[Federal Register Volume 82, Number 81 (Friday, April 28, 2017)]
[Proposed Rules]
[Pages 19796-20231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-07800]
[[Page 19795]]
Vol. 82
Friday,
No. 81
April 28, 2017
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 405, 412, 413, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Proposed Policy Changes and Fiscal Year 2018 Rates;
Quality Reporting Requirements for Specific Providers; Medicare and
Medicaid Electronic Health Record (EHR) Incentive Program Requirements
for Eligible Hospitals, Critical Access Hospitals, and Eligible
Professionals; Provider-Based Status of Indian Health Service and
Tribal Facilities and Organizations; Costs Reporting and Provider
Requirements; Agreement Termination Notices; Proposed Rule
Federal Register / Vol. 82 , No. 81 / Friday, April 28, 2017 /
Proposed Rules
[[Page 19796]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 405, 412, 413, 414, 416, 486, 488, 489, and 495
[CMS-1677-P]
RIN 0938-AS98
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Proposed Policy Changes and Fiscal Year 2018 Rates;
Quality Reporting Requirements for Specific Providers; Medicare and
Medicaid Electronic Health Record (EHR) Incentive Program Requirements
for Eligible Hospitals, Critical Access Hospitals, and Eligible
Professionals; Provider-Based Status of Indian Health Service and
Tribal Facilities and Organizations; Costs Reporting and Provider
Requirements; Agreement Termination Notices
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: We are proposing to revise 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 for FY 2018. Some of these
proposed changes would implement certain statutory provisions contained
in the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013,
the Improving Medicare Post-Acute Care Transformation Act of 2014, the
Medicare Access and CHIP Reauthorization Act of 2015, the 21st Century
Cures Act, and other legislation. We also are making proposals relating
to the provider-based status of Indian Health Service (IHS) and Tribal
facilities and organizations and to the low-volume hospital payment
adjustment for hospitals operated by the IHS or a Tribe. In addition,
we are providing the proposed estimated market basket update that would
apply 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 for FY 2018. We are proposing to update the payment policies and
the annual payment rates for the Medicare prospective payment system
(PPS) for inpatient hospital services provided by long-term care
hospitals (LTCHs) for FY 2018.
In addition, we are proposing to establish new requirements or
revise existing requirements for quality reporting by specific Medicare
providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs,
and inpatient psychiatric facilities). We also are proposing to
establish new requirements or revise existing requirements for eligible
professionals (EPs), eligible hospitals, and critical access hospitals
(CAHs) participating in the Medicare and Medicaid Electronic Health
Record (EHR) Incentive Programs. We are proposing to update policies
relating to the Hospital Value-Based Purchasing (VBP) Program, the
Hospital Readmissions Reduction Program, and the Hospital-Acquired
Condition (HAC) Reduction Program.
We also are proposing changes relating to transparency of
accrediting organization survey reports and plans of correction of
providers and suppliers; electronic signature and electronic submission
of the Certification and Settlement Summary page of the Medicare cost
reports; and clarification of provider disposal of assets.
DATES: Comment Period: To be assured consideration, comments must be
received at one of the addresses provided in the ADDRESSES section, no
later than 5 p.m. EDT on June 13, 2017.
ADDRESSES: In commenting, please refer to file code CMS-1677-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to http://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1677-P, 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 via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1677-P, 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 before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal Government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the 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, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-
4487, Operating Prospective Payment, MS-DRGs, Wage Index, New Medical
Service and Technology Add-On Payments, Hospital Geographic
Reclassifications, Graduate Medical Education, Capital Prospective
Payment, Excluded Hospitals, Sole Community Hospitals, Medicare
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, and Low-Volume Hospital
Payment Adjustment Issues.
Michele Hudson, (410) 786-4487, Mark Luxton, (410) 786-4530, and
Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective
Payment System and MS-LTC-DRG Relative Weights Issues.
Mollie Knight, (410) 786-7948, and Bridget Dickensheets, (410) 786-
8670, Rebasing and Revising the Hospital Market Basket Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
[[Page 19797]]
Jeris Smith, (410) 786-0110, Frontier Community Health Integration
Project Demonstration Issues.
Lein Han, (617) 879-0129, Hospital Readmissions Reduction Program--
Readmission Measures for Hospitals Issues.
Delia Houseal, (410) 786-2724, Hospital Readmissions Reduction
Program--Administration Issues.
Elizabeth Bainger, (410) 786-0529, Hospital-Acquired Condition
Reduction Program Issues.
Joseph Clift, (410) 786-4165, Hospital-Acquired Condition Reduction
Program--Measures Issues.
Grace Im, (410) 786-0700 and James Poyer, (410) 786-2261, Hospital
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Program Administration, Validation, and Reconsideration Issues.
Reena Duseja, (410) 786-1999 and Cindy Tourison, (410) 786-1093,
Hospital Inpatient Quality Reporting--Measures Issues Except Hospital
Consumer Assessment of Healthcare Providers and Systems Issues; and
Readmission Measures for Hospitals Issues.
Kim Spaulding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data
Reporting Issues.
Jeffrey Buck, (410) 786-0407 and Cindy Tourison (410) 786-1093,
Inpatient Psychiatric Facilities Quality Data Reporting Issues.
Lisa Marie Gomez, (410) 786-1175, EHR Incentive Program Clinical
Quality Measure Related Issues.
Kathleen Johnson, (410) 786-3295 and Steven Johnson (410) 786-3332,
EHR Incentive Program Nonclinical Quality Measure Related Issues.
Caecilia Blondiaux, (410), 786-2190, and Ariadne Saklas, (410) 786-
3322, Changes in Notice of Termination of Medicare Providers and
Suppliers Issues.
Monda Shaver, (410) 786-3410, and Patricia Chmielewski, (410) 786-
6899, Accrediting Organizations Survey Reporting Transparency Issues.
Kellie Shannon, (410) 786-0416, Medicare Cost Reporting and
Valuation of Assets 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 on 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 the rule, at the headquarters of the Centers for Medicare & Medicaid
Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday
through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To
schedule an appointment to view public comments, phone 1-800-743-3951.
Electronic Access
This Federal Register document is available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the Internet at: http://www.gpo.gov/fdsys.
Tables Available Only Through the Internet on the CMS Web Site
In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to the proposed rule and the final rule
were published in the Federal Register as part of the annual proposed
and final rules. However, beginning in FY 2012, some of the IPPS tables
and LTCH PPS tables are no longer published in the Federal Register.
Instead, these tables generally will be available only through the
Internet. The IPPS tables for this proposed rule are available through
the Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on
the link on the left side of the screen titled, ``FY 2018 IPPS Proposed
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH
PPS tables for this FY 2018 proposed rule are available through the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the
list item for Regulation Number CMS-1677-P. For further details on the
contents of the tables referenced in this proposed rule, we refer
readers to section VI. of the Addendum to this proposed rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Michael Treitel at (410) 786-4552.
Acronyms
3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AJCC American Joint Committee on Cancer
ALOS Average length of stay
ALTHA Acute Long-Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AMI Acute myocardial infarction
AO Accrediting Organizations
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ASPE Assistant Secretary for Planning and Evaluation (DHHS)
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
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
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
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Centers for Disease Control and Prevention
[[Page 19798]]
CERT Comprehensive error rate testing
CDI Clostridium difficile [C. difficile] infection
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
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
COPD Chronic obstructive pulmonary disease
CPI Consumer price index
CQL Clinical quality language
CQM Clinical quality measure
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External beam radiotherapy
ECE Extraordinary circumstances exemption
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCP Healthcare personnel
HCRIS Hospital Cost Report Information System
HF Heart failure
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health 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
HwH Hospital-within-hospital
HWR Hospital-wide readmission
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
ICU Intensive care unit
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of
2014, Public Law 113-185
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR [Hospital] Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LDS Limited Data Set
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCH QRP Long-Term Care Hospital Quality Reporting Program
MA Medicare Advantage
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public
Law 114-10
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
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
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MOON Medicare Outpatient Observation Notice
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
MU Meaningful Use [EHR Incentive Program]
MUC Measure under consideration
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
NHSN National Healthcare Safety Network
NOP Notice of Participation
NOTICE Act Notice of Observation Treatment and Implication for Care
Eligibility Act, Public Law 114-42
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991,
Public Law 104-113
NUBC National Uniform Billing Code
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
ONC Office of the National Coordinator for Health Information
Technology
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPR Potentially Preventable Readmissions
PPS Prospective payment system
PRA Paperwork Reduction Act
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
[[Page 19799]]
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
PUF Public use file
QDM Quality data model
QIES ASAP Quality Improvement Evaluation System Assessment
Submission and Processing
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QM Quality measure
QPP Quality Payment Program
QRDA Quality Reporting Document Architecture
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RIM Reference information model
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standard mortality rate
RSP Risk-standardized payment
RSSR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCHIP State Child Health Insurance Program
SCIP Surgical Care Improvement Project
SFY State fiscal year
SGR Sustainable Growth Rate
SIC Standard Industrial Classification
SIR Standardized infection ratio
SNF Skilled nursing facility
SNF QRP Skilled Nursing Facility Quality Reporting Program
SNF VBP Skilled Nursing Facility Value-Based Purchasing
SOCs Standard occupational classifications
SOM State Operations Manual
SRR Standardized risk ratio
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UR Utilization review
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism
Table of Contents
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. 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)
C. Summary of Provisions of Recent Legislation Proposed To Be
Implemented in This Proposed Rule
1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-
240), the Medicare Access and CHIP Reauthorization Act (MACRA) of
2015 (Pub. L. 114-10), and the 21st Century Cures Act (Pub. L. 114-
255)
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
3. Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act) (Pub. L. 113-185)
4. The Medicare Access and CHIP Reauthorization Act (MACRA) of
2015 (Pub. L. 114-10)
5. The 21st Century Cures Act (Pub. L. 114-255)
D. Summary of the Provisions of This Proposed Rule
II. Proposed Changes to Medicare Severity Diagnosis-Related Group
(MS-DRG) Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. Proposed FY 2018 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA)
3. Proposed Adjustment for FY 2018 Required Under Section 414 of
Public Law 114-10 (MACRA) and Section 15005 of Public Law 114-255
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion of Policy for FY 2018
F. Proposed Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for Proposed
FY 2018 MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
b. Basis for FY 2018 Proposed MS-DRG Updates
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Functional Quadriplegia
b. Responsive Neurostimulator (RNS(copyright)) System
c. Precerebral Occlusion or Transient Ischemic Attack With
Thrombolytic
3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye
Drops (Tetrahydrozoline)
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Cardiovascular Procedures and Insertion of a
Radioactive Element
b. Proposed Modification of the Titles for MS-DRG 246
(Percutaneous Cardiovascular Procedures With Drug-eluting Stent With
MCC or 4+ Vessels or Stents) and MS-DRG 248 (Percutaneous
Cardiovascular Procedures With Non-Drug-Eluting Stent With MCC or 4+
Vessels or Stents)
c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial
Appendage Closure (LAAC)
d. Percutaneous Mitral Valve Replacement Procedures
e. Percutaneous Tricuspid Valve Repair
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Total Ankle Replacement (TAR) Procedures
b. Revision of Total Ankle Replacement (TAR) Procedures
c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
d. Combined Anterior/Posterior Spinal Fusion
6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
a. Vaginal Delivery and Complicating Diagnoses
b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge
Diagnosis)
c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical
Complications)
d. Shock During or Following Labor and Delivery
7. MDC 15 (Newborns and Other Neonates With Conditions
Originating in Perinatal Period): Observation and Evaluation of
Newborn
8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs):
Complication Codes
9. MDC 23 (Factors Influencing Health Status and Other Contacts
With Health Services): Updates to MS-DRGs 945 and 946
(Rehabilitation With CC/MCC and Without CC/MCC, Respectively)
10. Proposed Changes to the Medicare Code Editor (MCE)
a. Age Conflict Edit
b. Sex Conflict Edit
c. Non-Covered Procedure Edit
d. Unacceptable Principal Diagnosis Edit
e. Future Enhancement
11. Proposed Changes to Surgical Hierarchies
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2018
a. Background of the CC List and the CC Exclusions List
b. Proposed Additions and Deletions to the Diagnosis Code
Severity Levels for FY 2018
c. Principal Diagnosis Is Its Own CC or MCC
d. Proposed CC Exclusions List for FY 2018
13. Comprehensive Review of CC List for FY 2019
14. Review of Procedure Codes in MS DRGs 981 Through 983; 984
Through 986; and 987 Through 989
[[Page 19800]]
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
15. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding
Systems
16. Proposed Replaced Devices Offered Without Cost or With a
Credit
a. Background
b. Proposed Changes for FY 2018
17. Other Proposed Policy Changes: Other Operating Room (O.R.)
and Non-O.R. Issues
a. O.R. Procedures to Non-O.R. Procedures
b. Revision of Neurostimulator Generator
c. External Repair of Hymen
d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases
and Disorders Poorly Differentiated Neoplasms)
G. Recalibration of the Proposed FY 2018 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
2. Methodology for Calculation of the Relative Weights
3. Development of National Average CCRs
H. Proposed Add-On Payments for New Services and Technologies
for FY 2018
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical
Services and Technologies
4. Proposal To Revise Reference to an ICD-9-CM Code in Sec.
412.87(b)(2) of the Regulations
5. Proposed FY 2018 Status of Technologies Approved for FY 2017
Add-On Payments
a. CardioMEMSTM HF (Heart Failure) Monitoring System
b. Defitelio[supreg] (Defibrotide)
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis
(IBE)
d. Idarucizumab
e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and
In.PACTTM AdmiralTM Paclitaxel Coated
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
f. MAGEC[supreg] Spinal Bracing and Distraction System
(MAGEC[supreg] Spine)
g. VistogardTM (Uridine Triacetate)
h. Blinatumomab (BLINCYTOTM Trade Brand)
6. FY 2018 Applications for New Technology Add-On Payments
a. Bezlotoxumab (ZINPLAVATM)
b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and
Liva Nova Perceval Valve (Perceval)
c. Ustekinumab (Stelara[supreg])
d. KTE-C19 (Axicabtagene Ciloleucel)
e. VYXEOSTM (Cytarabine and Daunorubicin Liposome for
Injection)
f. GammaTileTM
III. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
A. Background
1. Legislative Authority
2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2018
Hospital Wage Index
3. Codes for Constituent Counties in CBSAs
B. Worksheet S-3 Wage Data for the Proposed FY 2018 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Suppliers and Providers Other Than
Acute Care Hospitals Under the IPPS
C. Verification of Worksheet S-3 Wage Data
D. Method for Computing the Proposed FY 2018 Unadjusted Wage
Index
1. Proposed Methodology for FY 2018
2. Clarification of Other Wage Related Costs in the Wage Index
E. Proposed Occupational Mix Adjustment to the FY 2018 Wage
Index
1. Use of 2013 Occupational Mix Survey for the FY 2018 Wage
Index
2. Use of the 2016 Medicare Wage Index Occupational Mix Survey
for the FY 2019 Wage Index
3. Calculation of the Proposed Occupational Mix Adjustment for
FY 2018
F. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2018 Occupational Mix Adjusted Wage
Index
G. Proposed Application of the Rural, Imputed, and Frontier
Floors
1. Proposed Rural Floor
2. Proposed Expiration of the Imputed Floor Policy
3. Proposed State Frontier Floor for FY 2018
H. Proposed FY 2018 Wage Index Tables
I. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification and
Redesignation
2. MGCRB Reclassification and Redesignation Issues for FY 2018
a. FY 2018 Reclassification Requirements and Approvals
b. Extension of PRA Information Collection Requirement Approval
for MGCRB Applications
c. Proposed Deadline for Submittal of Documentation of Sole
Community Hospital (SCH) and Rural Referral Center (RRC)
Classification Status to the MGCRB
d. Clarification of Special Rules for SCHs and RRCs
Reclassifying to Geographic Home Area
3. Redesignations Under Section 1886(d)(8)(B) of the Act
4. Proposed Changes to the 45-Day Notification Rules
J. Proposed Out-Migration Adjustment Based on Commuting Patterns
of Hospital Employees
K. Reclassification From Urban to Rural Under Section
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
L. Clarification of Application Deadline for Rural Referral
Center (RRC) Classification
M. Proposed Process for Requests for Wage Index Data Corrections
1. Process for Hospitals To Accept Wage Index Data Corrections
2. Process for Wage Index Data Corrections by CMS After the
January Public Use File (PUF)
N. Proposed Labor Market Share for the Proposed FY 2018 Wage
Index
IV. Proposed Rebasing and Revising of the Hospital Market Baskets
for Acute Care Hospitals
A. Background
B. Rebasing and Revising the IPPS Market Basket
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data
b. Final Major Cost Category Computation
c. Derivation of the Detailed Cost Weights
2. Selection of Proposed Price Proxies
3. Labor-Related Share
C. Market Basket for Certain Hospitals Presently Excluded From
the IPPS
D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Proposed Changes to the IPPS for Operating
System
A. Proposed Changes to MS-DRGs Subject to Postacute Care
Transfer and MS-DRG Special Payment Policies
B. Proposed Changes in the Inpatient Hospital Updates for FY
2018 (Sec. 412.64(d))
1. Proposed FY 2018 Inpatient Hospital Update
2. Proposed FY 2018 Puerto Rico Hospital Update
C. Proposed Change to Volume Decrease Adjustment for Sole
Community Hospitals (SCHs) and Medicare-Dependent, Small Rural
Hospitals (MDHs) (Sec. 412.92)
1. Background
2. Proposed Changes to the Volume Decrease Adjustment
Calculation Methodology for SCHs
D. Rural Referral Centers (RRCs): Proposed Annual Updates to
Case-Mix Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
E. Proposed Payment Adjustment for Low-Volume Hospitals (Sec.
412.101)
1. Expiration of Temporary Changes to Low-Volume Hospital
Payment Policy
2. Background
3. Proposed Payment Adjustment for FY 2018 and Subsequent Fiscal
Years
4. Proposed Parallel Low-Volume Hospital Payment Adjustment
Regarding Hospitals Operated by the Indian Health Service (IHS) or a
Tribe
F. Indirect Medical Education (IME) Payment Adjustment (Sec.
412.105)
G. Proposed Payment Adjustment for Medicare Disproportionate
Share Hospitals (DSHs) for FY 2018 (Sec. 412.106)
1. General Discussion
2. Eligibility for Empirically Justified Medicare DSH Payments
and Uncompensated Care Payments
3. Empirically Justified Medicare DSH Payments
4. Uncompensated Care Payments
a. Proposed Calculation of Factor 1 for FY 2018
b. Proposed Calculation of Factor 2 for FY 2018
(1) Background
[[Page 19801]]
(2) Proposed Methodology for Calculation of Factor 2 for FY 2018
c. Calculation of Proposed Factor 3 for FY 2018
(1) Background
(2) Proposed Data Source for FY 2018
(3) Proposed Time Period for Calculating Factor 3 for FY 2018,
Including Methodology for Incorporating Worksheet S-10 Data
(4) Methodological Considerations for Calculating Factor 3
(5) Methodological Considerations for Incorporating Worksheet S-
10 Data
H. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background for the MDH Program
a. Expiration of the MDH Program
I. Hospital Readmissions Reduction Program: Proposed Updates and
Changes (Sec. Sec. 412.150 Through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Regulatory Background
3. Maintenance of Technical Specifications for Quality Measures
4. Proposed Policies for the Hospital Readmissions Reduction
Program
5. Proposed Applicable Period for FY 2018
6. Proposed Calculation of Aggregate Payments for Excess
Readmissions for FY 2018
7. Background and Current Payment Adjustment Methodology
a. Background
b. Current Payment Adjustment Methodology
8. Provisions for the Proposed Payment Adjustment Methodology
for FY 2019: Proposed Methodology for Calculating the Proportion of
Dual Eligible Patients
a. Background
b. Proposed Data Sources Used To Determine Dual Eligibility
c. Proposed Data Period Used To Define Dual Eligibility
9. Provision for the Proposed Payment Adjustment Methodology for
FY 2019: Proposed Methodology for Assigning Hospitals to Peer Groups
10. Provisions for the Proposed Payment Adjustment Methodology
for FY 2019: Proposed Payment Adjustment Formula Calculation
Methodology
a. Background
b. Proposals
c. Analysis
11. Accounting for Social Risk Factors in the Hospital
Readmissions Reduction Program
12. Extraordinary Circumstance Exception (ECE) Policy
13. Timeline for Public Reporting of Excess Readmission Ratios
on Hospital Compare for the FY 2018 Payment Determination
J. Hospital Value-Based Purchasing (VBP) Program: Proposed
Policy Changes
1. Background
a. Statutory Background and Overview of Past Program Years
b. FY 2018 Program Year Payment Details
2. Accounting for Social Risk Factors in the Hospital VBP
Program
3. Retention and Removal of Quality Measures for the FY 2019
Program Year
a. Retention of Previously Adopted Hospital VBP Program Measures
b. Proposed Removal of the PSI 90 Measure
c. Summary of Previously Adopted Measures and Proposed Measure
for Removal for the FY 2019 and FY 2020 Program Years
4. Proposed New Measures for the FY 2022 Program Year, FY 2023
Program Year, and Subsequent Years
a. Proposed New Measure for the FY 2022 Program Year and
Subsequent Years: Hospital-Level, Risk-Standardized Payment
Associated With a 30-Day Episode-of-Care for Pneumonia (PN Payment)
b. Proposed New Measure for the FY 2023 Program Year and
Subsequent Years: Patient Safety and Adverse Events (Composite) (NQF
#0531)
5. Previously Adopted and Proposed Baseline and Performance
Periods
a. Background
b. Person and Community Engagement Domain
c. Efficiency and Cost Reduction Domain
d. Safety Domain
e. Clinical Care Domain
f. Summary of Previously Adopted and Proposed Baseline and
Performance Periods for the FY 2019 Through FY 2023 Program Years
6. Proposed Performance Standards for the Hospital VBP Program
a. Background
b. Previously Adopted and Proposed Performance Standards for the
FY 2020 Program Year
c. Previously Adopted Performance Standards for Certain Measures
for the FY 2021 Program Year
d. Previously Adopted and Proposed Performance Standards for
Certain Measures for the FY 2022 Program Year
e. Proposed Performance Standards for Certain Measures for the
FY 2023 Program Year
7. Scoring Methodology and Data Requirements for the FY 2019
Program Year and Subsequent Years
a. Proposed Domain Weighting for the FY 2020 Program Year and
Subsequent Years for Hospitals That Receive a Score on All Domains
b. Proposed Domain Weighting for the FY 2019 Program Year and
Subsequent Years for Hospitals Receiving Scores on Fewer Than Four
Domains
c. Minimum Numbers of Cases for Hospital VBP Program Measures
for the FY 2019 Program Year and Subsequent Years
d. Weighting Measures Within the Efficiency and Cost Reduction
Domain
K. Proposed Changes to the Hospital-Acquired Condition (HAC)
Reduction Program
1. Background
2. Implementation of the HAC Reduction Program for FY 2018
3. Proposed Data Collection Time Periods for the FY 2020 HAC
Reduction Program
4. Request for Comments on Additional Measures for Potential
Future Adoption
5. Accounting for Social Risk Factors in the HAC Reduction
Program
6. Request for Comments on Inclusion on Disability and Medical
Complexity for CDC NHSN Measures
7. Maintenance of Technical Specifications for Quality Measures
8. Extraordinary Circumstances Exception (ECE) Policy for the
HAC Reduction Program
L. Rural Community Hospital Demonstration Program
1. Introduction
2. Background
3. Provisions of the 21st Century Cures Act (Pub. L. 114-255)
and Proposals for Implementation
a. Statutory Provisions
b. Proposed Terms of Continuation for Previously Participating
Hospitals
c. Solicitation for Additional Participants
4. Budget Neutrality
a. Statutory Budget Neutrality Requirement
b. Methodology Used in Previous Final Rules
c. Proposed Budget Neutrality Methodology for Extension Period
Authorized by the 21st Century Cures Act (Pub. L. 114-255)
d. Alternative Budget Neutrality Approach
e. Reconciling Actual and Estimated Costs of the Demonstration
for Previous Years (2011, 2012, and 2013)
M. Payments for Services in Inpatient and Outpatient Settings
1. Adjustment to IPPS Rates Resulting From the 2-Midnight Policy
for FY 2018
2. Eliminating Inappropriate Medicare Payment Differentials for
Similar Services in the Inpatient and Outpatient Settings
N. Provider-Based Status of Indian Health Service and Tribal
Facilities and Organizations
O. Request for Information Regarding Physician-Owned Hospitals
VI. Proposed Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Payments for Hospitals Located in Puerto Rico
C. Proposed Annual Update for FY 2018
VII. Proposed Changes for Hospitals Excluded From the IPPS
A. Proposed Rate-of-Increase in Payments To Excluded Hospitals
for FY 2018
B. Proposed Revisions to Hospital-Within-Hospital Regulations
C. Critical Access Hospitals (CAHs)
1. Background
2. Frontier Community Health Integration Project (FCHIP)
Demonstration
3. Physician Certification Requirement for Payment of Inpatient
CAH Services Under Medicare Part A
a. Background
b. Notice Regarding Changes to Instructions for the Review of
the CAH 96-Hour Certification Requirement
VIII. Proposed Changes to the Long-Term Care Hospital Prospective
Payment System (LTCH PPS) for FY 2018
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as an LTCH
[[Page 19802]]
a. Classification as an 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. Proposed Medicare Severity Long-Term Care Diagnosis-Related
Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2018
1. Background
2. Patient Classifications Into MS-LTC-DRGs
a. Background
b. Proposed Changes to the MS-LTC-DRGs for FY 2018
3. Development of the Proposed FY 2018 MS-LTC-DRG Relative
Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the Proposed MS-LTC-DRG Relative Weights for
FY 2018
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Proposed Low-Volume MS-LTC-DRGs
g. Steps for Determining the Proposed FY 2018 MS-LTC-DRG
Relative Weights
C. Proposed Changes to the LTCH PPS Payment Rates and Other
Proposed Changes to the LTCH PPS for FY 2018
1. Overview of Development of the LTCH PPS Standard Federal
Payment Rates
2. Proposed FY 2018 LTCH PPS Standard Federal Payment Rate
Annual Market Basket Update
a. Overview
b. Proposed Annual Update to the LTCH PPS Standard Federal
Payment Rate for FY 2018
c. Proposed Adjustment to the LTCH PPS Standard Federal Payment
Rate Under the Long-Term Care Hospital Quality Reporting Program
(LTCH QRP)
d. Proposed Annual Update Under the LTCH PPS for FY 2018
D. Proposed Changes to the Short-Stay Outlier Adjustment Policy
(Sec. 412.529)
E. Temporary Exception to the Site Neutral Payment Rate for
Certain Spinal Cord Specialty Hospitals
F. Temporary Exception to the Site Neutral Payment Rate for
Certain Discharges With Severe Wounds Form Certain LTCHs
G. Moratorium and Proposed Regulatory Delay of the Full
Implementation of the ``25-Percent'' Threshold Policy'' Adjustment
(Sec. 412.538)
H. Revision to Moratorium on Increasing Beds in Existing LTCH or
LTCH Satellite Locations Under the 21st Century Cures Act (Pub. L.
