set for future payment determinations.
Comment: Some commenters agreed with CMS' quality measure
retirement criteria including measures with consistent high performance
(topped-out), measures not supported by evidence, measures that no
longer represent the best clinical practice, and measures that have
become a cause for potential patient safety concerns. A commenter
recommended that CMS add the following two criteria to its list of
criteria to be considered when determining whether to retire a RHQDAPU
measure: (1) The measure should be modified or deleted if new clinical
evidence exists that demonstrates that the measure should be modified
or deleted; and (2) a previous process measure should be retired in
favor of a new risk-adjusted outcomes measure. Some commenters

[[Page 50186]]

suggested CMS collaborate with organizations such as the NQF and the
HQA in reviewing all current RHQDAPU quality measures for retirement
determinations.
A few commenters supported the retirement of topped-out measures
but some commenters were concerned that the retirement of topped-out
measures would lead to subsequent declining performance. The commenters
further suggested that the process measures are also accountability
measures and should not be retired just because they are topped-out.
Some commenters recommended that CMS should continue data collection
for topped out measures on a 3-year cycle, or consider incorporating
the measure into a meaningful composite measure set. Another commenter
recommended that CMS conduct demonstration projects to ascertain the
impact of the proposed measures for retirement and assess the
organizations' ability to sustain improvement over time for measures
that are considered to be taken out of the RHQDAPU program. The
commenter believed that demonstration projects would enable the cycling
of measures in and out of the RHQDAPU program as desired for public
reporting and incentive payment programs.
Response: We thank the commenters for sharing these suggestions and
criteria for quality measure retirement. We will consider the
commenters' recommendations for evaluating current RHQDAPU program
measures for retirement. We agree that changing scientific evidence
should be considered in deciding whether to modify or retain a measure.
We also agree that risk-adjusted outcome measures could potentially
serve to replace process measures, although we believe other factors
should be considered such as the performance on the process measures
and the degree to which the measures address the same populations.
While sustaining quality improvement gains for measures is important,
it currently is not feasible for us to conduct continued surveillance
on measures that have been retired from the RHQDAPU program. Further,
we do not believe that the one measure that we have retired requires
continued surveillance. This is because measuring oxygen saturation is
part of ongoing monitoring functions built into equipment used for all
hospitalized patients, and therefore would not suffer a decline in
practice from lack of inclusion in this reporting program. We will
consider the feasibility of the commenters' suggestions to periodically
monitor performance of measures that we may subsequently retire. As for
collaboration with NQF and HQA, we consider changes in NQF endorsement
status for measures adopted and considered for RHQDAPU, and as HQA
members, we participate in HQA activities, which include reviewing
measures which may be considered for retirement. We will consider the
feasibility and appropriateness of the suggestion to use Medicare
demonstrations as a potential mechanism to monitor measure performance
for measures that may in the future be retired from the RHQDAPU program
and suffer a decline in desired practices as a result of retirement.
b. Retirement of Quality Measures Under the RHQDAPU Program for the FY
2011 Payment Determination and Subsequent Years
In the FY 2009 IPPS final rule for the FY 2010 payment
determination, we adopted nine measures that were developed by the
Agency for Healthcare Research and Quality (AHRQ), and in the FY 2010
IPPS/RY 2010 LTCH PPS we subsequently retained these measures for the
FY 2011 payment determination. One of these measures was the AHRQ
Mortality for Selected Surgical Procedures Composite, which is
comprised of measures from the AHRQ Inpatient Quality Indicator (IQI)
measure set. In late June of 2009, following an NQF steering committee
evaluation of the AHRQ Mortality for Selected Surgical Procedures
composite, the AHRQ issued guidance \11\ that this composite is ``not
recommended for comparative reporting'' as specified due to significant
evidence gaps, and that these significant evidence gaps are unlikely to
be addressed with further development or validation work. This guidance
is available at: http://www.qualityindicators.ahrq.gov/downloads/publications/AHRQ%20QI%20Guide%20to%20Comparative%20Reporting%20v10.pdf.
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\11\ AHRQ. Guidance on Using the AHRQ QI for Hospital-Level
Comparative Reporting. June 2009. http://www.qualityindicators.ahrq.gov/downloads/publications/AHRQ%20QI%20Guide%20to%20Comparative%20Reporting%20v10.pdf.
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For this reason, we proposed to retire the Mortality for Selected
Procedures Composite from the RHQDAPU program measure set for the FY
2011 payment determination and for subsequent payment determinations
because the measure is not considered suitable for purposes of
comparative reporting by the measure developer. We will neither
calculate this measure for the FY 2011 payment determination, nor
display results for this measure on Hospital Compare. We invited
comment on our proposal to retire this measure from the RHQDAPU program
for the FY 2011 payment determination and for subsequent payment
determinations. We also invited commenters to submit suggestions and
rationales for retirement of other RHQDAPU program measures.
Comment: Commenters overwhelmingly supported the proposed
retirement of the Mortality for Selected Procedures Composite from the
RHQDAPU program measure set for the FY 2011 payment determination and
for subsequent payment determinations due to its unsuitability for
comparative reporting.
Response: We thank the commenters for their support and we are
finalizing the retirement of this measure for the FY 2011 and
subsequent payment determinations.
Set out below are the 45 RHQDAPU program quality measures for the
FY 2011 payment determination reflecting our retirement of 1 measure:
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3. Expansion Plan for Quality Measures for the FY 2012, FY 2013, and FY
2014 Payment Determinations
a. Considerations in Expanding and Updating Quality Measures Under the
RHQDAPU Program
In the FY 2009 IPPS final rule (73 FR 48613) and the FY 2010 IPPS/
RY 2010 LTCH PPS final rule (74 FR 43866 through 43869), we
acknowledged the data collection burden for hospitals participating in
the RHQDAPU program, and reiterated our desire to expand the RHQDAPU
program measure set while minimizing burden and seeking to provide
alternative mechanisms for data submission for the RHQDAPU program. In
the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we also stated that in
future expansions and updates to the RHQDAPU program measure set, we
would be taking into consideration several important goals. These goals
include: (a) Expanding the types of measures beyond process of care
measures to include an increased number of outcome measures, efficiency
measures, and patients' experience-of-care measures; (b) expanding the
scope of hospital services to which the measures apply; (c) considering
the burden on hospitals in collecting chart-abstracted data; (d)
harmonizing the measures used in the RHQDAPU program with other CMS
quality programs to align incentives and promote coordinated efforts to
improve quality; (e) seeking to use measures based on alternative
sources of data that do not require chart abstraction or that utilize
data already being reported by many hospitals, such as data that
hospitals report to clinical data registries, or all-payer claims data
bases; and (f) weighing the relevance and utility of the measures
compared to the burden on hospitals in submitting data under the
RHQDAPU program.
Specifically, we give priority to quality measures that assess
performance on: (a) Conditions that result in the greatest mortality
and morbidity in the Medicare population; (b) conditions that are high
volume and high cost for the Medicare program; and (c) conditions for
which wide cost and treatment variations have been reported, despite
established clinical guidelines. We have used and continue to use these
criteria to guide our decisions regarding what measures to add to the
RHQDAPU program measure set. In addition, in selecting measures, we
seek to address the six quality aims of effective, safe, timely,
efficient, patient-centered, and

[[Page 50189]]

equitable healthcare. Current and long term priority topics include:
prevention and population health; safety; chronic conditions; high cost
and high volume conditions; elimination of health disparities;
healthcare-associated infections and other adverse healthcare outcomes;
improved care coordination; improved efficiency; improved patient and
family experience of care; effective management of acute and chronic
episodes of care; reduced unwarranted geographic variation in quality
and efficiency; and adoption and use of interoperable health
information technology.
These criteria, priorities, and goals are consistent with section
1886(b)(3)(B)(viii)(X) of the Act, as added by section 3001(a)(2)(D) of
the Affordable Care Act, which requires the Secretary, to the extent
practicable and with input from consensus organizations and other
stakeholders, to take steps to ensure that the RHQDAPU measures are
coordinated and aligned with quality measures applicable to physicians
and other providers of services and suppliers under Medicare.
RHQDAPU program measures were initially based solely on a
hospital's submission of chart-abstracted quality measure data.
However, in recent years we have adopted measures that do not require
chart abstraction, including structural and claims-based quality
measures which we can calculate using other data sources. This supports
our goal of expanding the measures for the RHQDAPU program while
minimizing the burden on hospitals and, in particular, without
significantly increasing the chart abstraction burden.
In addition to claims-based and structural measures, we previously
noted that registries \12\ and electronic health records (EHRs) are
potential alternative sources of hospital data for the RHQDAPU program.
We observed that many hospitals already submit data to and participate
in existing registries, and that registries often capture outcome
information and provide ongoing quality improvement feedback to
registry participants. We envisioned that instead of requiring
hospitals to submit the same data to CMS that many hospitals are
already submitting to registries, that we would collect the data
directly from the registries. This could enable the expansion of the
RHQDAPU program measure set without increasing the burden of data
collection for those hospitals participating in the registries. We
cited as examples of registries actively used by hospitals the Society
of Thoracic Surgeons (STS) Cardiac Surgery Registry (with approximately
90 percent participation by cardiac surgery programs), the AHA Stroke
Registry (with approximately 1200 hospitals participating), and the
American Nursing Association (ANA) Nursing Sensitive Measures Registry
(with approximately 1400 hospitals participating). In the FY 2009 IPPS
final rule (73 FR 48608 through 48609), we adopted the first RHQDAPU
program measure related to registries: Participation in a Systematic
Database for Cardiac Surgery. Subsequently, in the FY 2010 IPPS/RY 2010
LTCH PPS (74 FR 43870 through 43872), we adopted two additional
structural measures of registry participation for the topics of Stroke
and Nursing Sensitive Care. We continue to evaluate the feasibility of
leveraging registry-based data collection mechanisms for the RHQDAPU
program.
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\12\ A registry is a collection of clinical data for purposes of
assessing clinical performance, quality of care, and opportunities
for quality improvement.
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We also stated our intention to explore mechanisms for data
submission using EHRs (73 FR 48614; 74 FR 43866, 43892). Establishing
such a system will require interoperability between EHRs and CMS data
collection systems, additional infrastructure development on the part
of hospitals and CMS, and the adoption of standards for the capturing,
formatting, and transmission of data elements that make up the
measures. However, once these activities are accomplished, the adoption
of measures that rely on data obtained directly from EHRs will enable
us to expand the RHQDAPU program measure set with less cost and burden
to hospitals.
In the FY 2009 IPPS final rule, we adopted nine AHRQ measures for
the RHQDAPU program, one of which is now retired for the FY 2011
payment determination and subsequent payment determinations in this
final rule. We stated that we would initially calculate the measures
using Medicare claims data (73 FR 48608). However, we also stated that
we remained interested in using all-payer claims data to calculate them
and that we might propose to collect such data in the future. In the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24169), we invited
input and suggestions on how all-payer claims data can be collected and
used by CMS to calculate these measures, as well as on additional AHRQ
measures that we should consider adopting for future RHQDAPU program
payment determinations.
In summary, we noted in the FY 2011 IPPS/LTCH PPS proposed rule
that we will continue to pursue goals regarding the expansion and
updating of quality measures under the RHQDAPU program while minimizing
burden. We will take into account the public comments we receive on the
possible uses of EHRs, registries, and all-payer claims data in the
RHQDAPU program. We also will consider the measure selection criteria
suggested by various commenters in prioritizing and selecting quality
measures for the future.
Comment: A few commenters supported the use of EHR-based data
collection. One commenter was concerned that the clinical quality
measures in the RHQDAPU program do not align with the electronic
quality measure reporting requirements as part of the meaningful use
criteria under the HITECH EHR incentive program rule.
Response: We appreciate these supportive comments for EHR-based
data collection as an alternative data source for quality measures. One
of our priorities in the RHQDAPU program is to align clinical quality
measures in the RHQDAPU program with the electronic quality measure
reporting requirements under the meaningful use criteria under the
HITECH EHR Incentive program in the future, and to specify current
RHQDAPU measures for EHR-based collection. We note that some of the
RHQDAPU program quality measures do not lend themselves to EHR
reporting, for example HCAHPS experience of care measures. We are
mindful of the need for alignment of the clinical measures used in the
two programs as more measures are implemented in the future.
Comment: Several commenters stated that CMS should delay the
implementation of additional quality measures and spend time
prioritizing future electronic quality measures during this transition
to EHR.
Response: Given the time that will be needed for building of
infrastructure, interoperability, testing and development of e-
specifications of measures, and the proposal and finalization of
clinical quality measures, we believe we should not wait for the
complete transition to EHR-based measure collection in order to move
forward with the expansion of the RHQDAPU program. In determining
whether to adopt new quality measures for the RHQDAPU program, we weigh
the potential benefit of improvement that would result from reporting a
given measure against the potential resource burden associated with
reporting a measure. However, in the future, our intent is to develop
and specify electronic measures of quality that will be aligned and
meet the requirements for both programs.

[[Page 50190]]

Comment: One commenter questioned the value of claims-based and
registry-based data collection when EHR data collection is fully
implemented.
Response: We believe that claims may still be needed to identify
prior events and diagnoses for measures that require look-back periods,
involving the matching of data for a single patient over long periods
of time (for example, 1 year of prior history) across multiple
settings. EHR data provides a cross-sectional snapshot of data, and
such matching is not possible with a snapshot of data from a single
provider or setting because it would not have all events and diagnoses
for a particular patient outside of the particular setting or episode
of care. This is possible, however, when claims for Medicare
beneficiaries are utilized for such historical information across
providers. Such data could be used to supplement cross-sectional
clinical EHR data. Furthermore, registries provide services beyond data
collection, such as quality improvement support, feedback and best
practices.
Comment: A commenter requested that CMS only implement measures
that are aligned with identical technical specifications as other
national data collection projects. For instance, the proposed Stroke
registry measure has different population definitions from the Joint
Commission stroke core measures, Disease certification program and
designated Stroke Centers.
Response: We agree that measures used in the RHQDAPU program should
be based on a single set of harmonized population definitions and
measure specifications. As discussed in later sections, we are not
finalizing the registry-based submission mechanism proposal.
Comment: One commenter asked for clarification on the requirements
for measures that are calculated based on ICD-9 CM codes as well as the
timeline and impact of transitioning to ICD-10-CM codes.
Response: CMS has announced the transition to ICD-10-CM codes
effective October 1, 2013, at the start of FY 2014. Prior to that date,
we will be respecifying measures that are implemented in quality data
reporting programs to incorporate ICD-10-CM codes.
Comment: Several commenters noted that CMS' intent to reduce burden
by proposing different reporting mechanism may in fact create more
burden on hospitals. Hospitals are most familiar with chart
abstraction.
Response: We agree with commenters that hospitals are most familiar
with chart abstraction as a data collection method. However, we also
recognize that this is a burdensome mechanism. Therefore, we believe,
that it is desirable to leverage other collection mechanisms,
especially where they are already actively being used by hospitals. We
introduced two alternative reporting mechanisms in the proposed rule,
the National Healthcare Safety Network (NHSN) and registry-based
reporting. Although we are not adopting registry-based reporting, we
envisioned that most hospitals would already be reporting one of the
measures sets to at least one registry. Accordingly, we anticipated
that in most cases there would be no new reporting required, only the
selection of a registry to which hospitals were already reporting.
With respect to the NHSN, many States are introducing requirements
that hospitals report HAI data to the Centers for Disease Control and
Prevention (CDC) via NHSN. Although we could have required that
hospitals report HAI measures to CMS via chart abstraction, this would
require duplicate effort on the part of hospitals submitting data
through the NHSN on HAIs. Therefore, we proposed and are finalizing the
CDC NHSN as the mechanism to submit data on HAI measures. In this way,
we have aligned the CDC reporting efforts, and reporting mandated by
many States. We believe that this is good policy and something
commenters have urged.
Comment: A number of commenters supported the use of registries as
an alternative source of hospital-specific data on quality measures and
as a means to reduce hospital burden. Several commenters indicated that
the use of registries to collect hospital-level data would reduce
administrative burden and ensure appropriate risk-adjustment for
quality improvement and public reporting purposes, as well as other
benefits, including broadening the information for quality improvement
and Hospital Compare, but cautioned that registry data could weaken the
validity and reliability of the information unless strict standards for
data quality were imposed. A commenter suggested that CMS consider
additional measures that could be compiled from registry data.
Response: We thank the commenters for acknowledging the potential
efficiencies and quality improvement support that could be gained
through registry-based quality data reporting. We agree that standards
for data quality would be necessary should CMS adopt registry-based
measures for RHQDAPU in the future. The qualification criteria we
proposed for registries were meant to establish standards for data
quality for the measures we proposed to receive from registries. We
will continue to pursue registry-based data submission as an
alternative mechanism for receiving data for quality measures adopted
into the RHQDAPU measurement set.
Comment: Many commenters opposed the inclusion of quality measures
that require participation in registries. Several commenters expressed
concern regarding the possibility that they may be required to
participate in proprietary registries in the future. These commenters
saw registry-based data collection as costly and labor intensive
because many of the measures collected by registries require chart
abstraction. Some commenters recommended that CMS first standardize the
data collection and submission process across registries to ensure data
quality. One commenter asked for clarification on how would the
registry-based measures which are only used by a subset of hospitals be
utilized in a value based purchasing program. Some commenters
encouraged CMS to promote the study of regional variation to enable
comparisons within/across systems and among regional registries in
order to give hospitals more options in data reporting.
Response: We are not finalizing the registry-based submission
proposal. Among other reasons for not finalizing this proposal, we
agree that it would be difficult to use the measures for value based
purchasing if only a subset of hospitals with such cases report the
measures, as the commenter suggests. Regional registries may be
appropriate for registry-based submission, so long as there are a
sufficient number of other registries to allow submission nationwide.
We agree with the importance of standardizing data collection and
submission processes by registries. Many hospitals are currently
participating in a number of registries that collect data on quality
measures that are topics of interest to us. We did not intend to
require hospitals to participate in a proprietary registry, but rather
to leverage existing participation in registries as an efficient
alternative source from which to collect the data. However, we
acknowledge the commenters' concern regarding the cost and labor
associated with participation in certain registries which may make this
alternative mechanism for data submission less feasible for some
hospitals.
In considering registry-based submission for the future, we will
consider whether registry-based data collection should be one means,
but not an exclusive means, of submitting data for RHQDAPU quality
measures.

[[Page 50191]]

Comment: Some commenters encouraged CMS to look to the National
Priorities Partnership goals as a framework for the types of measures
that should be included in the RHQDAPU program. Another commenter
suggested the RHQDAPU program should only include those quality
measures that meet a high threshold of accountability criteria. Another
commenter stated CMS should develop a core measure set for inclusion in
the pay-for-performance program.
Response: The National Priorities Partnership is a 28 member
organization convened by the NQF for the purpose of identifying
improvement goals and action steps for the U.S. healthcare system. We
are a member of the National Priorities Partnership and participate in
its framework-setting activity. Our measure selection activity and
measure development activity takes into account the priorities
established by this framework as well as other criteria described
earlier. Since measure selection for the HVBP program is dependent upon
the pool of measures that have been adopted for the RHQDAPU program,
the measures to be selected for inclusion in the HVBP program would be
guided by these same frameworks and criteria.
Comment: Several commenters stated that measures selected for the
RHQDAPU program should be both endorsed by the NQF and adopted by the
HQA. Some commenters suggested that these steps were required by the
Deficit Reduction Act of 2005 (DRA).
Response: Section 1886(b)(3)(B)(viii)(V) of the Act, as added by
the DRA and prior to the amendment made by section 3001(a)(2)(B) of the
Affordable Care Act, requires that, effective for payments beginning
with FY 2008, the Secretary add quality measures that reflect consensus
among affected parties and, to the extent feasible and practicable,
have been set forth by one or more national consensus building
entities. This provision does not require that the measures we adopt
for the RHQDAPU program be endorsed by any particular entity, and we
believe that consensus among affected parties can be reflected by means
other than endorsement by a voluntary consensus organization, including
consensus achieved during the measure development process, consensus
shown through broad acceptance and use of measures, and consensus
through public comment (74 FR 24165 through 24166). Nevertheless, we
have stated on numerous occasions that we prefer quality measures that
are endorsed by the NQF. The NQF uses a formal consensus development
process. As the NQF notes on its Web site at: http://www.qualityforum.org/Measuring_Performance/Consensus_Development_Process.aspx, it has been recognized as a voluntary consensus
standards-setting organization as defined by the National Technology
Transfer and Advancement Act of 1995 (Pub. L. 104-113) (NTTAA) and
Office of Management and Budget Circular A-119. We are unaware of any
other organizations that qualify as an NTTAA consensus organization for
the endorsement of quality measures.
We also take into consideration the measures adopted by the HQA as
well as an array of input from the public. The HQA is a national
public-private collaboration that is committed to making meaningful,
relevant, and easily understood information about hospital performance
accessible to the public and to informing and encouraging efforts to
improve quality. We appreciate HQA's integral efforts to improve
hospital quality of care and its support of our public quality
reporting programs. As discussed previously, section 3001(a)(2) of the
Affordable Care Act amended section 1886(b)(3)(B)(viii)(V) of the Act
and limited its applicability effective for payments for FYs 2008
through 2012. However, section 3001(a)(2) of the Affordable Care Act
added a new section 1886(b)(3)(B)(viii)(IX) to the Act. This provision
requires, for payments beginning with FY 2013, that each measure
specified by the Secretary be endorsed by a consensus entity, except in
certain circumstances. 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 consensus entity, the
Secretary may specify a measure that is not endorsed by the consensus
entity if due consideration is given to measures that have been
endorsed or adopted by a consensus organization identified by the
Secretary.
In the past, we have proposed to add new RHQDAPU program measures
for one year's payment determination in a given rulemaking cycle.
Although in prior years we have identified various measures for future
consideration, we have not proposed or finalized measures for RHQDAPU
beyond those to be collected for the purpose of the next sequential
payment determination. In the FY 2011 IPPS/LTCH PPS proposed rule (75
FR 23965), we proposed an expansion to the RHQDAPU program that will
take place over 3 payment years, and proposed to add measures not only
for the FY 2012 payment determination, but also for FY 2013 and FY 2014
payment determinations. To the extent we finalize some or all of these
proposed measures this year, we believe that we will be providing
greater certainty for hospitals to plan to meet future reporting
requirements and implement related quality improvement efforts. We will
also have more time to prepare, organize and implement the necessary
infrastructure to collect data on the measures and make payment
determinations. Finally, in section IV.A.5.a.(2) of the proposed rule
(75 FR 23985), we discussed a proposal to make RHQDAPU payment
determinations beginning with FY 2013 using, in part, a consecutive
calendar year of quality measure data. This proposed approach, of
synchronizing the quarters for which data on these measures must be
submitted during each year with the quarters we will use to make
payment determinations, would apply beginning with January 1, 2011
discharges although it would not affect our payment determinations
until FY 2013. We invited public comment on the measures and timeframe
for their addition to the RHQDAPU program measure set.
Comment: Many commenters expressed support of our proposal to
propose and finalize RHQDAPU quality measures for 3 years in a single
rulemaking in order to provide hospitals with advanced notice for
planning purpose.
Response: We appreciate the commenters' support of our proposal to
finalize measures for 3 consecutive payment determinations. Although we
will finalize measures for 3 consecutive years, we may add or remove
measures for these years in future rulemaking cycles should we need to
respond to agency and statutory changes.
Comment: A few commenters urged CMS not to finalize the proposed 3-
year RHQDAPU quality measure plan until the availability of adequate
information to align RHQDAPU program quality measures with the upcoming
health care priorities of the Affordable Care Act becomes available. A
commenter stated it is crucial to assure data quality given the various
data sources that CMS proposed.
Response: We retain the ability to change or replace measures in
future rulemaking, which could be based on the national strategy to be
developed under the Affordable Care Act. The measures that we finalize
reflect important HHS priorities. Establishing them as RHQDAPU measures
allows hospitals, CMS, and the public to have a longer time to prepare
for collection and quality improvement efforts related to the measure.
We have also previously

[[Page 50192]]

stated that should agency priorities or legislative changes require us
to alter the measures selected, we will do so through the rulemaking
process. We intend to examine and assure data quality for new sources
of data if adopted for RHQDAPU.
Comment: Some commenters questioned CMS' authority to add measures
to the RHQDAPU program beyond the FY 2012 payment determination as
section 3001(a)(2)(B) of the Affordable Care Act revises section
1886(b)(3)(B)(viii)(V) of the Act.
Response: We do not believe that the commenters are correctly
reading the amendment to section 1886(b)(3)(B)(viii)(V) of the Act made
by section 3001(a)(2)(B) of the Affordable Care Act in conjunction with
section 1886(b)(3)(B)(viii)(III) of the Act. As amended, section
1886(b)(3)(B)(viii)(V) of the Act states that, for payments for FYs
2008 through 2012, the Secretary shall add other measures that reflect
consensus among affected parties and, to the extent feasible and
practicable, shall include measures set forth by one or more national
consensus building entities. For payments for FY 2013 and beyond, the
Secretary would be able to add measures because section
1886(b)(3)(B)(viii)(III) of the Act provides the Secretary with the
authority to expand the measures consistent with the succeeding
statutory provisions. Section 1886(b)(3)(B)(viii)(V) of the Act simply
would not apply to payments for FYs 2013 and beyond.
In summary, we are finalizing our proposal to select measures for
three consecutive payment years. As discussed in section IV.A.5.a.(2)
of this final rule, where we respond to comments on synchronizing the
quarterly submission of data, we are finalizing our proposal to
synchronize the quarterly submission of data for RHQDAPU. We will
continue to pursue goals regarding the expansion and updating of
quality measures under the RHQDAPU program while minimizing burden. We
will take into account the public comments we received on the possible
uses of EHRs, registries, and all-payer claims data in the RHQDAPU
program. We also will consider the measure selection criteria suggested
by various commenters in prioritizing and selecting quality measures
for the future.
b. RHQDAPU Program Quality Measures for the FY 2012 Payment
Determination
(1) Retention of 45 Existing RHQDAPU Program Quality Measures for the
FY 2012 Payment Determination
As noted above, we are retiring the AHRQ Mortality for Selected
Surgical Procedures Composite for the FY 2011 payment determination. We
proposed that the remaining 45 of the 46 quality measures for the FY
2011 RHQDAPU program payment determination will be used for the FY 2012
RHQDAPU program payment determination. Details regarding data
submission requirements were discussed in section IV.A.5. of the
proposed rule. We invited comment on the proposal to include all FY
2011 measures except for the AHRQ Mortality for Selected Surgical
Procedures Composite in the FY 2012 RHQDAPU measure set.
Comment: A commenter suggested CMS further discuss risk-adjustment,
co-morbid conditions, exclusion criteria, and interpretation of the
collected data before making decisions to retain the 45 measures as
proposed.
Response: In general, we retain measures from one payment
determination to the next unless we specifically retire them.
Currently, risk adjustment of comorbidities for outcome measures and
exclusion criteria for all measures are maintained on an ongoing basis
as part of routine measure maintenance, and are submitted every 3 years
to NQF for reevaluation. We do not address measure maintenance or data
display and interpretation issues in annual rulemaking. These issues
are addressed in sub-regulatory processes.
Comment: Some commenters were concerned that the Pneumonia Measure
PN[middot]6 (including PN[middot]6a and PN-6b) relating to the initial
antibiotic selection for Community Acquired Bacterial Pneumonia (CABP)
in immune-competent patients is at risk of not representing the best
clinical practice if its technical specifications are not updated in a
timely manner. The commenters suggested that, for PN-6, CMS should
clearly define the process for hospitals to prescribe newly approved
antibiotics to treat CABP with flexibility. Furthermore, the commenters
noted that CMS also should add Ceftaroline Fosamil to the Pneumonia
Antibiotic Consensus Recommendations upon FDA approval.
Response: As stated earlier, we maintain and update the technical
specifications for RHQDAPU program measures regularly, which includes
regular updating of drug lists to include new FDA approved medications,
including antibiotics that could be used for patients included in the
PN-6 measure. Appropriate documentation for hospital prescribing
practices for measures such as PN-6 is also maintained in the technical
specifications.
After consideration of the public comments we received, we are
adopting as final our proposal to retain 45 existing measures from the
FY 2011 RHQDAPU payment determinations as RHQDAPU quality measures for
the FY 2012 payment determination.
In proposing to retain 45 of the 46 FY 2011 measures, we recognized
that we were not significantly reducing the burden for hospitals, since
the 1 measure that we proposed to remove is a measure that currently is
calculated based on Medicare claims. At the same time, our proposal to
expand the measures for FY 2012 and beyond may add additional reporting
burdens and new focus areas for hospital quality improvement efforts.
In view of our concern about the burden of reporting for hospitals,
especially when it comes to reporting chart-abstracted measures,
another option that we have considered to accommodate the expansion of
the measure set is the retirement of additional measures. Specifically,
we have considered retiring one or more of those measures suggested by
various commenters that were listed in the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43865). We noted in that final rule that 11
RHQDAPU program chart-abstracted measures were recommended for
retirement by commenters. Seven of these 11 measures were recommended
for retirement based on their performance being uniformly high
nationwide, with little variability among hospitals. Information on the
performance rates for hospitals reporting is available at: http://www.cms.hhs.gov/HospitalQualityInits/downloads/HospitalNationalLevelPerformance.pdf. These measures are:
AMI-1 Aspirin at arrival
AMI-3 ACEI/ARB for left ventricular systolic dysfunction
AMI-4 Adult smoking cessation advice/counseling
AMI-5 Beta-blocker prescribed at discharge
HF-4 Adult smoking cessation advice/counseling
PN-4 Adult smoking cessation advice/counseling
SCIP-Infection-6: Surgery patients with appropriate hair
removal
In addition to these ``topped-out'' measures, commenters
recommended we retire four additional measures listed below for reasons
unrelated to high

[[Page 50193]]

unvarying performance. These measures are:
HF-1 Discharge instructions
PN-3b Blood culture performed before first antibiotic
received in hospital
SCIP-Infection-2: Prophylactic antibiotic selection for
surgical patients
SCIP-Infection-4: Cardiac Surgery Patients with Controlled
6AM Postoperative Serum Glucose
Reasons given by commenters included the following: (1) Care
process measured has weak or no relationship to better outcomes, (2)
collection burden of measure negates or outweighs the benefit of
reporting the measure, and (3) measure perceived to be discordant with
current guidelines.
We invited comments on the option to retire 1 or more of these 11
measures that were suggested for retirement by commenters to the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule. We acknowledged that some of
these measures were proposed for electronic reporting under the program
for incentive payment for meaningful use of electronic health records
(75 FR 1896).
In addition, we stated that we were considering an option under
which if we propose and finalize measures that are specified to more
broadly address a clinical topic, and thus would require hospitals to
submit the same data that they are already submitting on more narrowly
specified measures that we previously adopted for the RHQDAPU program,
we would propose to retire the more narrowly specified measures from
the RHQDAPU measure set. An example of this option that we were
considering would be retirement of the current Influenza and
Pneumoccocal vaccination measures that apply only to the Pneumonia
admission inpatient population (PN-2 Pneumococcal vaccination status;
and PN-7 Influenza vaccination status) if we proposed and finalized
measures of Influenza and Pneumoccocal vaccination that apply to all
inpatients. We invited comments on this option to retire narrowly
specified measures in order to accommodate more broadly specified
measures on a given topic.
Comment: A few commenters supported retiring narrowly specified
measures such as the vaccination measures that are specific to
Pneumonia inpatients, as a way to reduce burden, especially when
broader measures are available.
Response: We thank the commenters for their support of the concept
of retiring narrowly specified measures and replacing them with
measures that could be applied to a broader population. As we discuss
below in section IV.A.3.d. of this final rule, we are using this
strategy and retiring the pneumonia-specific immunization measures for
the FY 2014 payment determination because we are adopting the global
immunization measures.
Comment: Some commenters supported the retirement of one or more of
the measures listed. Others also suggested additional measures to
consider for retirement including: PN-2 Pneumococcal vaccination status
and PN-7 Influenza vaccination status, and the AHRQ Abdominal Aortic
Aneurysm (AAA) Mortality Rate (with or without volume) (IQI 11).
Response: We appreciate the commenters' specific suggestions
regarding retirement of particular measures. As discussed in section
IV.A.3.d. of this final rule, we are retiring PN-2 and PN-7 for the FY
2014 payment determination because we are adopting the global
immunization measures.
Comment: A commenter pointed out that three of the measures listed
(AM1-1, AMI-5, and SCIP-INF-2) for the FY 2011 payment determination
overlap with the HITECH EHR incentive program Stage 1 meaningful use
criteria and, therefore, they should be retired for burden reduction
purposes. The commenter recommended that when the retirement of
overlapped measures occurs in one program, they should also be retired
in other programs as well.
Response: The final rule for the HITECH EHR incentive program (75
FR 44314) did not include the AMI and SCIP measures identified by the
commenter. Rather, the measures that were finalized for HITECH EHR
program hospital reporting are not currently included in the RHQDAPU
program. As discussed previously, an important objective for the
RHQDAPU program is to align the reporting of quality measures by
hospitals for both the RHQDQPU and HITECH EHR programs. However, this
alignment must be consistent with the data needs for the RHQDAPU
program. The HITECH EHR program does not require the submission of
patient level data, as is the case for the RHQDAPU program. Therefore,
in order to completely align the clinical quality measure reporting if
RHQDAPU measures were required in Stage 2 HITECH, changes to HITECH
requirements would need to be made through the rule making process and
also standardize other processes such as technology platform standards
and submission processes. In aligning the HITECH EHR and RHQDAPU
program measures, we anticipate developing electronic specifications
for all of the currently chart abstracted measures. This could provide
an EHR reporting alternative for measures that are currently chart
abstracted. However, in developing alternative data submission
mechanisms, we will be mindful of the specific uses of data submitted
for RHQDAPU measures, that go beyond uses for clinical quality measures
under the HITECH EHR program. Specifically, section
1886(b)(3)(B)(viii)(VII) of the Act, unlike the HITECH provisions,
requires the public reporting of information regarding measures
submitted to the RHQDAPU program, and the Affordable Care Act requires
that measures for the HVBP program be specified under the RHQDAPU
program. In view of the specific uses for RHQDAPU data, we must be
satisfied that the measures results are equivalent, whether the data
upon which the results are based are submitted based on chart
abstraction or through use of certified EHR technology.
Comment: One commenter stated that, although the mortality measures
exclude patients who have a history of Medicare hospice enrollment
prior to or on admission, the measures do not take into account
decisions made by the patient or family to withhold treatments and opt
for comfort care later in the hospital course as part of end-of-life
care. The commenter was concerned that hospitals would transfer these
patients or over-treat patients to avoid penalty. The commenter
suggested that CMS develop a mechanism, such as the POA flag, to
accurately and properly report the care that they deliver to the
patient.
Response: We thank the commenter for the input. However, we do not
use rulemaking to define the parameters of the measures, such as
exclusions. Rather, we depend on the processes of measure development
and, if applicable, the NQF endorsement review. In the case of this
measure, the exclusions in the measure were considered in the original
endorsement process and at a subsequent maintenance process conducted
by NQF. During the maintenance process, the measure was only modified
to exclude cases where the patient had been a prior hospice patient.
(2) New Claims-Based Measures
We proposed to add 10 claims-based measures to the RHQDAPU program
measure set for the FY 2012 payment determination: 2 AHRQ Patient
Safety Indicators and 8 Hospital Acquired Condition measures. These
proposed measures address important HHS priorities of Patient Safety
and healthcare associated infections. They would be calculated using up
to 3 years