114-255) (Sec. 412.23)
I. Proposed Changes to the Average Length of Stay Criterion
Under the 21st Century Cures Act (Pub. L. 114-255)
J. Change in Medicare Classification for Certain Hospitals
(Sec. 412.23)
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
d. Accounting for Social Risk Factors in the Hospital IQR
Program
2. Retention of Previously Adopted Hospital IQR Program Measures
for Subsequent Payment Determinations
3. Removal and Suspension of Previously Adopted Hospital IQR
Program Measures
4. Previously Adopted Hospital IQR Program Measures for the FY
2019 Payment Determination and Subsequent Years
5. Considerations in Expanding and Updating of Quality Measures
6. Refinements to Existing Measures in the Hospital IQR Program
for the FY 2020 Payment Determination and Subsequent Years
a. Refining Hospital Consumer Assessment of Healthcare Providers
and Systems (HCAHPS) Survey (NQF #0166) for the FY 2020 Payment
Determination and Subsequent Years
b. Refinement of the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Acute Ischemic Stroke
Hospitalization Measure for the FY 2023 Payment Determination and
Subsequent Years
c. Summary of Previously Adopted Hospital IQR Program Measures
for the FY 2020 Payment Determination and Subsequent Years
7. Proposed Voluntary Hybrid Hospital-Wide Readmission Measure
With Claims and Electronic Health Record Data (NQF #2879)
a. Background
b. Proposal for Voluntary Reporting of Electronic Health Record
Data for the Hybrid HWR Measure (NQF #2879)
c. Data Sources
d. Outcome
e. Cohort
f. Inclusion and Exclusion Criteria
g. Risk-Adjustment
h. Calculating the Risk-Standardized Readmission Rate (RSRR)
i. Data Submission and Reporting Requirements
j. Confidential Hospital-Specific Reports
8. Proposed Changes to Policies on Reporting of eCQMs
a. Background
b. Proposed Modifications to the eCQM Reporting Requirements for
the Hospital IQR Program for the CY 2017 Reporting Period/FY 2019
Payment Determination
c. Proposed Modifications to the eCQM Reporting Requirements for
the Hospital IQR Program for the CY 2018 Reporting Period/FY 2020
Payment Determination
9. Possible New Quality Measures and Measure Topics for Future
Years
a. Potential Inclusion of the Quality of Informed Consent
Documents for Hospital-Performed, Elective Procedures Measure
b. Potential Inclusion of Four End-of-Life (EOL) Measures for
Cancer Patients
c. Potential Inclusion of Two Nurse Staffing Measures
d. Potential Inclusion of Additional Electronic Clinical Quality
Measures (eCQMs) in the Hospital IQR and Medicare and Medicaid EHR
Incentive Programs
10. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2020 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Proposed Changes to the Reporting and Submission Requirements
for eCQMs
e. Proposed Submission Form and Method for the Proposed
Voluntary Hybrid Hospital-Wide Readmission Measure With Claims and
Electronic Health Record Data (NQF #2879)
f. Sampling and Case Thresholds for the FY 2020 Payment
Determination and Subsequent Years
g. HCAHPS Administration and Submission Requirements for the FY
2020 Payment Determination and Subsequent Years
h. Data Submission Requirements for Structural Measures for the
FY 2020 Payment Determination and Subsequent Years
i. Data Submission and Reporting Requirements for HAI Measures
Reported via NHSN
11. Proposed Modifications to the Validation of Hospital IQR
Program Data
a. Background
b. Proposed Changes to the Existing Processes for Validation of
Hospital IQR Program eCQM Data for the FY 2020 Payment Determination
and Subsequent Years
c. Proposed Modifications to the Educational Review Process for
Chart-Abstracted Measures Validation
12. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements for the FY 2020 Payment Determination and Subsequent
Years
13. Public Display Requirements for the FY 2020 Payment
Determination and Subsequent Years
a. Background
b. Potential Options for Confidential and Public Reporting of
Hospital IQR Measures Stratified by Patient Dual Eligibility Status
14. Reconsideration and Appeal Procedures for the FY 2020
Payment Determination and Subsequent Years
15. Proposed Change to the Hospital IQR Program Extraordinary
Circumstances Exceptions (ECE) Policy
a. Background
b. Proposals To Align the Hospital IQR Program ECE Policy With
Other CMS Quality Programs
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Background
2. Criteria for Removal and Retention of PCHQR Program Measures
3. Retention and Proposed Removal of Previously Finalized
Quality Measures for PCHs Beginning With the FY 2020 Program Year
[[Page 19803]]
a. Background
b. Proposed Removal of Measures From the PCHQR Program Beginning
With the FY 2020 Program Year
4. Proposed New Quality Measures Beginning With the FY 2020
Program Year
a. Considerations in the Selection of Quality Measures
b. Proposed New Quality Measures Beginning With the FY 2020
Program Year
c. Summary of Previously Finalized and Newly Proposed PCHQR
Program Measures for the FY 2020 Program Year and Subsequent Years
5. Accounting for Social Risk Factors in the PCHQR Program
6. Possible New Quality Measure Topics for Future Years
a. Background
b. Localized Prostate Cancer: Vitality; Localized Prostate
Cancer: Urinary Incontinence; Localized Prostate Cancer: Urinary
Frequency; Obstruction, and/or Irritation; Localized Prostate
Cancer: Sexual Function; and Localized Prostate Cancer: Bowel
Function
c. 30-Day Unplanned Readmission for Cancer Patients
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements
a. Background
b. Deferment of Public Display of Two Measures
9. Form, Manner, and Timing of Data Submission
a. Background
b. Proposed Reporting Requirements for the Proposed New Measures
10. Extraordinary Circumstances Exceptions (ECE) Policy Under
the PCHQR Program
a. Background
b. Proposed Modification to the Exception Policy
C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
1. Background and Statutory Authority
2. General Considerations Used for Selection of Quality Measures
for the LTCH QRP
a. Background
b. Accounting for Social Risk Factors in the LTCH QRP
3. Proposed Collection of Standardized Patient Assessment Data
Under the LTCH QRP
a. Proposed Definition of Standardized Patient Assessment Data
b. General Considerations Used for the Selection of Proposed
Standardized Patient Assessment Data
4. Policy for Retaining LTCH QRP Measures and Proposal to Apply
That Policy to Standardized Patient Assessment Data
5. Policy for Adopting Changes to LTCH QRP Measures and Proposal
To Apply That Policy to Standardized Patient Assessment Data
6. Quality Measures Previously Finalized for the LTCH QRP
7. LTCH QRP Quality Measures Proposed Beginning With the FY 2020
LTCH QRP
a. Proposal To Replace the Current Pressure Ulcer Quality
Measure, Entitled Percent of Residents or Patients With Pressure
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), With a
Modified Pressure Ulcer Measure, Entitled Changes in Skin Integrity
Post-Acute Care: Pressure Ulcer/Injury
b. Proposed Mechanical Ventilation Process Quality Measure:
Compliance With Spontaneous Breathing Trial (SBT) by Day 2 of the
LTCH Stay
c. Proposed Mechanical Ventilation Outcome Quality Measure:
Ventilator Liberation Rate
8. Proposed Removal of the All-Cause Unplanned Readmission
Measure for 30 Days Post-Discharge From LTCHs From the LTCH QRP
9. LTCH QRP Quality Measures Under Consideration for Future
Years
a. LTCH QRP Quality Measures Under Consideration for Future
Years
b. IMPACT Act Measure--Possible Future Update to Measure
Specifications
c. IMPACT Act Implementation Update
10. Proposed Standardized Patient Assessment Data Reporting for
the LTCH QRP
a. Proposed Standardized Patient Assessment Data Reporting for
the FY 2019 LTCH QRP
b. Proposed Standardized Patient Assessment Data Reporting
Beginning With the FY 2020 LTCH QRP
11. Proposals Relating to the Form, Manner, and Timing of Data
Submission Under the LTCH QRP
a. Proposed Start Date for Standardized Patient Assessment Data
Reporting by New LTCHs
b. Proposed Mechanism for Reporting Standardized Patient
Assessment Data Beginning With the FY 2019 LTCH QRP
c. Proposed Schedule for Reporting Standardized Patient
Assessment Data Beginning With the FY 2019 LTCH QRP
d. Proposed Schedule for Reporting the Proposed Quality Measures
Beginning With the FY 2020 LTCH QRP
e. Proposed Removal of Interrupted Stay Items From the LTCH CARE
Data Set
12. Proposed Changes to Previously Codified Participation
Requirements Under the LTCH QRP
13. Proposed Changes to Previously Codified Data Submission
Requirements Under the LTCH QRP
14. Proposed Changes to Previously Codified Exception and
Extension Requirements Under the LTCH QRP
15. Proposed Changes to Previously Codified Reconsiderations
Requirements Under the LTCH QRP
16. Proposal To Apply the LTCH QRP Data Completion Thresholds to
the Submission of Standardized Patient Assessment Data Beginning
With the FY 2019 LTCH QRP
17. Proposals and Policies Regarding Public Display of Measure
Data for the LTCH QRP
18. Mechanism for Providing Feedback Reports to LTCHs
D. Inpatient Psychiatric Facility Quality Reporting (IPFQR)
Program
1. Background
a. Statutory Authority
b. Covered Entities
c. Considerations in Selecting Quality Measures
2. Factors for Removal or Retention of IPFQR Program Measures
a. Background
b. Proposed Considerations in Removing or Retaining Measures
3. Proposed New Quality Measure for the FY 2020 Payment
Determination and Subsequent Years--Medication Continuation
Following Inpatient Psychiatric Discharge
a. Background
b. Appropriateness for the IPFQR Program
c. Measure Calculation
d. Data Sources
e. Public Comment
4. Summary of Proposed and Previously Finalized Measures for the
FY 2020 Payment Determinations and Subsequent Years
5. Possible IPFQR Program Measures and Topics for Future
Consideration
6. Public Display and Review Requirements
7. Form, Manner, and Timing of Quality Data Submission for the
FY 2019 Payment Determination and Subsequent Years
a. Procedural Requirements for FY 2019 Payment Determination and
Subsequent Years
b. Data Submission Requirements for the FY 2019 Payment
Determination and Subsequent Years
c. Reporting Requirements for the FY 2019 Payment Determination
and Subsequent Years
d. Population and Sampling
e. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements
8. Reconsideration and Appeals Procedures
9. Extraordinary Circumstances Exceptions (ECE) for the IPFQR
Program
a. Background
b. Proposed ECE Policy Modifications
E. Clinical Quality Measurement for Eligible Hospitals and
Critical Access Hospitals (CAHs) Participating in the EHR Incentive
Programs
1. Background
2. Proposed Modifications to the CQM Reporting Requirements for
the Medicare and Medicaid EHR Incentive Programs for CY 2017
a. Background
b. Proposed Changes to Policies Regarding Electronic Reporting
of CQMs for CY 2017
3. CQM Reporting for the Medicare and Medicaid EHR Incentive
Programs in 2018
a. Background
b. CQM Reporting Period for the Medicare and Medicaid EHR
Incentive Programs in CY 2018
c. CQM Reporting Form and Method for the Medicare EHR Incentive
Program in 2018
F. Clinical Quality Measurement for Eligible Professionals (EPs)
Participating in the Medicaid EHR Incentive Program in 2017
[[Page 19804]]
1. Proposed Modifications to the CQM Reporting Period for EPs in
2017
2. Proposed Modifications to CQM Reporting Requirements for
Medicaid EPs Under the Medicaid EHR Incentive Program
G. Changes to the Medicare and Medicaid EHR Incentive Programs
1. Proposed Revisions to the EHR Reporting Period in 2018
2. Significant Hardship Exception for Decertified Certified EHR
Technology (CEHRT) for EPs, Eligible Hospitals, and CAHs Seeking To
Avoid the Medicare Payment Adjustment
3. Ambulatory Surgical Center (ASC)-Based Eligible Professionals
(EPs)
4. Certification Requirements for 2018 X. Proposed Revisions of
Medicare Cost Reporting and Provider Requirements
A. Electronic Signature and Submission of the Certification and
Settlement Summary Page of the Medicare Cost Report
1. Background
2. Proposed Changes Relating to Electronic Signature on the
Certification and Settlement Summary Page of the Medicare Cost
Report
3. Proposed Changes Relating to Electronic Submission of the
Certification and Settlement Summary Page of the Medicare Cost
Report
4. Clarifications Relating to the Items Required To Be Submitted
by Providers With the Medicare Cost Report
a. Settlement Summary and Certification Statement
b. Removal of the Transition Period Language
5. Proposed Revisions to 42 CFR 413.24(f)(4)(iv)
B. Clarification of Limitations on the Valuation of Depreciable
Assets Disposed of On or After December 1, 1997
XI. Proposed Changes Relating to Survey and Certification
Requirements
A. Proposed Revisions to the Application and Re-Application
Procedures for National Accrediting Organizations (AOs), Provider
and Supplier Conditions, and Posting of Survey Reports and
Acceptable Plans of Corrections (PoCs)
1. Background
2. Proposed Regulation Changes
B. Proposed Changes to Termination Public Notice Requirements
for Certain Providers and Suppliers
1. Background
2. Basis for Proposed Changes
3. Proposed Changes to Regulations
XII. MedPAC Recommendations
XIII. Other Required Information
A. Publicly Available Data
1. CMS Wage Data Public Use File
2. CMS Occupational Mix Data Public Use File
3. Provider Occupational Mix Adjustment Factors for Each
Occupational Category Public Use File
4. Other Wage Index Files
5. FY 2018 IPPS SSA/FIPS CBSA State and County Crosswalk
6. HCRIS Cost Report Data
7. Provider-Specific File
8. CMS Medicare Case-Mix Index File
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
10. IPPS Payment Impact File
11. AOR/BOR Table
12. Prospective Payment System (PPS) Standardized File
13. Hospital Readmissions Reductions Program Supplemental File
14. Medicare Disproportionate Share Hospital (DSH) Supplemental
File
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Occupational Mix Adjustment to the Proposed FY
2018 Wage Index (Hospital Wage Index Occupational Mix Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Temporary Exception to the LTCH PPS Site Neutral
Payment Rate for Certain Spinal Cord Specialty Hospitals
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
Program (LTCH QRP)
10. ICRs for the Inpatient Psychiatric Facility Quality
Reporting (IPFQR) Program
11. ICRs for the Electronic Health Record (EHR) Incentive
Programs and Meaningful Use
12. ICRs Relating to Proposed Electronic Signature and
Electronic Submission of the Certification and Settlement Summary
Page of Medicare Cost Reports
13. ICRs Relating to Survey and Certification Requirements
C. Request for Information on CMS Flexibilities and Efficiencies
D. Response to Public Comments
Regulation Text
Addendum--Proposed Schedule of Standardized Amounts, Update Factors,
and Rate-of-Increase Percentages Effective With Cost Reporting
Periods Beginning on or After October 1, 2017 and Payment Rates for
LTCHs Effective With Discharges Occurring on or After October 1,
2017
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital
Inpatient Operating Costs for Acute Care Hospitals for FY 2018
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital
Inpatient Capital-Related Costs for FY 2018
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2018
C. Capital Input Price Index
IV. Proposed Changes to Payment Rates for Excluded Hospitals:
Proposed Rate-of-Increase Percentages for FY 2018
V. Proposed Changes to the Payment Rates for the LTCH PPS for FY
2018
A. Proposed LTCH PPS Standard Federal Payment Rate for FY 2018
B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS
for FY 2018
1. Background
2. Geographic Classifications (Labor Market Areas) for the LTCH
PPS Standard Federal Payment Rate
3. Proposed Labor-Related Share for the LTCH PPS Standard
Federal Payment Rate
4. Proposed Wage Index for FY 2018 for the LTCH PPS Standard
Federal Payment Rate
5. Proposed Budget Neutrality Adjustment for Changes to the LTCH
PPS Standard Federal Payment Rate Area Wage Level Adjustment
C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs
Located in Alaska and Hawaii
D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO)
Cases
E. Update to the IPPS Comparable/Equivalent Amounts to Reflect
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology
F. Computing the Proposed Adjusted LTCH PPS Federal Prospective
Payments for FY 2018
VI. Tables Referenced in This Proposed Rule and Available Only
Through the Internet on the CMS Web Site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded From the IPPS
F. Effects on Hospitals and Hospital Units Excluded From the
IPPS
G. Quantitative Effects of the Proposed Policy Changes Under the
IPPS for Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Proposed Policy Changes
1. Effects of Proposed Policy Relating to New Medical Service
and Technology Add-On Payments
2. Effects of Proposed Changes to MS-DRGs Subject to the
Postacute Care Transfer Policy and the MS-DRG Special Payment Policy
3. Effects of the Proposed Changes to the Volume Decrease
Adjustment for Sole Community Hospitals (SCHs)
4. Effects of Proposed Changes to Low-Volume Hospital Payment
Adjustment Policy
5. Effects of the Proposed Changes to Medicare DSH and
Uncompensated Care Payments for FY 2018
[[Page 19805]]
6. Effects of Proposed Reduction Under the Hospital Readmissions
Reduction Program
7. Effects of Proposed Changes Under the FY 2018 Hospital Value-
Based Purchasing (VBP) Program
8. Effects of Proposed Changes to the HAC Reduction Program for
FY 2018
9. Effects of Implementation of the Additional 5-Year Expansion
of the Rural Community Hospital Demonstration Program
10. Effects of the Proposed Changes Relating to Provider-Based
Status of Indian Health Service and Tribal Facilities and
Organizations
11. Effects of the Proposed Changes Relating to Hospital-Within-
Hospital Policy
12. Effects of Continued Implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration
I. Effects of Proposed Changes in the Capital IPPS
1. General Considerations
2. Results
J. Effects of Proposed Payment Rate Changes and Policy Changes
Under the LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes
and Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
K. Effects of Proposed Requirements for Hospital Inpatient
Quality Reporting (IQR) Program
L. Effects of Proposed Requirements for the PPS-Exempt Cancer
Hospital Quality Reporting (PCHQR) Program
M. Effects of Proposed Requirements for the Long-Term Care
Hospital Quality Reporting Program (LTCH QRP)
N. Effects of Proposed Updates to the Inpatient Psychiatric
Facility Quality Reporting (IPFQR) Program
O. Effects of Proposed Requirements Regarding the Electronic
Health Record (EHR) Incentive Programs and Meaningful Use
P. Effects of Proposed Electronic Signature and Electronic
Submission of the Certification and Settlement Summary Page of
Medicare Cost Reports
Q. Effects of Proposed Changes Relating to Survey and
Certification Requirements
R. Effects of Clarification of Limitations on the Valuation of
Depreciable Assets Disposed of on or After December 1, 1997
S. Alternatives Considered
T. Reducing Regulation and Controlling Regulatory Costs
U. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
V. Regulatory Review Costs
II. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act (UMRA) Analysis
VI. Executive Order 13175
VII. 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 2018
A. Proposed FY 2018 Inpatient Hospital Update
B. Proposed Update for SCHs for FY 2018
C. Proposed FY 2018 Puerto Rico Hospital Update
D. Proposed Update for Hospitals Excluded From the IPPS
E. Proposed Update for LTCHs for FY 2018
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This proposed rule would make payment and policy changes under the
Medicare inpatient prospective payment systems (IPPS) for operating and
capital-related costs of acute care hospitals as well as for certain
hospitals and hospital units excluded from the IPPS. We also are making
proposals relating to the provider-based status of Indian Health
Service (IHS) and Tribal facilities and organizations and to the IPPS
low-volume hospital payment adjustment for hospitals operated by the
IHS or a Tribe. In addition, it would make payment and policy changes
for inpatient hospital services provided by long-term care hospitals
(LTCHs) under the long-term care hospital prospective payment system
(LTCH PPS). It also would make policy changes to programs associated
with Medicare IPPS hospitals, IPPS-excluded hospitals, and LTCHs.
We are proposing to establish new requirements or revising
requirements for quality reporting by specific providers (acute care
hospitals, PPS-exempt hospitals, LTCHs, and inpatient psychiatric
facilities) that are participating in Medicare. We also are proposing
to establish new requirements or revise existing requirements for
eligible professionals (EPs), eligible hospitals, and CAHs
participating in the Medicare and Medicaid EHR Incentive Programs. We
are proposing to update policies relating to the Hospital Value-Based
Purchasing (VBP) Program, the Hospital Readmissions Reduction Program,
and the Hospital-Acquired Condition (HAC) Reduction Program. We also
are proposing changes related to the transparency of accrediting
organization survey reports and plans of correction; to allow
electronic signature and electronic submission of the Certification and
Settlement Summary page of the Medicare cost reports; and to clarify
provider reimbursement regulations relative to the sale or scrapping of
depreciable assets on or after December 1, 1997.
Under various statutory authorities, we are proposing to make
changes to the Medicare IPPS, to the LTCH PPS, and to other related
payment methodologies and programs for FY 2018 and subsequent fiscal
years. These statutory authorities include, but are not limited to, the
following:
Section 1886(d) of the Social Security Act (the Act),
which 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 that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; long-term care neoplastic disease hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
Sections 123(a) and (c) of the BBRA (Pub. L. 106-113) and
section 307(b)(1) of the BIPA (Pub. L. 106-554) (as codified under
section 1886(m)(1) of the Act), which provide for the development and
implementation of a prospective payment system for payment for
inpatient hospital services of long-term care hospitals (LTCHs)
described in section 1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specify that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes a quality reporting program
for hospitals described in section 1886(d)(1)(B)(v) of the Act,
referred to as ``PPS-exempt cancer hospitals.''
Section 1886(a)(4) of the Act, which specifies that costs
of approved
[[Page 19806]]
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.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase that would
otherwise apply to the standardized amount applicable to a subsection
(d) hospital for discharges occurring in a fiscal year if the hospital
does not submit data on measures in a form and manner, and at a time,
specified by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes a Hospital-Acquired
Condition (HAC) Reduction Program, under which payments to applicable
hospitals are adjusted to provide an incentive to reduce hospital-
acquired conditions.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act and section 15002 of the 21st Century Cures Act, which
establishes the ``Hospital Readmissions Reduction Program.'' Under the
program, payments for discharges from an ``applicable hospital'' under
section 1886(d) of the Act will be reduced to account for certain
excess readmissions. Section 15002 of the 21st Century Cures Act
requires the Secretary to compare cohorts of hospitals to each other in
determining the extent of excess readmissions.
Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share hospital (DSH) payments under section
1886(d)(5)(F) of the Act and for a new uncompensated care payment to
eligible hospitals. Specifically, section 1886(r) of the Act requires
that, for fiscal year 2014 and each subsequent fiscal year, subsection
(d) hospitals that would otherwise receive a DSH payment made under
section 1886(d)(5)(F) of the Act will receive two separate payments:
(1) 25 percent of the amount they previously would have received under
section 1886(d)(5)(F) of the Act for DSH (``the empirically justified
amount''), and (2) an additional payment for the DSH hospital's
proportion of uncompensated care, determined as the product of three
factors. These three factors are: (1) 75 percent of the payments that
would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1
minus the percent change in the percent of individuals who are
uninsured (minus 0.2 percentage points for FY 2018 through FY 2019);
and (3) a hospital's uncompensated care amount relative to the
uncompensated care amount of all DSH hospitals expressed as a
percentage.
Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act
of 2013 (Pub. L. 113-67), which provided for the establishment of site
neutral payment rate criteria under the LTCH PPS with implementation
beginning in FY 2016.
Section 1886(m)(6) of the Act, as amended by section 15009
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a
temporary exception to the application of the site neutral payment rate
under the LTCH PPS for certain spinal cord specialty hospitals for
discharges in cost reporting periods beginning during FYs 2018 and
2019.
Section 1886(m)(6) of the Act, as amended by section 15010
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a
temporary exception to the application of the site neutral payment rate
under the LTCH PPS for certain LTCHs with certain discharges with
severe wounds occurring in cost reporting periods beginning during FY
2018.
Section 1886(m)(5)(D)(iv) of the Act, as added by section
1206 (c) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of
2013 (Pub. L. 113-67), which provides for the establishment of a
functional status quality measure under the LTCH QRP for change in
mobility among inpatients requiring ventilator support.
Section 1899B of the Act, as added by the Improving
Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act,
Pub. L. 113-185), which imposes data reporting requirements for certain
post-acute care providers, including LTCHs.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the
Secretary to make a recoupment adjustment to the standardized amount of
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016,
and 2017. The FY 2014 through FY 2017 adjustments represented the
amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the ATRA, this
amount could not have been recovered under Public Law 110-90. Section
414 of the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015
(Pub. L. 114-10) replaced the single positive adjustment we intended to
make in FY 2018 with a 0.5 percent positive adjustment to the
standardized amount of Medicare payments to acute care hospitals for
FYs 2018 through 2023. The FY 2018 adjustment was subsequently adjusted
to 0.4588 percent by section 15005 of the 21st Century Cures Act.
For FY 2018, we are proposing to make the 0.4588 percent positive
adjustment to the standardized amount as required by section 414 of
Public Law 114-10, as amended by section 15005 of the 21st Century
Cures Act.
b. Adjustment to IPPS Rates Resulting From 2-Midnight Policy
In FY 2017, we made a permanent adjustment to the standardized
amount, the hospital-specific payment rates, and the national capital
Federal rate to prospectively remove the 0.2 percent reduction to the
rates put in place in FY 2014 to offset the estimated increase in IPPS
expenditures as a result of the 2-midnight policy. In addition, we made
a temporary one-time prospective increase to the FY 2017 standardized
amount, the hospital-specific payment rates, and the national capital
Federal rate of 0.6 percent by including a temporary one-time factor of
1.006 in the calculation of the standardized amount, the hospital-
specific payment rates, and the national capital Federal rate to
address the effects of the 0.2 percent reduction to the rate for the 2-
midnight policy in effect for FYs 2014, 2015, and 2016.
For FY 2018, we are including a factor of (1/1.006) in the
calculation of the FY 2018 standardized amount, the hospital-specific
payment rates, and the national capital Federal rate to remove the
temporary one-time factor of 1.006, as established in the FY 2017 IPPS/
LTCH PPS final rule.
[[Page 19807]]
c. Reduction of Hospital Payments for Excess Readmissions
We are proposing to make changes to policies for the Hospital
Readmissions Reduction Program, which is established under section
1886(q) of the Act, as added by section 3025 of the Affordable Care
Act, as amended by section 10309 of the Affordable Care Act. The
Hospital Readmissions Reduction Program requires a reduction to a
hospital's base operating DRG payment to account for excess
readmissions of selected applicable conditions. For FY 2018 and
subsequent years, the reduction is based on a hospital's risk-adjusted
readmission rate during a 3-year period for acute myocardial infarction
(AMI), heart failure (HF), pneumonia, chronic obstructive pulmonary
disease (COPD), total hip arthroplasty/total knee arthroplasty (THA/
TKA), and coronary artery bypass graft (CABG). In this proposed rule,
we are proposing the following policies: (1) Specify applicable time
period for FY 2018; (2) specify the calculation of aggregate payments
for excess readmissions for FY 2018; (3) propose changes to the payment
adjustment factor in accordance with the 21st Century Cures Act for FY
2019; and (4) update the Extraordinary Circumstances Exception policy.
d. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which value-based incentive payments are
made in a fiscal year to hospitals based on their performance on
measures established for a performance period for such fiscal year. In
this proposed rule, we are proposing to remove one previously adopted
measure, the PSI 90: Patient Safety for Selected Indicators measure,
from the Hospital VBP Program beginning with the FY 2019 program year.
We also are proposing to adopt one new measure, Hospital-Level, Risk-
Standardized Payment Associated with a 30-Day Episode of Care for
Pneumonia, beginning with the FY 2022 program year, and to adopt a
modified version of a previously adopted measure, Patient Safety and
Adverse Events Composite (NQF #0531), beginning with the FY 2023
program year. In addition, we are proposing two modifications to our
domain scoring policies beginning with the FY 2019 program year, and
further proposing a new weighting methodology for the Efficiency and
Cost Reduction domain. We also are inviting public comment on the
appropriateness of accounting for social risk factors in the Hospital
VBP Program, including which social risk factors should be included;
and how to account for these social risk factors in the Hospital VBP
Program.
e. Hospital-Acquired Condition (HAC) Reduction Program
Section 1886(p) of the Act, as added under section 3008(a) of the
Affordable Care Act, establishes an incentive to hospitals to reduce
the incidence of hospital-acquired conditions by requiring the
Secretary to make an adjustment to payments to applicable hospitals
effective for discharges beginning on October 1, 2014. This 1-percent
payment reduction applies to a hospital whose ranking is in the top
quartile (25 percent) of all applicable hospitals, relative to the
national average, of conditions acquired during the applicable period
and on all of the hospital's discharges for the specified fiscal year.
In this proposed rule, we are proposing the following policies: (1)
Specifying the dates of the time period used to calculate hospital
performance for the FY 2020 HAC Reduction Program; (2) requesting
comments on additional measures for potential future adoption; (3)
requesting comments on social risk factors; (4) requesting comments on
accounting for disability and medical complexity in the CDC NHSN
measures in Domain 2; and (5) updating the HAC Reduction Program's
Extraordinary Circumstances Exception policy.
f. DSH Payment Adjustment and Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Under section 1886(r) of the Act, which was added by section
3133 of the Affordable Care Act, starting in FY 2014, DSHs receive 25
percent of the amount they previously would have received under the
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of
the Act. The remaining amount, equal to 75 percent of the amount that
otherwise would have been paid as Medicare DSH payments, is paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH will
receive an additional payment based on its share of the total amount of
uncompensated care for all Medicare DSHs for a given time period.
In this proposed rule, we are proposing to update our estimates of
the three factors used to determine uncompensated care payments for FY
2018. The statute permits the use of a data source other than the CBO
estimates to determine the percent change in the rate of uninsurance as
part of the calculation of Factor 2 beginning in FY 2018. We are
proposing to use uninsured estimates produced by CMS' Office of the
Actuary (OACT) as part of the development of the National Health
Expenditure Accounts (NHEA) in the calculation of Factor 2. We also are
proposing to begin incorporating data from Worksheet S-10 in the
calculation of hospitals' share of uncompensated care by combining data
on uncompensated care costs from the Worksheet S-10 for FY 2014 with
proxy data regarding a hospital's share of low-income insured days for
FYs 2012 and 2013 to determine Factor 3 for FY 2018. The proposal to
continue to use data from three cost reporting periods to calculate
Factor 3 would have the effect of transitioning from the use of the
proxy data on low-income insured days toward use of uncompensated care
data from Worksheet S-10. As part of this proposal, we are proposing a
definition of uncompensated care costs consisting of the sum of charity
care and bad debt and a trim methodology to address anomalous charges.
We also are proposing that, for Puerto Rico hospitals and Indian Health
Service and Tribal hospitals, we would substitute data regarding low-
income insured days for FY 2013 for the Worksheet S-10 data from FY
2014 cost reports.
We are proposing to continue the policies that were finalized in FY
2015 to address several specific issues concerning the process and data
to be employed in determining hospitals' share of uncompensated care in
the case of hospital mergers. We also are proposing to continue the
policies finalized in FY 2017 concerning the methodology for
calculating each hospital's relative share of uncompensated care, such
as combining data from multiple cost reports beginning in the same
fiscal year and averaging the sum of three individual Factor 3s by the
number of cost reporting periods with data. In addition, we are
proposing to annualize hospital cost reports that do not span 12
months. We also are proposing to apply a scaling factor to each
hospital's uncompensated care amount so that total uncompensated care
payments will be consistent with the estimated amount available to make
uncompensated care payments for FY 2018.
[[Page 19808]]
g. Proposed Changes to the LTCH PPS
In this proposed rule, we set forth proposed changes to the LTCH
PPS Federal payment rates, factors, and other payment rate policies
under the LTCH PPS for FY 2018; proposed changes to the payment
methodology under the short-stay outlier (SSO) policy; proposals to
implement several provisions of the 21st Century Cures Act; and a
proposal to adopt a 1-year regulatory delay on the full implementation
of the 25-percent threshold policy for discharges occurring in FY 2018
(that is, for the fiscal year after expiration of the current statutory
moratoria under the 21st Century Cures Act, which is set to expire
September 30, 2017).
h. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, subsection (d)
hospitals are required to report data on measures selected by the
Secretary for a fiscal year in order to receive the full annual
percentage increase that would otherwise apply to the standardized
amount applicable to discharges occurring in that fiscal year. In past
years, we have established measures on which hospitals must report data
and the process for submittal and validation of the data.
In this proposed rule, we are proposing to make several changes.
First, we are proposing to refine two previously adopted measures.
Specifically, we are proposing to update the Hospital Consumer
Assessment of Healthcare Providers and Systems (HCAHPS) Survey measure
by replacing the three existing questions about Pain Management with
three new questions that address Communication About Pain During the
Hospital Stay, beginning with the FY 2020 payment determination. In
addition, we are proposing to update the stroke mortality measure to
include the use of NIH Stroke Scale claims data for risk adjustment,
beginning with the FY 2023 payment determination.
Second, we are proposing to adopt the Hospital-Wide All-Cause
Unplanned Readmission Hybrid Measure as a voluntary measure for the CY
2018 reporting period and note that we are considering proposing this
measure as a required measure as early as the CY 2021 reporting period/
FY 2023 payment determination and requiring hospitals to submit the
core clinical data elements and linking variables used in the measure
as early as CY 2020 to support a dry run of the measure during which
hospitals would receive a confidential preview of their results in
2021.
Third, we are proposing modifications of our previously finalized
eCQM reporting requirements. For the CY 2017 reporting period/FY 2019
payment determination, we are proposing that hospitals would be
required to select and submit six of the available eCQMs included in
the Hospital IQR Program measure set and provide two, self-selected,
calendar year quarters of data. For the CY 2018 reporting period/FY
2020 payment determination, we are proposing that hospitals would be
required to select and submit six of the available eCQMs, and provide
data for the first three calendar quarters (Q1-Q3). These modifications
are being proposed in alignment with proposals for the Medicare and
Medicaid EHR Incentive Programs, and would decrease the required number
of eCQMs and quarters of reporting as compared with the previously
finalized requirements in the FY 2017 IPPS/LTCH PPS final rule.
Fourth, we are proposing modifications to the eCQM validation
process if our proposals to modify the eCQM reporting requirements for
the CY 2017 reporting period/FY 2019 payment determination and CY 2018
reporting period/FY 2020 payment determination are finalized as
proposed, whereby hospitals would be required to submit a reduced
number of cases for eCQM data validation for the FY 2020 and FY 2021
payment determinations. In addition, we are proposing policies related
to the exclusion criteria for hospital selection and the data
submission requirements for participating hospitals.
Fifth, we are proposing to modify our educational review process
for chart-abstracted measures for the FY 2020 payment determination and
subsequent years, such that educational reviews would be offered
quarterly for the first three quarters of validation. Hospitals would
be allowed 30 calendar days following the date the results of
validation are posted to request an educational review. Also, we are
proposing that if an educational review demonstrates that the
abstraction score calculated by CMS is incorrect, we would use the
corrected quarterly score to compute the final confidence interval.
Sixth, we are making proposals related to our Hospital IQR Program
Extraordinary Circumstances Extension or Exemptions (ECE) policy,
including a change to the name of the policy to Extraordinary
Circumstances Exceptions policy.
Finally, we are inviting public comment on accounting for social
risk factors in the Hospital IQR Program, the confidential and
potential future public reporting of clinical quality measure data
stratified by patients' dual-eligible status, and the following
clinical quality measures that we are considering for future inclusion
in the Hospital IQR Program: (1) Quality of Informed Consent Documents
for Hospital-Performed, Elective Procedures measure; (2) four End-of-
Life process and outcome measures for cancer patients; (3) two nurse
staffing measures; and (4) eleven newly specified electronic clinical
quality measures (eCQMs).
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
Section 1886(m)(5) of the Act requires LTCHs to report certain
quality data to CMS in order to receive their full annual update under
the LTCH PPS. In this proposed rule, we are proposing to adopt one new
outcome measure related to pressure ulcers and two new measures (one
process and one outcome) related to ventilator weaning. We also are
proposing to define the standardized patient assessment data that LTCHs
must report to comply with section 1886(m)(5)(F)(ii) of the Act, as
well as the requirements for the reporting of these data. Finally, we
are proposing to publicly report data on four assessment-based measures
and three claims-based measures.
j. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program
For the Inpatient Psychiatric Facility Quality Reporting (IPFQR)
Program, we are making several proposals. First, beginning with the FY
2020 payment determination, we are proposing the Medication
Continuation following Inpatient Psychiatric Discharge measure. Second,
beginning with the FY 2019 payment determination (that is, for
extraordinary circumstances occurring during CY 2018), we are proposing
to update the IPFQR Program's extraordinary circumstances exception
(ECE) policy by: (1) Allowing designated personnel to provide their
contact information and sign the ECE request in lieu of the Chief
Executive Officer (CEO); (2) allowing up to 90 days after the
extraordinary circumstance to submit the request; and (3) stating that
we will strive to respond to requests for ECEs within 90 days of
receiving these requests. Third, we are proposing to change the annual
data submission period from a specific date range to a 45-day period
that begins at least 30 days following the end of the collection
period. Fourth, we are proposing to align our deadline for submission
of a Notice of Participation (NOP) or
[[Page 19809]]
program withdrawal with this proposed data submission timeframe.
Finally, we are proposing factors by which we will evaluate measures
for removal from the IPFQR Program. These factors align with those in
use in other quality reporting programs.
3. Summary of Costs and Benefits
Adjustment for MS-DRG Documentation and Coding Changes.
Section 414 of the MACRA replaced the single positive adjustment we
intended to make in FY 2018 once the recoupment required by section 631
of the ATRA was complete with a 0.5 percent positive adjustment to the
standardized amount of Medicare payments to acute care hospitals for
FYs 2018 through 2023. The FY 2018 adjustment was subsequently adjusted
to 0.4588 percent by section 15005 of the 21st Century Cures Act (Pub.
L. 114-255). For FY 2018, we are proposing to make the 0.4588 percent
positive adjustment to the standardized amount as required by these
provisions.
Adjustment to IPPS Payment Rates as a Result of the 2-
Midnight Policy. The removal of the adjustment to IPPS rates resulting
from the 2-midnight policy will decrease IPPS payment rates by (1/
1.006) for FY 2018. The (1/1.006) is a one-time factor that will be
applied to the standardized amount, the hospital-specific rates, and
the national capital Federal rate for FY 2018 only.
Medicare DSH Payment Adjustment and Additional Payment for
Uncompensated Care. Under section 1886(r) of the Act (as added by
section 3133 of the Affordable Care Act), DSH payments to hospitals
under section 1886(d)(5)(F) of the Act are reduced and an additional
payment for uncompensated care is made to eligible hospitals beginning
in FY 2014. Hospitals that receive Medicare DSH payments receive 25
percent of the amount they previously would have received under the
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of
the Act. The remainder, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, is the basis
for determining the additional payments for uncompensated care after
the amount is reduced for changes in the percentage of individuals that
are uninsured and additional statutory adjustments. Each hospital that
receives Medicare DSH payments will receive an additional payment for
uncompensated care based on its share of the total uncompensated care
amount reported by Medicare DSHs. The reduction to Medicare DSH
payments is not budget neutral.
For FY 2018, we are proposing that the 75 percent of what otherwise
would have been paid for Medicare DSH will be adjusted to approximately
58.01 percent of the amount to reflect changes in the percentage of
individuals that are uninsured and additional statutory adjustments. In
other words, approximately 43.51 percent (the product of 75 percent and
58.01 percent) of our estimate of Medicare DSH payments, prior to the
application of section 3133 of the Affordable Care Act, would be
available to make additional payments to hospitals for their relative
share of the total amount of uncompensated care.
We project that estimated Medicare DSH payments, and additional
payments for uncompensated care made for FY 2018, will increase
payments overall by approximately 0.8 percent as compared to the
estimate of overall payments, including Medicare DSH payments and
uncompensated care payments, that will be distributed in FY 2017. The
additional payments have redistributive effects based on a hospital's
uncompensated care amount relative to the uncompensated care amount for
all hospitals that are estimated to receive Medicare DSH payments, and
the calculated payment amount is not directly tied to a hospital's
number of discharges.
Proposed Changes to the Hospital Readmissions Reduction
Program. For FY 2018 and subsequent years, the reduction is based on a
hospital's risk-adjusted readmission rate during a 3-year period for
acute myocardial infarction (AMI), heart failure (HF), pneumonia,
chronic obstructive pulmonary disease (COPD), total hip arthroplasty/
total knee arthroplasty (THA/TKA), and coronary artery bypass graft
(CABG). Overall, in this proposed rule, we estimate that 2,591
hospitals would have their base operating DRG payments reduced by their
determined proxy FY 2018 hospital-specific readmission adjustment. As a
result, we estimate that the Hospital Readmissions Reduction Program
would save approximately $564 million in FY 2018, an increase of
approximately $27 million over the estimated FY 2017 savings.
Value-Based Incentive Payments Under the Hospital VBP
Program. We estimate that there would be no net financial impact to the
Hospital VBP Program for the FY 2018 program year in the aggregate
because, by law, the amount available for value-based incentive
payments under the program in a given year must be equal to the total
amount of base operating MS-DRG payment amount reductions for that
year, as estimated by the Secretary. The estimated amount of base
operating MS-DRG payment amount reductions for the FY 2018 program year
and, therefore, the estimated amount available for value-based
incentive payments for FY 2018 discharges is approximately $1.9
billion.
Proposed Changes to the HAC Reduction Program. A
hospital's Total HAC score and its ranking in comparison to other
hospitals in any given year depends on several different factors. Any
significant impact due to the proposed HAC Reduction Program changes
for FY 2018, including which hospitals will receive the adjustment,
will depend on actual experience.
Update to the LTCH PPS Payment Rates and Other Payment
Factors. Based on the best available data for the 415 LTCHs in our
database, we estimate that the proposed changes to the payment rates
and factors that we are presenting in the preamble and Addendum of this
proposed rule, which reflects the rolling end to the transition of the
statutory application of the site neutral payment rate required by
section 1886(m)(6)(A) of the Act, the proposed update to the LTCH PPS
standard Federal payment rate for FY 2018, and estimated changes to the
site neutral payment rate and high-cost outlier (HCO) payments would
result in an estimated decrease in payments from FY 2017 of
approximately $238 million.
Proposed Changes to the 25-Percent Threshold Policy. In
this proposed rule, we estimate our proposal to adopt a 1-year
regulatory delay of the full implementation of the 25-percent threshold
policy for discharges occurring in FY 2018 would increase payments to
LTCHs in FY 2018 by $50 million.
Proposed Changes to the Hospital Inpatient Quality
Reporting (IQR) Program. Across 3,300 IPPS hospitals, we estimate that
our policy proposals would result in the following changes to costs and
benefits in the Hospital IQR Program compared to previously finalized
requirements: (1) A cost reduction of $361,240 for the FY 2019 payment
determination due to the proposed updates to the eCQM reporting
requirements; (2) a total net cost reduction of $392,963 for the FY
2020 payment determination due to the proposed updates to the eCQM
reporting requirements, the proposed updates to the eCQM validation
procedures, and the proposed voluntary reporting of the new Hybrid
Hospital-Wide Readmission measure; and (3) a total cost reduction of
$70,048 for the FY 2021 payment determination due to
[[Page 19810]]
the proposed updates to the eCQM validation procedures.
Proposed Changes Related to the LTCH QRP. In this proposed
rule, we are proposing one outcome measure related to pressure ulcers
and two new measures (one process and one outcome) related to
ventilator weaning. We also are proposing to specify the use of the
standardized patient assessment data as required under section
1899B(b)(1)(B) of the Act and policies regarding public display of
measure data. Overall, the cost associated with the proposed changes to
the LTCH QRP is estimated at an additional $3,187.15 per LTCH annually,
or $1,357,726 for all LTCHs annually.
Proposed Changes to the IPFQR Program. In this proposed
rule, we are proposing to adopt one claims based measure, update our
ECE process, change the specification of the data submission period,
align the timeframe for submission of the NOP or program withdrawal
with the data submission period, and establish criteria to evaluate
measures for retention or removal. We do not believe that these
policies will have any impact on the IPFQR program burden.
B. 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 use a prospective payment system (PPS) to pay for the
capital-related costs of inpatient hospital services for these
``subsection (d) hospitals.'' 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 certain 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 varies based on the
outcome of the statutory calculations. The Affordable Care Act revised
the Medicare DSH payment methodology and provides for a new additional
Medicare payment that considers the amount of uncompensated care
beginning on October 1, 2013.
If the hospital is training residents in an approved residency
program(s), 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, which
is determined from 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. SCHs are the sole source of care 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.
Under current law, the Medicare-dependent, small rural hospital
(MDH) program is effective through FY 2017. Through and including FY
2006, an MDH received the higher of the Federal rate or the Federal
rate plus 50 percent of the amount by which the Federal rate was
exceeded by the higher of its FY 1982 or FY 1987 hospital-specific
rate. For discharges occurring on or after October 1, 2007, but before
October 1, 2017, an MDH receives 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. MDHs are a major source of care for Medicare
beneficiaries in their areas. 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).
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: Inpatient rehabilitation facility (IRF)
hospitals and units; long-term care hospitals (LTCHs); psychiatric
hospitals and units; children's hospitals; cancer hospitals; long-term
care neoplastic
[[Page 19811]]
disease hospitals (formerly LTCHs classified under section
1886(d)(1)(B)(iv)(II) of the Act and redesignated by section 15008 of
Pub. L. 114-255) and hospitals located outside the 50 States, the
District of Columbia, and Puerto Rico (that is, hospitals located in
the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and
American Samoa). 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 IRF
hospitals and units, 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,
hospitals located outside the 50 States, the District of Columbia, and
Puerto Rico (that is, hospitals located in the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs
continue to be paid solely under a reasonable cost-based system subject
to a rate-of-increase ceiling on inpatient operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
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) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (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. Section 1206(a) of the Pathway for SGR Reform Act
of 2013 (Pub. L. 113-67) established the site neutral payment rate
under the LTCH PPS, which made the LTCH PPS a dual rate payment system
beginning in FY 2016. Under this statute, based on a rolling effective
date that is linked to the date on which a given LTCH's Federal FY 2016
cost reporting period begins, LTCHs are paid for LTCH discharges at the
site neutral payment rate unless the discharge meets the patient
criteria for payment at the LTCH PPS standard Federal payment 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 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) of the Act and existing regulations under 42 CFR part 413.
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.
C. Summary of Provisions of Recent Legislation Proposed To Be
Implemented in This Proposed Rule
1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (Pub.
L. 114-10), and the 21st Century Cures Act (Pub. L. 114-255)
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to
require CMS to make a recoupment adjustment to the standardized amounts
under section 1886(d) of the Act based upon the Secretary's estimates
for discharges occurring from FYs 2014 through FY 2017 to fully offset
$11 billion. Once the recoupment required under section 631 of the ATRA
was completed, CMS had anticipated making a single positive adjustment
in FY 2018 to offset the reductions required to recoup the $11 billion
under section 631 of the ATRA. However, section 414 of the MACRA
(enacted on April 16, 2015) replaced the single positive adjustment CMS
intended to make in FY 2018 with a 0.5 percent positive adjustment for
each of FYs 2018 through 2023. Section 15005 of the 21st Century Cures
Act (Pub. L. 114-255, enacted December 13, 2016) further amended Public
Law 110-90 to reduce the adjustment for FY 2018 from 0.5 percent point
to 0.4588 percentage point.
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) introduced
new payment rules in the LTCH PPS. Under section 1206 of this law,
discharges in cost reporting periods beginning on or after October 1,
2015 under the LTCH PPS will receive payment under a site neutral rate
unless the discharge meets certain patient-specific criteria. In this
proposed rule, we are continuing to provide clarifications to prior
policy changes that implemented provisions under section 1206 of the
Pathway for SGR Reform Act.
3. Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act) (Pub. L. 113-185)
The Improving Medicare Post-Acute Care Transformation Act of 2014
(IMPACT Act (Pub. L. 113-185), enacted on October 6, 2014, made a
number of changes that affect the Long-Term Care Quality Reporting
Program (LTCH QRP). In this proposed rule, we are proposing to continue
to implement portions of section 1899B of the Act, as added by section
2 of the IMPACT Act, which, in part, requires LTCHs, among other
postacute care providers, to report standardized patient assessment
data, data on quality measures, and data on resource use and other
measures.
4. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L.
114-10)
Section 411(g) of the Medicare Access and CHIP Reauthorization Act
of 2015 (MACRA, Pub. L. 114-10) sets the annual update under the LTCH
PPS to 1.0 percent for FY 2018. In this proposed rule, consistent with
this requirement, we are proposing to update
[[Page 19812]]
the LTCH standard Federal payment rate by 1.0 percent for FY 2018.
The MACRA also extended the MDH program and changes to the payment
adjustment for low-volume hospitals through FY 2017. In this proposed
rule, we discuss the expiration of the MDH program and the expiration
of the temporary changes to the low-volume hospital payment adjustment
under current law.
5. The 21st Century Cures Act (Pub. L. 114-255)
The 21st Century Cures Act (Pub. L. 114-255), enacted on December
13, 2016, contains a number of provisions affecting payments under the
LTCH PPS and the Hospital Readmissions Reduction Program and the
Medicare EHR Incentive Program, which we are proposing to implement in
this proposed rule:
Section 4002(b)(1)(A) amended section 1848(a)(7)(B) of the
Act to provide that the Secretary shall exempt an eligible professional
from the application of the payment adjustment under section
1848(a)(7)(A) of the Act with respect to a year, subject to annual
renewal, if the Secretary determines that compliance with the
requirement for being a meaningful EHR user is not possible because the
certified EHR technology used by such eligible professional has been
decertified under the Office of the National Coordinator for Health
Information Technology's (ONC) Health IT Certification Program.
Section 4002(b)(2) amended section 1886(b)(3)(B)(ix)(II)
of the Act to provide that the Secretary shall exempt a hospital from
the application of the payment adjustment under section
1886(b)(3)(B)(ix)(I) with respect to a fiscal year, subject to annual
renewal, if the Secretary determines that compliance with the
requirement for being a meaningful EHR user is not possible because the
certified EHR technology used by the hospital is decertified under
ONC's Health IT Certification Program.
Section 15002, which amended section 1886(q)(3) of the Act
by adding subparagraphs (D) and (E), which requires the Secretary to
develop a methodology for the calculating the excess readmissions
adjustment factor for the Hospital Readmissions Reduction Program based
on cohorts defined by the percentage of dual eligible patients (that
is, patients who are eligible for both Medicare and full-benefit
Medicaid coverage) cared for by a hospital. In this proposed rule, we
are proposing to implement changes to the payment adjustment factor to
assess penalties based on a hospital's performance relative to other
hospitals treating a similar proportion of dual eligible patients.
Section 15004(a), which further amended section 114(d)(7)
of the MMSEA (as amended) by striking ``The moratorium under paragraph
(1)(A)'' and inserting ``[a]ny moratorium under paragraph (1)'' and
specified that such amendment shall take effect as if included in the
enactment of section 112 of the PAMA. We are proposing to implement the
exceptions to the current statutory moratorium, which is in effect
through September 30, 2017, on increasing beds in an existing LTCH or
an existing LTCH satellite as provided by Section 15004(a).
Section 15004(b), which modifies high cost outlier
payments to LTCH standard Federal rate cases beginning in FY 2018.
Section 15006, which further amended section 114(c)(1)(A)
of the MMSEA (as amended) by extending the moratorium on the full
implementation of the 25-percent threshold policy through June 30,
2016, and for discharges occurring on or after October 1, 2016 and
before October 1, 2017. In this proposed rule, we are implementing the
moratorium on the full implementation of the 25-percent threshold
policy for discharges occurring on or after October 1, 2016, through
September 30, 2017, as provided by section 15006.
Section 15007, which amended section 1206(a)(3) of the
Pathway for SGR Reform Act by extending the exclusion of Medicare
Advantage plans' and site neutral payment rate discharges from the
calculation of the average length-of-stay to all LTCHs, for discharges
occurring in cost reporting periods beginning on or after October 1,
2015.
Section 15008, which provided for a change in Medicare
classification for ``subclause (II)'' LTCHs by redesignating such
hospitals from section 1886(d)(1)(B)(iv)(II) to section
1886(d)(1)(B)(vi) of the Act. In this proposed rule, we are proposing
to implement the reclassification of hospitals which had previously
been classified as ``subclause (II)'' LTCHs as their own category of
IPPS-excluded hospitals as provided by the provisions of section 15008.
Section 15009 of Public Law 114-255, which added new
subparagraph (F) to section 1886(m)(6) of the Act, providing for a
temporary exception to the site neutral payment rate for certain spinal
cord specialty hospitals for all discharges occurring during FYs 2018
and 2019.
Section 15010, which added a new subparagraph (G) to
section 1886(m)(6) of the Act, to create a temporary exception to the
site neutral payment rate for certain severe wound discharges from
certain LTCHs during such LTCH's cost reporting period beginning during
FY 2018.
Public Law 114-255 also amended section 1886(q)(3) of the Act by
adding subparagraphs (D) and (E), which requires the Secretary to
develop a methodology for the Hospital Readmissions Reduction Program
that accounts for the percentage of dual-eligible patients (that is,
patients who are eligible for both Medicare and full-benefit Medicaid
coverage) cared for by a hospital. In this proposed rule, we are
proposing to implement changes to the payment adjustment factor to
assess penalties based on a hospital's performance relative to other
hospitals treating a similar proportion of dual-eligible patients.
Section 16003 amended section 1848(a)(7)(D) of the Act to
provide that no payment adjustment may be made under section
1848(a)(7)(A) of the Act for 2017 and 2018 in the case of an eligible
professional who furnishes substantially all of his or her covered
professional services in an ambulatory surgical center (ASC). Section
1848(a)(7)(D)(iii) of the Act provides that determinations of whether
an eligible professional is ASC-based may be made based on the site of
service as defined by the Secretary or an attestation, but shall be
made without regard to any employment or billing arrangement between
the eligible professional and any other supplier or provider of
services. Section 1848(a)(7)(D)(iv) of the Act provides that the ASC-
based exception shall no longer apply as of the first year that begins
more than 3 years after the date on which the Secretary determines,
through notice-and-comment rulemaking, that certified EHR technology
applicable to the ASC setting is available.
D. Summary of Provisions of This Proposed Rule
In this proposed rule, we are setting forth proposed payment and
policy changes to the Medicare IPPS for FY 2018 operating costs and for
capital-related costs of acute care hospitals and certain hospitals and
hospital units that are excluded from IPPS. In addition, we are setting
forth proposed changes to the payment rates, factors, and other payment
and policy-related changes to programs associated with payment rate
policies under the LTCH PPS for FY 2018.
[[Page 19813]]
Below is a summary of the major changes that we are proposing to
make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we include--
Proposed changes to MS-DRG classifications based on our
yearly review for FY 2018.
Proposed adjustment to the standardized amounts under
section 1886(d) of the Act for FY 2018 in accordance with the
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section
414 of the MACRA and section 15005 of the 21st Century Cures Act.
Proposed recalibrations of the MS-DRG relative weights.
A discussion of the FY 2018 status of new technologies
approved for add-on payments for FY 2017 and a presentation of our
evaluation and analysis of the FY 2018 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).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to this proposed rule, we are
proposing to make revisions to the wage index for acute care hospitals
and the annual update of the wage data. Specific issues addressed
include, but are not limited to, the following:
The proposed FY 2018 wage index update using wage data
from cost reporting periods beginning in FY 2014.
Clarification of other wage-related costs in the wage
index.
Calculation of the proposed occupational mix adjustment
for FY 2018 based on the 2013 Occupational Mix Survey.
Analysis and implementation of the proposed FY 2018
occupational mix adjustment to the wage index for acute care hospitals.
Proposed application of the rural floor and the frontier
State floor and the proposed expiration of the imputed floor.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications under
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
Proposal to require documentation of SCH and RRC
classification status approvals to be submitted to the MGCRB by the
first business day after January 1.
Clarification of special rules for SCHs and RRCs
reclassifying to geographic home areas.
Proposed changes to the 45-day notification rule.
The proposed adjustment to the wage index for acute care
hospitals for FY 2018 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
Determination of the labor-related share for the proposed
FY 2018 wage index.
3. Proposed Revising and Rebasing of Hospital Market Basket
In section IV. of this proposed rule, we are proposing to revise
and rebase the hospital market baskets for acute care hospitals and
update the labor-related share.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
In section V. of the preamble of this proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR parts 412 and 413, including the following:
Proposed changes to MS-DRGs subject to the postacute care
transfer policy.
Proposed changes to the inpatient hospital update for FY
2018.
Proposed changes to the volume decrease adjustment for
SCHs.
Proposed updated national and regional case-mix values and
discharges for purposes of determining RRC status.
Expiration of the MDH program and the temporary changes to
the payment adjustment for low-volume hospitals at the end of FY 2017.
Proposed parallel low-volume hospital payment adjustment
concerning hospitals operated by the Indian Health Service (IHS) or a
Tribe.
The statutorily required IME adjustment factor for FY
2018.
Proposed changes to the methodologies for determining
Medicare DSH payments and the additional payments for uncompensated
care.
Discussion of expiration of the MDH program at the end of
FY 2017 and our policy to allow MDHs to apply for SCH status in advance
of the expiration of the MDH program and be paid as such under certain
conditions.
Proposed changes to the rules for payment adjustments
under the Hospital Readmissions Reduction Program based on hospital
readmission measures and the process for hospital review and correction
of those rates for FY 2018.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program for FY 2018.
Discussion of and proposals relating to the additional 5-
year extension of the Rural Community Hospital Demonstration Program.
Proposals related to the provider-based status of IHS and
Tribal facilities and organizations that would remove the regulatory
date limitation that restricted the grandfathering provision to IHS or
Tribal facilities and organizations furnishing services on or before
April 7, 2000. We also are proposing to make a technical change to make
the regulation text more consistent with our current rules that require
these facilities to comply with all applicable Medicare conditions of
participation that apply to the main provider.
5. Proposed FY 2018 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to this proposed rule, we discuss
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2018.
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VII. of the preamble of this proposed rule, we discuss--
Proposed changes to payments to certain excluded hospitals
for FY 2018.
Proposed policy changes relating to payments to hospitals-
within-hospitals.
Proposed continued implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration.
7. Proposed Changes to the LTCH PPS
In section VIII. of the preamble of this proposed rule, we set
forth--
Proposed changes to the LTCH PPS Federal payment rates,
factors, and other payment rate policies under the LTCH PPS for FY
2018.
Proposed changes to the short-stay outlier (SSO) policy.
Proposed 1-year regulatory delay of the full
implementation of the 25-percent threshold policy for discharges
occurring in FY 2018.
Proposed changes to implement the temporary exception to
the site neutral payment rate for certain spinal cord specialty
hospitals and for certain discharges with severe wounds from certain
LTCHs, as provided under sections 15009 and 15010 of Public Law 114-
255, respectively.
[[Page 19814]]
Proposed change to the average length of stay criterion to
implement section 15007 of Public Law 114-255.
Proposed change in Medicare classification for certain
hospitals to implement section 15008 of Public Law 114-255.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of the proposed rule, we address--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting Program (LTCH QRP).
Proposed changes to the requirements under the Inpatient
Psychiatric Facility Quality Reporting (IPFQR) Program.
Proposed changes to requirements pertaining to the
clinical quality measurement of eligible hospitals and CAHs as well as
EPs participating in the Medicare and Medicaid Electronic Health Record
(EHR) Incentive Programs.
9. Proposed Changes Relating to Medicare Cost Reporting and Provider
Requirements
In section X. of the preamble of this proposed rule, we present our
proposals to revise the regulations to allow providers to use an
electronic signature to sign the Certification and Settlement Summary
page of the Medicare cost report and submit this page electronically,
and clarify the rules relating to the sale or scrapping of depreciable
assets disposed of on or after December 1, 1997.
10. Proposed Changes Relating to Survey and Certification Requirements
In section XI. of the preamble of this proposed rule, we present
our proposals for allowing transparency in accrediting organization
survey reports and plans of correction and for changing the requirement
for providers to publish self-termination notices in newspapers.
11. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In section V. of the Addendum to this proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2018 prospective payment rates for operating costs and
capital-related costs for acute care hospitals. We are proposing to
establish the threshold amounts for outlier cases. In addition, we are
addressing the update factors for determining the rate-of-increase
limits for cost reporting periods beginning in FY 2018 for certain
hospitals excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
In the Addendum to this proposed rule, we set forth proposed
changes to the amounts and factors for determining the proposed FY 2018
LTCH PPS standard Federal payment rate and other factors used to
determine LTCH PPS payments under both the LTCH PPS standard Federal
payment rate and the site neutral payment rate in FY 2018. We are
proposing to establish the adjustments for wage levels, the labor-
related share, the cost-of-living adjustment, and high-cost outliers,
including the applicable fixed-loss amounts and the LTCH cost-to-charge
ratios (CCRs) for both payment rates.
13. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact that the proposed changes would have on affected acute care
hospitals, CAHs, LTCHs, PCHs, and IPFs.
14. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we are providing our recommendations
of the appropriate percentage changes for FY 2018 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).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The LTCH PPS standard Federal payment rate and the site
neutral payment rate for hospital inpatient services provided for LTCH
PPS discharges.
15. 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 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2017 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We address these recommendations in Appendix B of this proposed rule.
For further information relating specifically to the MedPAC March 2017
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.
II. Proposed 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 diagnosis-related
groups (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.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust
the DRG classifications and relative weights at least annually to
account for changes in resource consumption. 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
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2017 IPPS/LTCH PPS final
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; and 81 FR 56787 through
56872, respectively).
[[Page 19815]]
C. Adoption of the MS-DRGs in FY 2008
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
D. Proposed FY 2018 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), 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. 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 percentage
points to the national standardized amount. We provided for phasing in
this -4.8 percentage point adjustment over 3 years. Specifically, we
established prospective documentation and coding adjustments of -1.2
percentage points for FY 2008, -1.8 percentage points for FY 2009, and
-1.8 percentage points 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 (Pub. L. 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 percentage point
for FY 2008 and -0.9 percentage point for FY 2009.
As discussed in prior year rulemaking, and most recently in the FY
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we
implemented a series of adjustments required under sections 7(b)(1)(A)
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of
FY 2008 and FY 2009 claims data. We completed these adjustments in FY
2013, but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53274 through 53275) that delaying full implementation of the
adjustment required under section 7(b)(1)(A) of Public Law 110-90 until
FY 2013 resulted in payments in FY 2010 through FY 2012 being
overstated, and that these overpayments could not be recovered.
2. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment
represented the amount of the increase in aggregate payments as a
result of not completing the prospective adjustment authorized under
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed
earlier, this delay in implementation resulted in overstated payment
rates in FYs 2010, 2011, and 2012. The resulting overpayments could not
have been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA was a one-time recoupment of a prior overpayment, not a permanent
reduction to payment rates. Therefore, we anticipated that any
adjustment made to reduce payment rates in one year would eventually be
offset by a positive adjustment in 2018, once the necessary amount of
overpayment was recovered. However, section 414 of the Medicare Access
and CHIP Reauthorization Act (MACRA) of 2015, Public Law 114-10,
enacted on April 16, 2015, replaced the single positive adjustment we
intended to make in FY 2018 with a 0.5 percentage point positive
adjustment for each of FYs 2018 through 2023. We stated in the FY 2016
IPPS/LTCH PPS final rule (80 FR 49345) that we would address this MACRA
provision in future rulemaking. However, section 15005 of the 21st
Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016,
reduced the adjustment for FY 2018 from 0.5 percentage points to 0.4588
percentage points. We are addressing these provisions of MACRA and the
21st Century Cures Act in section II.D.3. of the preamble of this
proposed rule.
As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515
through 50517), our actuaries estimated that a -9.3 percentage point
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014. It is often our practice to phase in payment rate
adjustments over more than one year, in order to moderate the effect on
payment rates in any one year. Therefore, consistent with the policies
that we have adopted in many similar cases, and after consideration of
the public comments we received, in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50515 through 50517), we implemented a -0.8 percentage
point recoupment adjustment to the standardized amount in FY 2014. We
estimated that if adjustments of approximately -0.8 percentage point
were implemented in FYs 2014, 2015, 2016, and 2017, using standard
inflation factors, the entire $11 billion would be accounted for by the
end of the statutory 4-year timeline. As estimates of any future
adjustments are subject to variations in total savings, we did not
provide for specific adjustments for FYs 2015, 2016, or 2017 at that
time.
Consistent with the approach discussed in the FY 2014 rulemaking
for recouping the $11 billion required by section 631 of the ATRA, in
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49874) and the FY 2016
IPPS/LTCH PPS final rule (80 FR 49345), we implemented additional -0.8
percentage point recoupment adjustments to the standardized amount in
FY 2015 and FY 2016, respectively. We estimated that these adjustments,
combined with leaving the prior -0.8 percentage point adjustments in
place, would recover up to $2 billion in FY 2015 and another $3 billion
in FY 2016. When combined with the approximately $1 billion adjustment
made in FY 2014, we estimated that approximately $5 to $6 billion would
be left to recover under section 631 of the ATRA by the end of FY 2016.
As indicated in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR
24966), due to lower than previously estimated inpatient spending, we
determined that an adjustment of -0.8 percentage point in FY 2017 would
not recoup the $11 billion under section 631 of the ATRA.
[[Page 19816]]
For the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), based on the
Midsession Review of the President's FY 2017 Budget, our actuaries
estimated that, to the nearest tenth of a percentage point, the FY 2017
documentation and coding adjustment factor that will recoup as closely
as possible $11 billion from FY 2014 through FY 2017 without exceeding
this amount is -1.5 percentage points. Based on those updated estimates
by the Office of the Actuary using the Midsession Review of the
President's FY 2017 Budget, we made a -1.5 percentage point adjustment
for FY 2017 as the final adjustment required under section 631 of the
ATRA. The estimates by our actuaries related to this finalized
adjustment were included in a memorandum that we made publicly
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-OACT.html.
3. Proposed Adjustment for FY 2018 Required Under Section 414 of Public
Law 114-10 (MACRA) and Section 15005 of Public Law 114-255
As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785),
once the recoupment required under section 631 of the ATRA was
complete, we had anticipated making a single positive adjustment in FY
2018 to offset the reductions required to recoup the $11 billion under
section 631 of the ATRA. However, section 414 of the MACRA (which was
enacted on April 16, 2015) replaced the single positive adjustment we
intended to make in FY 2018 with a 0.5 percentage point positive
adjustment for each of FYs 2018 through 2023. In the FY 2017
rulemaking, we indicated that we would address the adjustments for FY
2018 and later fiscal years in future rulemaking. As noted previously,
section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which
was enacted on December 13, 2016, amended section 7(b)(1)(B) of the
TMA, as amended by section 631 of the ATRA and section 414 of the
MACRA, to reduce the adjustment for FY 2018 from a 0.5 percentage point
to a 0.4588 percentage point. We believe the directive under section
15005 of Public Law 114-255 is clear. Therefore, for FY 2018, we are
proposing to implement the required +0.4588 percentage point adjustment
to the standardized amount. This is a permanent adjustment to payment
rates. While we are not proposing future adjustments required under
section 414 of the MACRA and section 15005 of Public Law 114-255 at
this time, we expect to propose positive 0.5 percentage point
adjustments to the standardized amounts for FYs 2019 through 2023.
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a 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. We also refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56785 through 56787) for a detailed
discussion of the history of changes to the number of cost centers used
in calculating the DRG relative weights. Since FY 2014, we calculate
the IPPS MS-DRG relative weights using 19 CCRs, which now include
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization.
2. Discussion of Policy for FY 2018
Consistent with our established policy, we calculated the proposed
MS-DRG relative weights for FY 2018 using two data sources: The MedPAR
file as the claims data source and the HCRIS as the cost report data
source. We adjusted the charges from the claims to costs by applying
the 19 national average CCRs developed from the cost reports. The
description of the calculation of the proposed 19 CCRs and the proposed
MS-DRG relative weights for FY 2018 is included in section II.G. of the
preamble to this FY 2018 IPPS/LTCH PPS proposed rule. As we did with
the FY 2017 IPPS/LTCH PPS final rule, for this proposed rule, we are
providing the version of the HCRIS from which we calculated these
proposed 19 CCRs on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on
the link on the left side of the screen titled, ``FY 2018 IPPS Proposed
Rule Home Page'' or ``Acute Inpatient Files for Download.''
F. Proposed Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for Proposed FY
2018 MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of
Diseases, 10th Revision (ICD-10)
As of October 1, 2015, providers use the International
Classification of Diseases, 10th Revision (ICD-10) coding system to
report diagnoses and procedures for Medicare hospital inpatient
services under the MS-DRG system instead of the ICD-9-CM coding system,
which was used through September 30, 2015. 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 ICD-10-PCS Guidelines for Coding and
Reporting. For a detailed discussion of the conversion of the MS-DRGs
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81
FR 56787 through 56789).
b. Basis for FY 2018 Proposed MS-DRG Updates
CMS has previously encouraged input from our stakeholders
concerning the annual IPPS updates when that input is made available to
us by December 7 of the year prior to the next annual proposed rule
update. For example, to be considered for any updates or changes in FY
2018, comments and suggestions should have been submitted by December
7, 2016. The comments that were submitted in a timely manner for FY
2018 are discussed in this section of the preamble of this proposed
rule. As CMS works with the public to examine the ICD-10 claims data
used for updates to the ICD-10 MS-DRGs, we would like to examine areas
where the MS-DRGs can be improved. This will require additional time
for us to review requests from the public to make specific updates,
analyze claims data, and consider any proposed updates. Given the need
for more time to carefully evaluate requests and propose updates, we
are changing the deadline to request updates to MS-DRGs to November 1
of each year. This will provide an additional 5 weeks for the data
analysis and review process. Interested parties should submit any
comments and suggestions for FY 2019 by November 1, 2017, via the CMS
MS-
[[Page 19817]]
DRG Classification Change Requests Mailbox located at:
[email protected].
Following are the changes that we are proposing to the MS-DRGs for
FY 2018 in this FY 2018 IPPS/LTCH PPS proposed rule. We are inviting
public comments on each of the MS-DRG classification proposed changes
as well as our proposals to maintain certain existing MS-DRG
classifications discussed in this proposed rule. In some cases, we are
proposing changes to the MS-DRG classifications based on our analysis
of claims data. In other cases, we are proposing to maintain the
existing MS-DRG classification based on our analysis of claims data.
For this FY 2018 proposed rule, our MS-DRG analysis was based on ICD-10
claims data from the December 2016 update of the FY 2016 MedPAR file,
which contains hospital bills received through September 30, 2016, for
discharges occurring through September 30, 2016. In our discussion of
the proposed MS-DRG reclassification changes, we referred to our
analysis of claims data from the ``December 2016 update of the FY 2016
MedPAR file''.
As explained in previous rulemaking (76 FR 51487), in deciding
whether to propose to make further modification to the MS-DRGs for
particular circumstances brought to our attention, 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 represented in the MS-DRG. We evaluate patient care
costs using average costs and lengths-of-stay and rely on the judgment
of our clinical advisors to determine whether patients are clinically
distinct or similar to other patients represented in the MS-DRG. 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. We also consider variation in
costs within these groups; that is, whether observed average
differences are consistent across patients or attributable to cases
that are extreme in terms of costs or length of stay, or both. Further,
we consider the number of patients who will have a given set of
characteristics and generally prefer not to create a new MS-DRG unless
it would include a substantial number of cases.
In our examination of the claims data, we apply the following
criteria established in FY 2008 (72 FR 47169) to determine if the
creation of a new complication or comorbidity (CC) or major
complication or comorbidity (MCC) subgroup within a base MS-DRG is
warranted:
A reduction in variance of costs 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 costs
between subgroups.
There is a $2,000 difference in average costs between
subgroups.
In order to warrant creation of a CC or MCC subgroup within a base
MS-DRG, the subgroup must meet all five of the criteria.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Functional Quadriplegia
We received a request to reassign cases identified by diagnosis
code R53.2 (Functional quadriplegia) from MS-DRGs 052 and 053 (Spinal
Disorders and Injuries with and without CC/MCC, respectively). The
requestor stated that because functional quadriplegia does not involve
any spinal injury or pathology, cases identified by the diagnosis code
should not be assigned to MS-DRGs 052 and 053. However, the requestor
did not suggest an alternative MS-DRG assignment.
Section I.C.18.f. of the FY 2017 ICD-10-CM Official Coding
Guidelines addresses the coding for the diagnosis of functional
quadriplegia. Section I.C.18.f. states that functional quadriplegia
(described by diagnosis code R53.2) is the lack of ability to use one's
limbs or to ambulate due to extreme debility. The condition is not
associated with neurologic deficit or injury, and diagnosis code R53.2
should not be used to identify cases of neurologic quadriplegia. In
addition, the Guidelines state that the diagnosis code should only be
assigned if functional quadriplegia is specifically documented by a
physician in the medical record, and the diagnosis of functional
quadriplegia is not associated with a neurologic deficit or injury. A
physician may document the diagnosis of functional quadriplegia as
occurring with a variety of conditions.
We examined claims data from the December 2016 update of the FY
2016 MedPAR file on cases reporting diagnosis code R53.2 in MS-DRGs 052
and 053. Our findings are shown in the table below.
Cases Reporting Functional Quadriplegia in MS-DRGs 052 and 053
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 052--All cases........................................... 865 5.4 $10,247
MS-DRG 052--Cases reporting diagnosis code R53.2................ 63 4.9 6,420
MS-DRG 053--All cases........................................... 239 3.3 6,326
MS-DRG 053--Cases reporting diagnosis code R53.2................ 16 3.3 2,318
----------------------------------------------------------------------------------------------------------------
As shown in the table above, for MS-DRG 052, there were a total of
865 cases with an average length of stay of 5.4 days and average costs
of $10,247. Of the 865 cases in MS-DRG 052, there were 63 cases that
reported a principal diagnosis of functional quadriplegia, with an
average length of stay of 4.9 days and average costs of $6,420. For MS-
DRG 053, there were a total of 239 cases, with an average length of
stay of 3.3 days and average costs of $6,326. Of the 239 cases in MS-
DRG 053, there were 16 cases that reported a principal diagnosis of
functional quadriplegia, with an average length of stay of 3.3 days and
average costs of $2,318.
To address the request to reassign cases reporting a diagnosis of
functional quadriplegia to a different MS-DRG, we reviewed the data for
a total of 79 cases (63 cases in MS-DRG 052 and 16 cases in MS-DRG 053)
that reported a principal diagnosis of functional quadriplegia in MS-
DRGs 052 and 053. As shown in the table above, our data analysis
demonstrates that the average costs for these 79 cases are lower than
the average costs of all cases in MS-DRGs 052 and 053 ($6,420 compared
to $10,247 for all cases in MS-DRG 052, and $2,318 compared to $6,326
for all cases in MS-DRG 053), and the average
[[Page 19818]]
lengths of stay are shorter for cases reporting a diagnosis of
functional quadriplegia in MS-DRG 052 (4.9 days compared to 5.4 days
for all cases in MS-DRG 052), but equal for cases in MS-DRG 053 (3.3
days for cases reporting a diagnosis of functional quadriplegia and for
all cases).
Our clinical advisors reviewed this issue and agreed that a
diagnosis of functional quadriplegia does not involve a spinal disorder
or injury, and may be associated with, or the result of, a variety of
underlying conditions. Our clinical advisors also agreed that it is not
clinically appropriate to include cases reporting a diagnosis of
functional quadriplegia within MS-DRGs 052 and 053 because these cases
do not involve a spinal disorder or injury. Therefore, given the fact
that functional quadriplegia can be the result of a variety of other
conditions, we reviewed the MS-DRGs in order to identify a more
appropriate placement for cases reporting this diagnosis. Our clinical
advisors recommended assigning cases representing a diagnosis of
functional quadriplegia from MS-DRGs 052 and 053 to MS-DRGs 091, 092,
and 093 (Other Disorders of Nervous System with MCC, with CC, and
without CC/MCC, respectively). Within each MDC, there are MS-DRGs that
describe a variety of other conditions that do not have the clinical
characteristics of the more specific MS-DRGs. In this case, MS-DRGs
091, 092, and 093 describe a variety of other disorders of the nervous
system that are not clinically similar in characteristics to the
disorders described by MS-DRGs 052 and 053. Our clinical advisors
believe that MS-DRGs 091, 092, and 093 are more appropriate MS-DRG
assignments for cases representing a diagnosis of functional
quadriplegia.
We examined claims data from the December 2016 update of the FY
2016 MedPAR file on cases in MS-DRGs 091, 092, and 093. Our findings
are shown in the table below.
Cases in MS-DRGs 091, 092, and 093
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 091--All cases........................................... 12,607 5.6 $10,815
MS-DRG 092--All cases........................................... 19,392 3.9 6,706
MS-DRG 093--All cases........................................... 8,120 2.7 5,253
----------------------------------------------------------------------------------------------------------------
As shown in the table above, for MS-DRG 091, there were a total of
12,607 cases, with an average length of stay of 5.6 days and average
costs of $10,815. For MS-DRG 092, there were a total of 19,392 cases,
with an average length of stay of 3.9 days and average costs of $6,706.
For MS-DRG 093, there were a total of 8,120 cases, with an average
length of stay of 2.7 days and average costs of $5,253. As stated
earlier, of the 865 total cases in MS-DRG 052, there were 63 cases that
reported a principal diagnosis of functional quadriplegia, with an
average length of stay of 4.9 days and average costs of $6,420. Of the
239 total cases in MS-DRG 053, there were 16 cases that reported a
principal diagnosis of functional quadriplegia, with an average length
of stay of 3.3 days and average costs of $2,318. The average lengths-
of-stay for cases reporting a diagnosis of functional quadriplegia in
MS-DRGs 052 and 053 are similar to the average lengths of stay for
cases found in MS-DRGs 091, 092 and 093 (4.9 days and 3.3 days for
cases in MS-DRGs 052 and 053, respectively, compared to 5.6 days, 3.9
days, and 2.7 days, respectively, for cases in MS-DRGs 091, 092, and
093). The average costs for cases reporting a diagnosis of functional
quadriplegia in MS-DRGs 052 and 053 are $6,420 and $2,318,
respectively, compared to $10,815, $6,706, and $5,253 for all cases in
MS-DRGs 091, 092, and 093. The average costs for cases reporting a
diagnosis of functional quadriplegia in MS-DRG 053 are lower than the
average costs for all cases in MS-DRG 093 without a CC or MCC ($2,318
compared to $5,253, respectively). The average costs for cases
reporting a diagnosis of functional quadriplegia in MS-DRG 052 are
$6,420, which is lower than the average costs of $10,815 for all cases
in MS-DRG 091, but close to the average costs of $6,706 for all cases
in MS-DRG 092. While we acknowledge that the average costs for cases
reporting a diagnosis of functional quadriplegia are lower than those
cases within MS-DRGs 091, 092, and 093, as stated earlier, the average
costs of cases reporting a diagnosis of functional quadriplegia also
are lower than the average costs of all cases in MS-DRGs 052 and 053
where these cases are currently assigned.
Our clinical advisors reviewed the clinical issues as well as the
claims data for MS-DRGs 052, 053, 091, 092, and 093. As a result of
this review, they recommended that cases reporting a diagnosis of
functional quadriplegia be reassigned from MS-DRGs 052 and 053 to MS-
DRGs 091, 092, and 093 because the current MS-DRG assignment is not
clinically appropriate. Our clinical advisors stated that reassigning
these cases to MS-DRGs 091, 092, and 093 is more appropriate because
this set of MS-DRGs includes a variety of nervous system disorders that
are not appropriately classified to more specific MS-DRGs within MDC 1.
Therefore, we are proposing to reassign cases identified by diagnosis
code R53.2 from MS-DRGs 052 and 053 to MS-DRGs 091, 092, and 093 for FY
2018.
We are inviting public comments on our proposal.
b. Responsive Neurostimulator (RNS(copyright)) System
We received a request to modify the MS-DRG assignment for cases
involving the use of the RNS(copyright) neurostimulator, a
cranially implanted neurostimulator that is a treatment option for
persons diagnosed with medically intractable epilepsy. Cases involving
the use of the RNS(copyright) neurostimulator are assigned
to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or
Chemo Implant) and MS-DRG 024 (Craniotomy with Major Device Implant or
Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX)
without MCC).
Cases involving the use of the RNS(copyright)
neurostimulator generator and leads are captured within the
descriptions of four ICD-10-PCS codes. ICD-10-PCS code 0NH00NZ
(Insertion of neurostimulator generator into skull, open approach)
captures the use of the neurostimulator generator, and the other three
ICD-10-PCS codes, 00H00MZ (Insertion of neurostimulator lead into
brain, open approach), 00H03MZ (Insertion of neurostimulator lead into
brain, percutaneous approach), and 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach)
describe the insertions of the leads, depending on the approach used.
The combination of an ICD-10-PCS
[[Page 19819]]
code capturing the use of the generator and another ICD-10-PCS code
describing the specific approach used to insert the leads would capture
the performance of the entire procedure.
The requestor stated that the RNS(copyright)
neurostimulator received FDA pre-market approval on November 14, 2013,
and is the first and only FDA-approved device used to provide
responsive stimulation directly to the seizure onset zone in the brain.
The RNS(copyright) neurostimulator includes a cranially
implanted programmable neurostimulator connected to one or two depth
and/or subdural cortical strip leads that are surgically placed in or
on the brain at the seizure focus. The neurostimulator and leads are
typically implanted during a single acute inpatient hospital procedure
at a Comprehensive Epilepsy Center (CEC). The implanted neurostimulator
continuously monitors brain electrical activity and is programmed by a
physician to detect abnormal patterns of electrical activity that the
physician believes may lead to seizures (epileptiform activity). In
response to the detection of epileptiform activity, the device delivers
brief, mild electrical pulses (responsive stimulation) to one or two
epileptic foci. Detection and stimulation parameters are adjusted
noninvasively by the physician to optimize control of epileptic
seizures for each patient.