[[Page 50194]]

of Medicare claims for discharges prior to January 1, 2011. These
measures are discussed below.
(A) AHRQ Patient Safety Indicators
In the FY 2009 IPPS final rule, we adopted a number of AHRQ Patient
Safety Indicators and Inpatient Quality Indicators for the RHQDAPU
program to be calculated using Medicare claims. The addition of these
measures to the RHQDAPU program allowed us to expand the RHQDAPU
program measure set to include measures of patient safety, in-hospital
mortality, adverse events and complications without increasing the data
submission burden on hospitals. In the FY 2010 IPPS/RY 2010 LTCH PPS
final rule, we retained these measures for the FY 2011 payment
determination. As we proposed in the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23960 and 23961), we are retiring one of those measures
(Mortality for Selected Surgical Procedures Composite) from the RHQDAPU
program measure set for the FY 2011 payment determination. For the FY
2012 payment determination, we proposed to adopt 2 additional Patient
Safety Indicators developed by the AHRQ. These were: PSI-11: Post-
Operative Respiratory Failure and PSI-12: Post-Operative Pulmonary
Embolism (PE) or Deep Vein Thrombosis (DVT). Both measures address
post-operative complications, a topic that is currently not well
represented in the RHQDAPU program measure set. Both measures are NQF-
endorsed, and have a Tier 1 evidence rating by AHRQ, the measure
developer. Indicators given this level of evidentiary rating by AHRQ
have the strongest evidence base, with established evidence in several
or most evidentiary areas established by AHRQ, no substantial evidence
suggesting that the indicator may not be useful for comparative
reporting purposes, and in most cases have been endorsed by the
National Quality Forum (NQF).\13\ The specific measures that we
proposed to add are NQF-endorsed, thus, reflecting consensus among
affected parties, and are deemed appropriate for comparative public
reporting by the measure developer. Like the current AHRQ measures in
the RHQDAPU program, these indicators are both risk-adjusted outcome
measures that can be calculated based on existing Medicare claims,
placing no additional reporting burden on hospitals while allowing us
to expand outcomes measurement in the RHQDAPU program. The
specifications for these measures can be found at http://www.qualityindicators.ahrq.gov/TechnicalSpecs41.htm#PSI41. We invited
comment on our proposal to adopt these two AHRQ Patient Safety
Indicators for the FY 2012 payment determination.
---------------------------------------------------------------------------

\13\ http://www.qualityindicators.ahrq.gov/downloads/publications/AHRQ%20QI%20Guide%20to%20Comparative%20Reporting%20v10.pdf.
---------------------------------------------------------------------------

Comment: Some commenters believed that claims data are not an
accurate source of quality measures compared to medically-abstracted
data. One commenter was concerned about the limitation of the claim-
based measures used in Hospital Compare because the claims used were
for the Medicare fee-for-service population only.
Response: We believe that claims data/administrative data are an
appropriate data source upon which quality measures selected by the
Secretary may be based. We note that many NQF-endorsed evidence-based
quality measures which have been found appropriate for public reporting
and quality improvement rely upon claims and administrative data as
data sources. Furthermore, the use of claims-based measures reduces
reliance upon chart abstraction and its associated burden for quality
measurement. We acknowledge that all-payer claims/administrative data
would further enhance the claims-based measures shown on Hospital
Compare. We plan to continue to explore mechanisms to collect all-payer
claims/administrative data.
Comment: Many commenters did not support the proposed inclusion of
PSI-11 and PSI-12 measures because they have time-limited NQF-
endorsement due to validation issues, and the delay in the AHRQ update
hampers hospitals' ability to monitor the PSI results timely. The
commenters believed the PSI-11 and PSI-12 measures need more refinement
and testing before they can be used for public reporting. One commenter
asked CMS to ensure that the PSI-12 measure is not reported twice as it
is also currently reported as part of PSI-90. Some commenters felt that
PSI-12 may be redundant with the SCIP VTE measure and the VTE
measurement set listed under the future measure section.
Response: NQF designates some measures as having a 2-year ``time-
limited'' endorsement when additional information like testing results
are needed. All other NQF-endorsed measures have a 3-year endorsement
period. However, in both instances, the measures have a status of
endorsed by NQF, and undergo re-evaluation at the end of the
endorsement period. Therefore, we do not agree with the suggestion to
treat endorsed measures with time limitations as not endorsed. We also
note that PSI-11 is endorsed without time limitation. Further, both
measures are recommended for public reporting by AHRQ. We also do not
agree that PSI-12 is duplicative of SCIP VTE. The PSI-12 measure
reflects the actual occurrence of DVT (outcome) following a broad set
of procedures. The SCIP VTE and VTE measurement set covers processes of
care intended to prevent DVT.
We have carefully considered all comments received and we are
finalizing the PSI-11 and PSI-12 measures for the FY 2012 payment
determination. These measures are NQF-endorsed and address adverse
surgical outcomes, a high HHS priority and a topic area that is
currently not represented in the RHQDAPU measurement set. We will
calculate these measures using the same process used for other measures
based on Medicare fee for service claims.
(B) Hospital Acquired Condition (HAC) Measures
Section 1886(d)(4)(D) of the Act required the Secretary to select,
in consultation with the Centers for Disease Control and Prevention
(CDC), at least two conditions that: (a) Are high cost, high volume, or
both; (b) are assigned to a higher paying MS-DRG when present as a
secondary diagnosis (that is, conditions under the MS-DRG system that
are CCs or MCCs); and (c) could reasonably have been prevented through
the application of evidence based guidelines. We currently have 10
categories of Hospital Acquired Conditions (HACs). We refer readers to:
section II.F. of the FY 2008 IPPS final rule with comment period (72 FR
47202 through 47218); section II.F. of the FY 2009 IPPS final rule with
comment period (73 FR 48474 through 48486); and section II.F. of the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43782 through 43785) for
detailed discussions regarding the selection of the current 10 HAC
categories. We refer readers to section II.F. of this final rule for
additional discussion and our HAC policy for FY 2011.
We have worked collaboratively with public health and infectious
disease professionals from across HHS, including CDC, AHRQ, and the
Office of Public Health and Science, to identify and select preventable
HACs with input and comment from affected parties. CMS and CDC have
also collaborated on the process for hospitals to submit a present on
admission (POA) indicator for each diagnosis listed on IPPS hospital
Medicare claims and on the

[[Page 50195]]

payment implications for POA reporting (74 FR 43783).
CMS, CDC and AHRQ held jointly sponsored HAC and POA Listening
Sessions (December 17, 2007 and December 18, 2008) to receive input
from affected parties, individuals, and organizations regarding the
selection and definition of HACs. The adoption of HACs were informed
and continue to be informed by feedback received during the listening
sessions, as well as through public comment received during the IPPS
rulemaking process. In addition to receiving comments regarding the
selection of conditions and POA indicator reporting, in the FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43785), commenters suggested
that CMS consider making aggregate POA information publicly available,
and providing comparative information as a means of facilitating
improvements in preventing the incidence of HACs.
We proposed to adopt as RHQDAPU measures for the FY 2012 payment
determination 8 (of 10) current HACs defined in section II.F. of the FY
2011 IPPS/LTCH PPS proposed rule (75 FR 23966), 6 of which have been
identified by NQF as serious reportable events, and to publicly report
these measures as we do other RHQDAPU program measures. These measures
are:
Foreign Object Retained After Surgery
Air Embolism
Blood Incompatibility
Pressure Ulcer Stages III & IV
Falls and Trauma: (Includes: Fracture, Dislocation,
Intracranial Injury, Crushing, Injury, Burn, Electric Shock)
Vascular Catheter-Associated Infection
Catheter-Associated UTI
Manifestations of Poor Glycemic Control
We did not believe that it was necessary to propose to adopt the
other two current HAC categories as RHQDAPU measures because the topics
that they deal with would substantially overlap with other RHQDAPU
program measures discussed below that we proposed to adopt for future
payment determinations as chart-abstracted measures (which allows us to
collect data on all patients). By contrast, the eight proposed HAC
measures are claims-based measures for which we can only (at this time)
collect data on Medicare beneficiaries.
We proposed to utilize Medicare claims data to calculate measure
rates for these eight HACs using the ICD-9-CM codes in conjunction with
POA coding of ``N'' or ``U,'' as defined in IPPS rulemaking. We refer
readers to section II.F.6. of the FY 2008 IPPS final rule with comment
period (72 FR 47202 through 47218), section II.F.7. of the FY 2009 IPPS
final rule (73 FR 48474 through 48486), section II.F.6. (74 FR 43782
through 43785) of the FY 2010 IPPS/RY 2010 LTCH PPS final rule, and
section II.F. of the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23880)
for detailed discussions regarding the use of the POA indicator in
conjunction with ICD-9-CM coding to determine the presence of HACs. We
also refer readers to the current ICD-9-CM codes and updates for these
eight HAC categories in this final rule. We proposed to use the ICD-9-
CM codes in conjunction with the ``N'' and ``U'' POA indicators for the
HAC categories that will be finalized in this FY 2011 IPPS/LTCH PPS
final rule to calculate the eight HAC measures for the RHQDAPU program.
We believe that these HAC measures reflect consensus among affected
parties as required for RHQDAPU program measures by section
1886(b)(3)(B)(viii)(V) of the Act. In addition to meeting the consensus
requirement through rulemaking and public comment, Vascular Catheter-
Associated Infection and Catheter-Associated UTI are the subject of a
quality measure which gained NQF endorsement in August 2009. The
remaining six HAC categories have been identified as serious reportable
events through the NQF consensus process and have also been selected as
HACs through rulemaking and public comment. Data reporting requirements
for these measures are provided in section IV.A.5.b.(6) of the FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23990). We invited comment on our
proposal to adopt these eight HAC measures for the FY 2012 payment
determination.
Comment: Some commenters supported inclusion of the HACs as
measures for the RHQDAPU program as public reporting would encourage
improvement. Other commenters supported inclusion, but also stressed
that appropriate risk adjustment, comprehensive exclusion criteria, and
NQF endorsement should be pursued.
Response: We agree that public reporting of the HACs on the
Hospital Compare Web site would encourage improvement. We also note
that section 3008 of the Affordable Care Act contains a provision for
the reporting of HACs on the Hospital Compare Web site as well. We
intend to publish measure specifications for the rates (including
numerators, denominators, and exclusion criteria) in the Specifications
Manual. We agree risk-adjustment may be appropriate for some of the
indicators, and intend to apply appropriate risk adjustment for those
HACs that are not considered Never Events, and are considered outcome
measures, such as infection-related HACs. We will also consider the
suggestion that we pursue NQF endorsement.
Comment: Many commenters opposed the inclusion of HACs in the
RHQDAPU program for various reasons. Some commenters did not believe
the HACs as currently defined by ICD-9-CM codes constitute measures as
there are no measure specifications. Commenters believed that they are
tied to variables which are indications of documentation and coding and
may inadvertently cause unintended consequences. Other commenters also
believed that present on admission (POA) reporting is in its infancy
and since the HACs would rely upon POA coding, they are not reliable.
Other commenters indicated that some of the HACs are too rare to be
meaningful. Other commenters believed that NQF endorsement or HQA
adoption would be necessary prior to adoption of the HACs.
Response: As stated in the response to the previous comment, we
intend to include measure specifications in the Specifications Manual.
We also believe that the HACs reflect consensus among affected parties
because they were refined during two public listening sessions and
underwent public comment through rulemaking. Furthermore, six of the
eight HACs proposed as measures for the FY 2012 payment determination
are also NQF-endorsed ``never events.'' We acknowledge that the rates
of never events may be rare. However, because these are considered
events that should never happen, reporting their prevalence, though
rare, is still meaningful. Although POA coding is relatively new, it is
subject to the same level of monitoring and oversight as diagnoses and
procedures reported on claims, and therefore, is accurate and reliable
to the best of hospitals' abilities.
Comment: One commenter asked CMS to address perceived overlap in
the proposed HAC measures, the proposed HAI measures, and the nursing
sensitive measure set.
Response: While two of the HACs topically address HAIs, they are
not the same measures as the HAIs proposed for collection via NHSN.
They have a close relationship but they are not identical. In our FY
2011 IPPS/LTCH PPS proposed rule, we proposed the addition of the CDC
central line catheter associated bloodstream infection rate for ICU and
high-risk nursery patients and Surgical Site Infection Rate measure for
inclusion in the RHQDAPU program (75

[[Page 50196]]

FR 23970 and 23971). These measures align with the topic areas of the
Vascular Catheter-Associated Infection and Surgical Site Infection
HACs. The information for determining the HACs is derived from claims
data, while the central line catheter associated bloodstream infection
rate for ICU and high-risk nursery patients and SSI measures are
derived from chart abstraction. The central line catheter associated
bloodstream infection rate for ICU and high-risk nursery patients
measure (NQF 0139) is part of the NQF Nursing Sensitive Set.
Section 1886(d)(4)(iv) of the Act requires the Secretary to select at
least two conditions as HACs that are: (a) High cost or high volume or
both, (b) result in the assignment of a case to a DRG that has a higher
payment when present as a secondary diagnosis, and (c) could reasonably
have been prevented through the application of evidence based
guidelines. The Hospital Acquired Conditions are based on NQF's Serious
Reportable Events.
After careful consideration of comments received, we are finalizing
the adoption of the eight HAC measures into the RHQDAPU program for the
FY 2012 payment determination. We will calculate these rates using
Medicare Part A fee for service claims, and we intend to publicly
report these measures on Hospital Compare starting in the fall of 2010
after an appropriate preview period. The data to be used for this
initial calculation will include claims from Q4 2008, and at least Q1
and Q2 of 2009. We also note that section 3008 of the Affordable Care
Act contains a provision for public reporting of the HACs on Hospital
Compare and that initiation of public reporting of the HACs now will
enable us to better fulfill the requirements of this section in the
future. Since the RHQDAPU program requires hospitals to submit data for
measures, hospitals have an obligation to accurately report the
diagnosis and events defined for the HACs, including POA codes, on
their claims, because their claims will be the source of data for these
measures under the RHQDAPU program.
(3) All-Patient Volume Data for Selected MS-DRGs
We currently display volume data for 70 MS-DRGs, 55 of which relate
to RHQDAPU program measures on the Hospital Compare Web site. However,
the volume data currently shown on Hospital Compare is based on
Medicare claims only. Although we do not consider volume alone to be a
quality measure unless volume has been determined to be an indicator of
quality, we believe that to the extent all-patient volume data are
related to the measures, as they provide context for the quality
measures in the inpatient hospital setting, and may assist Hospital
Compare users in understanding the measure calculations. In general, in
implementing RHQDAPU program measures, we have sought where currently
possible to measure the care rendered to all patients within a
hospital, and not just Medicare patients. For this reason, the chart-
abstracted process of care measures we collect and display on Hospital
Compare are based on the entire inpatient population for the hospital.
We proposed that hospitals begin submitting as data on measures
selected for the RHQDAPU program the all-patient data elements
discussed in section IV.A.5.b.(5) of the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23990) for 55 MS-DRGs displayed on Hospital Compare that
relate to adopted RHQDAPU program measures (75 FR 23967). The specific
MS-DRGs were listed in the proposed rule (75 FR 23970). As stated
above, we believe that the addition of this data will enable us and
Medicare beneficiaries to better understand and evaluate the quality of
care provided by hospitals with respect to both the chart-abstracted
and claims-based measures. We intend to publicly display this volume
data along with the corresponding measure results on Hospital Compare.
Hospitals would begin reporting these data once annually beginning with
January 1, 2011 discharges by submitting the all-patient data elements
needed to calculate MS-DRG volume to QualityNet so we can determine the
volume of cases treated by a hospital for the 55 MS-DRGs currently
displayed on Hospital Compare. Rather than require hospitals to group
their all-patient claims data by MS-DRG category themselves, CMS would
use the data to be submitted by hospitals to group the data.
We invited comments on this proposal. We also invited comments on
an alternative that hospitals submit all-patient volume data based upon
specific ICD-9-CM codes related to the proposed MS-DRGs rather than all
data necessary to calculate the MS-DRGs.
Comment: Many commenters opposed the collection of all-patient
volume data in the RHQDAPU program as proposed, and stated that: (1)
Volume does not constitute a quality measure and, therefore, would not
fall under the Secretary's authority under the Act to select measures
for the RHQDAPU program; (2) submitting all-patient volume would
require the transmission of Protected Health Information or Patient
Identifiable Information that is not related to either quality or
reimbursement and therefore is not in compliance with the requirements
of the Health Insurance Portability and Accountability Act of 1996
(HIPAA); (3) it is not clear how the collection of all-patient volume
data would be helpful to Medicare beneficiaries; (4) there are concerns
about whether CMS infrastructure can handle data collection of a large
amount of additional data; and (5) there are concerns regarding how the
data will be displayed on Hospital Compare and fear that CMS and the
public will equate high volume with high quality.
Response: We disagree with the commenters about our authority to
collect all-patient volume data in relation to RHQDAPU quality
measures. However, based on the public comment received, we are not
finalizing this proposal because commenters indicated that, as
proposed, the reporting requirement would be overly burdensome for
hospitals. We plan to explore how all-patient volume may be collected
in an efficient manner and reintroduce the proposal in a subsequent
rulemaking.
Comment: Some commenters argued that CMS has underestimated the
potential burden on hospitals which have to group the cases into one of
the 55 MS-DRGs before sending the ICD-9 codes and other related data
such as procedure date, discharge status, admission date, to name a
few. A commenter asked CMS to provide a MS-DRG to ICD-9-CM codes
equivalent table to ensure no overlapping as well as specifics on the
data submission process. Another commenter suggested CMS provide an
alternate method which allows hospitals already grouping data
internally into MS-DRGs to post the all-patient volumes for these 55
MS-DRGs onto QualityNet on an annual basis. A commenter recommended CMS
explore the possibility of getting the all-payer information from the
Joint Commission's vendors, State healthcare organizations or AHRQ.
Response: We agree with the commenters that submission of the
required data that would be necessary to determine the MS-DRG would be
burdensome. Further, we believe that the alternative of requiring
volume based on diagnosis codes would provide substantially equivalent
information, even though we could not relate the volume data to a
specific MS-DRG. As a result, we are not adopting our proposal to
require the submission of all-payer volume in this final rule. We
expect to refine the requirements for all-patient volume data
submission based

[[Page 50197]]

on diagnosis codes and reintroduce the proposal in a subsequent
rulemaking.
Comment: Some commenters supported the inclusion of all-patient
volume data for selected MS-DRGs and considered the inclusion of these
data a move in the right direction.
Response: We appreciate the supportive comments. As discussed
previously, we expect to reintroduce the proposal in a subsequent
rulemaking.
Comment: Many commenters asked CMS to provide more details about
the all-patient volume data submission process. Specifically, the
commenters inquired if ICD-9-CM codes have to be submitted; what data
elements have to be submitted; the data formats and transmission
methods; frequency of data submissions; and deadlines for data
submission.
Response: We expect to reintroduce the proposal in a subsequent
rulemaking as discussed previously and we would provide more details
for the data submission process at that time.
After consideration of the public comments we received, we are not
finalizing this proposal to collect all-patient volume data for
selected MS-DRGs. We currently require hospitals to submit all-patient
counts to assess the adequacy of sampling for the current RHQDAPU
measures, and will examine whether this requirement can be expanded
upon in the future for public reporting, and to accommodate future
quality measures adopted into the RHQDAPU program.
In summary, for the FY 2012 payment determination, we are retaining
45 measures adopted for the FY 2011 payment determination, and adding
10 claims-based measures (2 AHRQ surgical outcome measures, and 8 HAC
measures) for a total of 55 measures.
The RHQDAPU measure set for the FY 2012 payment determination is
listed below:
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR16AU10.039

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[GRAPHIC] [TIFF OMITTED] TR16AU10.040

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BILLING CODE 4120-01-C
c. RHQDAPU Program Quality Measures for the FY 2013 Payment
Determination
(1) Retention of FY 2012 Payment Determination Measures for the FY 2013
Payment Determination
We generally propose to retain RHQDAPU program measures from 1 year
to the next. Consistent with this approach, we proposed to retain all
of the proposed measures for the FY 2012 RHQDAPU payment determination,
if finalized, for the FY 2013 payment determination. We invited public
comment on the proposal to retain the 55 FY 2012 measures for the FY
2013 payment determination.
We did not receive any public comments for this section. We are
finalizing the retention of the 55 FY 2012 measures for the FY 2013
payment determination. We believe that all of the 55 finalized FY 2012
measures meet the requirements for RHQDAPU program measure selection
for FY 2013 and subsequent payment determinations under sections
1886(b)(3)(B)(viii)(VIII) and (IX) of the Act. As discussed previously,
section 1886(b)(3)(B)(viii)(VIII) of the Act requires the Secretary to
provide for such risk adjustment as the Secretary determines
appropriate to maintain incentives for hospitals to treat patients with
severe illnesses or conditions with respect to quality measures for
outcomes of care effective for payments beginning with FY 2013. Section
1886(b)(3)(B)(viii)(IX) of the Act requires, for payments beginning
with FY 2013, each measure specified by the Secretary to be endorsed by
a consensus entity, currently NQF, except in certain circumstances.
Specifically, 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 consensus entity, the
Secretary may specify a measure that is not endorsed by the consensus
entity if due consideration is given to measures that have been
endorsed or adopted by a consensus organization identified by the
Secretary.
The process of care measures for AMI, HF, PN, and SCIP, the three
structural measures regarding participation in a registry, and the
HCAHPS patient experience of care survey being retained for the FY 2013
payment determination are all NQF-endorsed. The outcome measures being
retained for the FY 2013 payment determination include the 30-day
mortality and 30-day readmission measures for AMI, HF, and PN as well
as the AHRQ PSIs and IQIs, the two AHRQ composite measures, and the
Death among surgical inpatients for serious treatable complications
measure that is both part of the AHRQ PSI measure set, and the Nursing
Sensitive measure set. These measures are all NQF-endorsed and provide
for such risk adjustment as the Secretary determines to be appropriate
to maintain incentives for hospitals to treat patients with severe
illnesses or conditions.
The eight HAC measures adopted for the FY 2012 payment
determination that are being retained for the FY 2013 payment
determination represent a specified area or medical topic determined
appropriate by the Secretary (CDC, CMS, AHRQ) for which a feasible and
practical measure has not been endorsed by the consensus entity, and
due consideration was given to measures that have been endorsed or
adopted by a consensus organization identified by the Secretary. In
fact, six of the HACs are NQF Never Events. The remaining two HACs are
claims-based measures of HAIs, and consideration was given to chart
abstracted NQF endorsed measures prior to determining that they would
not be feasible to implement for the FY 2012 payment determination.
(2) New Chart-Abstracted Measure for the FY 2013 Payment Determination
We proposed to add one new chart-abstracted measure for the FY 2013
payment determination--AMI-Statin prescribed at Discharge. This measure
is NQF-endorsed (NQF 0639), and is similar to the NQF-
endorsed stroke measure ``Ischemic stroke patients with LDL >/= 100 mg/
dL, or LDL not measured, or, who were on cholesterol reducing therapy
prior to hospitalization are discharged on a statin medication'' (NQF
0439), only specified for the AMI population. Current
scientific evidence supports the continuation of statins more strongly
for AMI patients than for stroke patients. Several randomized clinical
trials have proven the benefits of statin drugs (also known as HMG Co-A
reductase inhibitors) in reducing the risk of death and recurrent
cardiovascular events in a broad range of patients with established
cardiovascular disease, including those with prior myocardial
infarction. Current ACC/AHA guidelines place a strong emphasis on the
initiation or maintenance of statin drugs for patients hospitalized
with AMI, particularly those with LDL-cholesterol levels at or above
100 mg/dL. As a result of the strength of the evidence and guideline
support, the ACC/AHA has developed a performance measure to assess this
aspect of care for AMI patients.
Because statins are generally well-tolerated, most AMI patients are
appropriate candidates for this therapy. As a result of this clinical
evidence, the NQF was asked to review whether it should broaden the
current endorsed measure specification to include the AMI population.
Information on this project can be found at: http://www.qualityforum.org/Projects/a-b/Ad_Hoc_Reviews/Statin_Medication/Ad_Hoc_Review__Discharged_on_Statin.aspx. In the FY 2011 IPPS/
LTCH PPS proposed rule (75 FR 23970), we stated that we would decide
whether to finalize this measure based on whether it achieves NQF
endorsement and public comments. We believe that minimal additional
burden would result from adoption of this measure into the RHQDAPU
program because the AMI population that is the focus of this measure is
already part of data collection efforts for the RHQDAPU program, and
very few additional data elements would be needed to be abstracted for
the proposed new measure on this existing measurement population. We
proposed that hospitals would begin submission of data for the measure
AMI-Statin Prescribed at Discharge beginning with January 1, 2011
discharges for the RHQDAPU 2013 payment determination.
Comment: The majority of the commenters supported the proposed
addition of the AMI-Statin Prescribed at Discharge measure. Some
commenters supported the addition of Statins at Discharge for AMI
patients contingent on NQF endorsement.
Response: We thank the commenters for their support of this
proposed measure. We note that this measure was fully endorsed by the
NQF on June 11, 2010, thus meeting the requirement under section
1886(b)(3)(B)(viii)(IX) of the Act.
After consideration of the public comments, we are finalizing the
measure for Statins Prescribed at Discharge for AMI patients for the FY
2013 payment determination.
(3) New Healthcare Associated Infection (HAI) Measures for the FY 2013
Payment Determination
HHS has placed high priority on reducing Healthcare Associated
Infections and adopted an action plan in January of 2009. The HHS
action plan identified seven HAI measures and measure targets. One of
these measures, SSI-2 (as identified in the HHS Action Plan), is
currently included in the RHQDAPU program (identified as SCIP-1). In
the FY 2009 and FY 2010 IPPS rulemakings, we listed several Healthcare
Associated Infection (HAI)

[[Page 50201]]

measures as being under consideration for future adoption. Commenters
on the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule supported the HAI
measures that were listed as being under consideration for the future
and encouraged us to consider others as well (74 FR 43876). For the
measure set to be used for the FY 2013 payment determination, we
proposed adopting two new HAI measures that are currently being
collected by CDC via the National Healthcare Safety Network (NHSN).
These measures are: (1) Central Line Associated Blood Stream Infection
(CLABSI) (NQF 0139) and (2) Surgical Site Infection (SSI) (NQF
0299).
The NHSN is a secure, Internet-based surveillance system maintained
and managed by the CDC, and can be utilized by all types of healthcare
facilities in the United States, including acute care hospitals, long
term acute care hospitals, psychiatric hospitals, rehabilitation
hospitals, outpatient dialysis centers, ambulatory surgery centers, and
long term care facilities. The NHSN enables healthcare facilities to
collect and use data about HAIs, adherence to clinical practices known
to prevent HAIs, the incidence or prevalence of multidrug-resistant
organisms within their organizations, and other adverse events. Some
States use NHSN as a means for healthcare facilities to submit data on
HAIs mandated through their specific State legislation. NHSN data
collection occurs via a Web-based tool hosted by the CDC provided free
of charge to hospitals. Additionally, the ability of CDC to receive
NHSN measures data from EHRs may be possible in the near future.
Currently, 21 States require hospitals to report HAIs using NHSN, and
the CDC supports more than 2000 hospitals that are using NHSN.\14\
---------------------------------------------------------------------------

\14\ http://www.cdc.gov/nhsn/.
---------------------------------------------------------------------------

Both the Central Line Associated Blood Stream Infection measure and
the Surgical Site Infection measure are NQF-endorsed, and therefore
meet the statutory requirement under section 1886(b)(3)(B)(viii)(IX) of
the Act. The measures address HAIs, a topic area widely acknowledged by
the HHS, IOM, the National Priorities Partnership and others as a high
priority requiring measurement and improvement. HAIs are among the
leading causes of death in the United States. The CDC estimates that as
many as 2 million infections are acquired each year in hospitals and
result in approximately 90,000 deaths per year.\15\ It is estimated
that more Americans die each year from HAIs than from auto accidents
and homicides combined. HAIs not only put the patient at risk, but also
increase the days of hospitalization required for patients and add
considerable health care costs.
---------------------------------------------------------------------------

\15\ McKibben L, Horan T Guidance on public reporting of
healthcare-associated infections: recommendations of the Healthcare
Infection Control Practices Advisory Committee. AJIC 2005;33:217-26.
---------------------------------------------------------------------------

HAIs are largely preventable through interventions such as better
hygiene and advanced scientifically tested techniques for surgical
patients. Therefore, many health care consumers and organizations are
calling for public disclosure of HAIs, arguing that public reporting of
HAI rates provides the information health care consumers need to choose
the safest hospitals, and gives hospitals an incentive to improve
infection control efforts. We solicited comment on the inclusion of
quality measures that assess performance on HAIs as a high priority
topic. We also solicited public comment on additional measures that
could be added to those proposed in the FY 2011 IPPS/LTCH PPS proposed
rule for public reporting and quality improvement.
Comment: Many commenters supported the proposed use of the CDC/NHSN
to collect HAI measures. However, some commenters stated that the NHSN
data input process is burdensome and commenters questioned the CDC/
NHSN's readiness to handle the new enrollment of one fourth of the
RHQDAPU participating hospitals. Many commenters recommended that CMS
collaborate with the CDC to streamline and synchronize the data
collection mechanism and measure specifications prior to
implementation, and to limit the surgical procedures for inclusion in
data reporting. Commenters recommended development of robust training
and technical support for NHSN collection. Many commenters supported
phasing in these measures in order to allow hospitals to adjust to the
reporting requirement, adopting one measure for collection in FY 2011
and another for collection in FY 2012.
Response: We thank the commenters for their support and
suggestions. Concurrently with the development of the FY 2011 IPPS/LTCH
PPS final rule, we have been in extensive discussions with the CDC
regarding the development and enhancements to the existing NHSN and CMS
infrastructure that would enable utilization of the NHSN to report one
or more measures to CMS. These enhancements include improved user
support and training materials as well as streamlined specifications
for collection of required data needed to calculate the HAI measures
adopted for RHQDAPU. In the future, we will also be working toward the
ability to receive reports electronically from hospital EHRs. We agree
that phasing in these measures will allow more time for hospitals to
adjust to the reporting requirements of the NHSN and, as discussed
below, are finalizing the CLABSI measure for the FY 2013 payment
determination and the SSI measure for the FY 2014 payment
determination. We intend to limit the data elements required for
RHQDAPU reporting to the subset of data elements, populations and
procedures needed to calculate the NQF-endorsed measures we have
proposed.
Comment: A few commenters asked CMS to clarify how the proposed HAI
measures reported via NHSN would be validated and publicly reported.
Specifically, the commenters requested clarification whether the data
will be stratified by type of hospitals in Hospital Compare.
Response: We are considering adding CDC/NHSN measures to our
validation process, as outlined in section IV.A.7.b. of this final
rule. We acknowledge the need for uniformity in the data that will be
publicly reported and used in the HVBP program. We will examine the
need to validate these data, and may propose validation requirements
for these data in the future, should we determine a need. We plan to
publicly report the data for HAI measures collected through the NHSN on
the Hospital Compare Web site as we do for other RHQDAPU program
measures. Currently, the NQF specification stratifies the measure by
type of unit within a hospital. We note NQF-endorsed measure
specifications for measures adopted into the RHQDAPU program are
subject to periodic revision, and such revisions will also be reflected
in what we require hospitals to submit to the RHQDAPU program.
Comment: Some commenters were concerned that publishing
administrative data via the HAC list, hospitals reporting to NHSN, and
collecting data in another format could cause confusion for
stakeholders.
Response: We will take steps to determine how best to display these
data so that they do not cause confusion for viewers.
(A) Central Line Associated Blood Stream Infection (CLABSI)
This HAI measure assesses the rate of laboratory-confirmed cases of
bloodstream infection or clinical sepsis among ICU patients. It was
endorsed by the NQF in 2004 and was adopted by the HQA in 2007. The
measure can be stratified by the type of ICU.

[[Page 50202]]

(B) Surgical Site Infection (SSI)
This HAI measure assesses the number of NHSN-defined operative
procedures with a surgical site infection (deep incisional or organ
space) within 30 days, or 1 year if an implant is in place. Infections
are identified on original admission or upon readmission to the
facility of original operative procedure within the relevant time frame
(30 days for no implants; within 1 year for implants). The measure can
be stratified by procedure type or risk factors. This measure was NQF-
endorsed in 2007 (and adopted by the HQA in 2008).
We invited comment on our proposal to adopt these two HAI measures
into the RHQDAPU program for the FY 2013 payment determination.
Collection of these measures would begin with January 1, 2011
discharges for the FY 2013 payment determination. We proposed that
hospitals use the NHSN infrastructure to report the measures for
RHQDAPU program purposes. The proposed reporting mechanism for these
HAI measures is discussed in greater detail in section IV.A.5.b.(6) of
the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23990).
Comment: A few commenters supported the inclusion of CLABSI for the
FY 2013 annual payment determination, stating that CLABSI is the only
measure that can be adopted quickly to meet the statutory requirement
for inclusion in the HVBP program without undue burden on hospitals.
Some commenters indicated that a phased in approach starting with the
inclusion of the CLABSI measure is appropriate. The commenters provided
several suggestions to implement the CLABSI: (1) Provide clarification
whether the CLABSI data collection is unit-based or hospital-based; (2)
provide clarification whether any or all surgical procedures apply to
specific populations like adult, pediatric or both; (3) limit the
number of surgeries reported for the 1st year; and (4) States with
existing HAI reporting mandates be deemed to meet the CMS reporting
requirements by meeting their State mandate.
Response: We agree that because more hospitals are submitting the
CLABSI measure, this measure would be the most feasible of the two
proposed measures for hospitals to implement quickly, and that a phased
in approach to adopting the HAI measures is warranted. The CLABSI
measure is the one that is most commonly required by States, and
currently most commonly reported among the HAI measures collected
through the NHSN system. The CLABSI measure is currently stratified by
type of ICU unit within the hospital, but is aggregated to the
hospital-level by the NHSN. For the RHQDAPU program, we would limit the
required data elements, populations and procedures to only those needed
to calculate the NQF-endorsed measure. For the NQF-endorsed measure,
the procedures that apply are: Coronary artery bypass graft and other
cardiac surgery, hip or knee arthroplasty, colon surgery, hysterectomy
(abdominal and vaginal), and vascular surgery, and the populations that
apply are both the adult and pediatric populations. These procedures
also correspond to the procedure categories used in SCIP. Capturing
SCIP process-of-care data and NHSN SSI data for the same procedure
categories will provide process and outcome data for the same patient
populations. Regarding the extent that a State requirement can be used
to satisfy the RHQDAPU program requirement, if the data submission
requirement overlaps 100 percent with the requirements for the RHQDAPU
program, it will be possible to satisfy both requirements with one
submission. However, a State may mandate additional requirements beyond
what is required for RHQDAPU, for example States may also be requiring
the release of information to the State for public reporting at the
State level, which would of course be in addition to the RHQDAPU
requirement for public reporting. If a State mandate requires fewer
data elements than what is required for RHQDAPU, hospitals
participating in RHQDAPU will be required to submit the additional data
in order to satisfy the RHQDAPU requirement.
Comment: Many commenters did not support the SSI measure for FY
2013, citing resource constraints, a lack of clarification in data
collection procedure, the absence of risk-adjustment for data
presentation in Hospital Compare; and a lack of clarification in
exemptions for small hospitals.
Response: We are finalizing only one HAI measure for the FY 2013
payment determination, the CLABSI measure, in order to allow hospitals
to gain more experience with these types of measures and the new
collection mechanism. We are finalizing the SSI measure for the FY 2014
payment determination. In our view, both measures are equally
important. However, we believe this approach of phasing in the measures
will minimize the additional reporting burden on hospitals that are in
States that do not currently mandate reporting of infection data to the
NHSN, and will also allow time to address any measurement issues, such
as those raised by commenters, for the SSI measure.
Comment: One commenter strongly urged CMS to incorporate all seven
HAI metrics from the DHHS Action Plan into the RHQDAPU program to
ensure the corresponding HVBP program HAI topic is developed and
included in performance scoring by FY 2013. Another commenter suggested
CMS address the execution of the HVBP program with respect to the
targeted outcome metrics from HAIs as required by the Affordable Care
Act.
Response: We thank the commenters for their recommendations and
will consider them in future rulemaking. This FY 2011 IPPS/LTCH PPS
final rule does not directly address the HVBP program authorized by
section 3001 of the Affordable Care Act. We refer readers to section
IV.A.14. of this final rule where we discuss the relationship between
the RHQDAPU and HVBP programs.
After consideration of the public comments we received, we are
finalizing the CLABSI measure for the FY 2013 payment determination.
Collection for the CLABSI measure will begin with January 1, 2011
discharges. Also, based upon public comment, we are finalizing the SSI
measure for the FY 2014 payment determination with collection to begin
with January 1, 2012 discharges. We expect the CLABSI measure and the
SSI measure to be risk-adjusted consistent with section
1886(b)(3)(B)(viii)(VIII) of the Act for the FY 2013 and FY 2014
payment determinations, respectively.
(4) New Registry-Based Measures
For the FY 2013 payment determination, we proposed that hospitals
choose one of the following four proposed measure topics: (1)
Implantable Cardioverter Defibrillator (ICD) Complications, (2) Cardiac
Surgery, (3) Stroke, or (4) Nursing-Sensitive Care. With respect to the
proposed measure topic selected by a hospital, we proposed that the
hospital report data on the proposed measure(s) applicable to the
measure topic (discussed below) to a qualified registry for the
specific topic, and direct the registry to both calculate the measure
results for the hospital and release those results (along with the
numerator/denominator information and exclusion information) to CMS for
the RHQDAPU program. We proposed that hospitals begin submitting data
to the qualified registry of its choosing for discharges on or after
January 1, 2011, and we intend to release a list of qualified
registries