As the neurostimulator monitors brain activity, electrocorticograms
(ECoGs) recorded immediately before and after certain events are stored
for later review by the physician. The physician reviews the stored
recordings to see the detections and the effects of stimulation. The
physician can reprogram the neurostimulator at an in-person office
appointment to change detection and stimulation settings based on this
information, as well as review the patient's seizures.
The RNS(copyright) neurostimulator was approved for new
technology add-on payments for FY 2015 and FY 2016, and new technology
add-on payments were discontinued for FY 2017. The new technology add-
on payment application was discussed in the FY 2015 IPPS/LTCH PPS
proposed and final rules (79 FR 28051 through 28054 and 79 FR 49946
through 49950, respectively), the FY 2016 IPPS/LTCH PPS proposed and
final rules (80 FR 24427 through 24448 and 80 FR 49442 through 49443,
respectively), and the FY 2017 IPPS/LTCH PPS proposed and final rules
(81 FR 25036 through 25037 and 81 FR 56882 through 56884,
respectively).
The requestor suggested the following three options for MS-DRG
assignment updates for cases involving the RNS(copyright)
neurostimulator:
Create new MS-DRGs for cases involving the use of the
RNS(copyright) neurostimulator. The requestor suggested MS-
DRG XXX (Cranially Implanted Neurostimulators with MCC) and MS-DRG XXX
(Cranially Implanted Neurostimulators without MCC) as possible MS-DRG
titles. The requestor acknowledged that the number of cases assigned to
this MS-DRG would be low, but anticipated that the number of cases
would increase in the future.
Reassign cases involving the use of the
RNS(copyright) neurostimulator to MS-DRGs 020 and 021
(Intracranial Vascular Procedures with Principal Diagnosis of
Hemorrhage with MCC, with CC, respectively) and update the MS-DRG logic
and titles. The requestor asked CMS to reassign all cases involving the
use of the RNS(copyright) neurostimulator that currently map
to MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS
Principal Diagnosis with MCC or Chemo Implant) to MS-DRG 20, and change
the title of MS-DRG 20 to ``Intracranial Vascular Procedures with
Principal Diagnosis of Hemorrhage or Cranially Implanted
Neurostimulator with MCC.'' In addition, the requestor asked CMS to
reassign all cases involving the use of the RNS(copyright)
neurostimulator that currently map to MS-DRG 024 (Craniotomy with Major
Device Implant/Acute Complex CNS Principal Diagnosis without MCC) to
MS-DRG 021, and change the title of MS-DRG 021 to ``Intracranial
Vascular Procedures with Principal Diagnosis of Hemorrhage with CC or
Cranially Implanted Neurostimulator without MCC''. The requestor
believed that the majority of cases involving the use of the
RNS(copyright) neurostimulator that map to MS-DRG 024 do not
include a secondary diagnosis that is classified as a CC, and the
average cost of cases involving the use of the
RNS(copyright) neurostimulator without a CC is significantly
higher than the average cost of all cases in MS-DRG 022 (Intracranial
Vascular Procedures with Principal Diagnosis of Hemorrhage without CC/
MCC). Therefore, the requestor stated that it would not be adequate to
assign cases involving the use of the RNS(copyright)
neurostimulator without a CC to MS-DRG 022.
Reassign cases involving the use of the
RNS(copyright) neurostimulator to other higher paying MS-
DRGs that would provide adequate payment.
The requestor stated that it had analyzed data from two sources,
which demonstrated that the average cost of cases involving the use of
the RNS(copyright) neurostimulator was higher than the
average cost of all cases in MS-DRGs 023 and 024 (the current MS-DRGs
for cases involving the use of the RNS(copyright)
neurostimulator). The requestor indicated that the data used for its
analysis was obtained from hospitals performing the procedure, as well
as from the FY 2015 MedPAR file.
The requestor also asked that CMS examine the cases representing
cranially implanted neurostimulators and leads that were inserted for
the treatment of epilepsy. The requestor pointed out that
neurostimulators also are used in the treatment of movement disorders
such as Parkinson's disease, essential tremor, or dystonia. The
requestor asked that CMS identify those cases with a principal
diagnosis of epilepsy, and identified the following ICD-10-CM codes
that it believed were representative of potential epilepsy cases.
------------------------------------------------------------------------
ICD-10-CM code ICD-10-CM code title
------------------------------------------------------------------------
G40.001................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset, not
intractable, with status epilepticus.
G40.009................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset, not
intractable, without status epilepticus.
G40.011................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset,
intractable, with status epilepticus.
G40.019................... Localization-related (focal) (partial)
idiopathic epilepsy and epileptic syndromes
with seizures of localized onset,
intractable, without status epilepticus.
G40.101................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with simple partial seizures, not
intractable, with status epilepticus.
G40.119................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with simple partial seizures,
intractable, without status epilepticus.
[[Page 19820]]
G40.201................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
not intractable, with status epilepticus.
G40.209................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
not intractable, without status
epilepticus.
G40.211................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
intractable, with status epilepticus.
G40.219................... Localization-related (focal) (partial)
symptomatic epilepsy and epileptic
syndromes with complex partial seizures,
intractable, without status epilepticus.
G40.301................... Generalized idiopathic epilepsy and
epileptic syndromes, not intractable, with
status epilepticus.
G40.309................... Generalized idiopathic epilepsy and
epileptic syndromes, not intractable,
without status epilepticus.
G40.311................... Generalized idiopathic epilepsy and
epileptic syndromes, intractable, with
status epilepticus.
G40.319................... Generalized idiopathic epilepsy and
epileptic syndromes, intractable, without
status epilepticus.
G40.401................... Other generalized epilepsy and epileptic
syndromes, not intractable, with status
epilepticus.
G40.409................... Other generalized epilepsy and epileptic
syndromes, not intractable, without status
epilepticus.
G40.411................... Other generalized epilepsy and epileptic
syndromes, intractable, with status
epilepticus.
G40.419................... Other generalized epilepsy and epileptic
syndromes, intractable, without status
epilepticus.
G40.501................... Epileptic seizures related to external
causes, not intractable, with status
epilepticus.
G40.509................... Epileptic seizures related to external
causes, not intractable, without status
epilepticus.
G40.801................... Other epilepsy, not intractable, with status
epilepticus.
G40.802................... Other epilepsy, not intractable, without
status epilepticus.
G40.803................... Other epilepsy, intractable, with status
epilepticus.
G40.804................... Other epilepsy, intractable, without status
epilepticus.
G40.811................... Lennox-Gastaut syndrome, not intractable,
with status epilepticus.
G40.812................... Lennox-Gastaut syndrome, not intractable,
without status epilepticus.
G40.813................... Lennox-Gastaut syndrome, intractable, with
status epilepticus.
G40.814................... Lennox-Gastaut syndrome, intractable,
without status epilepticus.
G40.821................... Epileptic spasms, not intractable, with
status epilepticus.
G40.822................... Epileptic spasms, not intractable, without
status epilepticus.
G40.823................... Epileptic spasms, intractable, with status
epilepticus.
G40.824................... Epileptic spasms, intractable, without
status epilepticus.
G40.89.................... Other seizures.
G40.901................... Epilepsy, unspecified, not intractable, with
status epilepticus.
G40.909................... Epilepsy, unspecified, not intractable,
without status epilepticus.
G40.911................... Epilepsy, unspecified, intractable, with
status epilepticus.
G40.919................... Epilepsy, unspecified, intractable, without
status epilepticus.
------------------------------------------------------------------------
MS-DRGs 023 and 024 contain a number of cases representing
neurostimulator generator and lead code combinations that are captured
under a list referred to as ``Major Device Implant.'' The
neurostimulator generators on this list are inserted into the skull, as
well as into the subcutaneous areas of the chest, back, or abdomen. The
leads are all inserted into the brain. The RNS(copyright)
neurostimulator generators are inserted into the skull and the leads
are inserted into the brain. The following three ICD-10-PCS code
combinations capture the use of the RNS(copyright)
neurostimulator and leads that would determine an assignment of a case
to MS-DRGs 023 and 024, as shown in the ``Major Device Implant'' list:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
We examined claims data from the December 2016 update of the FY
2016 MedPAR file for all cases representing the use of a
neurostimulator in MS-DRGs 023 and 024 listed under the ``Major Device
Implant'' list. As requested, we also examined the cases represented by
the three neurostimulator code combinations, which capture the use of
the RNS(copyright) neurostimulator that are a subset of the
cases listed on the ``Major Device Implant'' list using the code
combinations listed above, and that had a principal diagnosis of
epilepsy from the list supplied by the requestor. The following tables
show our findings for those cases in MS-DRGs 023 and 024 as well as
findings for cases in MS-DRGs 020 and 021.
MS-DRGs 023 and 024
[Neurostimulator Cases]
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases........................................... 6,723 10.9 $39,014
MS-DRG 023--Cases with neurostimulators (Major Device Implant 21 6.7 48,821
list cases)....................................................
MS-DRG 023--Cases with neurostimulator generators inserted into 7 8.0 63,365
skull (includes cases involving the use of the RNS(copyright)
neurostimulator) and cases with a principal diagnosis of
epilepsy.......................................................
MS-DRG 024--All cases........................................... 2,275 5.5 27,574
[[Page 19821]]
MS-DRG 024--Cases with neurostimulators (Major Device Implant 394 2.1 31,669
list cases)....................................................
MS-DRG 024--Cases with neurostimulator generators inserted into 54 4.3 51,041
skull (includes cases involving the use of the RNS(copyright)
neurostimulator) and cases with a principal diagnosis of
epilepsy.......................................................
----------------------------------------------------------------------------------------------------------------
Cases in MS-DRGs 020 and 021
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 020--All cases........................................... 1,372 16.7 $72,926
MS-DRG 021--All cases........................................... 336 13.5 54,385
----------------------------------------------------------------------------------------------------------------
As shown by the table above, for MS-DRG 023, we identified a total
of 6,723 cases, with an average length of stay of 10.9 days and average
costs of $39,014. Of the 6,723 cases in MS-DRG 023, there were 21 cases
representing the implantation of any type of neurostimulator generator
with an average length of stay of 6.7 days, and average costs of
$48,821. Of the 21 neurostimulator generator cases, there were 7 cases
with the neurostimulator generators inserted into skull (including
cases involving the use of the RNS(copyright)
neurostimulator) and a principal diagnosis of epilepsy with an average
length of stay of 8.0 days and average costs of $63,365. For MS-DRG
024, we identified a total of 2,275 cases, with an average length of
stay of 5.5 days and average costs of $27,574. Of the 2,275 cases in
MS-DRG 024, there were 394 cases representing the implantation of any
type of neurostimulator generator with an average length of stay of 2.1
days and average costs of $31,669. Of the 394 neurostimulator generator
cases, there were 54 cases with the neurostimulator generators inserted
into skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy with an average length of stay of 4.3 days and average costs
of $51,041.
There were only 61 cases involving the use of the
RNS(copyright) neurostimulator with a principal diagnosis of
epilepsy in MS-DRGs 023 and 024 (7 and 54, respectively). Our clinical
advisors reviewed this issue, and agreed that this number of cases is
too small on which to base a rationale for creating a new MS-DRG.
Basing a new MS-DRG on such a small number of cases (61) could lead to
distortion in the relative payment weights for the MS-DRG because
several expensive cases could impact the overall relative payment
weight. Having larger clinical cohesive groups within an MS-DRG
provides greater stability for annual updates to the relative payment
weights.
We also examined the possibility of reassigning cases involving the
use of the RNS(copyright) neurostimulator to MS-DRGs 020 and
021. As the table above shows, for MS-DRG 020, there were a total of
1,372 cases with an average length of stay of 16.7 days and average
costs of $72,926. For MS-DRG 021, there were a total of 336 cases with
an average length of stay of 13.5 days and average costs of $54,385.
The cases in MS-DRG 023 with neurostimulator generators inserted into
skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy have average costs that are $9,561 lower than that for all
cases in MS-DRG 020 ($63,365 compared to $72,926), and the average
length of stay is 8.7 days shorter (8.0 days compared to 16.7 days). We
do not believe these data support reassigning the cases in MS-DRG 023
with neurostimulator generators inserted into the skull (including
cases involving the use of the RNS(copyright)
neurostimulator) and a principal diagnosis of epilepsy to MS-DRG 020.
While the cases in MS-DRG 024 with neurostimulator generators inserted
into the skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy have average costs that are similar to the average costs of
cases in MS-DRG 021 ($51,041 compared to $54,385), they have an average
length of stay that is 9.2 days shorter (4.3 days compared to 13.5
days). Our clinical advisors reviewed the clinical issues and the
claims data, and did not support reassigning the cases with
neurostimulator generators inserted into skull (including cases
involving the use of the RNS(copyright) neurostimulator) and
a principal diagnosis of epilepsy from MS-DRGs 023 and 024 to MS-DRGs
020 and 021. Our clinical advisors pointed out that the cases in MS-
DRGs 020 and 021 have a principal diagnosis of a hemorrhage. The
RNS(copyright) neurostimulator generators are not used to
treat patients with diagnosis of a hemorrhage. Therefore, our clinical
advisors stated that it was inappropriate to reassign cases
representing a principal diagnosis of epilepsy to an MS-DRG that
contains cases that represent the treatment of intracranial hemorrhage.
They also stated that the differences in average length of stay and
average costs support this recommendation.
We then explored alternative MS-DRG assignments, as was requested.
We noted that the 7 cases with the neurostimulator generators inserted
into the skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy had an average length of stay of 8.0 days and average costs of
$63,365, as compared to the 6,723 cases in MS-DRG 023 that had an
average length of stay of 10.9 days and average costs of $39,014. While
these neurostimulator cases had average costs that were $24,351 higher
than the average costs of all cases in MS-DRG 023, there were only a
total of 7 cases. There may have been other factors contributing to the
higher costs. We noted that the 54 cases with the neurostimulator
generators inserted into skull (including cases involving the use of
the RNS(copyright) neurostimulator) and a principal
diagnosis of epilepsy in MS-DRG 024 had average costs of $51,041 and an
average length of stay of 4.3 days, compared to average costs of
$27,574 and average length of stay of 5.5 days for all cases in MS-DRG
024. By reassigning all cases with the neurostimulator generators
inserted into the skull (including cases involving the use of the
RNS(copyright) neurostimulator) and a principal diagnosis of
epilepsy to MS DRG 023, even if there is not a MCC
[[Page 19822]]
present, the cases would receive higher payment. The average costs of
MS-DRG 023 were $39,014, compared to the average costs of $51,041 for
the cases with the neurostimulator generators inserted into skull
(including cases involving the use of the RNS(copyright)
neurostimulator) and a principal diagnosis of epilepsy in MS-DRG 024.
Our clinical advisors reviewed the clinical issues and the claims data,
and supported the recommendation to reassign the cases with the
neurostimulator generators inserted into skull (including cases
involving the use of the RNS(copyright) neurostimulator) and
a principal diagnosis of epilepsy to MS-DRG 023, even if there is not a
MCC reported. Therefore, we are proposing to reassign all cases with a
principal diagnosis of epilepsy from the epilepsy diagnosis list
provided earlier, and one of the following ICD-10-PCS code combinations
capturing cases with the neurostimulator generators inserted into the
skull (including cases involving the use of the
RNS(copyright) neurostimulator), to MS-DRG 023, even if
there is no MCC reported:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
We also are proposing to change the title of MS-DRG 023 from
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant'' to
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant
or Epilepsy with Neurostimulator'' to reflect the proposed
modifications to MS-DRG assignments.
We are inviting public comments on our proposals.
c. Precerebral Occlusion or Transient Ischemic Attack With Thrombolytic
We received a request to add the ICD-10-CM diagnosis codes
currently assigned to MS-DRGs 067 and 068 (Nonspecific CVA and
Precerebral Occlusion without Infarction with MCC and without MCC,
respectively) and the ICD-10-CM diagnosis codes currently assigned to
MS-DRG 069 (Transient Ischemia) to the GROUPER logic for MS-DRGs 061,
062, and 063 (Acute Ischemic Stroke with Use of Thrombolytic Agent with
MCC, with CC, and without CC/MCC, respectively) when those conditions
are sequenced as the principal diagnosis and reported with an ICD-10-
PCS procedure code describing use of a thrombolytic agent (for example,
tPA).
The ICD-10-CM diagnosis codes displayed in the table below identify
the conditions that are assigned to MS-DRGs 067 and 068 when reported
as a principal diagnosis.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
I65.01.................... Occlusion and stenosis of right vertebral
artery.
I65.02.................... Occlusion and stenosis of left vertebral
artery.
I65.03.................... Occlusion and stenosis of bilateral
vertebral arteries.
I65.09.................... Occlusion and stenosis of unspecified
vertebral artery.
I65.1..................... Occlusion and stenosis of basilar artery.
I65.21.................... Occlusion and stenosis of right carotid
artery.
I65.22.................... Occlusion and stenosis of left carotid
artery.
I65.23.................... Occlusion and stenosis of bilateral carotid
arteries.
I65.29.................... Occlusion and stenosis of unspecified
carotid artery.
I65.8..................... Occlusion and stenosis of other precerebral
arteries.
I65.9..................... Occlusion and stenosis of unspecified
precerebral artery.
I66.01.................... Occlusion and stenosis of right middle
cerebral artery.
I66.02.................... Occlusion and stenosis of left middle
cerebral artery.
I66.03.................... Occlusion and stenosis of bilateral middle
cerebral arteries.
I66.09.................... Occlusion and stenosis of unspecified middle
cerebral artery.
I66.11.................... Occlusion and stenosis of right anterior
cerebral artery.
I66.12.................... Occlusion and stenosis of left anterior
cerebral artery.
I66.13.................... Occlusion and stenosis of bilateral anterior
cerebral arteries.
I66.19.................... Occlusion and stenosis of unspecified
anterior cerebral artery.
I66.21.................... Occlusion and stenosis of right posterior
cerebral artery.
I66.22.................... Occlusion and stenosis of left posterior
cerebral artery.
I66.23.................... Occlusion and stenosis of bilateral
posterior cerebral arteries.
I66.29.................... Occlusion and stenosis of unspecified
posterior cerebral artery.
I66.3..................... Occlusion and stenosis of cerebellar
arteries.
I66.8..................... Occlusion and stenosis of other cerebral
arteries.
I66.9..................... Occlusion and stenosis of unspecified
cerebral artery.
------------------------------------------------------------------------
The ICD-10-CM diagnosis codes displayed in the table below identify
the conditions that are assigned to MS-DRG 069 when reported as a
principal diagnosis.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
G45.0..................... Vertebro-basilar artery syndrome.
G45.1..................... Carotid artery syndrome (hemispheric).
G45.2..................... Multiple and bilateral precerebral artery
syndromes.
G45.8..................... Other transient cerebral ischemic attacks
and related syndromes.
G45.9..................... Transient cerebral ischemic attack,
unspecified.
[[Page 19823]]
G46.0..................... Middle cerebral artery syndrome.
G46.1..................... Anterior cerebral artery syndrome.
G46.2..................... Posterior cerebral artery syndrome.
I67.81.................... Acute cerebrovascular insufficiency.
I67.82.................... Cerebral ischemia.
I67.841................... Reversible cerebrovascular vasoconstriction
syndrome.
I67.848................... Other cerebrovascular vasospasm and
vasoconstriction.
I67.89.................... Other cerebrovascular disease.
------------------------------------------------------------------------
The ICD-10-PCS procedure codes displayed in the table below
describe use of a thrombolytic agent. These procedure codes are
designated as non-O.R. procedure codes affecting the MS-DRG assignment
for MS-DRGs 061, 062, and 063.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
3E03017................... Introduction of other thrombolytic into
peripheral vein, open approach.
3E03317................... Introduction of other thrombolytic into
peripheral vein, percutaneous approach.
3E04017................... Introduction of other thrombolytic into
central vein, open approach.
3E04317................... Introduction of other thrombolytic into
central vein, percutaneous approach.
3E05017................... Introduction of other thrombolytic into
peripheral artery, open approach.
3E05317................... Introduction of other thrombolytic into
peripheral artery, percutaneous approach.
3E06017................... Introduction of other thrombolytic into
central artery, open approach.
3E06317................... Introduction of other thrombolytic into
central artery, percutaneous approach.
3E08017................... Introduction of other thrombolytic into
heart, open approach.
3E08317................... Introduction of other thrombolytic into
heart, percutaneous approach.
------------------------------------------------------------------------
At the onset of stroke symptoms, tPA must be given within 3 hours
(or up to 4.5 hours for certain eligible patients) in an attempt to
dissolve a clot and improve blood flow to the specific area affected in
the brain. If, upon receiving the tPA, the stroke symptoms completely
resolve within 24 hours and imaging studies (if performed) are
negative, the patient has suffered what is clinically defined as a
transient ischemic attack, not a stroke. According to the requestor,
the current MS-DRG assignments do not account for this subset of
patients who were successfully treated with tPA to prevent a stroke.
In addition, the requestor expressed concerns regarding
documentation and quality of the data. For example, the requestor noted
that the terms ``stroke-in-evolution'' and ``aborted stroke'' may be
documented as a ``workaround'' for a patient exhibiting symptoms of a
stroke who receives tPA and, regardless of the outcome, would result in
assignment to MS-DRG 061, 062, or 063. Therefore, in cases where the
patient's stroke symptoms completely resolved upon receiving tPA and
the patient clinically suffered a precerebral occlusion or transient
ischemia, this documentation practice is incorrectly labeling these
patients as having had a stroke and ultimately leading to inaccurate
data.
We analyzed claims data from the December 2016 update of the FY
2016 MedPAR file for MS-DRGs 061, 062, and 063. Our findings are shown
in the tables below.
MS-DRGs for Acute Ischemic Stroke With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases........................................... 4,528 6.4 $20,270
MS-DRG 062--All cases........................................... 8,600 4.2 14,124
MS-DRG 063--All cases........................................... 1,859 3.0 11,898
----------------------------------------------------------------------------------------------------------------
Our analysis also consisted of claims data for MS-DRGs 067 and 068
when reported with a procedure code describing the use of tPA. As shown
in the table below, the total number of cases reported in MS-DRG 067
was 811, with an average length of stay of 4.8 days and average costs
of $10,248. There were 9 cases in MS-DRG 067 with a precerebral
occlusion receiving tPA, with an average length of stay of 5.2 days and
average costs of $20,156. The total number of cases reported in MS-DRG
068 was 3,809, with an average length of stay of 2.8 days and average
costs of $6,555. There were 33 cases in MS-DRG 068 with a precerebral
occlusion receiving tPA, with an average length of stay of 4.3 days and
average costs of $13,814.
MS-DRGs for Precerebral Occlusion With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 067--All cases........................................... 811 4.8 $10,248
MS-DRG 067--Cases with tPA...................................... 9 5.2 20,156
MS-DRG 068--All cases........................................... 3,809 2.8 6,555
[[Page 19824]]
MS-DRG 068--Cases with tPA...................................... 33 4.3 13,814
----------------------------------------------------------------------------------------------------------------
We recognize that while the volume of cases for patients with a
diagnosis of precerebral occlusion receiving tPA in MS-DRGs 067 and 068
is relatively low, the average length of stay is longer, and the
average costs for this subset of patients is approximately twice the
amount of the average costs in comparison to all cases in MS-DRGs 067
and 068.
We then analyzed claims data for cases in MS-DRG 069 when reported
with a procedure code describing the use of tPA. As shown in the table
below, the total number of cases reported in MS-DRG 069 was 50,633,
with an average length of stay of 2.5 days and average costs of $5,518.
There were 554 cases of transient ischemia receiving tPA, with an
average length of stay of 3.2 days and average costs of $12,481.
MS-DRG for Transient Ischemia With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 069--All cases........................................... 50,633 2.5 $5,518
MS-DRG 069--Cases with tPA...................................... 554 3.2 12,481
----------------------------------------------------------------------------------------------------------------
Similar to the findings for MS-DRGs 067 and 068, the number of
cases for transient ischemia receiving tPA in MS-DRG 069 was relatively
low in comparison to all the cases in the MS-DRG, with a longer average
length of stay and approximately twice the amount of average costs in
comparison to all cases in MS-DRG 069.
The results of analysis of the data and the advice of our clinical
advisors support adding the ICD-10-CM diagnosis codes in MS-DRGs 067,
068, and 069 to the list of principal diagnoses in MS-DRGs 061, 062,
and 063 to better account for this subset of patients who were
successfully treated with tPA to prevent a stroke, to identify the
increasing use of thrombolytics at the onset of symptoms of a stroke,
to further encourage appropriate physician documentation for a
precerebral occlusion or transient ischemic attack when patients are
treated with tPA, and to reflect more appropriate payment for the
resources involved in evaluating and treating these patients. We
believe this approach will improve accuracy of the data and assist in
addressing the concern that facilities may be reporting incorrect
diagnoses for this subset of patients.
Therefore, for FY 2018, we are proposing to add the ICD-10-CM
diagnosis codes listed earlier in this section that are currently
assigned to MS-DRGs 067 and 068 and the ICD-10-CM diagnosis codes
currently assigned to MS-DRG 069 to the GROUPER logic for MS-DRGs 061,
062, and 063 when those conditions are sequenced as the principal
diagnosis and reported with an ICD-10-PCS procedure code describing use
of a thrombolytic agent (for example, tPA). We are inviting public
comments on our proposal.
We also are proposing to retitle MS-DRGs 061, 062, and 063 as
``Ischemic Stroke, Precerebral Occlusion or Transient Ischemia with
Thrombolytic Agent with MCC, with CC and without CC/MCC'',
respectively, and to retitle MS-DRG 069 as ``Transient Ischemia without
Thrombolytic''. We are inviting public comments on our proposals.
3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye Drops
(Tetrahydrozoline)
We received a request to reassign the following ICD-10-CM diagnosis
codes that capture swallowing eye drops from MS-DRGs 124 and 125 (Other
Disorders of the Eye with and without MCC, respectively) to MS-DRGs 917
and 918 (Poisoning and Toxic Effects of Drugs with and without MCC,
respectively). The requestor described a case where a patient was
treated following swallowing eye drops, specifically Tetrahydrozoline,
which the provider considers to be a poisoning, not a disorder of the
eye.
T49.5X1A (Poisoning by ophthalmological drugs and
preparations, accidental (unintentional), initial encounter);
T49.5X2A (Poisoning by ophthalmological drugs and
preparations, intentional self-harm, initial encounter);
T49.5X3A (Poisoning by ophthalmological drugs and
preparations, assault, initial encounter); and
T49.5X4A (Poisoning by ophthalmological drugs and
preparations, undetermined, initial encounter).
We agree with the requestor that the four diagnosis codes describe
a poisoning, not a disorder of the eye. We examined claims data for
cases in MS-DRGs 124 and 125 from the December 2016 update of the FY
2016 MedPAR file. Our findings are shown in the table below.
MS-DRG 124 and 125 Cases
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 124--All cases........................................... 874 4.8 $8,826
MS-DRG 124--Cases reporting poisoning by ophthalmological drugs 1 2.0 3,007
and preparations code..........................................
MS-DRG 125--All cases........................................... 3,205 3.3 5,565
MS-DRG 125--Cases reporting poisoning by ophthalmological drugs 1 2.0 1,446
and preparations code..........................................
----------------------------------------------------------------------------------------------------------------
[[Page 19825]]
As shown in the table above, there were only 2 cases of poisoning
by ophthalmological drugs and preparations--1 case in MS-DRG 124 with
an average length of stay of 2 days and average costs of $3,007 and 1
case in MS-DRG 125 with an average length of stay of 2 days and average
costs of $1,446. The case of poisoning by ophthalmological drugs and
preparations in MS-DRG 124 had a shorter average length of stay than
the average length of stay for all cases in MS-DRG 124 (2.0 days
compared to 4.8 days) and lower average costs than the average costs
for all cases in MS-DRG 124 ($3,007 compared to $8,826). The case of
poisoning by ophthalmological drugs and preparations in MS-DRG 125 also
had a shorter average length of stay than the average length of stay
for all cases in MS-DRG 125 (2.0 days compared to 3.3 days) and lower
average costs than the average costs for all cases in MS-DRG 125
($1,446 compared to $5,565).
We also examined claims data on cases reported in MS-DRGs 917 and
918 from the December 2016 update of the FY 2016 MedPAR file. Our
findings are shown in the table below.
MS-DRGs 917 and 918 Cases
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 917--All cases........................................... 32,381 4.8 $9,882
MS-DRG 918--All cases........................................... 24,061 3.0 5,326
----------------------------------------------------------------------------------------------------------------
As shown in the table above, the 2 cases of poisoning by
ophthalmological drugs and preparations also had shorter average
lengths of stay than the average length of stay for all cases in MS-
DRGs 917 and 918 (2.0 days compared to 4.8 days in MS-DRG 917 and 2.0
days compared to 3.0 days in MS-DRG 918). The average costs also were
lower for the 2 cases of poisoning by ophthalmological drugs and
preparations than the average costs for all cases in MS-DRGs 917 and
918 ($3,007 compared to $9,882 for all cases in MS-DRG 917 and $1,446
compared to $5,326 for all cases in MS-DRG 918). Therefore, cases with
this type of poisoning had lower average lengths of stay and lower
average costs than all other cases assigned to MS-DRGs 124 and 125 and
cases in MS-DRGs 917 and 918 where poisonings are assigned.
Because the codes clearly capture a poisoning and not an eye
disorder, we believe that these codes are more appropriately assigned
to MS-DRGs 917 and 918 where other poisonings are assigned. Our
clinical advisors also reviewed this issue and agreed that the codes
should be moved from MS-DRGs 124 and 125 to MS-DRGs 917 and 918 because
they clearly capture a poisoning and not a disorder of the eye. Because
MS-DRGs 917 and 918 contain cases with multiple types of poisonings, it
is expected that some types of poisoning cases will have longer lengths
of stay and greater average costs than other types of poisoning cases.
Therefore, we are proposing to reassign the following ICD-10-CM
diagnosis codes from MS-DRGs 124 and 125 to MS-DRGs 917 and 918 for FY
2018: T49.5X1A; T49.5X2A; T49.5X3A; and T49.5X4A.
We are inviting public comments on our proposal.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Cardiovascular Procedures and Insertion of a
Radioactive Element
Currently, under ICD-10-PCS, the logic for MS-DRG 246 (Percutaneous
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+
Vessels or Stents), MS-DRG 247 (Percutaneous Cardiovascular Procedures
with Drug-Eluting Stent without MCC), MS-DRG 248 (Percutaneous
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+
Vessels or Stents), and MS-DRG 249 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent without MCC) includes six
procedure codes that describe the insertion of a radioactive element.
When any of these six procedure codes are reported without the
reporting of a percutaneous cardiovascular procedure code, they are
assigned to MS-DRG 264 (Other Circulatory System O.R. Procedures). The
six specific procedure codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0WHC01Z................... Insertion of radioactive element into
mediastinum, open approach.
0WHC31Z................... Insertion of radioactive element into
mediastinum, percutaneous approach.
0WHC41Z................... Insertion of radioactive element into
mediastinum, percutaneous endoscopic
approach.
0WHD01Z................... Insertion of radioactive element into
pericardial cavity, open approach.
0WHD31Z................... Insertion of radioactive element into
pericardial cavity, percutaneous approach.
0WHD41Z................... Insertion of radioactive element into
pericardial cavity, percutaneous endoscopic
approach.
------------------------------------------------------------------------
Unlike procedures involving the insertion of stents, none of the
procedures described by the procedure codes listed above are performed
in conjunction with a percutaneous cardiovascular procedure, and two of
the six procedures described by these procedure codes (ICD-10-PCS codes
0WHC01Z and 0WHD01Z) are not performed using a percutaneous approach,
but rather describe an open approach to performing the specific
procedure. Our clinical advisors agreed that these procedures should
not be used to classify cases within MS-DRGs 246 through 249 because
they are not performed in conjunction with a percutaneous
cardiovascular procedure. Furthermore, the indications for the
insertion of a radioactive element typically involve a diagnosis of
cancer, whereas the indications for the insertion of a coronary artery
stent typically involve a diagnosis of coronary artery disease.
We conducted an analysis for the six procedures described by these
procedure codes by reviewing the claims data for MS-DRGs 246 through
249 from the December 2016 update of
[[Page 19826]]
the FY 2016 MedPAR file. We did not find any cases where any one of the
six procedure codes listed above was reported. As noted earlier, when
any of these six procedure codes are reported without the reporting of
a percutaneous cardiovascular procedure code, the case is assigned to
MS-DRG 264. Therefore, our clinical advisors also agreed that it would
be more appropriate to remove these six procedure codes from MS-DRGs
246 through 249, but maintain their current assignment in MS-DRG 264.
Based on our analysis and the advice from our clinical advisors, for FY
2018, we are proposing to remove ICD-10-PCS procedure codes 0WHC01Z,
0WHC31Z, 0WHC41Z, 0WHD01Z, 0WHD31Z, and 0WHD41Z from MS-DRGs 246
through 249, but maintain their current assignment in MS-DRG 264.
We are inviting public comments on our proposal to remove the six
procedure codes listed above from MS-DRGs 246 through 249. We also are
inviting public comments on our proposal to maintain their current
assignment in MS-DRG 264.
b. Proposed Modification of the Titles for MS-DRG 246 (Percutaneous
Cardiovascular Procedures With Drug-Eluting Stent With MCC or 4+
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular
Procedures With Non-Drug-Eluting Stent with MCC or 4+ Vessels or
Stents)
We are proposing to revise the titles for MS-DRGs 246 (Percutaneous
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent with MCC or 4+ Vessels or
Stents) to better reflect the ICD-10-PCS terminology of ``arteries''
versus ``vessels'' as used in the procedure code titles within the
classification. Specifically, we are proposing to revise the title of
MS-DRG 246 to ``Percutaneous Cardiovascular Procedures with Drug-
Eluting Stent with MCC or 4+ Arteries or Stents''. We are proposing to
revise the title of MS-DRG 248 to ``Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent with MCC or 4+ Arteries or
Stents''. We are inviting public comments on our proposals.
c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial
Appendage Closure (LAAC)
We received a request to create new MS-DRGs for cases involving
transcatheter aortic valve replacement (TAVR) and left atrial appendage
closure (LAAC) procedures when performed in combination in the same
operative episode. The requestor stated that there are both clinical
and financial advantages for the patient when performing concomitant
procedures. For example, the requestor indicated that the clinical
advantages for the patient may include single exposure to anesthesia
and a reduction in overall procedure time, while the financial
advantages may include lower cost-sharing. The requestor further
believed that a single hospitalization for these concomitant procedures
could be cost-effective for various providers and payers.
TAVR is indicated and approved as a treatment option for patients
diagnosed with symptomatic aortic stenosis who are not surgical
candidates for traditional open surgical techniques. Cases involving
TAVR procedures are assigned to MS-DRGs 266 and 267 (Endovascular
Cardiac Valve Replacement with MCC and without MCC, respectively), and
are identified by the following ICD-10-PCS procedure codes shown in the
table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
02RF37Z................... Replacement of aortic valve with autologous
tissue substitute, percutaneous approach.
02RF38Z................... Replacement of aortic valve with zooplastic
tissue, percutaneous approach.
02RF3JZ................... Replacement of aortic valve with synthetic
substitute, percutaneous approach.
02RF3KZ................... Replacement of aortic valve with
nonautologous tissue substitute,
percutaneous approach.
02RF37H................... Replacement of aortic valve with autologous
tissue substitute, transapical,
percutaneous approach.
02RF38H................... Replacement of aortic valve with zooplastic
tissue, transapical, percutaneous approach.
02RF3JH................... Replacement of aortic valve with synthetic
substitute, transapical, percutaneous
approach.
02RF3KH................... Replacement of aortic valve with
nonautologous tissue substitute,
transapical, percutaneous approach.
------------------------------------------------------------------------
LAAC is indicated and approved as a treatment option for patients
diagnosed with atrial fibrillation. Cases involving LAAC procedures are
assigned to MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures
with MCC and without MCC, respectively), and are identified by ICD-10-
PCS procedure code 02L73DK (Occlusion of left atrial appendage with
intraluminal device, percutaneous approach).
The requestor suggested that the structure of the possible new MS-
DRGs for TAVR procedures performed in combination with LAAC procedures
could be modeled similar to the structure of MS-DRGs 266 and 267. While
contemplating creation of the new MS-DRGs, the requestor asked CMS to
also consider subdividing the possible new MS-DRGs into two severity
levels and title them as follows:
Suggested MS-DRG 26x (Endovascular Cardiac Valve
Replacement with LAAC with MCC); and
Suggested MS-DRG 26x (Endovascular Cardiac Valve
Replacement with LAAC without MCC).