[[Page 50203]]

before that date. In section IV.A.13. of the FY 2011 IPPS/LTCH PPS
proposed rule (75 FR 23997), we specified the self-nomination process
we proposed to use to qualify registries for each proposed registry-
based measure topic. Proposed submission requirements for the proposed
registry-based measures were discussed in section IV.A.5.b.(7) of the
FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23990 through 23991).
Comment: Some commenters stated that the use of registries has the
potential for inconsistent reporting on Hospital Compare and inaccurate
comparisons across hospitals. Hospitals may cherry-pick the measures
they do best on and yet the measures may not fully reflect the care
they provide. One commenter stated that if registries are used,
hospitals should be required to report to more than one registry so
that they cannot just pick the registry in which they have the best
data.
Response: After consideration of the public comments received, we
are persuaded that we should not finalize any registry-based measures
at this time.
As noted above, after consideration of public comments received, we
are not finalizing any registry-based measures at this time.
Below is a discussion of the four proposed registry-based measure
topics and specific registry-based measures that fall within each topic
that we proposed to add to the RHQDAPU program for the FY 2013 payment
determination.
(A) Implantable Cardioverter Defibrillator (ICD) Complications
Registry-Based Topic and Measure
Implantable Cardioverter Defibrillators (ICDs) reduce the risk of
sudden cardiac death for select high risk patients, and the number of
patients undergoing ICD implantation increased from 5,600 in 1990 to
108,680 by 2005.\16\ ICD implantation is an expensive procedure
performed on patients with advanced cardiovascular disease and, often,
significant comorbidities. Despite improvements in technology and
increasing experience with device implantation, the procedure carries a
significant risk of complications, \17\ which in turn increases its
cost, the patient's length of stay, and the patient's risk of
mortality.\18\ In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43873 through 43875), our list of potential future quality measures
under consideration included a measure of implantable cardioverter
defibrillator (ICD) complications. This measure is a risk standardized
complication and mortality rate following implantation of ICDs in
Medicare Fee for Service (FFS) patients at least 65 years of age, with
complication specific outcome time frames. The measure (NQF
OT1-007-09) is currently undergoing NQF review under Phase 1
of a call for Patient Outcome Measures initiated in fall of 2009. We
proposed to add the ICD complications topic and measure to the RHQDAPU
measure set for collection beginning with January 1, 2011 discharges
for the FY 2013 RHQDAPU payment determination pending NQF endorsement.
We anticipated a final endorsement decision in the fall of 2010 after
publication of this FY 2011 IPPS/LTCH PPS final rule.
---------------------------------------------------------------------------

\16\ Brown, D.W., Croft, J.B., et al. (2008). ``Trends in
Hospitalizations for the Implantation of Cardioverter-Defibrillators
in the United States, 1990-2005.'' American Journal of Cardiology
101 (12): 1753-1755.
\17\ Hammill S and Curtis J. Publicly Reporting Implantable
Cardioverter Defibrillator Outcomes--Grading the Report Card. Circ
Arrhythmia Electrophysiol. 2008;1:235-237).
\18\ Al-Khatib SM, Greiner MA, Peterson ED, Hernandez AF,
Schulman KA, Curtis LH. Patient and Implanting Physician Factors
Associated With Mortality and Complications \9\After Implantable
Cardioverter-Defibrillator Implantation, 2002-2005. Circ Arrhythmia
Electrophysiol. 2008;1:240-249.
---------------------------------------------------------------------------

The proposed ICD complications measure was developed based upon
data submitted to the American College of Cardiology-National
Cardiovascular Data Registry's (ACC-NCDR) ICD registry, and data from
that registry has been linked with CMS administrative claims data used
to identify procedural complications. For this proposed measure, the
measured outcome for each ICD index admission is one or more
complications or mortality within 30 or 90 days (depending on the
complication) following ICD implantation. Complications are counted in
the measure only if they occur during a hospital admission.
Complications measured for 30 days include: (1) Pneumothorax or
hemothorax plus a chest tube, (2) Hematoma plus a blood transfusion or
evacuation, (3) Cardiac tamponade or pericardiocentesis, and (4) Death.
Complications measured for 90 days include: (5) Mechanical
complications requiring a system revision, (6) Device related infection
and (7) Additional ICD implantation.
To comply with a January 2005 National Coverage Determination for
ICDs for primary prevention, all hospitals in which ICD procedures are
performed are currently submitting to the ACC-NCDR ICD registry patient
information needed for CMS to determine whether the procedure was
reasonable and necessary. This requirement is documented in section
20.4 of the following Medicare National Coverage Determination Manual:
http://www.cms.hhs.gov/manuals/downloads/ncd103c1_Part1.pdf. For
purposes of the 2005 National Coverage Determination, CMS requires that
hospitals submit data to the ACC-NCDR ICD registry for primary
prevention patients only and does not require hospitals to submit data
on patients undergoing ICD implantation for secondary prevention.
However, the ICD complication measure as submitted to the NQF for
endorsement is specified such that it includes all ICD patients,
regardless of whether they receive an ICD for the primary or secondary
prevention of sudden cardiac death.
Therefore, hospitals that choose this registry-based measure topic
for the RHQDAPU program would submit data on the ICD complications
measure for both primary and secondary prevention patients to the
qualified registry. For risk adjustment, data matching, and secondary
prevention population identification purposes, we proposed that
hospitals also submit to the qualified ICD complications registry 11
additional data elements not currently required under the NCD in order
for the measure to be calculated for RHQDAPU program purposes.
In summary, we proposed to add the ICD complications measure topic
as one of four proposed measure topics that hospitals can choose from
to submit required data elements to a qualified registry for the FY
2013 RHQDAPU payment determination. The only measure that we proposed
to include in this proposed topic at this time would be the ICD
complications measure. Because the ICD complications measure is a risk-
adjusted outcome measure, it is necessary that all data for the measure
be collected by a single qualified registry in order for that registry
to be able to accurately calculate the risk adjustment model and
subsequent measure results. Therefore, we proposed to qualify one
registry for this topic. Proposed registry qualification criteria were
discussed in section IV.A.13. of the FY 2011 IPPS/LTCH PPS proposed
rule (75 FR 23997). We note that the ACC-NCDR ICD registry has already
been qualified to receive and transmit data to CMS for a Medicare
National Coverage Determination, and is currently the only registry to
which hospitals submit data for this NCD. However, this would not
preclude another registry from self-nominating to become a qualified
registry for this proposed topic for the RHQDAPU program. Because the
ICD complication measure is a risk adjusted measure, it

[[Page 50204]]

requires that all data be collected at a single repository for
calculation of the measure. Therefore, we anticipate qualifying a
single registry to collect all of the data for the proposed ICD
complications registry topic.
Comment: Several commenters supported the inclusion of the ICD
complications measure. One commenter was concerned with the quality of
data collected by the ACC-NCDR ICD Registry and the STS Cardiac Surgery
Registry, specifically related to data definition ambiguity and varying
levels of expertise amongst abstractors across hospitals. One commenter
pointed out the problem of lack of standardization of data and measure
quality and data submission process across registries. One commenter
suggested that CMS provide information on the impact of the ICD measure
on hospital's management of cardiac patients.
Response: As stated previously, we have decided not to finalize any
registry-based measures at this time. We understand the commenters'
concerns and will consider them in future rulemaking.
Comment: One commenter suggested that CMS provide detailed data
definitions to guide hospital coders to code complications in order to
avoid over or under documentation of complications by physicians.
Response: As stated previously, we have decided not to finalize any
registry-based measures at this time. We will take this into
consideration for future rulemaking.
As stated previously, we are not finalizing any registry-based
measures in this final rule.
(B) Stroke Registry-Based Topic and Measures
We previously proposed to add five stroke measures to the RHQDAPU
measure set in the FY 2009 IPPS proposed rule (73 FR 23648). We
indicated that we would again consider these measures once NQF reviewed
and endorsed the measures. Since that time, eight stroke measures have
received NQF endorsement in July of 2008, and in the FY 2010 IPPS/RY
2010 LTCH PPS final rule we included these measures in the list of
potential future measures. We also included these measures in the
preview section of the Specifications Manual, and have worked with the
Office of the National Coordinator for Health Information Technology
(ONC) and its partners to create a set of electronic specifications for
these measures to facilitate collection through EHRs.
We are also aware that a number of hospitals are already submitting
these measures to registries, and in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule, we finalized a structural measure of participation in a
systematic clinical database registry for stroke care. Stroke is a
topic of great relevance to the Medicare population due to its impact
on morbidity and mortality, and is an area of great potential
improvement for hospitals. Commenters on the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule expressed support for these measures, indicating that
they accurately measure evidence-based care of the stroke patient to
minimize secondary strokes and other complications, are widely
recognized, and have great potential for quality improvement (74 FR
43875).
Therefore, we proposed to include the following eight measures in
the Stroke registry-based topic:
BILLING CODE 4120-01-P

[[Page 50205]]

[GRAPHIC] [TIFF OMITTED] TR16AU10.041

BILLING CODE 4120-01-C
We proposed to add the stroke registry-based topic, which would
include these eight registry-based stroke measures, to the RHQDAPU
measure set as one of the four proposed measure topics that hospitals
can choose from to submit data to a qualified registry for the FY 2013
payment determination beginning with January 1, 2011 discharges. We
invited comment on the measures as well as the timing of their addition
to the RHQDAPU measure set.
Comment: Several commenters supported the stroke measures, and
suggested the measures be accepted by conventional chart abstraction,
EHRs or registry submission.
Response: As stated previously, we have decided not to finalize any
registry-based measures at this time. We thank the commenters for their
support and suggestions and will take them into consideration in future
rulemaking.
Comment: Some commenters did not support the Stroke registry-based
topic until the measure specifications are harmonized with the Get with
the Guidelines stroke registry, the NHIQM Stroke specifications, and
meaningful use requirements. A commenter recommended delaying the
implementation of any stroke measure set until they can be obtained
electronically. Another commenter requested CMS to allow the Joint
Commission-accredited organizations to use ORYX[supreg] stroke measure
data as a means for and in lieu of participating in a registry. One
commenter asked that CMS add an exclusion to the Stroke thrombolytic
therapy measure for patients who do not have an ER/admitting diagnosis
of stroke.
Response: We thank the commenters for their support and
suggestions. Because we are not finalizing registry-based measures at
this time, we will consider these suggestions in future rulemaking. We
intend to propose the Stroke measurement set for inclusion in a future
payment determination.
As stated previously, we are not finalizing any registry-based
measures in this final rule.
(C) Nursing Sensitive Care Registry-Based Topic and Measures
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we indicated that
we were considering adopting a number of nursing-sensitive care
measures for future RHQDAPU program payment determinations. Also in
that rule, we adopted a structural measure of participation in a
registry for nursing-sensitive care, under which hospitals submit data
directly to the QIO Clinical Warehouse.
For the FY 2013 payment determination, we proposed to add a nursing
sensitive care registry-based topic to the RHQDAPU measure set, which
would include the eight nursing-sensitive care measures listed below.
All

[[Page 50206]]

of the proposed nursing sensitive measures are NQF endorsed. Hospitals
selecting this topic would begin reporting data on the eight proposed
nursing-sensitive care registry-based measures to a qualified nursing-
sensitive care registry beginning with January 1, 2011 discharges.
Hospitals would continue reporting the nursing-sensitive care
structural measure previously adopted for the RHQDAPU program directly
to the QIO Clinical Warehouse.
We invited comment on the proposed addition of a nursing sensitive
care registry-based topic, which would include eight proposed nursing
sensitive care measures, as well as the timing of this addition to the
RHQDAPU program for the FY 2013 payment determination.

Proposed Measures for Nursing Sensitive Care Registry-Based Topic
------------------------------------------------------------------------

-------------------------------------------------------------------------
Patient Falls: All documented falls with or without injury, experienced
by patients on an eligible unit in a calendar month. (NQF 0141)
Falls with Injury: All documented patient falls with an injury level of
minor or greater. (NQF 0202)
Pressure Ulcer Prevalence (NQF 0201)
Restraint Prevalence (vest and limb) (NQF 0203)
Skill Mix: Percentage of hours worked by: RN, LPN/LVN, UAP, Contract/
Agency (NQF 0204)
Hours per patient day worked by RN, LPN, and UAP (NQF 0205)
Practice Environment Scale-Nursing Work Index (NQF 0206)
Voluntary turnover for RN, APN, LPN, UAP (NQF 0207)
------------------------------------------------------------------------

Comment: Many commenters supported the nursing sensitive care
measures/measure set, but objected to registry-based submission of the
measures for various reasons.
Response: We thank the commenters for their support of the proposed
measures. We will not be finalizing any of the registry-based measures
in this final rule.
Comment: One commenter did not support the inclusion of the eight
Nursing Sensitive measures proposed earlier unless significant
restructuring of the specifications were conducted and these
specifications were made available to the public. Another commenter
supported the proposed addition of Nursing Sensitive Care HAC measure
and topic.
Response: As stated earlier, we are not finalizing any of the
registry-based measures in this final rule. We thank the commenters for
their support and suggestions. We will consider these suggestions in
future rulemaking.
As stated earlier, we are not finalizing any of the registry-based
measures in this final rule.
(D) Cardiac Surgery Registry-Based Topic and Measures
We have previously proposed to add several measures on the topic of
cardiac surgery to the RHQDAPU measure set (73 FR 48608), and have also
listed a set of NQF-endorsed cardiac surgery measures in prior rules as
being under consideration for future adoption (74 FR 43874). We also
adopted a structural measure of cardiac surgery participation in the FY
2010 IPPS/RY 2010 LTCH PPS final rule. Cardiac surgery procedures carry
a significant risk of morbidity and mortality. We believe that the
nationwide public reporting of the 15 proposed cardiac surgery
registry-based measures would provide highly meaningful information for
Medicare beneficiaries because they address procedures widely performed
on Medicare beneficiaries. Analysis of the structural measure data we
have received from hospitals indicates that nearly 90 percent of
hospitals performing these procedures already report these data to
clinical registries, which means that if they choose this registry-
based topic for purposes of the FY 2013 payment determination and the
registry to which they already submit data is qualified for this
proposed topic, they will not face any additional data submission
burden.
For the FY 2013 payment determination, we proposed to include 15
cardiac surgery registry-based measures in the cardiac surgery
registry-based measure topic. These proposed registry-based measures
are listed below, and hospitals would submit data on these measures to
a qualified registry for the cardiac surgery registry-based topic. We
did not propose to retire the structural measure for cardiac surgery
participation.