We analyzed claims data from the December 2016 update of the FY
2016 MedPAR file for MS-DRGs 266 and 267 and identified the cases
reporting TAVR procedures with and without an LAAC procedure. As shown
in the table below, the data findings show that the total number of
cases reported in MS-DRG 266 was 9,949, with an average length of stay
of 7.2 days and average costs of $56,762. There were 9,872 cases
involving a TAVR procedure, with an average length of stay of 7.2 days
and average costs of $56,628. There was only one case identified in MS-
DRG 266 where both a TAVR and an LAAC procedure were reported. This
case had an average length of stay of 21.0 days and average costs of
$60,226. For MS-DRG 267, the total number of cases found was 13,290,
with an average length of stay of 3.5 days and average costs of
$45,297. There were 13,245 cases involving a TAVR procedure, with an
average length of stay of 3.5 days and average costs of $45,302. There
were no cases identified in MS-DRG 267 where both a TAVR and an LAAC
procedure were reported.
[[Page 19827]]
MS-DRGs for TAVR Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 266--All cases........................................... 9,949 7.2 $56,762
MS-DRG 266--Cases with TAVR..................................... 9,872 7.2 56,628
MS-DRG 266--Cases TAVR and LAAC................................. 1 21.0 60,226
MS-DRG 267--All cases........................................... 13,290 3.5 45,297
MS-DRG 267--Cases with TAVR..................................... 13,245 3.5 45,302
MS-DRG 267--Cases TAVR and LAAC................................. 0 0 0
----------------------------------------------------------------------------------------------------------------
We then analyzed claims data in MS-DRGs 273 and 274 for cases
reporting an LAAC procedure. As shown in the table below, the data
findings show that the total number of cases reported in MS-DRG 273 was
6,541, with an average length of stay of 7.7 days and average costs of
$26,042. There were 179 cases involving an LAAC procedure, with an
average length of stay of 3.6 days and average costs of $30,131. For
MS-DRG 274, the total number of cases found was 14,441, with an average
length of stay of 3.0 days and average costs of $20,267. There were
2,428 cases involving an LAAC procedure, with an average length of stay
of 1.2 days and average costs of $26,213.
MS-DRGs for LAAC Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 273--All cases........................................... 6,541 7.7 $26,042
MS-DRG 273--Cases with LAAC..................................... 179 3.6 30,131
MS-DRG 274--All cases........................................... 14,441 3.0 20,267
MS-DRG 274--Cases with LAAC..................................... 2,428 1.2 26,213
----------------------------------------------------------------------------------------------------------------
The analysis of claims data for MS-DRGs 266, 267, 273, and 274 and
input from our clinical advisors do not support creating new MS-DRGs
for TAVR and LAAC procedures when performed in combination in the same
operative episode. We found only one case in MS-DRG 266 where both a
TAVR and an LAAC procedure were reported and the claims data for cases
reporting an LAAC procedure in MS-DRGs 273 and 274 support their
current assignment. Our clinical advisors agreed the current MS-DRG
assignments are appropriate for each respective procedure.
Therefore, we are not proposing to create new MS-DRGs for cases
involving TAVR and LAAC procedures when performed in combination in the
same operative episode. We are inviting public comments on our proposal
to maintain the current MS-DRG structure for TAVR procedures in MS-DRGs
266 and 267, as well as the current MS-DRG structure for LAAC
procedures in MS-DRGs 273 and 274.
d. Percutaneous Mitral Valve Replacement Procedures
We received a request to reassign four ICD-10-PCS procedure codes
that describe percutaneous mitral valve replacement procedures from MS-
DRGs 216 through 221 (Cardiac Valve and Other Major Cardiothoracic
Procedures with and without Cardiac Catheterization with MCC, with CC
and without CC/MCC, respectively) to MS-DRGs 266 and 267 (Endovascular
Cardiac Valve Replacement with MCC and without MCC, respectively). The
requestor indicated that there are inconsistencies in the current
GROUPER logic for endovascular cardiac valve replacement procedures.
Specifically, the requestor stated that the procedure codes that
describe both the percutaneous approach and the transapical,
percutaneous approach for the aortic and pulmonary valves are included
in MS-DRGs 266 and 267. However, for the mitral valve, the GROUPER
logic only includes the procedure codes that describe the transapical,
percutaneous approach.
The requestor also stated that when MS-DRGs 266 and 267 were
created, the intent was to include percutaneous replacement procedures
for all cardiac valves. Therefore, the requestor recommended that CMS
reassign the four ICD-10-PCS procedure codes shown in the table below
that describe mitral valve replacement procedures, performed with the
percutaneous approach from MS-DRGs 216 through 221 to MS-DRGs 266 and
267 to more appropriately group these procedures within the MS-DRG
structure.
------------------------------------------------------------------------
ICD-10-PCS procedure code Code description
------------------------------------------------------------------------
02RG37Z................... Replacement of mitral valve with autologous
tissue substitute, percutaneous approach.
02RG38Z................... Replacement of mitral valve with zooplastic
tissue, percutaneous approach.
02RG3JZ................... Replacement of mitral valve with synthetic
substitute, percutaneous approach.
02RG3KZ................... Replacement of mitral valve with
nonautologous tissue substitute,
percutaneous approach.
------------------------------------------------------------------------
We agree with the requestor regarding the intent of the creation of
MS-DRGs 266 and 267. As discussed in the FY 2015 IPPS/LTCH PPS final
rule (79 FR 49890 through 49893), MS-DRGs 266 and 267 were created to
uniquely classify the subset of high-risk cases representing patients
who undergo a cardiac valve replacement procedure
[[Page 19828]]
performed by a percutaneous (endovascular) approach. As such, we agree
that all cardiac valve replacement procedures should be grouped within
the same MS-DRG. In FY 2015, under the ICD-9-CM classification, there
was not a specific procedure code for a percutaneous mitral valve
replacement procedure. Therefore, when we converted from the ICD-9
based MS-DRGs to the ICD-10 MS-DRGs, there was not a code available
from which to replicate. We refer the reader to the FY 2015 IPPS/LTCH
PPS final rule (79 FR 49890 through 49893) for a detailed discussion on
the initial request to create new MS-DRGs for endovascular cardiac
valve replacement procedures, as well as the FY 2016 IPPS/LTCH PPS
final rule (80 FR 49354 through 49358) and the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56787 through 56790) for a detailed discussion of the
conversion to ICD-10 MS-DRGs, including our analysis of claims data and
the need to accurately replicate the ICD-9-CM based MS-DRGs.
The requestor also noted that a proposal was discussed at the
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee
meeting involving the creation of procedure codes that describe
percutaneous tricuspid valve replacement procedures and, if finalized,
these new procedure codes would also be assigned to MS-DRGs 266 and
267.
As shown in the table below and in Table 6B.--New Procedure Codes,
which is associated with this proposed rule and available via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, there are eight
new procedure codes that describe tricuspid valve replacement
procedures performed with percutaneous and transapical types of
percutaneous approaches that will be effective October 1, 2017.
------------------------------------------------------------------------
ICD-10-PCS procedure code Code description
------------------------------------------------------------------------
02RJ37H................... Replacement of tricuspid valve with
autologous tissue substitute, transapical,
percutaneous approach.
02RJ37Z................... Replacement of tricuspid valve with
autologous tissue substitute, percutaneous
approach.
02RJ38H................... Replacement of tricuspid valve with
zooplastic tissue, transapical,
percutaneous approach.
02RJ38Z................... Replacement of tricuspid valve with
zooplastic tissue, percutaneous approach.
02RJ3JH................... Replacement of tricuspid valve with
synthetic substitute, transapical,
percutaneous approach.
02RJ3JZ................... Replacement of tricuspid valve with
synthetic substitute, percutaneous
approach.
02RJ3KH................... Replacement of tricuspid valve with
nonautologous tissue substitute,
transapical, percutaneous approach.
02RJ3KZ................... Replacement of tricuspid valve with
nonautologous tissue substitute,
percutaneous approach.
------------------------------------------------------------------------
We agree with the requestor and believe that, in addition to the
four procedure codes that describe the percutaneous mitral valve
replacement procedures listed earlier in this section, the eight codes
that describe percutaneous and transapical types of percutaneous
tricuspid valve replacement procedures also should be grouped with the
other endovascular cardiac valve replacement procedures. Therefore, we
are proposing to reassign the four percutaneous mitral valve
replacement procedures described by the procedure codes listed in the
table above from MS-DRGs 216 through 221 to MS-DRGs 266 and 267. In
addition, we are proposing to assign the eight new procedure codes
(also listed in a separate table above) that describe percutaneous and
transapical, percutaneous tricuspid valve replacement procedures to MS-
DRGs 266 and 267.
We are inviting public comments on our proposals.
e. Percutaneous Tricuspid Valve Repair
We received a request to reassign cases reporting ICD-10-PCS
procedure code 02UJ3JZ (Supplement tricuspid valve with synthetic
substitute, percutaneous approach) from MS-DRGs 216 through 221
(Cardiac Valve and Other Major Cardiothoracic Procedures with and
without Cardiac Catheterization with MCC, with CC and without CC/MCC,
respectively) to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures
with MCC and without MCC, respectively). According to the requestor,
reassigning cases involving these procedures would more appropriately
align the cohesiveness with other clinically similar procedures, such
as percutaneous mitral valve repair (for example, procedures involving
the Mitraclip) described by procedure code 02UG3JZ (Supplement mitral
valve with synthetic substitute, percutaneous approach), which are
assigned to MS-DRGs 228 and 229.
The requestor noted that the FORMA Tricuspid Transcatheter Repair
System (herein after referred to as the FORMA system) is currently in
clinical trials in the United States, Europe, and Canada, but has not
received FDA approval. However, the FORMA system is presently available
for compassionate use purposes. The FORMA system technology is
indicated for use in the treatment of patients diagnosed with tricuspid
regurgitation and occupies the regurgitant area of the affected valve,
providing a surface for native leaflet coaptation. The requestor stated
that the technology offers a viable alternative treatment using
traditional tricuspid valve surgery. According to the requestor, the
technology consists of a rail and a spacer, and the procedure to insert
the device involves fluoroscopic imaging guidance.
We analyzed claims data from the December 2016 update of the FY
2016 MedPAR file for MS-DRGs 216 through 221 for cases reporting
procedure code 02UJ3JZ (Supplement tricuspid valve with synthetic
substitute, percutaneous approach). Our findings are shown in the
following table.
MS-DRGs for Cardiac Valve and Other Major Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All cases........................................... 9,139 14.4 $68,304
MS-DRG 216--Cases with percutaneous tricuspid valve repair...... 1 5.0 14,954
MS-DRG 217--All cases........................................... 3,536 8.9 45,857
MS-DRG 217--Cases with percutaneous tricuspid valve repair...... 1 3.0 16,234
[[Page 19829]]
MS-DRG 218--All cases........................................... 498 5.9 41,274
MS-DRG 218--Cases with percutaneous tricuspid valve repair...... 0 0 0
MS-DRG 219--All cases........................................... 16,011 11.1 54,519
MS-DRG 219--Cases with percutaneous tricuspid valve repair...... 6 9.0 58,075
MS-DRG 220--All cases........................................... 18,476 6.8 37,506
MS-DRG 220--Cases with percutaneous tricuspid valve repair...... 1 5.0 90,155
MS-DRG 221--All cases........................................... 3,547 5.0 33,606
MS-DRG 221--Cases with percutaneous tricuspid valve repair...... 0 0 0
----------------------------------------------------------------------------------------------------------------
We also analyzed claims data for MS-DRGs 228 and 229. Our findings
are shown in the following table below.
MS-DRGs for Other Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 228--All cases........................................... 3,466 9.8 $47,435
MS-DRG 229--All cases........................................... 4,553 4.9 33,347
----------------------------------------------------------------------------------------------------------------
The claims data show that there were very few cases reported for
performing a percutaneous tricuspid valve repair procedure in MS-DRGs
216 through 221. Of the 6 cases found in MS-DRG 219, with average costs
of $58,075, the average cost of these cases aligned with the average
cost of all cases in the MS-DRG assignment ($54,519). The data analysis
and our clinical advisors do not support reassigning cases reporting
procedure code 02UJ3JZ to MS-DRGs 228 and 229. The current MS-DRG
assignment for percutaneous tricuspid valve repair procedures to MS-
DRGs 216 through 221 is clinically coherent with the other percutaneous
procedures performed on the heart valves that are currently assigned to
these MS-DRGs. Percutaneous repair of the aortic, pulmonary and
tricuspid valves utilizing various tissue substitutes (autologous,
nonautologous, zooplastic, and synthetic) are assigned to MS-DRGs 216
through 221. The exception is the percutaneous mitral valve repair,
which, as the requestor pointed out, is assigned to MS-DRGs 228 and 229
as discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56809
through 56813). Our clinical advisors also agreed that the limited
number of cases reported in MS-DRGs 216 through 221 does not warrant
reassignment.
As a result of our review and the input from our clinical advisors,
we are not proposing to reassign cases reporting procedure code 02UJ3JZ
from MS-DRGs 216 through 221 to MS-DRGs 228 and 229.
We are inviting public comments on our proposal to maintain the
current MS-DRG assignment for cases reporting procedure code 02UJ3JZ.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Total Ankle Replacement (TAR) Procedures
For FY 2018, we again received two requests for the reassignment of
total ankle replacement (TAR) procedures to a different MS-DRG. TAR
procedures are currently assigned to MS-DRGs 469 and 470 (Major Joint
Replacement or Reattachment of Lower Extremity with and without MCC,
respectively). This topic was discussed previously in the FY 2015 IPPS/
LTCH PPS proposed and final rules (79 FR 28013 through 28015 and 79 FR
49896 through 49899, respectively) and in the FY 2017 IPPS/LTCH PPS
proposed and final rules (81 FR 24989 through 24990 and 81 FR 56814
through 56816, respectively). For FY 2015 and FY 2017, we did not
change the MS-DRG assignment for TAR procedures. The requestors
indicated that TAR procedures are currently assigned to MS-DRGs 469 and
470, to which total hip replacement and total knee replacement
procedures also are assigned. The requestors stated that there are
significant clinical and cost differences among these procedures, which
results in underpayment for TAR procedures. The requestors asked CMS to
examine claims data for the following six ICD-10-PCS codes within MS-
DRGs 469 and 470:
0SRF0J9 (Replacement of right ankle joint with synthetic
substitute, cemented, open approach);
0SRF0JA (Replacement of right ankle joint with synthetic
substitute, uncemented, open approach);
0SRF0JZ (Replacement of right ankle joint with synthetic
substitute, open approach);
0SRG0J9 (Replacement of left ankle joint with synthetic
substitute, cemented, open approach);
0SRG0JA (Replacement of left ankle joint with synthetic
substitute, uncemented, open approach); and
0SRG0JZ (Replacement of left ankle joint with synthetic
substitute, open approach).
The requestors recommended that, if the claims data show a
disparity in costs between TAR procedures and total hip and knee
replacement procedures, the TAR procedures be reassigned to a more
appropriate MS-DRG.
The requestors also stated that total ankle replacement is a
complicated surgery that involves the replacement of the damaged parts
of the three bones that comprise the ankle joint, as compared to the
two bones in hip and knee replacement procedures. Furthermore, as the
smallest weight-bearing large joint in the body, the requestors stated
that TAR procedures demand a complexity of implant device design,
engineering, and manufacture to exacting functional specifications that
is vastly different from that of total hip and knee replacement
devices. One of the requestors stated that the ankle region typically
has poorer circulation and thinner soft tissue coverage than the
[[Page 19830]]
hip and knee, leading to a higher risk of wound complications and
infection that may be more challenging and expensive to treat. In
addition, this requestor stated that the unique anatomical
characteristics and function of the ankle joint require a specialized
surgical skill set, operative technique, and level of operating room
resource utilization that is vastly dissimilar from that of total hip
and knee replacement procedures.
We examined claims data from the December 2016 update of the FY
2016 MedPAR file on reported cases of TAR procedures in MS-DRGs 469 and
470. Our findings are shown in the table below.
Total Ankle Replacements Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,778 6.7 $22,139
MS-DRG 469--Cases reporting TAR procedure codes................. 31 4.6 23,828
MS-DRG 470--All cases........................................... 461,553 2.7 14,751
MS-DRG 470--Cases reporting TAR procedure codes................. 2,114 1.9 20,862
----------------------------------------------------------------------------------------------------------------
As shown in the table above, for MS-DRG 469, there were a total of
25,778 cases, with an average length of stay of 6.7 days and average
costs of $22,139. Of the 25,778 cases in MS-DRG 469, there were 31
cases reporting a TAR procedure, with an average length of stay of 4.6
days and average costs of $23,828. For MS-DRG 470, there were a total
of 461,553 cases, with an average length of stay of 2.7 days and
average costs of $14,751. Of the 461,553 cases in MS-DRG 470, there
were 2,114 cases reporting a TAR procedure, with an average length of
stay of 1.9 days and average costs of $20,862. As mentioned earlier,
there were only 31 TAR procedure cases in MS-DRG 469, and these cases
had average costs of $1,689 higher than the average costs of all cases
within MS-DRG 469. The relatively small number of cases may have been
impacted by other factors. Several expensive cases could impact the
average costs for a very small number of patients. We also note that
the average length of stay for the TAR procedure cases was 4.6 days, as
compared to 6.7 days for all cases within MS-DRG 469. The 2,114 TAR
procedure cases in MS-DRG 470 had average costs that were $6,111 higher
than the average costs of all cases in MS-DRG 470 ($20,862 compared to
$14,751 for all cases). The data support reassigning all of the TAR
procedures to MS-DRG 469, even when there is no MCC reported. While the
average costs of the TAR procedures in MS-DRG 470 are lower than the
average costs for all cases in MS-DRG 469 ($20,862 compared to
$22,139), the average costs are much closer to the average costs of TAR
procedure cases in MS-DRG 470.
Our clinical advisors reviewed this clinical issue and the claims
data, and agreed that it is clinically appropriate to reassign all of
the TAR procedure cases from MS-DRG 470 to MS-DRG 469, even when there
is no MCC reported. The claims data support the fact that these cases
require more resources than other cases assigned to MS-DRG 470.
Therefore, we are proposing to reassign the following TAR procedure
codes from MS-DRG 470 to MS-DRG 469, even if there is no MCC reported:
0SRF0J9; 0SRF0JA; 0SRF0JZ; 0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018.
We are proposing to change the titles of MS-DRGs 469 and 470 to the
following to reflect these proposed MS-DRG reassignments:
Proposed retitle of MS-DRG 469: ``Major Hip and Knee Joint
Replacement or Reattachment of Lower Extremity with MCC or Total Ankle
Replacement''; and
Proposed retitle of MS-DRG 470: ``Major Hip and Knee Joint
Replacement or Reattachment of Lower Extremity without MCC.''
We are inviting public comments on our proposals.
b. Revision of Total Ankle Replacement (TAR) Procedures
We received two requests to modify the MS-DRG assignment for
revision of total ankle replacement (TAR) procedures, which are
assigned to MS-DRGs 515, 516, and 517 (Other Musculoskeletal System and
Connective Tissue O.R. Procedures with MCC, with CC, and without CC/
MCC, respectively). This topic was discussed in the FY 2015 IPPS/LTCH
PPS proposed and final rules (79 FR 28013 through 28015 and 79 FR 49896
through 49899, respectively) and in the FY 2017 IPPS/LTCH PPS proposed
and final rules (81 FR 24992 through 24993 and 81 FR 56819 through
56820, respectively). For FY 2015 and FY 2017, we did not change the
MS-DRG assignment for revision of TAR procedures.
The requestors asked that CMS examine the following eight ICD-10-
PCS codes for revision of TAR procedures, which are assigned to MS-DRGs
515, 516, and 517:
0SWF0JZ (Revision of synthetic substitute in right ankle
joint, open approach);
0SWF3JZ (Revision of synthetic substitute in right ankle
joint, percutaneous approach);
0SWF4JZ (Revision of synthetic substitute in right ankle
joint, percutaneous endoscopic approach);
0SWFXJZ (Revision of synthetic substitute in right ankle
joint, external approach);
0SWG0JZ (Revision of synthetic substitute in left ankle
joint, open approach);
0SWG3JZ (Revision of synthetic substitute in left ankle
joint, percutaneous approach);
0SWG4JZ (Revision of synthetic substitute in left ankle
joint, percutaneous endoscopic approach); and
0SWGXJZ (Revision of synthetic substitute in left ankle
joint, external approach).
One requestor stated that these ICD-10-PCS codes more specifically
identify the revision of TAR procedures than the prior ICD-9-CM codes.
Specifically, ICD-9-CM code 81.59 (Revision of joint replacement of
lower extremity, not elsewhere classified) was an unspecified code,
which included toe and foot joint revision procedures in addition to
revision of TAR procedures. The requestor stated that claims data
reporting these ICD-10-PCS codes would allow CMS to better identify
revisions of TAR procedures, and determine if the procedures are
assigned to the appropriate MS-DRGs.
One requestor suggested the following three options for MS-DRG
assignments:
Assign the ICD-10-PCS ankle revision procedure codes to
MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with
MCC, with CC, and without CC/MCC, respectively), and rename MS-DRGs
466, 467, and 468 as ``Revision of Hip, Knee or Ankle with MCC, with
CC, and without CC/MCC'', respectively);
[[Page 19831]]
Assign the ICD-10-PCS ankle revision procedure codes to
MS-DRG 469 (Major Joint Replacement or Reattachment of Lower Extremity
with MCC) to more appropriately recognize higher hospital procedure
costs associated with revision of TAR procedures; or
Establish a new MS-DRG for the assignment of revision of
TAR procedures.
The other requestor asked that CMS consider reassigning revision of
TAR procedures to MS-DRGs that better address the cost-to-payment
differential, such as MS-DRGs 466, 467, and 468.
We examined claims data from the December 2016 update of the FY
2016 MedPAR file on reported cases of revision of TAR procedures, as
well as cases assigned to MS-DRGs 466, 467, 468, and MS-DRG 469. Our
findings are shown in the tables below.
Revisions of Joint Replacements Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases........................................... 5,038 8.0 $20,562
MS-DRG 515--Cases reporting revision of total ankle replacement 0 0 0
procedure codes................................................
MS-DRG 516--All cases........................................... 13,276 4.8 13,524
MS-DRG 516--Cases reporting revision of total ankle replacement 2 2.5 11,400
procedure codes................................................
MS-DRG 517--All cases........................................... 13,330 2.8 10,003
MS-DRG 517--Cases reporting revision of total ankle replacement 4 1.5 7,423
procedure codes................................................
----------------------------------------------------------------------------------------------------------------
Cases in MS-DRGs 466, 467, 468, and 469
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 466--All cases........................................... 3,886 8.4 $33,720
MS-DRG 467--All cases........................................... 19,145 4.2 24,609
MS-DRG 468--All cases........................................... 16,529 2.7 20,208
MS-DRG 469--All cases........................................... 25,778 6.7 22,139
----------------------------------------------------------------------------------------------------------------
As shown in the tables above, there were only 6 cases representing
revisions of TAR procedures with no cases in MS-DRG 515, two cases in
MS-DRG 516, and four cases in MS-DRG 517. The limited number of six
cases does not justify the creation of a new MS-DRG for the assignment
of revision of TAR procedures. Our data analysis demonstrates that the
average length of stay for the revision of TAR procedures was lower
than that for all cases in MS-DRG 516 (2.5 days compared to 4.8 days),
and the average costs were lower ($11,400 compared to $13,524). The
average length of stay for the revision of TAR procedures also was
lower than that for all cases in MS-DRG 517 (1.5 days compared to 2.8
days), and the average costs were lower ($7,423 compared to $10,003).
The data do not support reassigning the cases from MS-DRGs 515, 516,
and 517.
Furthermore, the average length of stay and average costs of cases
in MS-DRGs 466, 467, 468, and 469 are significantly higher than those
for the revision of TAR procedures in MS-DRG 516 and 517. The average
length of stay for all cases in MS-DRGs 466, 467, 468, and 469 is 8.4,
4.2, 2.7, and 6.7 days, respectively, compared to the average length of
stay of 2.5 and 1.5 days for cases representing revision of TAR
procedures in MS-DRGs 516 and 517, respectively. The average costs for
all cases in MS-DRGs 466, 467, 468, and 469 are $33,720, $24,609,
$20,208, and $22,139, respectively, compared to the average costs of
$11,400 and $7,423 for cases representing revision of TAR procedures in
MS-DRGs 516 and 517, respectively. Therefore, the data do not support
reassigning the cases to MS-DRGs 466, 467, 468, or 469.
Our clinical advisors reviewed the clinical issue and the claims
data and agreed that the revision of TAR procedures are appropriately
assigned to MS-DRGs 515, 516, and 517, along with other procedures that
describe revisions of joint replacements of the lower extremities,
including the foot and toe. Our clinical advisors did not support
reassigning these cases to MS-DRGs 466, 467, 468, or 469, or creating a
new MS-DRG. Therefore, based on the findings of our analysis of claims
data and the advice of our clinical advisors, we are proposing to
maintain the current MS-DRG assignment for revision of TAR procedures
within MS-DRGs 515, 516, and 517 for FY 2018.
We are inviting public comments on our proposal.
c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
We received a request to add six ICD-10-PCS procedure codes that
describe the use of magnetically controlled growth rods for the
treatment of early onset scoliosis (MAGEC[supreg] System) to MS-DRGs
456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature
or Malignancy or Infection or Extensive Fusions with MCC, with CC or
without CC/MCC, respectively). The MAGEC[supreg] System was discussed
in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25040 through 25042)
and final rule (81 FR 56888 through 56891) as a new technology add-on
payment application. The application was approved for FY 2017 new
technology add-on payments, effective with discharges occurring on and
after October 1, 2016. The request for new procedure codes to identify
the MAGEC[supreg] System technology was discussed at the March 9-10,
2016 ICD-10 Coordination and Maintenance Committee meeting. Six new
procedure codes were approved, effective October 1, 2016, and were
displayed in Table 6B.--New Procedure Codes associated with the FY 2017
IPPS/LTCH PPS final rule (which is available via the Internet on the
CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page.html. These
six procedure codes are currently assigned to MS-DRGs 518, 519, and 520
(Back and Neck Procedure Except Spinal Fusion with MCC or Disc Device/
Neurostimulator, with CC, or without CC/MCC, respectively) and are
shown in the table below.
[[Page 19832]]
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
XNS0032................... Reposition of lumbar vertebra using
magnetically controlled growth rod(s), open
approach, new technology group 2.
XNS0432................... Reposition of lumbar vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
XNS3032................... Reposition of cervical vertebra using
magnetically controlled growth rod(s), open
approach, new technology group 2.
XNS3432................... Reposition of cervical vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
XNS4032................... Reposition of thoracic vertebra using
magnetically controlled growth rod(s), open
approach, new technology group 2.
XNS4432................... Reposition of thoracic vertebra using
magnetically controlled growth rod(s),
percutaneous endoscopic approach, new
technology group 2.
------------------------------------------------------------------------
According to the requestor, adding these six procedure codes will
allow these cases to group to MS-DRGs that more accurately reflect the
diagnosis of early onset scoliosis for which the MAGEC[supreg] System
is indicated. In addition, the requestor stated that because this
technology is utilized on a small subset of patients with approximately
2,500 cases per year, adding these procedure codes to MS-DRGs 456, 457,
and 458 would have little impact.
Because these six procedure codes shown in the table above were
effective as of October 1, 2016, there are no MedPAR claims data
available to analyze. More importantly, we note that cases are assigned
to MS-DRGs 456, 457, and 458 when an actual spinal fusion procedure is
performed. Our clinical advisors agree that use of the MAGEC[supreg]
System's magnetically controlled growth rods technology alone does not
constitute a spinal fusion. Therefore, because there are no claims data
available at this time and based on the advice of our clinical
advisors, we are not proposing to add the six procedure codes to MS-
DRGs 456, 457, or 458. If a spinal fusion procedure is performed along
with the procedure to insert the MAGEC[supreg] System's magnetically
controlled growth rods, it would be appropriate to report that a spinal
fusion was performed and the case would be assigned to one of the
spinal fusion MS-DRGs.
We are inviting public comments on our proposal to maintain the
current GROUPER logic for cases assigned to MS-DRGs 456, 457, and 458
and not add the six procedure codes describing the use of the
MAGEC[supreg] System magnetically controlled growth rods. We also are
inviting public comments on our proposal to maintain the assignment of
the six procedure codes in MS-DRGs 518, 519, and 520.
d. Combined Anterior/Posterior Spinal Fusion
It was brought to our attention that 7 of the 10 new ICD-10-PCS
procedure codes describing fusion using a nanotextured surface
interbody fusion device were not added to the appropriate GROUPER logic
list for MS-DRGs 453, 454, and 455 (Combined Anterior/Posterior Spinal
Fusion with MCC, with CC and without CC/MCC, respectively), effective
October 1, 2016. The logic for MS-DRGs 453, 454, and 455 is comprised
of two lists: An anterior spinal fusion list and a posterior spinal
fusion list. Assignment to one of the combined spinal fusion MS-DRGs
requires that a code from each list be reported.
The seven new ICD-10-PCS procedure codes currently included in the
posterior spinal fusion list for MS-DRGs 453, 454, and 455 are shown in
the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
XRG6092................... Fusion of thoracic vertebral joint using
nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRG7092................... Fusion of 2 to 7 thoracic vertebral joints
using nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRG8092................... Fusion of 8 or more thoracic vertebral
joints using nanotextured surface interbody
fusion device, open approach, new
technology group 2.
XRGA092................... Fusion of thoracolumbar vertebral joint
using nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRGB092................... Fusion of lumbar vertebral joint using
nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRGC092................... Fusion of 2 or more lumbar vertebral joints
using nanotextured surface interbody fusion
device, open approach, new technology group
2.
XRGD092................... Fusion of lumbosacral joint using
nanotextured surface interbody fusion
device, open approach, new technology group
2.
------------------------------------------------------------------------
We note that the remaining three new procedure codes are accurately
reflected in the anterior spinal fusion list; that is, ICD-10-PCS code
XRG1092 (Fusion of cervical vertebral joint using nanotextured surface
interbody fusion device, open approach, new technology group 2); ICD-
10-PCS code XRG2092 (Fusion of 2 or more cervical vertebral joints
using nanotextured surface interbody fusion device, open approach, new
technology group 2); and ICD-10-PCS code XRG4092 (Fusion of
cervicothoracic vertebral joint using nanotextured surface interbody
fusion device, open approach, new technology group 2).
The seven procedure codes currently included in the posterior
spinal fusion list describe an anterior spinal fusion by use of the
interbody fusion device. In an interbody fusion, the anterior column of
the spine is being fused. The results of our review of these procedure
codes discussed below and the advice of our clinical advisors support
moving the seven procedure codes from the posterior spinal fusion list
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs
453, 454, and 455. This will improve clinical accuracy and allow
appropriate assignment to these MS-DRGs when both an anterior and
posterior spinal fusion is performed.
During our review of the spinal fusion codes using a nanotextured
surface interbody fusion device in MS-DRGs 453, 454, and 455, we
identified 149 additional procedure codes that should be moved from the
posterior spinal fusion list to the anterior spinal fusion
[[Page 19833]]
list. These codes describe spinal fusion of the anterior column with a
posterior approach. As mentioned earlier, the logic for MS-DRGs 453,
454, and 455 is dependent upon a code from the anterior spinal fusion
list and a code from the posterior spinal fusion list. Spinal fusion
codes involving the anterior column should be included on the anterior
spinal fusion list only. We are proposing to move the 149 ICD-10-PCS
procedure codes listed in Table 6P.3a. associated with this proposed
rule (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the posterior spinal fusion list to
the anterior spinal fusion list in MS-DRGs 453, 454, and 455.
In addition, we also identified 33 ICD-10-PCS procedure codes in
the posterior spinal fusion list in MS-DRGs 453, 454, and 455 that
describe an interbody fusion device in the posterior column and,
therefore, are not considered clinically valid spinal fusion
procedures. These procedure codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0RG00A1................... Fusion of occipital-cervical joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RG03A1................... Fusion of occipital-cervical joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG04A1................... Fusion of occipital-cervical joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG10A1................... Fusion of cervical vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RG13A1................... Fusion of cervical vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG14A1................... Fusion of cervical vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG20A1................... Fusion of 2 or more cervical vertebral
joints with interbody fusion device,
posterior approach, posterior column, open
approach.
0RG23A1................... Fusion of 2 or more cervical vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous approach.
0RG24A1................... Fusion of 2 or more cervical vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous endoscopic approach.
0RG40A1................... Fusion of cervicothoracic vertebral joint
with interbody fusion device, posterior
approach, posterior column, open approach.
0RG43A1................... Fusion of cervicothoracic vertebral joint
with interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG44A1................... Fusion of cervicothoracic vertebral joint
with interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG60A1................... Fusion of thoracic vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RG63A1................... Fusion of thoracic vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG64A1................... Fusion of thoracic vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG70A1................... Fusion of 2 to 7 thoracic vertebral joints
with interbody fusion device, posterior
approach, posterior column, open approach.
0RG73A1................... Fusion of 2 to 7 thoracic vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RG74A1................... Fusion of 2 to 7 thoracic vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0RG80A1................... Fusion of 8 or more thoracic vertebral
joints with interbody fusion device,
posterior approach, posterior column, open
approach.
0RG83A1................... Fusion of 8 or more thoracic vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous approach.
0RG84A1................... Fusion of 8 or more thoracic vertebral
joints with interbody fusion device,
posterior approach, posterior column,
percutaneous endoscopic approach.
0RGA0A1................... Fusion of thoracolumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0RGA3A1................... Fusion of thoracolumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0RGA4A1................... Fusion of thoracolumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0SG00A1................... Fusion of lumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, open approach.
0SG03A1................... Fusion of lumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0SG04A1................... Fusion of lumbar vertebral joint with
interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0SG10A1................... Fusion of 2 or more lumbar vertebral joints
with interbody fusion device, posterior
approach, posterior column, open approach.
0SG13A1................... Fusion of 2 or more lumbar vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
approach.
0SG14A1................... Fusion of 2 or more lumbar vertebral joints
with interbody fusion device, posterior
approach, posterior column, percutaneous
endoscopic approach.
0SG30A1................... Fusion of lumbosacral joint with interbody
fusion device, posterior approach,
posterior column, open approach.
0SG33A1................... Fusion of lumbosacral joint with interbody
fusion device, posterior approach,
posterior column, percutaneous approach.
0SG34A1................... Fusion of lumbosacral joint with interbody
fusion device, posterior approach,
posterior column, percutaneous endoscopic
approach.
------------------------------------------------------------------------
We are proposing to delete these 33 procedure codes from MS-DRGs
453, 454, and 455 for FY 2018. We also note that some of the above
listed codes also may be included in the logic for MS-DRGs 456, 457,
and 458 (Spinal Fusion Except Cervical with Spinal Curvature or
Malignancy or Infection or Extensive Fusions with MCC, with CC or
without
[[Page 19834]]
CC/MCC, respectively), MS-DRGs 459 and 460 (Spinal Fusion Except
Cervical with MCC and without MCC, respectively), and MS-DRGs 471, 472,
and 473 (Cervical Spinal Fusion with MCC, with CC and without CC/MCC,
respectively). Therefore, we are proposing to delete the 33 procedure
codes from the logic for those spinal fusion MS-DRGs as well. In
addition, we are proposing to delete the 33 procedure codes from the
ICD-10-PCS classification as shown in Table 6D.--Invalid Procedure
Codes associated with this proposed rule (which is available via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
In summary, we are inviting public comments on our proposal to move
the seven procedure codes describing spinal fusion using a nanotextured
surface interbody fusion device from the posterior spinal fusion list
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs
453, 454, and 455. We also are inviting public comments on our proposal
to move the 149 procedure codes describing spinal fusion of the
anterior column with a posterior approach from the posterior spinal
fusion list to the anterior spinal fusion list in the GROUPER logic for
MS-DRGs 453, 454, and 455. In addition, we are inviting public comments
on our proposal to delete the 33 procedure codes describing spinal
fusion of the posterior column with an interbody fusion device from MS-
DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, as well
as from the ICD-10-PCS classification.
6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
a. Vaginal Delivery and Complicating Diagnoses
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56854), we noted
that the code list as displayed in the ICD-10 MS-DRG Version 33
Definitions Manual for MS-DRG 774 (Vaginal Delivery with Complicating
Diagnoses) required further analysis to clarify what constitutes a
vaginal delivery to satisfy the ICD-10 MS-DRG logic. We stated our
plans to conduct further analysis of the diagnosis code lists in MS-DRG
774 for FY 2018.