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These measures were endorsed by the NQF in May of 2007 and meet the
statutory requirement of reflecting consensus among affected parties.
We proposed that hospitals selecting this topic would begin submitting
data on the proposed measures to a qualified cardiac surgery registry
beginning with January 1, 2011 discharges. We note that five of these
measures (indicated with an asterisk in the table above) must be risk
adjusted in order to be calculated properly, which requires that the
data needed to calculate these measures be collected by a single
registry. While the remaining measures do not require risk adjustment,
we believe it may be overly burdensome for hospitals to submit data for
this topic to more than one registry. For this reason, we anticipate
qualifying a single registry to collect all of the data for the
proposed cardiac surgery registry-based topic. We invited public
comment on this proposal.
Comment: Many commenters supported the cardiac surgery measures/
measure set, but objected to registry-based submission of the measures.
Response: We thank the commenters for their support of the proposed
measures. As stated earlier, we are not finalizing any registry-based
measures in this final rule.
Comment: One commenter was concerned with the quality of data
collected by the STS Cardiac Surgery Registry, specifically related to
data definition ambiguity and varying levels of expertise amongst
abstractors across hospitals. Another commenter recommended requiring
all hospitals to participate in registries to report specific measures
sets, and to phase in the measures sets starting with cardiac surgery
and nursing sensitive measures.
Response: We agree with the importance of cardiac surgery measures
that include both processes of care and outcomes in view of the
significance of such surgery and the benefit of having such measures
publicly reported. Although we have decided not to adopt registry-based
reporting in this final rule, we continue to believe that cardiac
surgery measures are a priority for the RHQDAPU program.
Comment: Some commenters stated that the use of registries has the
potential for inconsistent reporting on Hospital Compare and inaccurate
comparisons across hospitals. Hospitals may select to participate in
registries for measures that they expect the best performance. Thus,
allowing hospitals to report on only one registry-based measures set
may not fully reflect the care the hospital provides. One commenter
stated that if registries are used, hospitals should be required to
report to more than one registry so that they cannot just pick the
registry in which they have the best data.
Response: We continue to believe that registry participation is
very beneficial, providing ongoing measurement of quality of care,
feedback to participants, and the ability to measure outcomes. We
intend to continue considering how best to implement registry reporting
as a means for data submission. In doing so, we will consider allowing
registry-based reporting as an option, rather than a requirement, and
to address the issues of data comparability. We agree that if the
option to report measures by a registry is adopted, is important to
assure that measures specifications are standardized.
After consideration of public comments received, we will not
finalize any registry-based measures at this time.
In summary, based on the public comments received, for the FY 2013
payment determination, we are retaining the 55 measures adopted for the
FY 2012 payment determination, and are adding 1 chart abstracted
measure (AMI-Statin at Discharge) and 1 HAI measure to be collected via
NHSN (Catheter Associated Bloodstream Infection) for the FY 2013
payment determination. Collection of these two new measures for the FY
2013 payment determination will begin with January 1, 2011 discharges.
We refer readers to section IV.A.5. of this final rule for further
information about submission requirements. We are not finalizing our
proposal for hospitals to pick one of four topics in which to initiate
registry-based measure submission to a qualified registry. As discussed
in section IV.A.13., we also are not finalizing our proposal to qualify
registries for these four topics. In the future, we anticipate offering
registry-based submission as a mechanism to submit data for

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RHQDAPU measures, but not necessarily the sole mechanism to submit data
for RHQDAPU measures.
Set out below are the 57 RHQDAPU program quality measures to be
used for the FY 2013 payment determination:
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d. RHQDAPU Program Quality Measures for the FY 2014 Payment
Determination
(1) Retention of FY 2013 Payment Determination Measures for the FY 2014
Payment Determination
We proposed to retain all of the measures adopted for the FY 2013
payment determination for the FY 2014 payment determination. Collection
of data for these measures would begin with January 1, 2012 discharges.
We invited public comment on this proposal. We did not receive any
specific comments on this proposal. As discussed below, in response to
comments, we are retiring 2 FY 2013 narrowly specified measures (PN-2
and PN-7) and adopting in their place 2 global immunization measures.
We are adopting as final our proposal to retain all of the measures
adopted for the FY 2013 payment determination for the FY 2014 payment
determination, as modified by our retirement of these FY 2013 measures.
(2) New Chart-Abstracted Measures for the FY 2014 Payment Determination
We also proposed to add the following four new chart-abstracted
measures to the RHQDAPU program measure set for the FY 2014 payment
determination: (1) Emergency Department (ED) Throughput--Admit Decision
Time to ED Departure Time for Admitted Patients (NQF 0497),
(2) ED Throughput--Median time from emergency department arrival to ED
departure for admitted patients (NQF 0495), (3) Global Flu
Immunization, and (4) Global Pneumonia Immunization. In proposing to
adopt these chart-abstracted measures, we recognized that we were
proposing to increase the chart-abstraction burden on hospitals with
respect to the RHQDAPU program. However, we stated that the burden
associated with the proposed immunization measures for all inpatients
could be counterbalanced by future retirement of the two current
immunization measures that apply only to pneumonia inpatients. This
measure retirement option is discussed earlier in section IV.A.2.b.(1)
of the FY 2011 IPPS/LTCH PPS proposed rule (75 FR 23965). Furthermore,
we note that the ED Throughput measures have been specified for EHR-
based collection, which may also serve to reduce burden associated with
these measures in the future. We proposed to adopt these four chart-
abstracted measures into the RHQDAPU program measure set for the FY
2014 payment determination. We proposed that data submission for these
measures would begin with January 1, 2012 discharges. We invited
comment on these proposed measures as well as on the proposed timing of
their addition to the RHQDAPU program for the FY 2014 payment
determination.
(A) Emergency Department (ED) Throughput Measures
The two ED Throughput measures we proposed for the FY 2014 payment
determination were: (1) Median time from admit decision time to time of
departure from the emergency department for emergency department
patients admitted to inpatient status, and (2) Median time from
emergency department arrival to time of departure from the emergency
room for patients admitted to the facility from the emergency
department.
The ED-Throughput measures reflect not only the processes of care
that occur while the patient is in the emergency department, but also
reflect the coordination of care, communication, and efficiency of
service provision beyond the walls of the emergency department. These
measures have been NQF-endorsed (NQF 0497 and 0495);
thereby, meeting the requirement of section 1886(b)(3)(B)(viii)(IX) of
the Act. They also have been adopted by HQA. Specifications for these
measures are available in the preview section of the current
Specification Manual available on QualityNet.
These measures also address ED overcrowding, which the IOM
identified as a major quality issue. Reducing the time patients remain
in the ED can improve access to treatment and increase the quality of
care, and capability of the hospital to provide adequate treatment to
patients. ED overcrowding may result in delays in the administration of
medication such as antibiotics for pneumonia and has been associated
with perceptions of compromised emergency care. For patients with non-
ST-segment-elevation myocardial infarction, long ED stays were
associated with decreased use of guideline-recommended therapies and a
higher risk of recurrent myocardial infarction. Overcrowding and heavy
emergency resource demand have led to a number of problems, including
ambulance refusals, prolonged patient waiting times, increased
suffering for those who wait, rushed and unpleasant treatment
environments, and potentially poor patient outcomes. Finally, when EDs
are overwhelmed, their ability to respond to community emergencies and
disasters may be compromised.
Comment: Many commenters supported the inclusion of the proposed ED
Throughput--Admit Decision Time to ED Departure Time for Admitted
Patients (NQF 0497), and ED Throughput--Median time from
emergency department arrival to ED departure for admitted patients (NQF
0495) measures. Some commenters supporting these measures
agreed that the measures should reflect not only processes within the
emergency department but also reflect coordination of care,
communication and efficiency of provision beyond the walls of the
emergency department. However, some of the commenters believed that the
measures need to be refined, terminology needs to be clearly defined,
and a percentile should be used to identify outliers. Some commenters
stated that implementation of the ED measures should be contingent upon
successful EHR testing by CMS so the measures can be reported
electronically and not via manual chart abstraction. Several commenters
opposed the proposed ED Throughput measures, stating there are multiple
factors affecting the ED admit decision time to ED departure time for
admitted patients as well as the median time from ED arrival to ED
departure for admitted patients and the proposed measures cannot be
adequately interpreted to evaluate quality. Commenters requested that
CMS take into consideration timing factors that are outside the control
of the ED, for example, bed availability and patient characteristics.
Response: We appreciate the supportive comments as to the
importance of the ED throughput measures. Specifications are handled
through a sub-regulatory process previously described with
specifications updated as needed. In order to gain experience prior to
the date of required RHQDAPU submission, we encourage hospitals to take
advantage of the voluntary submission process, which we plan to have
available starting in October 2010. Although we believe that the
measures are well specified, experience gained through the voluntary
reporting mechanism will assist us to identify any needed refinements,
prior to the beginning of required submission for the RHQDAPU program
to begin with January 1, 2012 discharges. We will consider the
suggestion regarding showing the percentile distribution to allow
consumers to discern outliers when publicly reporting the measures.
With regard to electronic submission, we are working to provide an
optional mechanism for electronic submission for ED and other RHQDAPU
chart-abstracted measures.
After consideration of the public comments received, we are
finalizing the two ED-Throughput measures as

[[Page 50211]]

proposed for the FY 2014 payment determination.
(B) Global Immunization Measures
For the FY 2014 payment determination, we proposed to adopt two
global immunization measures: (1) Pneumoccocal Immunization; and (2)
Influenza Immunization. Increasing influenza (flu) and pneumonia
vaccination could reduce unnecessary hospitalizations and secondary
complications particularly among high risk populations such as the
elderly. About 36,000 adults die annually and over 200,000 are
hospitalized for flu-related causes. Older adults are more vulnerable,
and adults over 65 comprise about 90 percent of deaths related to flu.
Vaccinations can significantly reduce the number of flu related
illnesses and deaths. The measures being proposed are currently
endorsed by the NQF, which occurred as part of a consensus development
project titled ``National Voluntary Consensus Standards for Influenza
and Pneumococcal Immunizations'' which concluded in 2008. This project
resulted in the endorsement of immunization measures that reflect
current consensus among affected parties that standard measure
specifications for influenza and pneumonia immunization should be
broadly applicable across conditions, populations, and care settings.
The technical specifications for these global measures will be
available in an upcoming release of the Specifications Manual to be
published in October 2010. The difference between these proposed
immunization measures, and the two immunization measures that are
currently part of the RHQDAPU program is that the current measures only
apply to inpatients admitted for pneumonia, whereas the proposed
measures apply to all inpatients regardless of admission diagnosis.
Comment: Some commenters strongly supported the proposed addition
of the Global Immunization measures ((1) Pneumoccocal Immunization; and
(2) Influenza Immunization) to the RHQDAPU program. The commenters also
recommended a measure threshold and exemptions, for example, in times
of vaccine shortage.
Response: We thank the commenters for supporting these measures. We
will take into consideration these suggestions for exemptions during
vaccine shortages. We are finalizing these measures for the FY 2014
payment determination.
Comment: Some commenters expressed concerned that the proposed FY
2014 global immunization measures overlap with previously adopted
immunization measures that are specific to the Pneumonia population
(PN-2: Pneumoccocal Vaccination Status and PN-7: Influenza Vaccination
Status). Commenters also recommended that we retire the two pneumonia-
specific measures if we elect to adopt the global immunization measures
into the RHQDAPU program.
Response: We agree with the commenters and are retiring the PN-2
and PN-7 measures from the RHQDAPU measure set for the FY 2014 payment
determination because these measures overlap with the global
immunization measures that we are adopting for the FY 2014 payment
determination.
Comment: Several commenters opposed the inclusion of the Global
Influenza or Global Pneumococcal measures into the RHQDAPU program
because of perceived burden of collection. In addition, some commenters
stated that vaccination during the acute phase of illness treated in
the hospital inpatient setting is not an optimum practice, and that
miscommunication with patients' primary care provider may lead to
unnecessary vaccinations.
Response: We understand the burden concern and have attempted to
mitigate this by adopting the ED throughput and Global immunization
measures concurrently as they utilize the same global population, and
adopting the measures several years in advance. We believe that
finalizing the global immunization measures for FY 2014 in this final
rule will give hospitals adequate time to develop efficient collection
plans for future collection. We agree with the commenters that the
current RHQDAPU immunizations specified for the pneumonia inpatient
population should be replaced in favor of these broadly applicable
immunization measures. The NQF also recommends the use of the global
immunization measures over the condition specific immunization measures
that are currently in the program. Based on the public comments
received, we are adopting the two global immunization measures for the
FY 2014 payment determination, and we are retiring the PN-2:
Pneumoccocal Vaccination Status and PN-7: Influenza Vaccination Status
measures for the FY 2014 payment determination in order to accommodate
these more broadly applicable immunization measures.
As for the commenter's point that a patient's primary care provider
would ordinarily be the locus for immunization, the current NQF-
endorsed measures recognize a role for the acute care setting to assess
the vaccination status of and to intervene in the appropriate
vaccination of acutely hospitalized patients against influenza and
pneumonia. This is consistent with the indications for these vaccines
which are global in nature in the sense that they are generally
recommended for patients over a certain age, not those with only who
have contracted pneumonia. We will provide specifications for these new
measures in the upcoming Specifications Manual release.
After consideration of the public comments received, we are
finalizing all four chart-abstracted measures into the RHQDAPU program
measure set for the FY 2014 payment determination. Also based upon
public comments received, and discussed in section IV.A.3.c.(3) of this
final rule, we are finalizing the adoption of the SSI measure to be
collected via NHSN for the FY 2014 payment determination. Data
submission for these five measures would begin with January 1, 2012
discharges. In addition, based on comments received regarding
retirement of narrowly specified measures when broader measures are
available, we are retiring the PN-2 and PN-7 measures for the FY 2014
and subsequent payment determinations, which will be replaced by the
two global measures for influenza and pneumococcal vaccination
beginning with January 1, 2012 discharges. We will retain the remaining
FY 2013 measures for the FY 2014 payment determination. We expect the
CLABSI measure and the SSI measure to be risk-adjusted consistent with
section 1886(b)(3)(B)(viii)(VIII) of the Act for the FY 2013 and FY
2014 payment determinations, respectively.
The complete list of 60 quality measures to be used for the FY 2014
payment determination is set out below.
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4. Possible New Quality Measures for Future Years
We invited public comment on the following quality measures and
topics set out below that we are considering for the future. We also
sought suggestions and rationales to support the adoption of measures
and topics that were not included in this list for the RHQDAPU program.

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General comments
Comment: A commenter recommended that any long-range planning must
be consistent with the Secretary's strategic plan and priorities which
are unknown at this time for the future years. A commenter stated that
CMS needs to have a more systematic quality measure strategy and
framework to align measures in order to achieve the overall goals of
quality improvement and attainment. Another commenter stated that
hospitals should be allowed to prioritize measures based on risks of
their populations and programs and questioned the reason why hospitals
are not given the option as physicians to select from a list of
measures to focus on their quality improvement efforts. The commenters
suggested that we follow a more methodical framework to prioritize and
integrate measures into the RHQDAPU program and the HITECH EHR
incentive program with a long-term goal of transitioning from the
RHQDAPU program to the meaningful use criteria under the HITECH EHR
program. One commenter noted that in moving forward, CMS should focus
on developing measures collected through EHRs rather than using
manually intensive, chart-based measures through the RHQDAPU program.
Several commenters believed that many of the proposed measures for
future years overlap with the current RHQDAPU measures. Another
commenter recommended that CMS focus reporting on a variety of aspects
for fewer conditions rather than adding one or two measures in a
particular medical condition or significantly increasing the overall
number of conditions being measured at any one time. The commenter
believed that the second approach would stretch hospital resources.
Another commenter noted that it is unnecessary to put a single measure
under different composite measures or under different reporting
requirements. The commenter gave the PSI-4 measure as an example which
is required in both the Nursing sensitive composite measure as well as
in the AHRQ Patient Safety Indicators measurement set. A commenter
suggested that CMS take a more aggressive approach and add more
measures in high priority areas.
Response: We have retained the ability to modify the measure set in
the future in order to respond to changes in our priorities as well as
changes in legislation. One of our goals is to align the quality
measures across programs including the HITECH EHR program in order to
reduce the burden on hospitals reporting quality measures to multiple
programs. We generally try to adopt measures for the RHQDAPU program
that are broadly applicable across IPPS hospitals, because RHQDAPU
measures are made publicly available in comparative reporting tools,
and will be the basis for measure selection for hospital value based
purchasing in the future. Allowing hospitals to pick among measure sets
may not be ideal for comparative public reporting and performance-based
incentive programs.
With respect to long-range planning and the Affordable Care Act
required strategic plan and priorities, we agree that the RHQDAPU
program priorities will be guided by this plan. Although this plan is
yet to be developed, the measures that we include in this final rule
represent established HHS priorities, which include some of the
priorities selected by the NQF National Priorities Partners process.
These include patient safety, population health, and care coordination.
The new outcomes measures, the HACs and HAIs, the immunization
measures, AMI statin at discharge, and ED throughput measures finalized
in this final rule reflect these priorities as we discuss in the
portions of this final rule dealing with those measures. To the extent
that these or other measures are incompatible with any revision to HHS
priorities and new strategic framework, the measures can be modified.
Because IPPS hospitals provide a broad array of services, we believe
that it is important have an array of measures that cover very
substantially inpatient services. We also believe it is beneficial to
consumers to measure and report many topics governing aspects of health
care delivered in hospital settings, and thus, we have been
systematically expanding the RHQDAPU program quality measures in scope
and topic. Currently, AHRQ PSI-4 is in both the AHRQ Patient Safety
Indicator measure set and the Nursing Sensitive Care measure set. We
have not adopted the Nursing Sensitive Measure set at this time, but
would address this overlap in the future should we propose to require
this measure set of participating hospitals. We will also continue to
assess the feasibility of alternative data sources for measures, such
as registries and EHRs to lessen the data collection burden on
hospitals. We agree with the importance of transitioning to EHR
submission of RHQDAPU measures and plan to actively move toward
implementation. However, we expect that, at least in the short term, it
would not be practical to require all hospitals to report using EHR
technology, but rather to provide this reporting method as an option.
Comment on Measure Topic: Atrial fibrillation
Comment: A commenter indicated that atrial fibrillation measures is
the root cause of several conditions upon which CMS has focused and
that quality measures for atrial fibrillation help alert hospitals and
clinicians to diagnose and manage the condition.
Response: We agree and we did propose the STK-3: Anticoagulation
therapy for atrial fibrillation/flutter (NQF 0436) in the FY
2011 IPPS/LTCH proposed rule under proposed measures for the Stroke
registry-based topic. As discussed previously, we are not finalizing
any registry-based measures in this final rule. We will take the
commenter's suggestion into

[[Page 50217]]

consideration in determining whether to adopt this measure for the
RHQDAPU program in the future.
Comment on prioritization of Measure Topics
Comment: One commenter recommended that CMS prioritize the
cardiovascular-related conditions that are in the CMS top 20 based on
root cause and prevention of subsequent conditions as follows:
Diabetes, ischemic heart disease, atrial fibrillation, acute myocardial
infarction, congestive heart failure, stroke, Alzheimer's disease, and
depression.
Response: We thank the commenter for the suggestions and we will
take the commenter's suggestion into consideration in determining the
priorities of the measures for the RHQDAPU program in the future.
Comments on Measure Topic: Cardiac rehabilitation referral
for AMI, HF, and Cardiac Surgery
Comment: A few commenters strongly endorsed the proposal to
consider ``Cardiac Rehabilitation Referral for AMI, HF, and Cardiac
Surgery'' for possible RHQDAPU program futures measure and topics.
Response: We thank the commenters for their support of the proposed
measure. We will take that into consideration in determining whether to
adopt this measure for the RHQDAPU program in the future.
Comments on Measure Topic: Percutaneous coronary
intervention (PCI)
Comment: A few commenters requested the addition of percutaneous
coronary intervention (PCI) in the RHQDAPU measures for future years.
Response: We thank the commenters for the suggestion and we will
take it into consideration in determining whether to adopt this measure
for the RHQDAPU program in the future.
Comment on Measure Topic: Participation in a systematic
database for general thoracic surgery
Comment: One commenter suggested the inclusion of participation in
a systematic database for general thoracic surgery as a structural
measure.
Response: We thank the commenter for the suggestion and we will
take it into consideration in determining whether to adopt this measure
for the RHQDAPU program in the future.
Comments on Measure Topic: 30-day AMI and heart failure
care transition composites
Comment: A few commenters urged CMS not to include composite
measures for 30-day AMI and heart failure care transition composites
because they believed they do not accurately identify differences in
performance that are due to failure to provide adequate care
coordination and may penalize providers unfairly from serving
disadvantaged population served or providing unrelated emergency
department visits. One commenter recommended the inclusion of more AMI
measures.
Response: We acknowledge these concerns. These measures are
currently undergoing NQF review and endorsement. We also thank the
commenter that supported the addition of AMI measures.
Comment on Measure Topic: Initiation of statin therapy in
patients with ischemic stroke or acute AMI prior to discharge
Comment: One commenter recommended adding a measure for the
initiation of statin therapy in patients with ischemic stroke or acute
AMI prior to discharge when there is no contraindication.
Response: We thank the commenter for the suggestion and we will
consider it in future rulemaking.
Comment on Measure Topic: Smoking cessation screening,
treatment, and post-discharge follow-up
Comment: One commenter suggested the inclusion of measures like the
smoking cessation screening, treatment, and post-discharge follow-up
measures which are being pilot tested by the Joint Commission.
Response: We thank the commenter for the suggestion and we will
take it into consideration in determining whether to adopt this measure
for the RHQDAPU program in the future.
Comment on Measure Topic: 30-Day PCI Readmission Measures
Comment: One commenter supported the PCI mortality and readmission
measures and urged CMS to reconsider delayed implementation of the
measures after FY 2014 and consider implementing PSI-9 and/or other
measures to track severe bleeding as a preventable readmission from
PCI. One commenter opposed the PCI readmission measure. This commenter
opposed the data quality (probability matching with CMS data),
timeframe (30-day) and numerator (readmission for all-cause) of the
measure and the validity of the risk adjustment model (as indicated by
the low C-statistic).
Response: The PCI readmission measure was developed using a
probabilistic match to link the registry data with the Medicare data
but would be implemented using direct patient identifiers. As to the
time frame of the measures, we selected 30-day period of assessment
based on empirical analysis of available data, clinical judgment and
the advice of expert consultants. The consensus was that a 30-day time
provided the correct balance by capturing the bulk of excess
readmissions occurring after PCI and maintaining a high likelihood that
the readmission was attributable to the hospital care. Moreover from a
patient perspective, readmission for any reason is likely to be an
undesirable outcome of care. Readmissions not associated with a cardiac
diagnosis may be directly related to the care delivered during the
index hospitalization. Finally in regard to the low C-statistic, two
factors affect the C-statistic--patient factors and hospital care.
Since the patient-level predictors included in the risk adjustment
model for the PCI measure were robust based on registry clinical data,
the C-statistic of 0.663 indicates that the quality of care delivered
to patients by hospitals (that are not part of the model) plays a
larger role. We will consider the comment regarding adoption of other
companion measures, such as PSI-9, that may address preventability.
Comment: One commenter supported the inclusion of Catheter-
Associated UTI and VAP in FY 2014.
Response: We thank the commenter for the support of the proposed
measure. We will take it into consideration in determining whether to
adopt these measures for the RHQDAPU program in a future rulemaking
cycle.
Comment on Measure Topic: HACs
Comment: One commenter recommended that CMS make a long-term goal
to cultivate more global hospital-wide assessments of harm rather than
targeting individual organisms or HACs.
Response: We thank the commenter for the suggestion and we will
take it into consideration in determining whether to adopt this kind of
measure for the RHQDAPU program in the future.
Comments on Measure Topic: HAI
Comment: One commenter recommended the inclusion of HAI--ventilator
associated pneumonia, HAI--multidrug-resistant organism infection, and
HAI--CDAD. Another commenter cautioned that for the possible inclusion
of the VAP measures, the term ``VAP'' must be clearly defined so that
trauma or immune-compromised patients can be diagnosed correctly for
VAP and recommended that CMS take into consideration the inadvertent
penalty of academic medical centers and hospitals that treat complex
and critically-ill patients who are at risk for MDRO, and experience
high volume of patient transfer.
Response: We thank the commenters for their suggestion for other
HAIs and

[[Page 50218]]

we will take this into consideration in determining whether to adopt
the measures for the RHQDAPU program in the future. We plan to propose
additional HAI measures in a future rulemaking cycle as they gain NQF
endorsement.
Comment: A commenter recommended that the HHS Action Plan to
Prevent Healthcare-associated Infections must be assessed for whether
the Plan's metrics and targets have been met and to provide the results
to the public at the hospital level, especially measures related to
MRSA, CDAD, and UTI. A commenter urged CMS to add the Catheter-
Associated UTI in FY 2012. The commenter suggested CMS and CDC
collaborate to develop a workable guideline for identifying hospital-
acquired VAP infections, moving surveillance and reporting of central
line associated bloodstream infections beyond the ICU. The commenter
did not recommend using NQF-endorsement alone as adoption criteria.
Another commenter recommended that no further data submission plan be
proposed for VAP, MRSA, and CDAD until after fall of 2010 when the HHS
HAI Action Plan Review and Update is released.
Response: We will take these comments into consideration for
planning and measure selection. We appreciate the commenter's
suggestion that we add the Catheter-Associated UTI in FY 2012, but we
have determined that we will consider it for future years. The HHS
Action Plan is currently undergoing a process of interdepartmental
review and update that will include an examination of the metrics and
targets. We anticipate that this will be complete in October 2010.
Comments on Measure Topic: VTE
Comment: One commenter suggested the inclusion of a thromboembolism
(VTE) measure into the RHQDAPU program for future years. One commenter
requested clarification for the documentation requirements for the VTE-
1 VTE Prophylaxis and for the VTE-2 ICU VTE Prophylaxis. The commenter
also agreed with the exclusion of patients with reasons for not
administering mechanical and pharmacological prophylaxis.
Response: We appreciate the suggestion and agree with the high
importance of the VTE topic. With respect to specifications and
documentation requirements these are handled through a sub-regulatory
process.
Comment on Measure Topic: Surgical Safety
Comment: One commenter supported the continued development of
Surgical Safety measures.
Response: We thank the commenter for the encouragement and we will
take that into consideration in determining whether to adopt more of
these types of measures for the RHQDAPU program in the future.
Comment on Measure Topic: NQF-approved serious reportable
events.
Comment: One commenter suggested that CMS adopt NQF-endorsed
serious reportable events in future years.
Response: We thank the commenter for the suggestion and we will
take it into consideration in determining whether to adopt this measure
for the RHQDAPU program in the future.
Comments on Measure Topic: Influenza vaccination of
healthcare personnel
Comment: Many commenters recommended the inclusion of Influenza
vaccination of healthcare personnel.
Response: We agree that Influenza vaccination of healthcare
personnel is an important practice that may prevent the spread of
influenza and we thank the commenters for their recommendation. We will
take this into consideration in determining whether to adopt this
measure for the RHQDAPU program in the future.
Comment on Measure Topic: Mortality measures
Comment: A commenter strongly opposed the inclusion of mortality
measures because they are inconsistent and unreliable indicators of the
quality of patient care. Furthermore, the commenter stated that
mortality measures do not take into account terminal, end-of-life
issues, or withhold treatment decisions made by patients and families.
Response: These comments were related to the prospect of
inconsistent approaches to mortality measures resulting from inclusion
of various registry-based measures sets. We have withdrawn the
registry-based reporting proposal. We have added no additional
mortality measures beyond the CMS 30-day mortality measures and the
AHRQ PSI and IQI mortality measures. These measures and their
underlying methodologies are all endorsed by NQF.
We thank the commenters for all their suggestions for quality
measures for the future years. We also note that, although we did not
adopt the proposed registry-based measures: Stroke, Cardiac Surgery,
and Nurse Sensitive measures for the FY 2013 payment determination in
this final rule, we are still very interested in reconsidering them for
future adoption. While the stroke measures were proposed only for
registry-based participation in the proposed rule, and not finalized,
these measures are currently specified for chart abstraction and
electronically specified for EHR submission and included in the HITECH
EHR incentive program for 2011 and 2012. We intend to propose to add
these measures to the RHQDAPU program in future rulemaking. In
addition, while we did not propose the VTE measures set in the FY 2011
IPPS/LTCH PPS proposed rule, which are also included in the HITECH EHR
incentive program for 2011 and 2012, we intend to propose to add these
measures to the RHQDAPU program in future rulemaking.
5. Form, Manner, and Timing of Quality Data Submission
Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the
payment update, for FY 2007 and each subsequent fiscal year, be reduced
by 2.0 percentage points (or, beginning with FY 2015, by one-quarter of
such applicable percentage increase (determined without regard to
clause (ix), (xi), or (xii)) for any subsection (d) hospital that does
not submit quality data in a form and manner, and at a time, specified
by the Secretary. The data submission requirements, Specifications
Manual, and submission deadlines are posted on the QualityNet Web site
at: http://www.QualityNet.org/. CMS requires that hospitals submit data
in accordance with the specifications for the appropriate discharge
periods.
Hospitals submit quality data through the secure portion of the
QualityNet Web site (formerly known as QualityNet Exchange) (http://www.QualityNet.org). This Web site meets or exceeds all current Health
Insurance Portability and Accountability Act (HIPAA) requirements for
security of protected health information.
a. RHQDAPU Program Requirements for FY 2012, FY 2013 and FY 2014
(1) Procedural Requirements for the FY 2012, FY 2013 and FY 2014
Payment Determinations
For the FY 2012, FY 2013, and FY 2014 payment determinations, we
proposed that the following procedures would apply to hospitals
participating in the RHQDAPU program. These procedures are, for the
most part, the same as the procedures that apply to the FY 2011 payment
determination. We identified where we proposed to modify a procedure.
Register with QualityNet, before participating hospitals
initially begin reporting data, regardless of the method used for
submitting data.

[[Page 50219]]

Identify a QualityNet Administrator who follows the
registration process located on the QualityNet Web site (http://www.QualityNet.org).
Complete a Notice of Participation. New subsection (d)
hospitals and existing hospitals that wish to participate in the
RHQDAPU program for the first time must complete a revised ``Reporting
Hospital Quality Data for Annual Payment Update Notice of
Participation'' form (Notice of Participation form) that includes the
name and address of each hospital campus that shares the same CMS
Certification Number (CCN). We will revise the Notice of Participation
form as needed and will provide appropriate notification of any
revisions to hospitals and QIOs through the routine RHQDAPU
communication channels which include memo and e-mail notification and
QualityNet Web site articles and postings.
We proposed that, consistent with our policy for the FY 2011
payment determination, any hospital that receives a new CCN on or after
October 15, 2009 (including new subsection (d) hospitals and hospitals
that have merged) that wishes to participate in the RHQDAPU program and
has not otherwise submitted a Notice of Participation form using the
new CCN must submit a completed Notice of Participation form no later
than 180 days from the date identified as the open date (that is, the
Medicare acceptance date) on the approved CMS Online System
Certification and Reporting (OSCAR) system to participate in the
RHQDAPU program for FY 2012 and future years. We believe that this
deadline will give these hospitals a sufficient amount of time to get
their operations up and running while simultaneously providing CMS with
clarity regarding whether they intend to participate in the RHQDAPU
program for FY 2012.
We did not receive any public comments related to our proposal for
procedural requirements for the FY 2012, FY 2013 and FY 2014 payment
determinations. We are adopting as final our proposal regarding the
procedural requirements discussed above for the FY 2012, FY 2013 and FY
2014 payment determinations.
(2) Synchronization of RHQDAPU Program Data Submission and Validation
Quarters With Quarters Used To Make Payment Determinations
Currently, we determine, in part, whether a hospital has met the
RHQDAPU program requirements for a given fiscal year by looking at
whether the hospital properly submitted data with respect to a number
of quarterly discharge periods. However, the quarters that we look at
for HCAHPS data, chart-abstracted RHQDAPU program measures, and
structural measures may not be the same for a single payment
determination. For example, for the FY 2011 payment determination, we
looked at discharge data submitted by hospitals from 4th quarter 2008
through 3rd quarter 2009 for AMI, HF, and PN chart-abstracted RHQDAPU
program measures, 1st quarter 2010 for the newly added SCIP Infection 9
and 10 measures, April 2008 through March 2009 data for HCAHPS, and
January 1, 2010 through June 30, 2010 data for structural measures.
This lack of synchronization has developed because we have
generally made payment decisions using the four earliest occurring
discharge quarters for each measure topic that we did not include in a
previous year's payment determination, and we have not synchronized
when hospitals must begin reporting data on new measures.
Starting with the FY 2013 payment determination, we proposed to
determine whether the hospital meets the data submission requirement
for quality measure data by looking at whether the hospital properly
submitted data on the applicable measures during the same quarterly
discharge periods. Specifically, the quarterly discharge periods that
will apply to a particular payment determination will be the four
quarters that occur within a calendar year. In other words, beginning
with the FY 2013 payment determination, we will look at whether the
hospital properly submitted data for HCAHPS, CDC NHSN, chart-abstracted
measures, and structural measure quality measure data during the four
calendar year quarters of FY 2011.
With respect to our requirement that hospital data be successfully
validated in order for the hospital to earn the full payment update for
a given fiscal year, we also proposed, beginning with the FY 2013
payment determination, to validate four discharge quarters, but the
quarters will be the 4th calendar quarter of the year that occurs 2
years before the payment determination and the first 3 calendar
quarters of the following calendar year. Thus, for the FY 2013 payment
determination, we will validate data from the 4th calendar quarter of
2010 through the 3rd calendar quarter of 2011. We believe this is
appropriate given the time required for the validation abstraction and
appeal process.
This proposed synchronization will give us a more complete picture
of the quality of care provided by a hospital during a given time
period, thus enabling us to link that quality of care to the applicable
RHQDAPU payment determination. In addition, this proposal will provide
clarity to hospitals regarding what data we will look at to make
payment determinations for a given fiscal year. We believe that this
synchronization will also assist us to more effectively implement the
RHQDAPU program because we will be able to achieve operational
consistency regarding what data applies to what payment determination.
Further, we believe that this proposal may assist the agency in
implementing the Hospital Value-Based Purchasing Program as authorized
by section 3001(a)(1) of the Affordable Care Act because it will
improve the link between quality as measured during a single period of
time and the payment amounts provided to hospitals. For example, under
our proposal, HCAHPS patient experience of care measures and chart-
abstracted measures for a single set of discharge quarters will be used
together for a single payment determination. Finally, we believe that
this proposal will improve hospitals' ability to implement quality
improvement strategies that affect RHQDAPU program measures and their
quality of care.
We would post a table outlining the discharge quarters that would
be used to make each fiscal year payment determination no later than
September 15th annually on the QualityNet Web site (http://www.QualityNet.org). We invited public comment on this proposal.
Comment: Many commenters supported the proposal to move all
measures to a consistent timeframe, beginning with the FY 2013 payment
determination, in anticipation of the transition to the HVBP program
when all measures need to be calculated across a consistent timeframe.
Commenters also indicated that the move provides clarity for the
timeframe of data for each fiscal year.
Response: We thank the commenters for their support of this
proposal.
Comment: Many commenters questioned CMS' intent related to the HVBP
program requirements under section 3001 of the Affordable Care Act.
Response: We appreciate the comments and intend to propose
regulations for the HVBP program consistent with the legislative
mandates of section 3001 of the Affordable Care Act in the FY 2012
IPPS/LTCH PPS proposed rule.
After consideration of the public comments we received, we are
adopting as final our proposal for synchronization of RHQDAPU program