We believe that the Version 34 Definitions Manual and GROUPER logic
for MS-DRG 774 continue to require additional analysis to determine how
best to classify a vaginal delivery. For example, under MS-DRG 774, the
Definitions Manual currently states that three conditions must be met,
the first of which is a vaginal delivery. To satisfy this first
condition, codes that describe conditions or circumstances from among
three lists of codes must be reported. The first list is comprised of
ICD-10-CM diagnosis codes that may be reported as a principal diagnosis
or a secondary diagnosis. These diagnosis codes describe conditions in
which it is assumed that a vaginal delivery has occurred. The second
list of codes is a list of ICD-10-PCS procedure codes that also
describe circumstances in which it is assumed that a vaginal delivery
occurred. The third list of codes identifies diagnoses describing the
outcome of the delivery. Therefore, if any code from one of those three
lists is reported, the first condition (vaginal delivery) is considered
to be met for assignment to MS-DRG 774.
Our continued concern with the first list of ICD-10-CM diagnosis
codes as currently displayed in the Definitions Manual under the first
condition is that not all of the conditions necessarily reflect that a
vaginal delivery occurred. Several of the diagnosis codes listed could
also reflect that a cesarean delivery occurred. For example, ICD-10-CM
diagnosis code O10.02 (Pre-existing essential hypertension complicating
childbirth) does not specify that a vaginal delivery took place; yet it
is included in the list of conditions that may be reported as a
principal diagnosis or a secondary diagnosis in the GROUPER logic for a
vaginal delivery. The reporting of this code also could be appropriate
for a delivery that occurred by cesarean section.
As noted earlier, the second list of codes for the first condition
are comprised of ICD-10-PCS procedure codes. While we agree that the
current list of procedure codes in MS-DRG 774 may appropriately
describe that a vaginal delivery occurred, we also believe this list
could be improved and warrants closer review.
The third list of codes for the first condition in MS-DRG 774
includes conditions describing the outcome of the delivery that would
be reported as secondary diagnoses. Similar to concerns with the first
list of codes, we believe the conditions do not necessarily reflect
that a vaginal delivery occurred because they also can be reported on
claims where a cesarean delivery occurred.
For the second condition in MS-DRG 774 to be met, diagnosis codes
that are identified as a complicating diagnosis from among two lists
may be reported. The first list is comprised of ICD-10-CM diagnosis
codes that may be reported as a principal or secondary diagnosis. The
second list is comprised of ICD-10-CM diagnosis codes that may be
reported as a secondary diagnosis. Currently, there is only one code
listed under the secondary diagnosis list. We have concerns with these
lists and what is classified as a complicating diagnosis when reviewing
the code lists for this and other MS-DRGs that use that logic in MDC
14.
For the third condition in MS-DRG 774 to be met, a limited set of
O.R. procedures, including both extensive and nonextensive procedures,
are listed. We have concerns with this third condition as being needed
to satisfy the logic for a vaginal delivery MS-DRG.
In summary, the MS-DRG logic involving a vaginal delivery under MDC
14 is technically complex as a result of the requirements that must be
met to satisfy assignment to the affected MS-DRGs. Upon review and
discussion, our clinical advisors recommended, and we agree, that we
should solicit public comments on further refinement to the following
four MS-DRGs related to vaginal delivery: MS-DRG 767 (Vaginal Delivery
with Sterilization and/or D&C); MS-DRG 768 (Vaginal Delivery with O.R.
Procedure Except Sterilization and/or D&C); MS-DRG 774 (Vaginal
Delivery with Complicating Diagnosis); and MS-DRG 775 (Vaginal Delivery
without Complicating Diagnosis).
In addition, our clinical advisors agreed that we should solicit
public comments on further refinement to the conditions defined as a
complicating diagnosis in MS-DRG 774 and MS-DRG 781 (Other Antepartum
Diagnoses with Medical Complications).
Therefore, we are soliciting public comments on which diagnosis or
procedure codes, or both, should be considered in the logic to identify
a vaginal delivery and which diagnosis codes should be considered in
the logic to identify a complicating diagnosis. As MS-DRGs 767, 768,
774, 775, and 781 incorporate one or both aspects (vaginal delivery or
complicating diagnosis), public comments that we receive from this
solicitation will be helpful in determining what proposed revisions to
the current logic should be made. We will review public comments
received in response to this solicitation as we continue to evaluate
these areas under MDC 14 and, if warranted, we would propose
refinements for FY 2019. We are requesting that all comments be
directed to the CMS MS-DRG Classification Change Request Mailbox
located at: [email protected] by November 1, 2017.
[[Page 19835]]
b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis)
The logic for MS-DRG 998 (Principal Diagnosis Invalid as Discharge
Diagnosis) currently includes a list of diagnoses that are considered
inappropriate for reporting as a principal diagnosis on an inpatient
hospital claim. In other words, these conditions would reasonably be
expected not to necessitate an inpatient admission. Examples of these
diagnosis codes include what are referred to as the ``Supervision of
pregnancy'' codes, as well as pregnancy, maternal care and fetal
related codes with an ``unspecified trimester''. We refer the reader to
the ICD-10 Version 34 Definitions Manual which is available via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the
complete list of diagnosis codes in MS-DRG 998 under MDC 14.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56840 through
56841), there was discussion regarding the supervision of ``high-risk''
pregnancy codes, including elderly primigravida and multigravida
specifically, with regard to removing them from the Unacceptable
principal diagnosis edit code list in the Medicare Code Editor (MCE).
After consultation with the staff at the CDC's NCHS, we learned that
the FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting were
updated to explain appropriate coding for this set of codes. As a
result, the codes describing supervision of high-risk pregnancy (and
other supervision of pregnancy codes) remained on the Unacceptable
principal diagnosis edit code list in the MCE. Therefore, the MCE code
edit is consistent with the logic of MS-DRG 998 (Principal Diagnosis
Invalid as Discharge Diagnosis) for these supervision of pregnancy
codes.
However, as a result of our review and consultation with our
clinical advisors regarding the ``unspecified trimester'' codes in MS-
DRG 998, we have determined that there are more appropriate MS-DRG
assignments for this set of codes. Although it may seem unlikely that a
patient would be admitted and ultimately discharged or transferred
without the caregiver or medical personnel having any further knowledge
of the exact trimester, it is conceivable that a situation may present
itself. For example, the pregnant patient may be from out of town or
unable to communicate effectively. The fact that the specific trimester
is not known or documented does not preclude the resources required to
care for the patient with the particular diagnosis.
Therefore, as shown in Table 6P.3b. associated with this proposed
rule (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html), we are proposing to remove the 314 ICD-
10-CM diagnosis codes identified with ``unspecified trimester'' from
MS-DRG 998 and reassign them to the MS-DRGs in which their counterparts
(first trimester, second trimester, or third trimester) are currently
assigned as specified in Column C. This would enable more appropriate
MS-DRG assignments and payment for these cases. We are inviting public
comments on our proposal.
c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical
Complications)
The following three ICD-10-CM diagnosis codes are currently on the
principal diagnosis list for the MS-DRG 782 (Other Antepartum Diagnoses
without Medical Complications) logic.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
O09.41.................... Supervision of pregnancy with grand
multiparity, first trimester.
O09.42.................... Supervision of pregnancy with grand
multiparity, second trimester.
O09.43.................... Supervision of pregnancy with grand
multiparity, third trimester.
------------------------------------------------------------------------
It was brought to our attention that these codes also are included
in the MCE Unacceptable principal diagnosis code edit list. As
discussed earlier in section II.F.6.b. of the preamble of this proposed
rule, the supervision of pregnancy codes are accurately reflected in
the MCE code edit list for Unacceptable principal diagnosis. Therefore,
it is not appropriate to include the three above listed codes in MS-DRG
782.
We are proposing to remove the three codes describing supervision
of pregnancy from MS-DRG 782 and reassign them to MS-DRG 998 (Principal
Diagnosis Invalid as Discharge Diagnosis) to reflect a more appropriate
MS-DRG assignment. We are inviting public comments on our proposal.
d. Shock During or Following Labor and Delivery
We received a request to review ICD-10-CM diagnosis code O75.1
(Shock during or following labor and delivery), which is currently
assigned to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis),
MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C), and MS-DRG
768 (Vaginal Delivery with O.R. Procedure Except Sterilization and/or
D&C).
The requestor provided an example of a patient that delivered at
Hospital A and was transferred to Hospital B for specialized care
related to the diagnosis of shock. The claim for Hospital B resulted in
assignment to a delivery MS-DRG, despite the fact that a delivery did
not occur during that hospitalization. The requestor noted that, by not
reporting the diagnosis code for shock, the claim grouped to a
postpartum MS-DRG and recommended that we evaluate the issue further.
Our analysis initially involved reviewing the GROUPER logic for MS-
DRGs 774, 767 and 768. As discussed earlier in section II.F.14.a. of
the preamble of this proposed rule, the GROUPER logic for
classification and assignment to MS-DRG 774 requires that three
conditions must be met, the first of which is a vaginal delivery.
Similar GROUPER logic applies for assignment to MS-DRGs 767 and 768,
except that only two conditions must be met, with the first condition
being a vaginal delivery. For each of these three MS-DRGs, to satisfy
the first condition, one code that describes a condition or
circumstance from among the three separate lists of codes must be
reported. The first list is comprised of ICD-10-CM diagnosis codes that
may be reported as a principal or secondary diagnosis. These diagnosis
codes describe conditions in which it is assumed that a vaginal
delivery has occurred. Among this first list is ICD-10-CM diagnosis
code O75.1, which is included in the GROUPER logic for MS-DRGs 774, 767
and 768 (under the first condition--vaginal delivery). We refer readers
to the ICD-10 MS-DRG Version 34 Definitions Manual located via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/AcuteInpatient
[[Page 19836]]
PPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-
Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for
documentation of the GROUPER logic associated with these MS-DRGs.
In addition, in MS-DRG 774, to satisfy the second condition,
diagnosis codes that are identified as a complicating diagnosis from
among two lists may be reported. The first list is comprised of ICD-10-
CM diagnosis codes that may be reported as a principal or secondary
diagnosis. The second list is comprised of ICD-10-CM diagnosis codes
that may be reported as a secondary diagnosis. Currently, there is only
one code listed under the secondary diagnosis list.
Next, our analysis involved reviewing the GROUPER logic for
assignment to post-partum MS-DRG 769 (Postpartum and Post Abortion
Diagnoses with Major Procedure) and MS-DRG 776 (Postpartum and Post
Abortion Diagnoses without O.R. Procedure). The GROUPER logic for these
postpartum MS-DRGs requires that a principal diagnosis be reported from
a list of several conditions, such as those following pregnancy, those
complicating the puerperium, conditions that occurred during or
following delivery and conditions associated with lactation disorders.
For assignment to MS-DRG 769, the GROUPER logic also requires that a
major procedure be reported in addition to a principal diagnosis from
the list of conditions.
As a result of our analysis, we agree with the requestor that ICD-
10-CM diagnosis code O75.1 should be added to the GROUPER logic for
assignment to the postpartum MS-DRGs. This diagnosis code is consistent
with other diagnosis codes structured within the GROUPER logic for
assignment to MS-DRGs 769 and 776, and clearly represents a post-partum
diagnosis with the terminology ``during or following labor and
delivery'' in the title. We believe that adding this diagnosis code to
the postpartum MS-DRGs will enable more appropriate MS-DRG assignment
for cases where a delivery did not occur.
Therefore, we are proposing the following:
Removing ICD-10-CM diagnosis code O75.1 from the list of
principal or secondary diagnosis under the first condition--vaginal
delivery GROUPER logic in MS-DRGs 774, 767, and 768;
Moving ICD-10-CM diagnosis code O75.1 from the list of
principal or secondary diagnosis under the second condition--
complicating diagnosis for MS-DRG 774 to the secondary diagnosis list
only; and
Adding ICD-10-CM diagnosis code O75.1 to the principal
diagnosis list GROUPER logic in MS-DRGs 769 and 776.
We are inviting public comments on our proposals.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in
Perinatal Period): Observation and Evaluation of Newborn
We received a request to add the ICD-10-CM diagnosis codes
describing observation and evaluation of newborns for suspected
conditions that are ruled out to MS-DRG 795 (Normal Newborn). The 14
diagnosis codes describing observation and evaluation of newborn for
suspected conditions ruled out are displayed in the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
Z05.0..................... Observation and evaluation of newborn for
suspected cardiac condition ruled out.
Z05.1..................... Observation and evaluation of newborn for
suspected infectious condition ruled out.
Z05.2..................... Observation and evaluation of newborn for
suspected neurological condition ruled out.
Z05.3..................... Observation and evaluation of newborn for
suspected respiratory condition ruled out.
Z05.41.................... Observation and evaluation of newborn for
suspected genetic condition ruled out.
Z05.42.................... Observation and evaluation of newborn for
suspected metabolic condition ruled out.
Z05.43.................... Observation and evaluation of newborn for
suspected immunologic condition ruled out.
Z05.5..................... Observation and evaluation of newborn for
suspected gastrointestinal condition ruled
out.
Z05.6..................... Observation and evaluation of newborn for
suspected genitourinary condition ruled
out.
Z05.71.................... Observation and evaluation of newborn for
suspected skin and subcutaneous tissue
condition ruled out.
Z05.72.................... Observation and evaluation of newborn for
suspected musculoskeletal condition ruled
out.
Z05.73.................... Observation and evaluation of newborn for
suspected connective tissue condition ruled
out.
Z05.8..................... Observation and evaluation of newborn for
other specified suspected condition ruled
out.
Z05.9..................... Observation and evaluation of newborn for
unspecified suspected condition ruled out.
------------------------------------------------------------------------
The requestor expressed concern that currently when one of these
ruled out codes is added to a newborn encounter with a principal
diagnosis described by ICD-10-CM code Z38.00 (Single liveborn infant,
delivered vaginally), the case is assigned to MS-DRG 794 (Neonate with
Other Significant Problems). The requestor stated that this assignment
appears to be in error and that the assignment should instead be to MS-
DRG 795 (Normal Newborn).
We reviewed Section I.C.16.b. of the 2017 ICD-10-CM Official
Guidelines for Coding and Reporting which includes the following
instructions for the diagnosis codes listed in the table above:
Assign a code from category Z05 (Observation and
evaluation of newborns and infants for suspected conditions ruled out)
to identify those instances when a healthy newborn is evaluated for a
suspected condition that is determined after study not to be present.
Do not use a code from category Z05 when the patient has identified
signs or symptoms of a suspected problem; in such cases code the sign
or symptom.
A code from category Z05 may also be assigned as a
principal or first-listed code for readmissions or encounters when the
code from category Z38 code no longer applies. Codes from category Z05
are for use only for healthy newborns and infants for which no
condition after study is found to be present.
A code from category Z05 is to be used as a secondary code
after the code from category Z38, Liveborn infants according to place
of birth and type of delivery.
After review of the guidelines and discussion with our clinical
advisors, we agree with the requestor that the assignment of these
codes to MS-DRG 794 is not accurate because the assignment incorrectly
labels the newborns as having a significant problem when the condition
does not truly exist. We and our clinical advisors also agree that the
above list of diagnosis codes should be added to MS-DRG 795. Therefore,
we are proposing to add the 14 diagnosis codes describing observation
and evaluation of newborns for suspected conditions that are ruled out
listed in the table above to the GROUPER logic for MS-DRG 795. We are
inviting public comments on our proposals.
[[Page 19837]]
8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs):
Complication Codes
We received a request to examine the ICD-10-CM diagnosis codes in
the T85.8-series of codes that describe other specified complications
of internal prosthetic devices, implants and grafts, not elsewhere
classified and their respective MS-DRG assignments. According to the
requestor, the 7th character values in this series of codes impact the
MS-DRG assignment under MDC 21 (Injuries, Poisonings and Toxic Effects
of Drugs) and MDC 23 (Factors Influencing Health Status & Other
Contacts with Health Services) that have resulted in inconsistencies
(that is, shifts) between the MS-DRG assignments under Version 33 and
Version 34 of the ICD-10 MS-DRGs.
Under ICD-10-CM, diagnosis codes in the range of S00 through T88
require a 7th character value of ``A-'' initial encounter, ``D-''
subsequent encounter, or ``S-'' sequela to identify if the patient is
undergoing active treatment for a condition. For complication codes,
active treatment refers to treatment for the condition described by the
code, even though it may be related to an earlier precipitating
problem.
The requestor suggested that the following list of diagnosis codes
with the 7th character ``A'' (initial encounter) may have been
inadvertently assigned to the GROUPER logic in the list of diagnoses
(Assignment of Diagnosis Codes) under MDC 23 because when one of these
diagnosis codes was reported with an O.R. procedure, the requestor
found claims grouping to MS-DRG 939, 940, or 941 (O.R. Procedures with
Diagnoses of Other Contact with Health Services with MCC, with CC and
without CC/MCC, respectively) that had previously grouped to MDC 21
under Version 33 of the ICD-10 MS-DRGs. The requestor also suggested
these codes may have been inadvertently assigned to the GROUPER logic
list of principal diagnoses for MS-DRGs 949 and 950 (Aftercare with CC/
MCC and without CC/MCC, respectively) under MDC 23 because it found
claims that grouped to these MS-DRGs (949 and 950) when one of the
following diagnosis codes was reported as a principal diagnosis that
had previously grouped to MDC 21 under Version 33 of the ICD-10 MS-
DRGs.
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.818A.................. Embolism due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.828A.................. Fibrosis due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.838A.................. Hemorrhage due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.848A.................. Pain due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.858A.................. Stenosis due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.868A.................. Thrombosis due to other internal prosthetic
devices, implants and grafts, initial
encounter.
T85.898A.................. Other specified complication of other
internal prosthetic devices, implants and
grafts, initial encounter.
------------------------------------------------------------------------
The requestor believed that the above list of diagnosis codes with
the 7th character ``A'' (initial encounter) would be more appropriately
assigned under MDC 21 to MS-DRGs 919, 920, and 921 (Complications of
Treatment with MCC, with CC and without CC/MCC, respectively),
according to its review of the 2017 Official Coding Guidelines for use
of the 7th character and assignment of other diagnoses of associated
complications of care. The requestor also noted that these codes were
new, effective October 1, 2016 (FY 2017), and the predecessor codes
grouped to MS-DRGs 919, 920, and 921 in MDC 21 under Version 33 of the
ICD-10 MS-DRGs in FY 2016.
In addition, the requestor suggested that the following list of
diagnosis codes with the 7th character ``D'' (subsequent encounter) may
have been inadvertently assigned to the GROUPER logic list of principal
diagnoses for MS-DRG 919, 920, or 921 in MDC 21. The requestor noted
that these codes were new, effective October 1, 2016 (FY 2017), and the
predecessor codes grouped to MS-DRGs 949 and 950 (Aftercare with CC/MCC
and without CC/MCC, respectively) in MDC 23 under Version 33 of the
ICD-10 MS-DRGs in FY 2016.
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.810D.................. Embolism due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.820D.................. Fibrosis due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.830D.................. Hemorrhage due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.840D.................. Pain due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.850D.................. Stenosis due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.860D.................. Thrombosis due to nervous system prosthetic
devices, implants and grafts, subsequent
encounter.
T85.890D.................. Other specified complication of nervous
system prosthetic devices, implants and
grafts, subsequent encounter.
------------------------------------------------------------------------
The requestor also suggested that the following list of additional
diagnosis codes with the 7th character ``D'' (subsequent encounter) may
have been inadvertently assigned to the GROUPER logic list of principal
diagnoses for MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic
Effect with MCC and without MCC, respectively) also under MDC 21. The
requestor noted these codes were also new, effective October 1, 2016
(FY 2017) and that the predecessor codes grouped to MS-DRGs 949 and 950
in MDC 23 under Version 33 of the ICD-10 MS-DRGs in FY 2016.
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.818D.................. Embolism due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.828D.................. Fibrosis due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.838D.................. Hemorrhage due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
[[Page 19838]]
T85.848D.................. Pain due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.858D.................. Stenosis due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.868D.................. Thrombosis due to other internal prosthetic
devices, implants and grafts, subsequent
encounter.
T85.898D.................. Other specified complication of other
internal prosthetic devices, implants and
grafts, subsequent encounter.
------------------------------------------------------------------------
The requestor believed that the lists of diagnosis codes above with
7th character ``D'' (subsequent encounter) would be more appropriately
assigned to MS-DRGs 949 and 950 under MDC 23, according to its review
of the 2017 Official Coding Guidelines for use of the 7th character and
assignment of other diagnoses of associated complications of care.
We ran test cases to determine if we could duplicate the
requestor's findings with regard to the shifts in MS-DRG assignment
between Version 33 and Version 34 of the ICD-10 MS-DRGs. Results of our
review were consistent with the requestor's findings. We found that the
T85.8-series of diagnosis codes with the 7th character of ``A''
(initial encounter) and 7th character of ``D'' (subsequent encounter)
were inadvertently assigned to the incorrect MDC for Version 34 of the
ICD-10 MS-DRGs, which led to inconsistencies (MS-DRG shifts) when
compared to Version 33 of the ICD-10 MS-DRGs. Our analysis also
included review of all of the diagnosis codes in the T85.8- series and
their current MDC and MS-DRG assignments, as well as review of the 2017
Official Coding Guidelines for use of the 7th character and assignment
of other diagnoses of associated complications of care. Based on the
results of our review, we agree with the requestor's findings.
In addition, we identified the following list of diagnosis codes
with the 7th character ``S'' (sequela) that appear to have been
inadvertently assigned to MS-DRGs 949 and 950 in MDC 23 rather than MDC
21 in MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic Effect
with MCC and without MCC, respectively).
------------------------------------------------------------------------
ICD-10-CM diagnosis code Code description
------------------------------------------------------------------------
T85.810S.................. Embolism due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.820S.................. Fibrosis due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.830S.................. Hemorrhage due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.840S.................. Pain due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.850S.................. Stenosis due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.860S.................. Thrombosis due to nervous system prosthetic
devices, implants and grafts, sequela.
T85.890S.................. Other specified complication of nervous
system prosthetic devices, implants and
grafts, sequela.
------------------------------------------------------------------------
We are inviting public comment on our proposals to (1) reassign the
ICD-10-CM diagnosis codes with the 7th character ``A'' (initial
encounter) from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 919, 920 and
921 in MDC 21; (2) reassign the ICD-10-CM diagnosis codes with the 7th
character ``D'' (subsequent encounter) from MS-DRGs 919, 920, 921, 922,
and 923 in MDC 21 to MS-DRGs 949 and 950 in MDC 23; and (3) reassign
the ICD-10-CM diagnosis codes with the 7th character ``S'' (sequela)
from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in MDC 21 for
FY 2018. The table below displays the current Version 34 MDC and MS-DRG
assignments and the proposed Version 35 MDC and MS-DRG assignments that
we are seeking public comment on for the respective ICD-10-CM diagnosis
codes.
----------------------------------------------------------------------------------------------------------------
Current V34 Current V34 MS- Proposed V35 Proposed V35
ICD-10-CM code Code description MDC DRG MDC MS-DRG
----------------------------------------------------------------------------------------------------------------
T85.810D................... Embolism due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.810S................... Embolism due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.818A................... Embolism due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.818D................... Embolism due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.820D................... Fibrosis due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.820S................... Fibrosis due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.828A................... Fibrosis due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.828D................... Fibrosis due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.830D................... Hemorrhage due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.830S................... Hemorrhage due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.838A................... Hemorrhage due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
[[Page 19839]]
T85.838D................... Hemorrhage due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.840D................... Pain due to nervous 21 919, 920, 921 23 949, 950
system prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.840S................... Pain due to nervous 23 949, 950 21 922, 923
system prosthetic
devices, implants
and grafts,
sequela.
T85.848A................... Pain due to other 23 949, 950 21 919, 920, 921
internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.848D................... Pain due to other 21 922, 923 23 949, 950
internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.850D................... Stenosis due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.850S................... Stenosis due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.858A................... Stenosis due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.858D................... Stenosis due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.860D................... Thrombosis due to 21 919, 920, 921 23 949, 950
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.860S................... Thrombosis due to 23 949, 950 21 922, 923
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.868A................... Thrombosis due to 23 949, 950 21 919, 920, 921
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.868D................... Thrombosis due to 21 922, 923 23 949, 950
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.890D................... Other specified 21 919, 920, 921 23 949, 950
complication of
nervous system
prosthetic
devices, implants
and grafts,
subsequent
encounter.
T85.890S................... Other specified 23 949, 950 21 922, 923
complication of
nervous system
prosthetic
devices, implants
and grafts,
sequela.
T85.898A................... Other specified 23 949, 950 21 919, 920, 921
complication of
other internal
prosthetic
devices, implants
and grafts,
initial encounter.
T85.898D................... Other specified 21 922, 923 23 949, 950
complication of
other internal
prosthetic
devices, implants
and grafts,
subsequent
encounter.
----------------------------------------------------------------------------------------------------------------
9. MDC 23 (Factors Influencing Health Status and Other Contacts With
Health Services): Updates to MS-DRGs 945 and 946 (Rehabilitation With
CC/MCC and Without CC/MCC, Respectively)
In FY 2016, we received requests to modify the MS-DRG assignment
for MS-DRGs 945 and 946 (Rehabilitation with CC/MCC and without CC/MCC,
respectively). This issue was addressed in the FY 2017 IPPS/LTCH PPS
proposed and final rules (81 FR 24998 through 25000 and 81 FR 56826
through 56831). For FY 2017, we did not change the MS-DRG assignments
for MS-DRGs 945 and 946.
We did not receive a request to address this issue as part of this
FY 2018 IPPS/LTCH PPS proposed rule or suggestions on how to update the
MS-DRGs 945 and 946 logic. However, we did refer the FY 2016 requests
for a new ICD-10-CM diagnosis code to the Centers for Disease Control
and Prevention (CDC) for consideration at a future meeting of the ICD-
10 Coordination and Maintenance Committee. CDC has the lead on updating
and maintaining ICD-10-CM codes. CDC did not address the issue at the
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee
meeting. When the topic was not addressed at the September 13-14, 2016
ICD-10 Coordination and Maintenance Committee meeting, we asked CDC to
address the code request at the March 7-8, 2017 meeting of the ICD-10
Coordination and Maintenance Committee. The topic was on the agenda for
the March 7-8, 2017 ICD-10 Coordination and Maintenance Committee
meeting. The deadline for providing comments on proposals considered at
this meeting was April 7, 2017. Any new codes approved after this
meeting which will be implemented on October 1, 2017 will be posted on
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html and on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10.html in June 2017. New codes also will be included in the FY 2018
IPPS/LTCH PPS final rule.
As addressed in the FY 2017 IPPS/LTCH PPS final rule, the ICD-9-CM
MS-DRGs used ICD-9-CM codes reported as the principal diagnosis that
clearly identified an encounter for rehabilitation services, such as
diagnosis codes V57.89 (Care involving other specified rehabilitation
procedure) and V57.9 (Care involving unspecified rehabilitation
procedure), and these codes were not included in ICD-10-CM. Given this
lack of ICD-10-CM codes to indicate that the reason for the encounter
was for rehabilitation, the ICD-10 MS-DRG logic could not reflect the
logic of the ICD-9-CM MS-DRGs. Commenters on the final rule recommended
that CDC create new diagnosis codes for these concepts in ICD-10-CM so
that the MS-DRG logic could be updated to more closely reflect that of
the ICD-9-CM MS-DRGs.
If new ICD-10-CM codes are created for encounter for rehabilitation
services, we would address any updates to MS-DRGs 945 and 946 utilizing
these new codes in future rulemaking. In the meantime, we welcome other
specific recommendations on how to update MS-DRGs 945 and 946. We are
sharing the following data on these MS-DRGs from the MedPAR file.
[[Page 19840]]
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2015 MS-DRGs with ICD-9-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945...................................................... 3,991 10.3 $8,242
MS-DRG 946...................................................... 1,184 8.0 7,322
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2016 MS-DRGs with ICD-10-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945...................................................... 671 10.8 $7,814
MS-DRG 946...................................................... 157 7.3 7,672
----------------------------------------------------------------------------------------------------------------
As shown by the tables above, there was a decrease of 3,320 MS-DRG
945 cases (from 3,991 to 671) from FY 2015, when claims were submitted
with ICD-9-CM codes, to FY 2016 when ICD-10 codes were submitted. There
was a decrease of 1,027 MS-DRG 946 cases (from 1,184 to 157) from FY
2015 to FY 2016. The average length of stay increased 0.5 days (from
10.3 to 10.8 days) for MS-DRG 945 and decreased 0.7 days (from 8.0 to
7.3 days) for MS-DRG 946. The average costs decreased by $428 (from
$8,242 to $7,814) for MS-DRG 945 cases and increased by $350 (from
$7,322 to $7,672) for MS-DRG 946 cases. The number of cases was
significantly lower in FY 2016 compared to FY 2015. However, the
difference in average length of stay and average costs did not show
large changes.
We also examined possible MS-DRGs where these cases may have been
assigned in FY 2016 based on increases in the number of claims. Because
there is not a diagnosis code that could be reported as a principal
diagnosis, which would indicate if the admissions were for
rehabilitation services, we are unable to determine if these were cases
admitted for rehabilitation that moved from MS-DRGs 945 and 946 because
of the lack of a code for encounter for rehabilitation, or if there was
simply a change in the number of cases. The following tables show our
findings for MS-DRG 056 (Degenerative Nervous System Disorders with
MCC); MS-DRG 057 (Degenerative Nervous System Disorders without MCC);
MS-DRG 079 (Hypertensive Encephalopathy without CC/MCC); MS DRG 083
(Traumatic Stupor & Coma, Coma >1 Hour with CC); MS-DRG 084 (Traumatic
Stupor & Coma, Coma >1 Hour without CC/MCC); MS-DRG 092 (Other
Disorders of Nervous System with MCC); and MS-DRG 093 (Other Disorders
of Nervous System without CC/MCC).
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2015 MS-DRGs with ICD-9-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056...................................................... 9,548 7.3 $12,606
MS-DRG 057...................................................... 25,652 5.1 7,918
MS-DRG 079...................................................... 618 2.7 5,212
MS-DRG 083...................................................... 2,516 4.3 9,446
MS-DRG 084...................................................... 1,955 2.8 6,824
MS-DRG 092...................................................... 12,643 5.7 11,158
MS-DRG 093...................................................... 7,928 2.8 5,182
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY 2016 MS-DRGs with ICD-10-CM codes cases of stay Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056...................................................... 10,817 7.6 $12,930
MS-DRG 057...................................................... 28,336 5.3 7,902
MS-DRG 079...................................................... 1,233 2.7 5,579
MS-DRG 083...................................................... 4,058 6.2 9,134
MS-DRG 084...................................................... 3,016 2.7 6,508
MS-DRG 092...................................................... 19,392 3.9 6,706
MS-DRG 093...................................................... 8,120 2.7 5,253
----------------------------------------------------------------------------------------------------------------
As shown by the tables above, some of the MS-DRGs that show the
largest increase in number of cases do not show significant changes in
the average length of stay or average costs. For instance, MS-DRG 079
cases doubled from FY 2015 to FY 2016 (from 618 to 1,233). However, the
average length of stay did not change from 2.7 days and the average
costs increased only $367 (from $5,212 to $5,579). MS-DRG 083 cases
increased by 1,542 (from 2,516 to 4,058) with a 1.9 day increase in the
average length of stay (from 4.3 to 6.2 days); however, the average
costs decreased only $312 (from $9,446 to $9,134). There were large
changes for MS-DRG 092 with cases increasing by 6,749 (from 12,643 to
19,392), the average length of stay decreasing by 1.8 days (from 5.7 to
3.9) and the average costs decreasing by $4,452 (from $11,158 to
$6,706). Once again, it is not possible to determine if any changes are
a result of the impact of not having a code for the encounter for
rehabilitation services to report as a principal diagnosis, or if other
factors such as changes in types of patient admissions were involved.
Given the lack of a diagnosis code to capture the principal
diagnosis of encounter for rehabilitation, we are unable to update MS-
DRG 945 or MS-DRG 946 to better identify those cases in which patients
are admitted for rehabilitation services. If the CDC creates a new
code, we will consider proposing updates to MS-DRGs 945 and 946 in the
future.
We are inviting public comments on our proposal not to update MS-
DRGs 945 and 946 for FY 2018.
10. Proposed Changes to the Medicare Code Editor (MCE)
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare
[[Page 19841]]
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 an MS-DRG.
As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56831
through 56844), we made available the FY 2017 ICD-10 MCE Version 34
manual file and an ICD-9-CM MCE Version 34.0A manual file (for analysis
purposes only). The links to these MCE manual files, along with the
links to purchase the mainframe and computer software for the MCE
Version 34 (and ICD-10 MS-DRGs) are posted on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2017 IPPS Final Rule Home
Page.
For this FY 2018 IPPS/LTCH PPS proposed rule, below we address the
MCE requests we received by the December 7, 2016 deadline. We also
discuss the proposals we are making based on our internal review and
analysis.
a. Age Conflict Edit
In the MCE, the Age Conflict edit exists to detect inconsistencies
between a patient's age and any diagnosis on the patient's record; for
example, a 5-year-old patient with benign prostatic hypertrophy or a
78-year-old patient coded with a delivery. In these cases, the
diagnosis is clinically and virtually impossible for a patient of the
stated age. Therefore, either the diagnosis or the age is presumed to
be incorrect. Currently, in the MCE, the following four age diagnosis
categories appear under the Age Conflict edit and are listed in the
manual and written in the software program:
Perinatal/Newborn--Age of 0 years only; a subset of
diagnoses which will only occur during the perinatal or newborn period
of age 0 (for example, tetanus neonatorum, health examination for
newborn under 8 days old).
Pediatric--Age is 0 to 17 years inclusive (for example,
Reye's syndrome, routine child health examination).
Maternity--Age range is 12 to 55 years inclusive (for
example, diabetes in pregnancy, antepartum pulmonary complication).
Adult--Age range is 15 to 124 years inclusive (for
example, senile delirium, mature cataract).
We received a request to provide clarification regarding the
overlapping age ranges (0 to 17 years and 15 to 124 years) in the
Pediatric and Adult categories under the Age Conflict edit. The
requestor questioned which diagnosis code would be most appropriate to
identify when a general or routine health examination is performed on
patients who are within the age range of 15 to 17 years. The specific
ICD-10-CM diagnosis codes that the requestor inquired about related to
a child or to an adult encounter for a health examination are displayed
in the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
Z00.00.................... Encounter for general adult medical
examination without abnormal findings.
Z00.01.................... Encounter for general adult medical
examination with abnormal findings.
Z00.121................... Encounter for routine child health
examination with abnormal findings.
Z00.129................... Encounter for routine child health
examination without abnormal findings.
------------------------------------------------------------------------
The age ranges defined within the Age Conflict edits were
established with the implementation of the IPPS. The adult age range
includes the minimum age of 15 years for those patients who are
declared emancipated minors. We note that, historically, we have not
provided coding advice in rulemaking with respect to policy. We
collaborate with the American Hospital Association (AHA) through the
Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We
recommend that the requestor and other interested parties submit any
questions pertaining to correct coding practices for this specific
issue to the AHA.
(1) Perinatal/Newborn Diagnosis Category
Under the ICD-10 MCE, the Perinatal/Newborn Diagnosis category
under the Age Conflict edit considers the age of 0 years only; a subset
of diagnoses which will only occur during the perinatal or newborn
period of age 0 to be inclusive. This includes conditions that have
their origin in the fetal or perinatal period (before birth through the
first 28 days after birth) even if morbidity occurs later. For that
reason, the diagnosis codes on this Age Conflict edit list would be
expected to apply to conditions or disorders specific to that age group
only.
In the ICD-10-CM classification, there are two diagnosis codes that
describe conditions as occurring during infancy and the neonatal period
that are currently not on the Perinatal/Newborn Diagnosis category edit
code list. We consulted with staff at the Centers for Disease Control's
(CDC's) National Center for Health Statistics (NCHS) because NCHS has
the lead responsibility for the ICD-10-CM diagnosis codes. The NCHS'
staff confirmed that, although diagnosis codes D80.7 (Transient
hypogammaglobulinemia of infancy) and diagnosis code E71.511 (Neonatal
adrenoleukodystrophy) do occur during infancy and the neonatal period,
both conditions can last beyond the 28-day timeframe which is used to
define the perinatal/newborn period. These diagnosis codes are not
intended to be restricted for assignment to newborn patients.