[[Page 50220]]

data submission and validation quarters with quarters used to make
payment determinations.
(3) HCAHPS Requirements for the FY 2012, FY 2013 and FY 2014 Payment
Determinations
We proposed that, for the FY 2012, FY 2013 and FY 2014 payment
determinations, except as noted below, the RHQDAPU program HCAHPS
requirements we adopted for FY 2011 would continue to apply. Under
these requirements, a hospital must continuously collect and submit
HCAHPS data in accordance with the current HCAHPS Quality Assurance
Guidelines and the quarterly data submission deadlines, both of which
are posted at http://www.hcahpsonline.org. In order for a hospital to
participate in the collection of HCAHPS data, a hospital must either:
(1) Contract with an approved HCAHPS survey vendor that will conduct
the survey and submit data on the hospital's behalf to the QIO Clinical
Warehouse; or (2) self-administer the survey without using a survey
vendor provided that the hospital attends HCAHPS training and meets
Minimum Survey Requirements as specified on the Web site at: http://www.hcahpsonline.org. A current list of approved HCAHPS survey vendors
can be found on the HCAHPS Web site at: http://www.hcahpsonline.org.
We proposed that the FY 2012 payment determination for the RHQDAPU
program for HCAHPS will be based on discharges from April 1, 2010
through December 31, 2010.
We proposed that the FY 2013 payment determination for the RHQDAPU
program for HCAHPS will be based on discharges from January 1, 2011
through December 31, 2011.
We proposed that the FY 2014 payment determination for the RHQDAPU
program for HCAHPS will be based on discharges from January 1, 2012
through December 31, 2012.
Every hospital choosing to contract with a survey vendor should
provide the sample frame of HCAHPS-eligible discharges to its survey
vendor with sufficient time to allow the survey vendor to begin
contacting each sampled patient within 6 weeks of discharge from the
hospital. (We refer readers to the Quality Assurance Guidelines located
at http://www.hcahpsonline.org for details about HCAHPS eligibility and
sample frame creation.) In addition, the hospital must authorize the
survey vendor to submit data via My QualityNet, the secure part of the
QualityNet Web site, on the hospital's behalf.
After the survey vendor submits the data to the QIO Clinical
Warehouse, we strongly recommend that hospitals employing a survey
vendor promptly review the two HCAHPS Feedback Reports (the Provider
Survey Status Summary Report and the Data Submission Detail Report)
that are available. These reports enable a hospital to ensure that its
survey vendor has submitted the data on time and the data has been
accepted into the QIO Clinical Warehouse.
Any hospital that has five or fewer HCAHPS-eligible discharges in
any month is no longer required to submit HCAHPS surveys for that
month, although the hospital may voluntarily choose to submit these
data. However, the hospital still must submit its total number of
HCAHPS-eligible cases for that month to the QIO Clinical Warehouse as
part of its quarterly HCAHPS data submission.
In order to ensure compliance with HCAHPS survey and administration
protocols, hospitals and survey vendors must participate in all
oversight activities. As part of the oversight process, during the
onsite visits or conference calls, the HCAHPS Project Team will review
the hospital's or survey vendor's survey systems and assess protocols
based upon the most recent HCAHPS Quality Assurance Guidelines. All
materials relevant to survey administration will be subject to review.
The systems and program review includes, but is not limited to: (a)
Survey management and data systems; (b) printing and mailing materials
and facilities; (c) telephone and Interactive Voice Response (IVR)
materials and facilities; (d) data receipt, entry and storage
facilities; and (e) written documentation of survey processes.
Organizations will be given a defined time period in which to correct
any problems and provide follow-up documentation of corrections for
review. As needed, hospitals and survey vendors will be subject to
follow-up site visits or conference calls. If CMS determines that a
hospital is not compliant with HCAHPS program requirements, CMS may
determine that the hospital is not submitting HCAHPS data that meet the
requirements of the RHQDAPU program.
We continue to strongly recommend that each new hospital
participate in an HCAHPS dry run, if feasible, prior to beginning to
collect HCAHPS data on an ongoing basis to meet RHQDAPU program
requirements. New hospitals can conduct a dry run in the last month of
a calendar quarter. The dry run will give newly participating hospitals
the opportunity to gain first-hand experience collecting and
transmitting HCAHPS data without the public reporting of results. Using
the official survey instrument and the approved modes of administration
and data collection protocols, hospitals/survey vendors will collect
HCAHPS dry-run data and submit the data to My QualityNet, the secure
portion of QualityNet.
We again encouraged hospitals to regularly check the HCAHPS Web
site at http://www.hcahpsonline.org for program updates and
information.
Comment: Commenters expressed support for the use of the HCAHPS
survey, but they suggested the development of additional survey
domains.
Response: We thank the commenters for their input and will take
their suggestions into consideration in developing future rulemaking.
After consideration of the public comments we received, we are
adopting as final our proposed HCAHPS requirements for the FY 2012, FY
2013 and FY 2014 payment determinations.
b. Additional RHQDAPU Program Procedural Requirements for the FY 2012,
FY 2013 and FY 2014 Payment Determinations
(1) Chart-Abstracted Measures for Which Data Are Submitted Directly to
CMS (via QualityNet)
Hospitals must begin submitting RHQDAPU program data starting with
the first day of the quarter following the date when the hospital
registers to participate in the program. For purposes of meeting this
requirement, we interpret the registration date to be the date that the
hospital submits a completed Notice of Participation form. As proposed
previously in this section, hospitals must also register with
QualityNet and identify a QualityNet Administrator who follows the
QualityNet registration process before submitting RHQDAPU program data.
Hospitals must continuously collect and report data to CMS (via
QualityNet) for each of the quality measures under the topic areas that
require chart abstraction (and are not registry-based topic areas). For
the FY 2012 and FY 2013 payment determinations, the proposed topic
areas are AMI, HF, PN, and SCIP. For the FY 2014 payment determination,
the proposed topic areas are AMI, HF, PN, SCIP, Emergency Department
Throughput (EDT), and Global Immunization (GIM).
For FY 2012, we proposed that hospitals must submit data for five
calendar year discharge quarters as follows: 4Q CY 2009, 1Q CY 2010
(AMI,

[[Page 50221]]

HF and PN only), 2Q CY 2010, 3Q CY 2010 and 4Q CY 2010. For the FY 2013
payment determination, we proposed that hospitals must submit data for
four consecutive calendar year discharge quarters as follows: 1Q CY
2011, 2Q CY 2011, 3Q CY 2011 and 4Q CY 2011. For the FY 2014 payment
determination, hospitals must submit data for four consecutive calendar
year discharge quarters as follows: 1Q CY 2012, 2Q CY 2012, 3Q CY 2012
and 4Q CY 2012. Hospitals must report these data by each quarterly
deadline.
We did not receive any public comments related to this proposal. We
are adopting as final our proposal related to chart-abstracted measures
for which data is submitted directly to CMS (via QualityNet).
Hospitals must submit the data to the QIO Clinical Warehouse using
the CMS Abstraction & Reporting Tool (CART), The Joint Commission
ORYX[supreg] Core Measures Performance Measurement System, or another
third-party vendor tool that meets the measurement specification
requirements for data transmission to QualityNet. All submissions will
be executed through My QualityNet, the secure part of the QualityNet
Web site. Because the information in the QIO Clinical Warehouse is
considered QIO information, it is subject to the stringent QIO
confidentiality regulations in 42 CFR part 480. The QIO Clinical
Warehouse will submit the data to CMS on behalf of the hospitals.
Hospitals must submit complete data for each quality measure that
requires chart abstraction in accordance with the joint CMS/The Joint
Commission sampling requirements located on the QualityNet Web site.
These requirements specify that hospitals must submit a random sample
or complete population of cases for each of the topics covered by the
quality measures. Hospitals must meet the sampling requirements for
these quality measures for discharges in each quarter.
For the FY 2012 payment determination, we proposed that hospitals
must submit population and sampling data for three consecutive calendar
year discharge quarters as follows: 2Q CY 2010, 3Q CY 2010 and 4Q CY
2010.
For the FY 2013 payment determination, we proposed that hospitals
must submit population and sampling data for four consecutive calendar
year discharge quarters as follows: 1Q CY 2011, 2Q CY 2011, 3Q CY 2011
and 4Q CY 2011.
For the FY 2014 payment determination, we proposed that hospitals
must submit population and sampling data for four consecutive calendar
year discharge quarters as follows: 1Q CY 2012, 2Q CY 2012, 3Q CY 2012
and 4Q CY 2012.
We did not receive any public comments related to these proposals.
We are adopting these proposals as final.
Hospitals must submit to CMS on a quarterly basis aggregate
population and sample size counts for Medicare and non-Medicare
discharges for the topic areas for which chart-abstracted data must be
submitted (currently AMI, HF, PN, and SCIP). For clarification, we
proposed that hospitals are required to submit a numeric representation
of their aggregate population and sample size count for each topic area
even if the hospital has not treated patients in a specific topic area.
For example, if a hospital has not treated AMI patients, the hospital
is still required to submit a zero for its quarterly aggregate
population and sample count for that topic in order to meet the
requirement.
In order to reduce the burden on hospitals that treat a low number
of patients in an RHQDAPU program topic area, a hospital that has five
or fewer discharges (Medicare and non-Medicare combined) in a topic
area during a quarter in which data must be submitted is not required
to submit patient-level data for that topic area for the quarter. The
hospital must still submit its aggregate population and sample size
counts for Medicare and non-Medicare discharges for the topic areas
each quarter. We also noted that hospitals meeting the five or fewer
patient discharge exception may voluntarily submit these data.
The quarterly data submission deadline for hospitals to submit
patient level data for the proposed measures that require chart
abstraction is 4\1/2\ months following the last discharge date in the
calendar quarter. CMS will post the quarterly submission deadline
schedule on the QualityNet Web site (http://www.QualityNet.org). Chart-
abstracted measures have not been added for the FY 2012 payment
determination. The collection of new chart-abstracted measures proposed
for the FY 2013 payment determination would begin with the 1st calendar
quarter 2011 discharges, for which the submission deadline would be
August 15, 2011. The collection of new chart-abstracted measures
proposed for the FY 2014 payment determination would begin with the 1st
calendar quarter 2012 discharges, for which the submission deadline
would be August 15, 2012. Hospitals must comply with the discharge
quarter submission deadlines in any fiscal year for each quarter for
which data submission is required (Quarter 1--August 15th; Quarter 2--
November 15th; Quarter 3--February 15th; Quarter 4--May 15th).
The data submission deadline for hospitals to submit aggregate
population and sample size count data for the measures requiring chart
abstraction is four months following the last discharge date in the
calendar quarter. This requirement allows CMS to advise hospitals
regarding their submission status in enough time for them to make
appropriate revisions before the data submission deadline. We will post
the aggregate population and sample size count data submission
deadlines on the QualityNet Web site (http://www.QualityNet.org).
CMS strongly recommends that hospitals review the QIO Clinical
Warehouse Feedback Reports and the RHQDAPU Program Provider
Participation Reports that are available after patient level data are
submitted to the QIO Clinical Warehouse. CMS generally updates these
reports on a daily basis to provide accurate information to hospitals
about their submissions. These reports enable hospitals to ensure that
their data were submitted on time and accepted into the QIO Clinical
Warehouse.
We did not receive any public comments related to this proposal. We
are adopting as final our proposal related to the submission of
aggregate population and sampling data for AMI, HF, PN, and SCIP
topics.
(2) Data Submission Requirements for HCAHPS
Hospitals must continuously collect and submit HCAHPS data in
accordance with the current HCAHPS Quality Assurance Guidelines, which
can be found on the HCAHPS Web site, http://www.hcahpsonline.org. If a
hospital has zero HCAHPS-eligible discharges, the hospital must submit
this information through the QIO Clinical Warehouse. The QIO Clinical
Warehouse will accept zero HCAHPS-eligible discharges. Hospitals with
zero HCAHPS-eligible discharges must submit their total number of
HCAHPS-eligible cases to the QIO Clinical Warehouse for that month as
part of their quarterly HCAHPS data submission.
In order to reduce the burden on hospitals that treat a low number
of patients that would be otherwise covered by the HCAHPS submission
requirements, a hospital that has five or fewer HCAHPS-eligible
discharges during a month is not required to submit HCAHPS surveys for
that month. However, hospitals that meet this

[[Page 50222]]

exception may voluntarily submit this data. Hospitals with five or
fewer HCAHPS-eligible discharges must submit their total number of
HCAHPS-eligible cases to the QIO Clinical Warehouse for that month as
part of their quarterly HCAHPS data submission.
We did not receive any public comments related to this proposal. We
are adopting as final our proposal related to data submission
requirements for HCAHPS.
(3) Procedures for Claims-Based Measures
Hospitals are encouraged to regularly check the QualityNet Web
site, http://www.QualityNet.org, for program updates and information.
The following RHQDAPU program claims-based measures would
be calculated using Medicare claims:
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR16AU10.050

BILLING CODE 4120-01-C
For the claims-based RHQDAPU program measures listed above,
hospitals are not required to submit the data to the QIO Clinical
Warehouse. We use the existing Medicare fee-for-service claims to
calculate the measures. For the FY 2012 payment determination, we would
use up to 3 years of discharges prior to January 1, 2011 (as
appropriate for the measure), to calculate the 30-day mortality and 30-
day readmission

[[Page 50223]]

measures AHRQ PSI, IQI and Composite measures (including the AHRQ PSI
and Nursing Sensitive Care measure, Death among surgical inpatients
with serious, treatable complications), and the proposed new HAC
Measures. For the FY 2013 and FY 2014 payment determinations, we would
use up to 3 years of discharges (as appropriate for the measure) prior
to January 1, 2012, and January 1, 2013, respectively. Hospitals are
required to appropriately report the POA indicator in conjunction with
ICD-9-CM coding to determine the presence of HACs so that the proposed
HAC measures can be calculated for the RHQDAPU program using Medicare
claims.
We did not receive any public comments on this proposal. We are
finalizing our proposal to use up to 3 years of discharges (based on
Medicare claims) to calculate the claims-based measures as appropriate.
For the FY 2012 payment determination, we would use up to 3 years of
discharges prior to January 1, 2011 as appropriate for the measure. For
the FY 2013 and FY 2014 payment determinations, we would use up to 3
years of discharges as appropriate for the measure prior to January 1,
2012, and January 1, 2013, respectively. In addition, hospitals are
required to appropriately report the POA indicator in conjunction with
ICD-9-CM coding to determine the presence of HACs so that the proposed
HAC measures can be calculated for the RHQDAPU program using Medicare
claims.
(4) Data Submission Requirements for Structural Measures
We proposed that for the FY 2012 payment determination,
hospitals submit the required registry participation information once
for the structural measures via a Web-based collection tool between
July 1, 2011-August 15, 2011 with respect to the time period of July 1,
2010 through December 31, 2010.
Below is the list of structural measures we proposed to adopt for
the FY 2012 payment determination:

------------------------------------------------------------------------
FY 2012 Payment determination:
Topic Proposed structural measures
------------------------------------------------------------------------
Cardiac Surgery................... Participation in a
Systematic Database for Cardiac
Surgery.
Stroke Care....................... Participation in a
Systematic Clinical Database
Registry for Stroke Care.
Nursing Sensitive Care............ Participation in a
Systematic Clinical Database
Registry for Nursing Sensitive
Care.
------------------------------------------------------------------------

We did not receive any public comments related to this proposal. We
are adopting as final our proposal related to data submission
requirements for structural measures.
(5) Data Submission of All-Patient Volume Data for Selected DRGs
Related to RHQDAPU Program Measures
For submission of the all-patient volume data for selected DRGs, we
proposed that hospitals submit patient level information needed for CMS
to apply the MS-DRG GROUPER software to calculate the all-patient MS-
DRG volumes, the data elements for which would be defined in the
Hospital Measure Specification Manual. Hospitals would begin submitting
this data quarterly via QualityNet beginning with January 1, 2011
discharges.
We invited comment on an alternative that hospitals submit
hospital-level all-patient volume data based upon specific ICD-9-CM
codes that are related to the proposed MS-DRGs (rather than the
patient-level data) necessary for CMS to calculate the MS-DRGs.
Hospitals would begin submitting this data quarterly via QualityNet
beginning with January 1, 2011 discharges.
As we stated in our responses to comments on all-patient volume in
section IV.A.3.b.(3) of this final rule, we are not finalizing the
collection of all-patient volume data for selected MS-DRGs; therefore,
we are not adopting the data submission requirements for all-patient
volume data for selected MS-DRGs.
(6) Data Submission and Reporting Requirements for HAI Measures
Reported via NHSN
We proposed that hospitals participating in the RHQDAPU program
submit the data elements needed to calculate the Central Line
Associated Blood Stream Infection and Surgical Site Infection measures
to the NHSN using the standard procedures that have been set forth by
CDC for NHSN participation in general and for submission of these two
measures to NHSN in particular. This would include NHSN participation
forms and indications to CDC allowing CMS to access data for these two
measures for RHQDAPU program purposes, adherence to training
requirements, use of standard CDC measure specifications, data element
definitions, data collection requirements and instructions, and data
reporting timeframes. Detailed requirements for NHSN participation,
measure specifications, and data collection can be found at http://www.cdc.gov/nhsn/. Hospitals must use the current specifications and
data collection tools available on the CDC Web site to submit data for
the Central Line Associated Bloodstream Infection and Surgical Site
Infection measures. We proposed that hospitals would submit data for
these two measures to CDC's NHSN on a monthly basis for discharges
occurring on or after January 1, 2011.
For the FY 2013 payment determination, we proposed that hospitals
must submit HAI data via the NHSN for four consecutive calendar year
discharge quarters as follows: 1Q CY 2011, 2Q CY 2011, 3Q CY 2011 and
4Q CY 2011.
For the FY 2014 payment determination, hospitals must submit HAI
data for four consecutive calendar year discharge quarters as follows:
1Q CY 2012, 2Q CY 2012, 3Q CY 2012 and 4Q CY 2012.
We proposed that once quarterly each hospital would utilize an
automated report function that will be made available to submitters in
the NHSN, to generate a quarterly report containing hospital-level
numerator, denominator, and exclusion counts for these two CDC measures
specifically for the RHQDAPU program. The CDC will create this
automated RHQDAPU report function and add it to NHSN's reporting
functionalities in the next few months. While hospitals may be
reporting other data elements to CDC for other reporting programs (that
is, State mandated surveillance programs), the quarterly RHQDAPU report
that would be generated within NHSN would only contain those data
elements needed to calculate the two measures currently being proposed
for the RHQDAPU program. We will access the reports in the NHSN and
will compile the reports for RHQDAPU program and public reporting
purposes.
We invited comment on the proposed mechanism for submitting data
for the Central Line Associated Blood Stream Infection measure and the
Surgical Site Infection measure for the RHQDAPU program beginning with
the FY 2012 payment determination.

[[Page 50224]]

We previously discussed public comments on these data submission
and reporting requirements for HAI measures reported via NHSN in
section IV.A.3.(c)(3) of this final rule. We are adopting the CLABSI
HAI measure for the FY 2013 payment determination and the SSI HAI
measure for the FY 2014 payment determination. We are also finalizing
the quarterly NHSN submission requirement. Requirements for NHSN
participation, measure specifications, and data collection can be found
at http://www.cdc.gov/nhsn/. Hospitals are encouraged to visit this Web
sit