Therefore, we are proposing to not add these two diagnosis codes to the
Perinatal/Newborn Diagnosis category under the Age Conflict edit. We
are inviting public comments on our proposal.
(2) Pediatric Diagnosis Category
Under the ICD-10 MCE, the Pediatric diagnosis category under the
Age Conflict edit considers the age range of 0 to 17 years inclusive.
For that reason, the diagnosis codes on this Age Conflict edit list
would be expected to apply to conditions or disorders specific to that
age group only.
The ICD-10-CM diagnosis code list for the Pediatric diagnosis
category under the Age Conflict edit currently includes a diagnosis
code pertaining to dandruff that is not intended to apply to pediatric
patients only. We consulted with staff at the Centers for Disease
Control's (CDC's) National Center for Health Statistics (NCHS) because
NCHS has the lead responsibility for the ICD-10-CM diagnosis codes. The
NCHS' staff confirmed that, although diagnosis code L21.0 (Seborrhea
capitis) has an inclusion term of ``Cradle cap,'' the description of
the diagnosis code is not intended to be restricted for assignment of
pediatric patients. Therefore, we are proposing to remove diagnosis
code L21.0 from the list of diagnosis codes for the Pediatric diagnosis
category under the Age Conflict edit. We are inviting public comments
on our proposal.
[[Page 19842]]
(3) Maternity Diagnoses
Under the ICD-10 MCE, the Maternity diagnosis category under the
Age Conflict edit considers the age range of 12 to 55 years inclusive.
For that reason, the ICD-10-CM diagnosis codes on this Age Conflict
edit list would be expected to apply to conditions or disorders
specific to that age group only.
As discussed in section II.F.12. of the preamble of this proposed
rule, Table 6A.--New Diagnosis Codes lists the new ICD-10-CM diagnosis
codes that have been approved to date, which will become effective with
discharges occurring on and after October 1, 2017. Included on this
list are a number of diagnosis codes associated with pregnancy and
maternal care that we believe are appropriate to add to the list of
diagnosis codes for the Maternity diagnoses category under the Age
Conflict edit. We refer readers to Table 6P.1a. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for a review of the ICD-10-CM diagnosis
codes that we are proposing to add to the Age Conflict edit list. We
are inviting public comments on our proposal.
b. Sex Conflict Edit
In the MCE, the Sex Conflict edit detects inconsistencies between a
patient's sex and any diagnosis or procedure on the patient's record;
for example, a male patient with cervical cancer (diagnosis) or a
female patient with a prostatectomy (procedure). In both instances, the
indicated diagnosis or the procedure conflicts with the stated sex of
the patient. Therefore, the patient's diagnosis, procedure, or sex is
presumed to be incorrect.
(1) Diagnoses for Males Only Edit
We received a request to review the following ICD-10-CM diagnosis
codes pertaining to conditions associated with males for possible
inclusion on the list of diagnosis codes for the Diagnoses for Males
Only edit.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
B37.42.................... Candidal balanitis.
N35.011................... Post-traumatic bulbous urethral stricture.
N35.012................... Post-traumatic membranous urethral
stricture.
N35.013................... Post-traumatic anterior urethral stricture.
N35.112................... Postinfective bulbous urethral stricture,
not elsewhere classified.
N35.113................... Postinfective membranous urethral stricture,
not elsewhere classified.
N35.114................... Postinfective anterior urethral stricture,
not elsewhere classified.
N99.115................... Postprocedural fossa navicularis urethral
stricture.
------------------------------------------------------------------------
We agree with the requestor that diagnosis code B37.42 describes a
condition that is applicable only to males. Balanitis is the
inflammation of the glans (rounded head) of the penis. We also agree
that the diagnosis codes listed above that align under subcategory
N35.01 (Post-traumatic urethral stricture, male) and subcategory N35.11
(Postinfection urethral stricture, not elsewhere classified, male) are
appropriate to add to the list of diagnosis codes for the Diagnoses for
Males Only edit because these diagnosis codes include specific
terminology that is applicable only to males. Further, we agree that
diagnosis code N99.115 is appropriate to add to the list of diagnosis
codes for the Diagnoses for Males Only edit because subcategory N99.11
(Postprocedural urethral stricture, male) includes specific terminology
that is applicable to males only as well. Therefore, we are proposing
to add the ICD-10-CM diagnosis codes listed in the table above to the
list of diagnosis codes for the Diagnoses for Males Only edit.
We also are proposing to remove ICD-10-CM diagnosis code Q64.0
(Epispadias) from the list of diagnosis codes for the Diagnoses for
Males Only edit because this rare, congenital condition involving the
opening of the urethra can occur in both males and females.
In addition, as discussed in section II.F.12. of the preamble of
this proposed rule, Table 6A.--New Diagnosis Codes lists the new ICD-
10-CM diagnosis codes that have been approved to date, which will
become effective with discharges occurring on and after October 1,
2017. Included on this list are a number of diagnosis codes associated
with male body parts that we believe are appropriate to add to the list
of diagnosis codes for the Diagnoses for Males Only category under the
Sex Conflict edit. We refer readers to Table 6P.1b. associated with
this proposed rule (which is available via the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for a review of the ICD-10-CM diagnosis
codes that we are proposing to add to the list of diagnosis codes for
the Diagnoses for Males Only category.
We are inviting public comments on our proposals.
(2) Diagnoses for Females Only
We received a request to review the following ICD-10-CM diagnosis
codes for possible removal from the list of diagnosis codes for the
Diagnoses for Females Only edit.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
F52.6..................... Dyspareunia not due to a substance or known
physiological condition.
J84.81.................... Lymphangioleiomyomatosis.
R97.1..................... Elevated cancer antigen 125 [CA 125].
------------------------------------------------------------------------
The requestor noted that, in the ICD-10-CM classification, the term
``Dyspareunia'' (painful sexual intercourse) has specified codes for
males and females located in the Alphabetic Index to Diseases for
Reporting Physiological Dyspareunia. However, the indexing for
diagnosis code F52.6 (Dyspareunia not due to a substance or known
physiological condition) specifies that it is not due to a
physiological condition and the entry is not gender specific. According
to the requestor, while the condition is most often associated with
female sexual dysfunction, there is a subset of males who also suffer
from this condition.
[[Page 19843]]
In addition, the requestor stated that diagnosis code J84.81
(Lymphangioleiomyomatosis) describes a rare form of lung disease
believed to occur more often in patients with tuberous sclerosis
complex (TSC), a disorder due to genetic mutation. Although the
condition is described as being exclusive to women, unique cases for
men with TSC have also been reported.
Lastly, the requestor indicated that diagnosis code R97.1 (Elevated
cancer antigen 125 [CA 125]) describes the tumor marker that commonly
identifies ovarian cancer cells in women. However, the requestor stated
that high levels have also been demonstrated in men (and women) with
lung cancer as well.
We reviewed ICD-10-CM diagnosis codes F52.6, J84.81, and R97.1, and
we agree with the requestor that Dyspareunia, not due to a
physiological condition, can also occur in males. We also agree that
the condition of Lymphangioleiomyomatosis and Elevated CA 125 levels
can be found in males. Therefore, we are proposing to remove these
three diagnosis codes from the list of diagnosis codes for the
Diagnoses for Females Only edit. We are inviting public comments on our
proposals.
In addition, we are proposing to add new diagnosis code Z40.03
(Encounter for prophylactic removal of fallopian tube(s)) to the list
of diagnosis codes for the Diagnoses for Females Only edit. Currently,
diagnosis code Z40.02 (Encounter for prophylactic removal of ovary) is
on the edit's code list; therefore, inclusion of new diagnosis code
Z40.03 would be consistent. We refer readers to Table 6A.--New
Diagnosis Codes associated with this proposed rule (which is available
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the
list of new ICD-10-CM diagnosis codes finalized to date. We are
inviting public comments on our proposal.
c. Non-Covered Procedure Edit: Gender Reassignment Surgery
In the MCE, the Non-Covered Procedure edit identifies procedures
for which Medicare does not provide payment. Payment is not provided
due to specific criteria that are established in the National Coverage
Determination (NCD) process. We refer readers to the Web site at:
https://www.cms.gov/Medicare/Coverage/DeterminationProcess/howtorequestanNCD.html for additional information on this process. In
addition, there are procedures that would normally not be paid by
Medicare but, due to the presence of certain diagnoses, are paid.
We issued instructions on June 27, 2014, as a one-time
notification, Pub. 100-03, Transmittal 169, Change Request 8825,
effective May 30, 2014, announcing to MACs the invalidation of National
Coverage Determination (NCD) 140.3 for Transsexual Surgery. As a
result, MACs determined coverage on a case-by-case basis. The
transmittal is available via the Internet on the CMS Web site at:
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R169NCD.html?DLPage=1&DLEntries=10&DLFilter=Transsexual&DLSort=1&DLSortDir=ascending.
It was brought to our attention that the ICD-10-PCS procedure codes
shown in the table below are currently included on the list of
procedure codes for the Non-Covered Procedure edit. As a result, when
one of these procedure codes is reported on a claim, the edit for Non-
Covered Procedure is triggered and claims are not able to process
correctly.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
0W4M070................... Creation of vagina in male perineum with
autologous tissue substitute, open
approach.
0W4M0J0................... Creation of vagina in male perineum with
synthetic substitute, open approach.
0W4M0K0................... Creation of vagina in male perineum with
nonautologous tissue substitute, open
approach.
0W4M0Z0................... Creation of vagina in male perineum, open
approach.
0W4N071................... Creation of penis in female perineum with
autologous tissue substitute, open
approach.
0W4N0J1................... Creation of penis in female perineum with
synthetic substitute, open approach.
0W4N0K1................... Creation of penis in female perineum with
nonautologous tissue substitute, open
approach.
0W4N0Z1................... Creation of penis in female perineum, open
approach.
------------------------------------------------------------------------
Therefore, we are proposing to remove the ICD-10-PCS procedure
codes included in the table above from the list of procedure codes for
the Non-Covered Procedure edit to help resolve claims processing issues
associated with the reporting of these procedure codes. We are inviting
public comments on our proposal.
d. Unacceptable Principal Diagnosis Edit
In the MCE, there are select codes that describe a circumstance
that influences an individual's health status, but does not actually
describe a current illness or injury. There also are codes that are not
specific manifestations but may be due to an underlying cause. These
codes are considered unacceptable as a principal diagnosis. In limited
situations, there are a few codes on the MCE Unacceptable Principal
Diagnosis edit code list that are considered ``acceptable'' when a
specified secondary diagnosis is also coded and reported on the claim.
(1) Bacterial and Viral Infectious Agents (B95 Through B97)
We examined ICD-10-CM diagnosis codes in Chapter 1 (Certain
Infectious and Parasitic Diseases) of the Classification Manual that
fall within the range of three code categories for ``Bacterial and
Viral Infectious Agents'' (B95 through B97). The instructional note
provided at this section states that these categories are provided for
use as supplementary or additional codes to identify the infectious
agent(s) in diseases classified elsewhere.
We identified 45 ICD-10-CM diagnosis codes within the range of
these code categories for ``Bacterial and Viral Infectious Agents''
(B95 through B97) that, as a result of the instructional note, are not
appropriate to report as a principal diagnosis. We are proposing to add
the 45 ICD-10-CM diagnosis codes shown in Table 6P.1c. associated with
this proposed rule (which is available via the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit. We are inviting public comments on our
proposal.
(2) Mental Disorders Due to Known Physiological Conditions (F01 Through
F09)
We examined ICD-10-CM diagnosis codes in Chapter 5 (Mental and
Behavioral Disorders) of the Classification Manual that fall within the
range of nine code categories for ``Mental Disorders Due to Known
[[Page 19844]]
Physiological Conditions'' (F01 through F09). The instructional note
provided at this section states that this block comprises a range of
mental disorders grouped together on the basis of their having in
common a demonstrable etiology in cerebral disease, brain injury, or
other insult leading to cerebral dysfunction. The dysfunction may be
primary, as in diseases, injuries, and insults that affect the brain
directly and selectively; or secondary, as in systemic diseases and
disorders that attack the brain only as one of the multiple organs or
systems of the body that are involved.
We identified 21 ICD-10-CM diagnosis codes that fall within the
range of these code categories for ``Mental Disorders Due to Known
Physiological Conditions'' (F01 through F09). Of these nine code
categories, seven have a ``Code first the underlying physiological
condition'' note. For example, at code category F01-Vascular dementia,
the note reads, ``Code first the underlying physiological condition or
sequelae of cerebrovascular disease.'' There are a total of 19
diagnosis codes that fall under these 7 code categories with a ``Code
first'' note and, therefore, are not appropriate to report as a
principal diagnosis. Therefore, we are proposing to add the 19 ICD-10-
CM diagnosis codes shown in Table 6P.1d. associated with this proposed
rule (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit. We are inviting public comments on our
proposal.
(3) Other Obstetric Conditions, Not Elsewhere Classified (O94 Through
O9A)
We examined ICD-10-CM diagnosis codes in Chapter 15 (Pregnancy,
Childbirth and the Puerperium) of the Classification Manual that fall
within the range of four code categories for ``Other Obstetric
Conditions, Not Elsewhere Classified'' (O94 through O9A). The
instructional note provided at this section under category O94 states
that ``this category is to be used to indicate conditions in O00
through O77, O85 through O94 and O98 through O9A as the cause of late
effects. The sequelae include conditions specified as such, or as late
effects, which may occur at any time after the puerperium. Code first
condition resulting from (sequela) of complication of pregnancy,
childbirth, and the puerperium.''
We identified one ICD-10-CM diagnosis code within the range of
these code categories for ``Other Obstetric Conditions, Not Elsewhere
Classified'' (O94 through O9A) that, as a result of the instructional
note, is not appropriate to report as a principal diagnosis because
that code identifies the cause of the late effect. This ICD-10-CM
diagnosis code is O94 (Sequelae of complication of pregnancy,
childbirth, and the puerperium). We are proposing to add ICD-10-CM
diagnosis code O94 to the list of codes for the Unacceptable Principal
Diagnosis edit. We are inviting public comments on our proposal.
(4) Symptoms and Signs Involving Cognition, Perception, Emotional State
and Behavior (R40 Through R46)
We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms,
Signs and Abnormal Findings) of the Classification Manual that fall
within the range of code categories for ``Symptoms and Signs Involving
Cognition, Perception, Emotional State and Behavior'' (R40 through
R46), specifically under code category R40--Somnolence, stupor and
coma. At subcategory R40.2--Coma, there is an instructional note, which
states ``Code first any associated: Fracture of skull (S02.-);
Intracranial injury (S06.-).''
We identified 96 ICD-10-CM diagnosis codes under this subcategory
that, as a result of the instructional note, are not appropriate to
report as a principal diagnosis. We are proposing to add the 96 ICD-10-
CM diagnosis codes shown in Table 6P.1e. associated with this proposed
rule (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit. We are inviting public comments on our
proposal.
(5) General Symptoms and Signs (R50 Through R69)
We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms,
Signs and Abnormal Findings) of the Classification Manual that fall
within the range of code categories for ``General Symptoms and Signs''
(R50 through R69), specifically, at code category R65--Symptoms and
signs associated with systemic inflammation and infection. There is an
instructional note at subcategory R65.1--Systemic inflammatory response
syndrome (SIRS) of non-infectious origin, which states ``Code first
underlying condition, such as: Heatstroke (T67.0); Injury and trauma
(S00-T88).'' There is also an instructional note at subcategory R65.2--
Severe sepsis, which states ``Code first underlying infection, such
as:'' and provides a list of examples.
We identified four ICD-10-CM diagnosis codes in these subcategories
that, as a result of the instructional notes described above, are not
appropriate to report as a principal diagnosis. These four ICD-10-CM
codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
R65.10.................... Systemic inflammatory response syndrome
(SIRS) of non-infectious origin without
acute organ dysfunction.
R65.11.................... Systemic inflammatory response syndrome
(SIRS) of non-infectious origin with acute
organ dysfunction.
R65.20.................... Severe sepsis without septic shock.
R65.21.................... Severe sepsis with septic shock.
------------------------------------------------------------------------
We are proposing to add the four ICD-10-CM diagnosis codes shown in
the table above to the list of codes for the Unacceptable Principal
Diagnosis edit. We are inviting public comments on our proposal.
(6) Poisoning by, Adverse Effects of, and Underdosing of Drugs,
Medicaments and Biological Substances (T36 Through T50)
We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and
Poisoning) of the Classification Manual that fall within the range of
code categories for ``Poisoning by, Adverse Effects of and Underdosing
of Drugs, Medicaments and Biological Substances'' (T36 through T50).
The instructional note provided at this section states ``Code first,
for adverse effects, the nature of the adverse effect, such as:'' and
provides a list of examples. In addition, the FY 2017 ICD-10-CM
Official Guidelines for Coding and Reporting at Section I.C.19.e.5.c.,
state that ``Codes for underdosing should never be assigned as
principal or first-listed codes.''
[[Page 19845]]
We identified 996 ICD-10-CM diagnosis codes that, as a result of
the instructional note for adverse effects and the guideline for
reporting diagnosis codes for underdosing, are not appropriate to
report as a principal diagnosis. We are proposing to add the 996 ICD-
10-CM diagnosis codes shown in Table 6P.1f. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable
Principal Diagnosis edit. We are inviting public comments on our
proposal.
(7) Complications of Surgical and Medical Care, Not Elsewhere
Classified (T80 Through T88)
We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and
Poisoning) of the Classification Manual that fall within the range of
code categories for ``Complications of Surgical and Medical Care, Not
Elsewhere Classified'' (T80 through T88), specifically, at code
category T81--Complications of procedures, not elsewhere classified.
There is an instructional note at subcategory T81.12x--Postprocedural
septic shock, which states, ``Code first underlying infection.''
We identified two ICD-10-CM diagnosis codes in this subcategory
that, as a result of the instructional note, are not appropriate to
report as a principal diagnosis. These two ICD-10-CM codes are shown in
the table below.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
T81.12XD.................. Postprocedural septic shock, subsequent
encounter.
T81.12XS.................. Postprocedural septic shock, sequela.
------------------------------------------------------------------------
We are proposing to add the two ICD-10-CM diagnosis codes shown in
the table above to the list of codes for the Unacceptable Principal
Diagnosis edit. We are inviting public comments on our proposal.
(8) Persons Encountering Health Services for Examinations (Z00 Through
Z13)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Persons Encountering Health
Services for Examinations'' (Z00 through Z13), specifically, at code
category Z00--Encounter for general examination without complaint,
suspected or reported diagnosis. The FY 2017 ICD-10-CM Official
Guidelines for Coding and Reporting at Section I.C.21.c.16., state that
the following ICD-10-CM Z-codes/categories may only be reported as the
principal/first-listed diagnosis, except when there are multiple
encounters on the same day and the medical records for the encounters
are combined:
Z00 (Encounter for general examination without complaint,
suspected or reported diagnosis); except Z00.6 (Encounter for
examination for normal comparison and control in clinical research
program).
Therefore, diagnosis code Z00.6 should not be reported as a
principal/first-listed diagnosis. We are proposing to add ICD-10-CM
diagnosis code Z00.6 to the list of codes for the Unacceptable
Principal Diagnosis edit. We are inviting public comments on our
proposal.
To address a separate issue, we are proposing to remove the
diagnosis codes under category Z05 (Encounter for observation and
examination of newborn for suspected diseases and conditions ruled out)
from the list of codes for the Unacceptable Principal Diagnosis edit.
The FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting at
Section I.C.16.b. state the following:
Assign a code from category Z05, Observation and
evaluation of newborns and infants for suspected conditions ruled out,
to identify those instances when a healthy newborn is evaluated for a
suspected condition that is determined after study not to be present.
Do not use a code from category Z05 when the patient has identified
signs or symptoms of a suspected problem; in such cases code the sign
or symptom.
A code from category Z05 may also be assigned as a
principal or first-listed code for readmissions or encounters when the
code from category Z38 no longer applies. Codes from category Z05 are
for use only for healthy newborns and infants for which no condition
after study is found to be present.
A code from category Z05 is to be used as a secondary code
after the code from category Z38, Liveborn infants according to place
of birth and type of delivery.
Therefore, the ICD-10-CM diagnosis codes under category Z05 are
allowed to be reported as a principal diagnosis. We are proposing to
remove the 14 ICD-10-CM diagnosis codes shown in the table below from
the list of codes for the Unacceptable Principal Diagnosis edit.
------------------------------------------------------------------------
ICD-10-CM code Code description
------------------------------------------------------------------------
Z05.0..................... Observation and evaluation of newborn for
suspected cardiac condition ruled out.
Z05.1..................... Observation and evaluation of newborn for
suspected infectious condition ruled out.
Z05.2..................... Observation and evaluation of newborn for
suspected neurological condition ruled out.
Z05.3..................... Observation and evaluation of newborn for
suspected respiratory condition ruled out.
Z05.41.................... Observation and evaluation of newborn for
suspected genetic condition ruled out.
Z05.42.................... Observation and evaluation of newborn for
suspected metabolic condition ruled out.
Z05.43.................... Observation and evaluation of newborn for
suspected immunologic condition ruled out.
Z05.5..................... Observation and evaluation of newborn for
suspected gastrointestinal condition ruled
out.
Z05.6..................... Observation and evaluation of newborn for
suspected genitourinary condition ruled
out.
Z05.71.................... Observation and evaluation of newborn for
suspected skin and subcutaneous tissue
condition ruled out.
Z05.72.................... Observation and evaluation of newborn for
suspected musculoskeletal condition ruled
out.
Z05.73.................... Observation and evaluation of newborn for
suspected connective tissue condition ruled
out.
Z05.8..................... Observation and evaluation of newborn for
other specified suspected condition ruled
out.
Z05.9..................... Observation and evaluation of newborn for
unspecified suspected condition ruled out.
------------------------------------------------------------------------
[[Page 19846]]
We are inviting public comments on our proposal.
(9) Encounters for Other Specific Health Care (Z40 Through Z53)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Encounters for Other Specific
Health Care'' (Z40 through Z53), specifically, at code category Z52--
Donors of organs and tissues. The FY 2017 ICD-10-CM Official Guidelines
for Coding and Reporting at Section I.C.21.c.16. state that the
following Z-codes/categories may only be reported as the principal/
first-listed diagnosis, except when there are multiple encounters on
the same day and the medical records for the encounters are combined:
Z52 (Donors of organs and tissues); except Z52.9 (Donor of
unspecified organ or tissue).
Therefore, ICD-10-CM diagnosis code Z52.9 should not be reported as
a principal/first-listed diagnosis. We are proposing to add ICD-10-CM
diagnosis code Z52.9 to the list of codes for the Unacceptable
Principal Diagnosis edit. We are inviting public comments on our
proposal.
(10) Persons Encountering Health Services in Other Circumstances (Z69
Through Z76)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Persons Encountering Health
Services in Other Circumstances'' (Z69 through Z76), specifically, at
subcategory Z71.8--Other specified counseling. Consistent with ICD-10-
CM diagnosis codes Z71.81 (Spiritual or religious counseling) and
Z71.89 (Other specified counseling), we are proposing to add new
diagnosis code Z71.82 (Exercise counseling) to the list of codes for
the Unacceptable Principal Diagnosis edit. We refer readers to Table
6A.--New Diagnosis Codes associated with this proposed rule (which is
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html)
for the list of new ICD-10-CM diagnosis codes finalized to date. We are
inviting public comments on our proposal.
(11) Persons With Potential Health Hazards Related to Family and
Personal History and Certain Conditions Influencing Health Status (Z77
Through Z99)
We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors
Influencing Health Status) of the Classification Manual that fall
within the range of code categories for ``Persons with Potential Health
Hazards Related to Family and Personal History and Certain Conditions
Influencing Health Status'' (Z77 through Z99), specifically, at code
category Z91.8--Other specified personal risk factors, not elsewhere
classified. Consistent with ICD-10-CM diagnosis codes Z91.81 (History
of falling), Z91.82 (Personal history of military deployment), and
Z91.89 (Other specified personal risk factors, not elsewhere
classified), we are proposing to add new ICD-10-CM diagnosis codes
Z91.841 (Risk for dental caries, low), Z91.842 (Risk for dental caries,
moderate), Z91.843 (Risk for dental caries, high), and Z91.849
(Unspecified risk for dental caries) to the list of codes for the
Unacceptable Principal Diagnosis edit. We refer readers to Table 6A.--
New Diagnosis Codes associated with this proposed rule (which is
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html)
for the list of new ICD-10-CM diagnosis codes finalized to date. We are
inviting public comments on our proposal.
e. Future Enhancement
Similar to our discussion in the FY 2017 IPPS/LTCH PPS final rule
(81 FR 56843 through 56844), with the implementation of ICD-10, it is
clear that there are several new concepts in the classification.
Looking ahead to the needs and uses of coded data as the data continue
to evolve from the reporting, collection, processing, coverage, payment
and analysis aspects, we believe the need to ensure the accuracy of the
coded data becomes increasingly significant.
The purpose of the MCE is to ensure that errors and inconsistencies
in the coded data are recognized during Medicare claims processing. As
we continue to evaluate the purpose and function of the MCE with
respect to ICD-10, we encourage public input for future discussion. As
we discussed in the FY 2017 IPPS/LTCH PPS final rule, we recognize a
need to further examine the current list of edits and the definitions
of those edits. We encourage public comments on whether there are
additional concerns with the current edits, including specific edits or
language that should be removed or revised, edits that should be
combined, or new edits that should be added to assist in detecting
errors or inaccuracies in the coded data.
11. Proposed Changes to 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, for
FY 2018, 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 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. 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
[[Page 19847]]
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 in this rule.
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 with cases assigned to 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 hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
We received a request to examine a case involving the principal
procedure for excision of pituitary gland (ICD-10-PCS code 0GB00ZZ
Excision of pituitary gland, open approach) with a secondary procedure
for harvesting of a fat graft (ICD-10-PCS code 0JB80ZZ Excision of
abdomen subcutaneous tissue and fascia, open approach) to treat a
condition of pituitary adenoma (ICD-10-CM diagnosis code D35.2 (Benign
neoplasm of pituitary gland)) and the resulting sella turcica defect.
The requestor noted that when the procedure code for harvesting of the
fat graft is reported on the claim, the case currently groups to MS-
DRGs 622, 623, and 624 (Skin Grafts and Wound Debridement for
Endocrine, Nutritional, and Metabolic Disorders with MCC, with CC and
without CC/MCC, respectively). However, when the procedure code for
harvesting of the fat graft is not reported on the claim, the case
groups to MS-DRGs 614 and 615 (Adrenal and Pituitary Procedures with
CC/MCC and without CC/MCC, respectively), which appears to be a more
appropriate assignment. The requester expressed concern regarding the
procedure code for harvesting of the fat graft in the secondary
position driving the MS-DRG assignment versus the principal procedure
of the excision of pituitary gland.
We analyzed the codes provided by the requestor in the GROUPER to
determine if we could duplicate the requestor's findings. The findings
from our analysis were consistent with the requestor's findings. Our
clinical advisors reviewed this issue and agreed that it should be the
procedure code for excision of the pituitary gland that is used to
determine the MS-DRG assignment in this scenario and not the harvesting
of the fat graft procedure code.
Therefore, in this FY 2018 IPPS/LTCH PPS proposed rule, we are
proposing to move MS-DRGs 614 and 615 above MS-DRGs 622, 623, and 624
in the surgical hierarchy to enable more appropriate MS-DRG assignment
for these types of cases.
We are inviting public comments on our proposal.
12. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2018
a. Background of the CC List and the CC Exclusions List
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. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, CC, or MCC)
assignment. We refer readers to sections 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 47152 through 47171).
b. Proposed Additions and Deletions to the Diagnosis Code Severity
Levels for FY 2018
The following tables identifying the proposed additions and
deletions to the MCC severity levels list and the proposed additions
and deletions to the CC severity levels list for FY 2018 are available
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Table 6I.1--Proposed Additions to the MCC List--FY 2018;
Table 6I.2--Proposed Deletions to the MCC List--FY 2018;
Table 6J.1--Proposed Additions to the CC List--FY 2018; and
Table 6J.2--Proposed Deletions to the CC List--FY 2018.
We are inviting public comments on our proposed severity level
designations for the diagnosis codes listed in Table 6I.1. and Table
6J.1. We note that, for Table 6I.2. and Table 6J.2., the proposed
deletions are a result of code expansions. Therefore, the diagnosis
codes on these lists are no longer valid codes, effective FY 2018. For
example, diagnosis code O00.10 (Tubal pregnancy without intrauterine
pregnancy) is a current CC for FY 2017 under Version 34 of the ICD-10
MS-DRGs. Effective FY 2018, under Version 35 of the ICD-10 MS-DRGs,
this single code has been expanded into three diagnosis codes to
include laterality (left/right) and an unspecified option with the
addition of a sixth character. Therefore, diagnosis code O00.10 is
included in Table 6J.2. for deletion from the CC list because it is no
longer a valid code in FY 2018.
c. Principal Diagnosis Is Its Own CC or MCC
CMS' initial goal in developing the ICD-10 MS-DRGs was to ensure
that a patient case was assigned to the same MS-DRG, regardless of
whether the patient record was to be coded in ICD-9-CM or ICD-10. When
certain ICD-10-CM combination codes are reported as a principal
diagnosis, it implies that a CC or MCC is present. This occurs as a
result of evaluating the cluster of ICD-
[[Page 19848]]
9-CM codes that would have been coded on an ICD-9-CM record. If one of
the ICD-9-CM codes in the cluster was a CC or an MCC, the single ICD-
10-CM combination code used as a principal diagnosis also must imply
that the CC or MCC is present.
The ICD-10-CM diagnosis codes to which this logic applies are
included in Appendix J of the ICD-10 MS-DRG Version 34 Definitions
Manual (which is available via the Internet on the CMS Web site at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLfxsp0;Entries=10&DLSort=0&DLSortDir=ascending).
Appendix J includes two lists: Part 1 is the list of principal
diagnosis codes where the ICD-10-CM code is its own MCC. Part 2 is the
list of principal diagnosis codes where the ICD-10-CM code is its own
CC. Part 1 of Appendix J corresponds to Table 6L.--Principal Diagnosis
Is Its Own MCC List, and Part 2 of Appendix J corresponds to Table
6M.--Principal Diagnosis Is Its Own CC List.
We received a request to add the ICD-10-CM diagnosis codes for
acute myocardial infarction, decompensated heart failure and specified
forms of shock, which are currently designated as a CC or an MCC when
reported as a secondary diagnosis, to Table 6L.--Principal Diagnosis Is
Its Own MCC List. According to the requestor, the addition of these
codes to the list is necessary for bundled payment initiatives and so
that facilities that accept these patients in transfer have resources
to care for them.
The purpose of the Principal Diagnosis Is Its Own CC or MCC Lists
was to ensure consistent MS-DRG assignment between the ICD-9-CM and
ICD-10 MS-DRGs due to the clusters and combination codes. There are a
number of other ICD-10-CM combination codes that, due to their prior
designation as a CC or an MCC when reported as a secondary diagnosis,
are not on either of these lists. Having multiple lists for CC and MCC
diagnoses when reported as a principal and/or secondary diagnosis may
not provide an accurate representation of resource utilization for the
MS-DRGs. As discussed in further detail below, we have plans to conduct
a comprehensive review of the CC and MCC lists for FY 2019. We believe
the results of that review will help to inform the future of these
lists.
Therefore, we are not proposing to add the ICD-10-CM diagnosis
codes for acute myocardial infarction, decompensated heart failure and
specified forms of shock to Table 6L.--Principal Diagnosis Is Its Own
MCC List. In addition, we are not proposing any changes to Table 6L.--
Principal Diagnosis Is Its Own MCC List and Table 6M.--Principal
Diagnosis Is Its Own CC List. We are inviting public comments on our
proposal to maintain the existing lists of principal diagnosis codes in
Tables 6L. and 6M for FY 2018.
d. Proposed CC Exclusions List for FY 2018
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 previously indicated,
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 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; and
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. We
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541
through 50544) for detailed information regarding revisions that were
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
For FY 2018, we are proposing changes to the ICD-10 MS-DRGs Version
35 CC Exclusion List. Therefore, we have developed Table 6G.1.--
Proposed Secondary Diagnosis Order Additions to the CC Exclusions
List--FY 2018; Table 6G.2.--Proposed Principal Diagnosis Order
Additions to the CC Exclusions List--FY 2018; Table 6H.1.--Proposed
Secondary Diagnosis Order Deletions to the CC Exclusions List--FY 2018;
and Table 6H.2.--Proposed Principal Diagnosis Order Deletions to the CC
Exclusions List--FY 2018. Each of these principal diagnosis codes for
which there is a CC exclusion is shown in Table 6G.2. 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.
Beginning with discharges on or after October 1 of each year, the
indented diagnoses are not recognized by the GROUPER as valid CCs for
the asterisked principal diagnoses. Tables 6G. and 6H. associated with
this proposed rule are available via the Internet on the CMS Web site
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
To identify new, revised and deleted diagnosis and procedure codes,
for FY 2018, we have developed 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,
and Table 6F.--Revised Procedure Code Titles for this proposed rule.
These tables are not published in the Addendum to this proposed
rule but are available via the Internet on the CMS Web site at:
(https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to this proposed rule. As discussed in section II.F.15. of the
preamble of this proposed rule, the code titles are adopted as part of
the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee
process. Therefore, 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 are inviting public comments on the MDC and
MS-DRG assignments for the new
[[Page 19849]]
diagnosis and procedure codes as set forth in Table 6A.--New Diagnosis
Codes and Table 6B.--New Procedure Codes. In addition, we are inviting
public comments on the proposed severity level designations for the new
diagnosis codes as set forth in Table 6A. and the proposed O.R. status
for the new procedure codes as set forth in Table 6B.
13. Comprehensive Review of CC List for FY 2019
In the FY 2008 IPPS final rule (72 FR 47153 through 47175), we
discussed our efforts to better recognize severity of illness which
began with a comprehensive review of the CC list and, ultimately, the
implementation of the MS-DRGs. Similar to the analysis that was
performed at that time, we are providing the public with notice of our
plans to conduct a comprehensive review of the CC and MCC lists for FY
2019.
As a result of the time that has elapsed since that review and
changes to how inpatient care is currently delivered, we plan to
analyze if further refinements to these lists are warranted. For
example, over the past several years, there has been a steady increase
in the proportion of cases grouping to the MS-DRGs with an MCC severity
level than had previously occurred. Our evaluation will assist in
determining if the conditions designated as an MCC continue to
represent significant increases in resource utilization that support
the MCC designation.
We currently utilize a statistical algorithm to determine the
impact on resource use of each secondary diagnosis. Each diagnosis for
which Medicare data are available is 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 costs for each subset of cases is compared to the expected
costs for cases in that subset. The following format is used to
evaluate each diagnosis:
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Code Diagnosis Cnt1 C1 Cnt2 C2 Cnt3 C3
----------------------------------------------------------------------------------------------------------------
Count (Cnt) is the number of patients in each subset and 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 costs 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 an MCC. The C3 value
reflects a patient with at least one other secondary diagnosis that is
an MCC. A value close to 1.0 in the C1 field would suggest that the
code produces the same expected value as a non-CC diagnosis. That is,
average costs for the case are similar to the expected average costs
for that subset and the diagnosis is not expected to increase resource
usage. A higher value in the C1 (or C2 and C3) field suggests more
resource usage is associated with the diagnosis and an increased
likelihood that it is more like a CC or major CC than a non-CC. Thus, 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 example, a C1 value of 1.8
for a secondary diagnosis means that for the subset of patients who
have the secondary diagnosis and have either no other secondary
diagnosis present, or all the other secondary diagnoses present are
non-CCs, the impact on resource use of the secondary diagnoses is
greater than the expected value for a non-CC by an amount equal to 80
percent of the difference between the expected value of a CC and a non-
CC (that is, the impact on resource use of the secondary diagnosis is
closer to a CC than a non-CC).
We are inviting public comments regarding other possible ways we
can incorporate meaningful indicators of clinical severity.
14. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to MS-DRGs 981, 982, and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively); MS-DRGs 984, 985, and 986
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively); and MS-DRGs 987, 988, and
989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC, and without CC/MCC, respectively) to determine whether it
would be appropriate to change the procedures assigned among these MS-
DRGs. MS-DRGs 981 through 983, 984 through 986, and 987 through 989 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.
Under the ICD-10 MS-DRGs Version 34, MS-DRGs 984 through 986 are
assigned when one or more of the procedures described by ICD-10-PCS
codes in Table 6P.2. that is associated with this FY 2018 proposed rule
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) are performed and are unrelated to the
principal diagnosis. 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.
We refer the reader to the FY 2017 IPPS/LTCH PPS final rule (81 FR
56847 through 56848) for a discussion of the movement and redesignation
of procedure codes from MS-DRGs 984 through 986 related to the
transition of the ICD-10 MS-DRGs.
Our review of MedPAR claims data showed that there are no cases
that merited movement or should logically be reassigned from ICD-10 MS-
DRGs 984 through 986 to any of the other MDCs for FY 2018. Therefore,
for FY 2018, we are not proposing to change the procedures assigned
among these MS-DRGs. We are inviting public comments on our proposal to
maintain the current structure of these MS-DRGs.
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
[[Page 19850]]
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.
Upon review of the claims data from the December 2016 update of the FY
2016 MedPAR file, we did not find any cases that merited movement or
that should logically be assigned to any of the other MDCs. Therefore,
for FY 2018, we are not proposing 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 are
inviting public comments on our proposal to maintain the current
structure of these MS-DRGs.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also review the list of ICD-10-PCS procedures that, when in
combination with their principal diagnosis code, result in assignment
to MS-DRGs 981 through 983, 984 through 986, or 987 through 989, to
ascertain whether any of those procedures should be reassigned from one
of those three groups of MS-DRGs to another of the three groups of MS-
DRGs based on average costs 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.
Based on the results of our review of the December 2016 update of
the FY 2016 MedPAR file, we are proposing to reassign the procedure
codes currently assigned to MS-DRGs 984 through 986 (Prostatic O.R.
Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without CC/MCC, respectively) to MS-DRGs 987 through 989 (Non-extensive
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without CC/MCC, respectively). As shown in the table below, we found a
total of 1,001 cases in MS-DRGs 984 through 986 with an average length-
of-stay of 7.5 days and average costs of $16,539. In MS-DRGs 987
through 989, we found a total of 17,772 cases, with an average length
of stay of 7.5 days and average costs of $16,193.
O.R. Procedures Unrelated to Principal Diagnosis
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 984, 985 and 986 (Prostatic O.R. Procedure Unrelated to 1,001 7.5 $16,539
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively)..................................................
MS-DRGs 987, 988 and 989 (Non[dash]extensive O.R. Procedure 17,772 7.5 16,193
Unrelated to Principal Diagnosis with MCC, with CC, and without
CC/MCC, respectively)..........................................
----------------------------------------------------------------------------------------------------------------
The claims data demonstrate that it is no longer necessary to
maintain a separate set of MS-DRGs specifically for the prostatic O.R.
procedures. The average length of stay of 7.5 days is identical in both
sets of MS-DRGs and the average costs are very similar with a
difference of only $346. Our clinical advisors reviewed the data and
support movement of these 1,001 cases into the nonextensive O.R.
procedures MS-DRGs. They noted that treatment practices have shifted
since the inception of the prostatic O.R. procedures grouping and the
average costs are in alignment.
Therefore, for FY 2018, we are proposing to reassign the prostatic
O.R. procedure codes from MS-DRGs 984 through 986 to MS-DRGs 987
through 989 and to delete MS-DRGs 984, 985 and 986 because they would
no longer be needed as a result of this proposed movement. We are
inviting public comments on our proposals.
15. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
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 final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the
Committee was changed to the ICD-10 Coordination and Maintenance
Committee, effective with the March 19-20, 2014 meeting. The ICD-10
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible
for approving coding changes, and developing errata, addenda, and other
modifications to the coding systems 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 list of ICD-9-CM diagnosis and procedure codes by
fiscal year can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM
diagnosis codes included in the Tabular List and Alphabetic Index for
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index
for Procedures.
The Committee encourages participation in the previously mentioned
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
[[Page 19851]]
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 2018 at a public meeting held on September 13-14,
2016, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 13, 2016.
The Committee held its 2017 meeting on March 7-8, 2017. The
deadline for submitting comments on these code proposals was April 7,
2017. It was announced at this meeting that any new ICD-10-CM/PCS codes
for which there was consensus of public support and for which complete
tabular and indexing changes would be made by May 2017 would be
included in the October 1, 2017 update to ICD-10-CM/ICD-10-PCS. As
discussed in earlier sections of the preamble of this proposed rule,
there are new, revised, and deleted ICD-10-CM diagnosis codes and ICD-
10-PCS procedure codes that are captured in 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, and Table 6F.--Revised Procedure Code Titles for this
proposed rule, which are available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Because of the length of these tables,
they are not published in the Addendum to this proposed rule. Rather,
they are available via the Internet as discussed in section VI. of the
Addendum to this proposed rule.
Live Webcast recordings of the discussions of procedure codes at
the Committee's September 13-14, 2016 meeting and March 7-8, 2017
meeting can be obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
discussions of diagnosis codes at the September 13-14, 2016 meeting and
March 7-8, 2017 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. 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-10
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email to:
[email protected].
Questions and comments concerning the procedure codes should be
addressed to: Patricia Brooks, Co-Chairperson, ICD-10 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
Email to: [email protected].
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.
Section 503(a) of Public Law 108-173 included a requirement for
updating diagnosis and procedure 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-10 (previously 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 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. 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 diagnosis and procedure coding changes, both
tabular and index, is published on the CMS and NCHS Web sites in June
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 Meeting 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-10
(previously 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
[[Page 19852]]
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, 2017 implementation of a code at the
September 13-14, 2016 Committee meeting. Therefore, there were no new
codes implemented on April 1, 2017.
ICD-9-CM addendum and code title information is published on the
CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and
ICD-10-PCS addendum and code title information is published on the CMS
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at:
http://www.cdc.gov/nchs/icd/icd10.htm. Information on new, revised, and
deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for
publication in the Coding Clinic for ICD-10. AHA also distributes
information to publishers and software vendors.
CMS also sends copies of all ICD-10-CM and ICD-10-PCS coding
changes to its Medicare contractors for use in updating their systems
and providing education to providers.
The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore,
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.
The following chart shows the number of ICD-10-CM and ICD-10-PCS
codes and code changes since FY 2016 when ICD-10 was implemented.
Total Number of Codes and Changes in Total Number of Codes per Fiscal
Year ICD-10-CM and ICD-10-PCS Codes
------------------------------------------------------------------------
Fiscal year Number Change
------------------------------------------------------------------------
FY 2016:
ICD-10-CM......................................... 69,823 ........
ICD-10-PCS........................................ 71,974 ........
FY 2017:
ICD-10-CM......................................... 71,486 +1,663
ICD-10-PCS........................................ 75,789 +3,815
FY 2018:
ICD-10-CM......................................... 71,772 +286
ICD-10-PCS........................................ 78,299 +2,510
------------------------------------------------------------------------
As mentioned previously, the public is provided the opportunity to
comment on any requests for new diagnosis or procedure codes discussed
at the ICD-10 Coordination and Maintenance Committee meeting.
At the September 12-13, 2016 and March 7-8, 2017 Committee
meetings, we discussed any requests we had received for new ICD-10-CM
diagnosis codes and ICD-10-PCS procedure codes that were to be
implemented on October 1, 2017. We invited public comments on any code
requests discussed at the September 12-13, 2016 and March 7-8, 2017
Committee meetings for implementation as part of the October 1, 2017
update. The deadline for commenting on code proposals discussed at the
September 12-13, 2016 Committee meeting was November 13, 2016. The
deadline for commenting on code proposals discussed at the March 7-8,
2017 Committee meeting was April 7, 2017.
16. Proposed Replaced Devices Offered Without Cost or With a Credit
a. Background
In the FY 2008 IPPS final rule with comment period (72 FR 47246
through 47251), we discussed the topic of Medicare payment for devices
that are replaced without cost or where credit for a replaced device is
furnished to the hospital. We implemented a policy to reduce a
hospital's IPPS payment for certain MS-DRGs where the implantation of a
device that has been recalled determined the base MS-DRG assignment. At
that time, we specified that we will reduce a hospital's IPPS payment
for those MS-DRGs where the hospital received a credit for a replaced
device equal to 50 percent or more of the cost of the device.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through
51557), we clarified this policy to state that the policy applies if
the hospital received a credit equal to 50 percent or more of the cost
of the replacement device and issued instructions to hospitals
accordingly.
b. Proposed Changes for FY 2018
For FY 2018, we are not proposing to add any MS-DRGs to the policy
for replaced devices offered without cost or with a credit. We are
proposing to continue to include the existing MS-DRGs currently subject
to the policy as displayed in the table below.
----------------------------------------------------------------------------------------------------------------
MDC MS-DRG MS-DRG title
----------------------------------------------------------------------------------------------------------------
Pre-MDC................................... 001 Heart Transplant or Implant of Heart Assist
System with MCC.
Pre-MDC................................... 002 Heart Transplant or Implant of Heart Assist
System without MCC.
1......................................... 023 Craniotomy with Major Device Implant/Acute
Complex CNS Principal Diagnosis with MCC or
Chemo Implant.
1......................................... 024 Craniotomy with Major Device Implant/Acute
Complex CNS Principal Diagnosis without MCC.
1......................................... 025 Craniotomy & Endovascular Intracranial Procedures
with MCC.
1......................................... 026 Craniotomy & Endovascular Intracranial Procedures
with CC.
1......................................... 027 Craniotomy & Endovascular Intracranial Procedures
without CC/MCC.
1......................................... 040 Peripheral, Cranial Nerve & Other Nervous System
Procedures with MCC.
1......................................... 041 Peripheral, Cranial Nerve & Other Nervous System
Procedures with CC or Peripheral
Neurostimulator.
1......................................... 042 Peripheral, Cranial Nerve & Other Nervous System
Procedures without CC/MCC.
3......................................... 129 Major Head & Neck Procedures with CC/MCC or Major
Device.
3......................................... 130 Major Head & Neck Procedures without CC/MCC.
5......................................... 215 Other Heart Assist System Implant.
5......................................... 216 Cardiac Valve & Other Major Cardiothoracic
Procedure with Cardiac Catheterization with MCC.
5......................................... 217 Cardiac Valve & Other Major Cardiothoracic
Procedure with Cardiac Catheterization with CC.
5......................................... 218 Cardiac Valve & Other Major Cardiothoracic
Procedure with Cardiac Catheterization without
CC/MCC.
5......................................... 219 Cardiac Valve & Other Major Cardiothoracic
Procedure without Cardiac Catheterization with
MCC.
[[Page 19853]]
5......................................... 220 Cardiac Valve & Other Major Cardiothoracic
Procedure without Cardiac Catheterization with
CC.
5......................................... 221 Cardiac Valve & Other Major Cardiothoracic
Procedure without Cardiac Catheterization
without CC/MCC.
5......................................... 222 Cardiac Defibrillator Implant with Cardiac
Catheterization with AMI/Heart Failure/Shock
with MCC.
5......................................... 223 Cardiac Defibrillator Implant with Cardiac
Catheterization with AMI/Heart Failure/Shock
without MCC.
5......................................... 224 Cardiac Defibrillator Implant with Cardiac
Catheterization without AMI/Heart Failure/Shock
with MCC.
5......................................... 225 Cardiac Defibrillator Implant with Cardiac
Catheterization without AMI/Heart Failure/Shock
without MCC.
5......................................... 226 Cardiac Defibrillator Implant without Cardiac
Catheterization with MCC.
5......................................... 227 Cardiac Defibrillator Implant without Cardiac
Catheterization without MCC.
5......................................... 242 Permanent Cardiac Pacemaker Implant with MCC.
5......................................... 243 Permanent Cardiac Pacemaker Implant with CC.
5......................................... 244 Permanent Cardiac Pacemaker Implant without CC/
MCC.
5......................................... 245 AICD Generator Procedures.
5......................................... 258 Cardiac Pacemaker Device Replacement with MCC.
5......................................... 259 Cardiac Pacemaker Device Replacement without MCC.
5......................................... 260 Cardiac Pacemaker Revision Except Device
Replacement with MCC.
5......................................... 261 Cardiac Pacemaker Revision Except Device
Replacement with CC.
5......................................... 262 Cardiac Pacemaker Revision Except Device
Replacement without CC/MCC.
5......................................... 265 AICD Lead Procedures.
5......................................... 266 Endovascular Cardiac Valve Replacement with MCC.
5......................................... 267 Endovascular Cardiac Valve Replacement without
MCC.
5......................................... 268 Aortic and Heart Assist Procedures Except
Pulsation Balloon with MCC.
5......................................... 269 Aortic and Heart Assist Procedures Except
Pulsation Balloon without MCC.
5......................................... 270 Other Major Cardiovascular Procedures with MCC.
5......................................... 271 Other Major Cardiovascular Procedures with CC.
5......................................... 272 Other Major Cardiovascular Procedures without CC/
MCC.
8......................................... 461 Bilateral or Multiple Major Joint Procedures Of
Lower Extremity with MCC.
8......................................... 462 Bilateral or Multiple Major Joint Procedures of
Lower Extremity without MCC.
8......................................... 466 Revision of Hip or Knee Replacement with MCC.
8......................................... 467 Revision of Hip or Knee Replacement with CC.
8......................................... 468 Revision of Hip or Knee Replacement without CC/
MCC.
8......................................... 469 Major Joint Replacement or Reattachment of Lower
Extremity with MCC.
8......................................... 470 Major Joint Replacement or Reattachment of Lower
Extremity without MCC.
----------------------------------------------------------------------------------------------------------------
We are soliciting public comments on our proposal to continue to
include the existing MS-DRGs currently subject to the policy for
replaced devices offered without cost or with credit and to not add any
additional MS-DRGs to the policy. We note that, as discussed in section
II.F.2.b. and in section II.F.5.a. of the preamble of this proposed
rule, we are proposing to revise the titles for MS-DRG 023 and MS-DRGs
469 and 470. We refer readers to those discussions of the specific
proposed MS-DRG titles. The final list of MS-DRGs subject to the
payment policy for devices provided at no cost or with a credit for FY
2018 will be listed in the FY 2018 IPPS/LTCH PPS final rule, as well as
issued to providers through guidance and instructions in the form of a
Change Request (CR).
17. Other Policy Changes: Other Operating Room (O.R.) and Non-O.R.
Issues
a. O.R. Procedures to Non-O.R. Procedures
For this FY 2018 IPPS/LTCH PPS proposed rule, we continued our
efforts to address the recommendations for consideration that we
received in response to some of the proposals set forth in the FY 2017
IPPS/LTCH PPS proposed rule pertaining to changing the designation of
ICD-10-PCS procedure codes from O.R. procedures to non-O.R. procedures.
As we stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56871), we
received requests and recommendations for over 800 procedure codes that
we were not able to fully evaluate and finalize for FY 2017. We discuss
these requests and recommendations below.
We also are addressing separate requests that we received regarding
changing the designation of specific ICD-10-PCS procedure codes. For
each group summarized below, the detailed lists of procedure are shown
in Tables 6P.4a. through 6P.4p. (Proposed ICD-10-CM and ICD-10-PCS Code
Designations, MCE and MS-DRG Changes--FY 2018) associated with this
proposed rule (which are available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
(1) Percutaneous/Diagnostic Drainage
One commenter identified 135 ICD-10-PCS procedure codes describing
procedures involving percutaneous diagnostic and therapeutic drainage
of central nervous system, vascular and other body sites that generally
would not require the resources of an operating room and can be
performed at the bedside. The list includes procedure codes that
describe procedures involving drainage with or without placement of a
drainage device. We agree with the commenter. Therefore, we are
proposing that the 135 ICD-10-PCS procedure codes listed in Table
6P.4a. associated with this proposed rule (which is available via the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as
non-O.R. procedures. We are inviting public comments on our proposal.
(2) Percutaneous Insertion of Intraluminal or Monitoring Device
One commenter identified 28 ICD-10-PCS procedure codes describing
procedures involving the percutaneous insertion of intraluminal and
monitoring devices into central nervous system and other cardiovascular
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. We agree with the
commenter. Therefore, we are proposing that the 28 ICD-10-
[[Page 19854]]
PCS procedure codes listed in Table 6P.4b. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(3) Percutaneous Removal of Drainage, Infusion, Intraluminal or
Monitoring Device
One commenter identified 22 ICD-10-PCS procedure codes that
describe procedures involving the percutaneous removal of drainage,
infusion, intraluminal and monitoring devices from central nervous
system and other vascular body parts that generally would not require
the resources of an operating room and can be performed at the bedside.
We agree with the commenter. Therefore, we are proposing that the 22
ICD-10-PCS procedure codes listed in Table 6P.4c. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(4) External Removal of Cardiac or Neurostimulator Lead
One commenter identified four ICD-10-PCS procedure codes that
describe procedures involving the external removal of cardiac leads
from the heart and neurostimulator leads from central nervous system
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
00P6XMZ................... Removal of neurostimulator lead from
cerebral ventricle, external approach.
00PEXMZ................... Removal of neurostimulator lead from cranial
nerve, external approach.
01PYXMZ................... Removal of neurostimulator lead from
peripheral nerve, external approach.
02PAXMZ................... Removal of cardiac lead from heart, external
approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
four ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(5) Percutaneous Revision of Drainage, Infusion, Intraluminal or
Monitoring Device
One commenter identified 28 ICD-10-PCS procedure codes that
describe procedures involving the percutaneous revision of drainage,
infusion, intraluminal and monitoring devices for vascular and heart
and great vessel body parts that generally would not require the
resources of an operating room and can be performed at the bedside. We
agree with the commenter. Therefore, we are proposing that the 28 ICD-
10-PCS procedure codes listed in Table 6P.4d. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(6) Percutaneous Destruction
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving the percutaneous destruction of retina
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
085E3ZZ................... Destruction of right retina, percutaneous
approach.
085F3ZZ................... Destruction of left retina, percutaneous
approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(7) External/Diagnostic Drainage
One commenter identified 20 ICD-10-PCS procedure codes that
describe procedures involving external drainage for structures of the
eye that generally would not require the resources of an operating room
and can be performed at the bedside. We agree with the commenter.
Therefore, we are proposing that the 20 ICD-10-PCS procedure codes
listed in Table 6P.4e. associated with this proposed rule (which is
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html)
be designated as non-O.R. procedures. We are inviting public comments
on our proposal.
(8) External Extirpation
One commenter identified four ICD-10-PCS procedure codes that
describe procedures involving external extirpation of matter from eye
structures that generally would not require the resources of an
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
08C0XZZ................... Extirpation of matter from right eye,
external approach.
08C1XZZ................... Extirpation of matter from left eye,
external approach.
08CSXZZ................... Extirpation of matter from right
conjunctiva, external approach.
08CTXZZ................... Extirpation of matter from left conjunctiva,
external approach.
------------------------------------------------------------------------
[[Page 19855]]
We agree with the commenter. Therefore, we are proposing that the
four ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(9) External Removal of Radioactive Element or Synthetic Substitute
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving the external removal of radioactive or
synthetic substitutes from the eye that generally would not require the
resources of an operating room and can be performed at the bedside.
These three ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
08P0X1Z................... Removal of radioactive element from right
eye, external approach.
08P0XJZ................... Removal of synthetic substitute from right
eye, external approach.
08P1XJZ................... Removal of synthetic substitute from left
eye, external approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
three ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(10) Endoscopic/Transorifice Diagnostic Drainage
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) drainage of ear structures that generally would not
require the resources of an operating room and can be performed at the
bedside. These eight ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
09977ZX................... Drainage of right tympanic membrane, via
natural or artificial opening, diagnostic.
09978ZX................... Drainage of right tympanic membrane, via
natural or artificial opening endoscopic,
diagnostic.
09987ZX................... Drainage of left tympanic membrane, via
natural or artificial opening, diagnostic.
09988ZX................... Drainage of left tympanic membrane, via
natural or artificial opening endoscopic,
diagnostic.
099F7ZX................... Drainage of right eustachian tube, via
natural or artificial opening, diagnostic.
099F8ZX................... Drainage of right eustachian tube, via
natural or artificial opening endoscopic,
diagnostic.
099G7ZX................... Drainage of left eustachian tube, via
natural or artificial opening, diagnostic.
099G8ZX................... Drainage of left eustachian tube, via
natural or artificial opening endoscopic,
diagnostic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
eight ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(11) External Release
One commenter identified four ICD-10-PCS procedure codes that
describe procedures involving the external release of ear structures
that generally would not require the resources of an operating room and
can be performed at the bedside. These four ICD-10-PCS codes are shown
in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
09N0XZZ................... Release right external ear, external
approach.
09N1XZZ................... Release left external ear, external
approach.
09N3XZZ................... Release right external auditory canal,
external approach.
09N4XZZ................... Release left external auditory canal,
external approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
four ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(12) External Repair
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving the external repair of body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. These three ICD-10-PCS codes are shown in
the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
09QKXZZ................... Repair nose, external approach.
0CQ4XZZ................... Repair buccal mucosa, external approach.
0CQ7XZZ................... Repair tongue, external approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
three ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(13) Endoscopic/Transorifice Destruction
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving the endoscopic/transorifice destruction
of respiratory system body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These eight ICD-10-PCS codes are shown in the table below.
[[Page 19856]]
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0B538ZZ................... Destruction of right main bronchus, via
natural or artificial opening endoscopic.
0B548ZZ................... Destruction of right upper lobe bronchus,
via natural or artificial opening
endoscopic.
0B558ZZ................... Destruction of right middle lobe bronchus,
via natural or artificial opening
endoscopic.
0B568ZZ................... Destruction of right lower lobe bronchus,
via natural or artificial opening
endoscopic.
0B578ZZ................... Destruction of left main bronchus, via
natural or artificial opening endoscopic.
0B588ZZ................... Destruction of left upper lobe bronchus, via
natural or artificial opening endoscopic.
0B598ZZ................... Destruction of lingula bronchus, via natural
or artificial opening endoscopic.
0B5B8ZZ................... Destruction of left lower lobe bronchus, via
natural or artificial opening endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
eight ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(14) Endoscopic/Transorifice Drainage
One commenter identified 40 ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) drainage of respiratory system body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. We agree with the commenter. Therefore, we
are proposing that the 40 ICD-10-PCS procedure codes listed in Table
6P.4f. associated with this proposed rule (which is available via the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as
non-O.R. procedures. We are inviting public comments on our proposal.
(15) Endoscopic/Transorifice Extirpation
One commenter identified nine ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice extirpation of
matter from respiratory system body parts that generally would not
require the resources of an operating room and can be performed at the
bedside. These nine ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BCC8ZZ................... Extirpation of matter from right upper lung
lobe, via natural or artificial opening
endoscopic.
0BCD8ZZ................... Extirpation of matter from right middle lung
lobe, via natural or artificial opening
endoscopic.
0BCF8ZZ................... Extirpation of matter from right lower lung
lobe, via natural or artificial opening
endoscopic.
0BCG8ZZ................... Extirpation of matter from left upper lung
lobe, via natural or artificial opening
endoscopic.
0BCH8ZZ................... Extirpation of matter from lung lingula, via
natural or artificial opening endoscopic.
0BCJ8ZZ................... Extirpation of matter from left lower lung
lobe, via natural or artificial opening
endoscopic.
0BCK8ZZ................... Extirpation of matter from right lung, via
natural or artificial opening endoscopic.
0BCL8ZZ................... Extirpation of matter from left lung, via
natural or artificial opening endoscopic.
0BCM8ZZ................... Extirpation of matter from bilateral lungs,
via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
nine ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(16) Endoscopic/Transorifice Fragmentation
One commenter identified 16 ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice fragmentation of
respiratory system body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These 16 ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BF37ZZ................... Fragmentation in right main bronchus, via
natural or artificial opening.
0BF38ZZ................... Fragmentation in right main bronchus, via
natural or artificial opening endoscopic.
0BF47ZZ................... Fragmentation in right upper lobe bronchus,
via natural or artificial opening.
0BF48ZZ................... Fragmentation in right upper lobe bronchus,
via natural or artificial opening
endoscopic.
0BF57ZZ................... Fragmentation in right middle lobe bronchus,
via natural or artificial opening.
0BF58ZZ................... Fragmentation in right middle lobe bronchus,
via natural or artificial opening
endoscopic.
0BF67ZZ................... Fragmentation in right lower lobe bronchus,
via natural or artificial opening.
0BF68ZZ................... Fragmentation in right lower lobe bronchus,
via natural or artificial opening
endoscopic.
0BF77ZZ................... Fragmentation in left main bronchus, via
natural or artificial opening.
0BF78ZZ................... Fragmentation in left main bronchus, via
natural or artificial opening endoscopic.
0BF87ZZ................... Fragmentation in left upper lobe bronchus,
via natural or artificial opening.
0BF88ZZ................... Fragmentation in left upper lobe bronchus,
via natural or artificial opening
endoscopic.
0BF97ZZ................... Fragmentation in lingula bronchus, via
natural or artificial opening.
0BF98ZZ................... Fragmentation in lingula bronchus, via
natural or artificial opening endoscopic.
0BFB7ZZ................... Fragmentation in left lower lobe bronchus,
via natural or artificial opening.
0BFB8ZZ................... Fragmentation in left lower lobe bronchus,
via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
[[Page 19857]]
We agree with the commenter. Therefore, we are proposing that the
16 ICD-10-PCS procedure codes shown in the table above be designated as
non-O.R. procedures. We are inviting public comments on our proposal.
(17) Endoscopic/Transorifice Insertion of Intraluminal Device
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving an endoscopic/transorifice (via natural
or artificial opening) insertion of intraluminal devices into
respiratory system body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These two ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BH17DZ................... Insertion of intraluminal device into
trachea, via natural or artificial opening.
0BH18DZ................... Insertion of intraluminal device into
trachea, via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
non-O.R. procedures. We are inviting public comments on our proposal.
(18) Endoscopic/Transorifice Removal of Radioactive Element
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving the endoscopic/transorifice removal of
radioactive elements from respiratory system body parts that generally
would not require the resources of an operating room and can be
performed at the bedside. These two ICD-10-PCS codes are shown in the
table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0BPK71Z................... Removal of radioactive element from right
lung, via natural or artificial opening.
0BPK81Z................... Removal of radioactive element from right
lung, via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(19) Endoscopic/Transorifice Revision of Drainage, Infusion,
Intraluminal or Monitoring Device
One commenter identified 18 ICD-10-PCS procedure codes that
describe procedures involving the revision of drainage, infusion,
intraluminal, or monitoring devices from respiratory system body parts
that generally would not require the resources of an operating room and
can be performed at the bedside. We agree with the commenter.
Therefore, we are proposing that the 18 ICD-10-PCS procedure codes
listed in Table 6P.4g. associated with this proposed rule (which is
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html)
be designated as non-O.R. procedures. We are inviting public comments
on our proposal.
(20) Endoscopic/Transorifice Excision
One commenter identified one ICD-10-PCS procedure code that
describes the procedure involving endoscopic/transorifice (via natural
or artificial opening) excision of the digestive system body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. This code is 0DBQ8ZZ (Excision of anus,
via natural or artificial opening endoscopic. We agree with the
commenter. Therefore, we are proposing that ICD-10-PCS procedure code
0DBQ8ZZ be designated as a non-O.R. procedure. We are inviting public
comments on our proposal.
(21) Endoscopic/Transorifice Insertion
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving the endoscopic/transorifice (via natural
or artificial opening) insertion of intraluminal device into the
stomach that generally would not require the resources of an operating
room and can be performed at the bedside. These two ICD-10-PCS codes
are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0DH67DZ................... Insertion of intraluminal device into
stomach, via natural or artificial opening.
0DH68DZ................... Insertion of intraluminal device into
stomach, via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(22) Endoscopic/Transorifice Removal
One commenter identified six ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) removal of feeding devices that generally would not
require the resources of an operating room and can be performed at the
bedside. These six ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0DP07UZ................... Removal of feeding device from upper
intestinal tract, via natural or artificial
opening.
0DP08UZ................... Removal of feeding device from upper
intestinal tract, via natural or artificial
opening endoscopic.
0DP67UZ................... Removal of feeding device from stomach, via
natural or artificial opening.
0DP68UZ................... Removal of feeding device from stomach, via
natural or artificial opening endoscopic.
0DPD7UZ................... Removal of feeding device from lower
intestinal tract, via natural or artificial
opening
[[Page 19858]]
0DPD8UZ................... Removal of feeding device from lower
intestinal tract, via natural or artificial
opening endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
six ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(23) External Reposition
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving external reposition of gastrointestinal
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0DS5XZZ................... Reposition esophagus, external approach.
0DSQXZZ................... Reposition anus, external approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(24) Endoscopic/Transorifice Drainage
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) drainage of hepatobiliary system and pancreatic
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These eight ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0F9580Z................... Drainage of right hepatic duct with drainage
device, via natural or artificial opening
endoscopic.
0F958ZZ................... Drainage of right hepatic duct, via natural
or artificial opening endoscopic.
0F9680Z................... Drainage of left hepatic duct with drainage
device, via natural or artificial opening
endoscopic.
0F968ZZ................... Drainage of left hepatic duct, via natural
or artificial opening endoscopic.
0F9880Z................... Drainage of cystic duct with drainage
device, via natural or artificial opening
endoscopic.
0F988ZZ................... Drainage of cystic duct, via natural or
artificial opening endoscopic.
0F9D8ZZ................... Drainage of pancreatic duct, via natural or
artificial opening endoscopic.
0F9F8ZZ................... Drainage of accessory pancreatic duct, via
natural or artificial opening endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
eight ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(25) Endoscopic/Transorifice Fragmentation
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) fragmentation of hepatobiliary system and
pancreatic body parts that generally would not require the resources of
an operating room and can be performed at the bedside. These two ICD-
10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0FFD8ZZ................... Fragmentation in pancreatic duct, via
natural or artificial opening endoscopic.
0FFF8ZZ................... Fragmentation in accessory pancreatic duct,
via natural or artificial opening
endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(26) Percutaneous Alteration
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving percutaneous alteration of the breast
that generally would not require the resources of an operating room and
can be performed at the bedside. These three ICD-10-PCS codes are shown
in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0H0T3JZ................... Alteration of right breast with synthetic
substitute, percutaneous approach.
0H0U3JZ................... Alteration of left breast with synthetic
substitute, percutaneous approach.
0H0V3JZ................... Alteration of bilateral breast with
synthetic substitute, percutaneous
approach.
------------------------------------------------------------------------
[[Page 19859]]
We agree with the commenter. Therefore, we are proposing that the
three ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(27) External Division and Excision of Skin
One commenter identified 41 ICD-10-PCS procedure codes that
describe procedures involving external division and excision of the
skin for body parts that generally would not require the resources of
an operating room and can be performed at the bedside. We agree with
the commenter. Therefore, we are proposing that the 41 ICD-10-PCS
procedure codes listed in Table 6P.4h. associated with this proposed
rule (which is available via the Internet on the CMS Web site at:
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(28) External Excision of Breast
One commenter identified six ICD-10-PCS procedure codes that
describe procedures involving external excision of the breast that they
believed would generally not require the resources of an operating room
and can be performed at the bedside. These six ICD-10-PCS codes are
shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0HBTXZZ................... Excision of right breast, external approach.
0HBUXZZ................... Excision of left breast, external approach.
0HBVXZZ................... Excision of bilateral breast, external
approach.
0HBWXZZ................... Excision of right nipple, external approach.
0HBXXZZ................... Excision of left nipple, external approach.
0HBYXZZ................... Excision of supernumerary breast, external
approach.
------------------------------------------------------------------------
We disagree with the commenter because these procedure codes
describe various types of surgery performed on the breast or nipple
(for example, partial mastectomy) that would typically involve the use
of general anesthesia. Therefore, we are proposing that the six ICD-10-
PCS procedure codes shown in the table above remain designated as O.R.
procedures. We are inviting public comments on our proposal.
(29) Percutaneous Supplement
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving percutaneous supplement of the breast
with synthetic substitute that generally would not require the
resources of an operating room and can be performed at the bedside.
These three ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0HUT3JZ................... Supplement right breast with synthetic
substitute, percutaneous approach.
0HUU3JZ................... Supplement left breast with synthetic
substitute, percutaneous approach.
0HUV3JZ................... Supplement bilateral breast with synthetic
substitute, percutaneous approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
three ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(30) Open Drainage
One commenter identified 25 ICD-10-PCS procedure codes that
describe procedures involving open drainage of subcutaneous tissue and
fascia body parts that generally would not require the resources of an
operating room and can be performed at the bedside. The list includes
procedure codes for drainage with or without placement of a drainage
device. We agree with the commenter. Therefore, we are proposing that
the 25 ICD-10-PCS procedure codes listed in Table 6P.4i. associated
with this proposed rule (which is available via the Internet on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We are inviting public comments on our proposal.
(31) Percutaneous Drainage
One commenter identified two ICD-10-PCS procedure codes that
describe procedures involving percutaneous drainage of subcutaneous
tissue and fascia body parts that generally would not require the
resources of an operating room and can be performed at the bedside.
These two ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0J9J3ZZ................... Drainage of right hand subcutaneous tissue
and fascia, percutaneous approach.
0J9K3ZZ................... Drainage of left hand subcutaneous tissue
and fascia, percutaneous approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
two ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(32) Percutaneous Extraction
One commenter identified 22 ICD-10-PCS procedure codes that
describe procedures involving percutaneous extraction of subcutaneous
tissue and fascia body parts that generally would not require the
resources of an operating room and can be performed at the bedside. We
agree with the commenter. Therefore, we are proposing that the 22 ICD-
10-PCS procedure codes listed in Table 6P.4j. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be
[[Page 19860]]
designated as non-O.R. procedures. We are inviting public comments on
our proposal.
(33) Open Extraction
One commenter identified 22 ICD-10-PCS procedure codes that
describe procedures involving open extraction of subcutaneous tissue
and fascia body parts that the commenter believed would generally not
require the resources of an operating room and can be performed at the
bedside. We disagree with the commenter because these codes describe
procedures that utilize an open approach and are being performed on the
skin and subcutaneous tissue. Depending on the medical reason for the
open extraction, the procedures may require an O.R. setting. Therefore,
we are proposing that the 22 ICD-10-PCS procedure codes listed in Table
6P.4k. associated with this proposed rule (which is available via the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) remain designated
as O.R. procedures. We are inviting public comments on our proposal.
(34) Percutaneous and Open Repair
One commenter identified 44 ICD-10-PCS procedure codes that
describe procedures involving percutaneous and open repair of
subcutaneous tissue and fascia body parts that generally would not
require the resources of an operating room and can be performed at the
bedside. We agree with the commenter. Therefore, we are proposing that
the 44 ICD-10-PCS procedure codes listed in Table 6P.4l. associated
with this proposed rule (which is available via the Internet on the CMS
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R.
procedures. We are inviting public comments on our proposal.
(35) External Release
One commenter identified 28 ICD-10-PCS procedure codes that
describe procedures involving external release of bursa and ligament
body parts that generally would not require the resources of an
operating room and can be performed at the bedside. We agree with the
commenter. Therefore, we are proposing that the 28 ICD-10-PCS procedure
codes listed in Table 6P.4m. associated with this proposed rule (which
is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(36) External Repair
One commenter identified 135 ICD-10-PCS procedure codes that
describe procedures involving external repair of various bones and
joints. We believe that these procedures generally would not be
performed in the operating room. We are proposing that the 135 ICD-10-
PCS procedure codes listed in Table 6P.4n. associated with this
proposed rule (which is available via the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(37) External Reposition
One commenter identified 14 ICD-10-PCS procedure codes that
describe procedures involving external reposition of various bones.
These 14 ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0NS0XZZ................... Reposition skull, external approach.
0NS1XZZ................... Reposition right frontal bone, external
approach.
0NS2XZZ................... Reposition left frontal bone, external
approach.
0NS3XZZ................... Reposition right parietal bone, external
approach.
0NS4XZZ................... Reposition left parietal bone, external
approach.
0NS5XZZ................... Reposition right temporal bone, external
approach.
0NS6XZZ................... Reposition left temporal bone, external
approach.
0NS7XZZ................... Reposition right occipital bone, external
approach.
0NS8XZZ................... Reposition left occipital bone, external
approach.
0PS3XZZ................... Reposition cervical vertebra, external
approach.
0PS4XZZ................... Reposition thoracic vertebra, external
approach.
0QS0XZZ................... Reposition lumbar vertebra, external
approach.
0QS1XZZ................... Reposition sacrum, external approach.
0QSSXZZ................... Reposition coccyx, external approach.
------------------------------------------------------------------------
We believe that these procedures generally would not be performed
in the operating room. Therefore, we are proposing that the 14 ICD-10-
PCS procedure codes shown in the table above be designated as non-O.R.
procedures. We are inviting public comments on our proposal.
(38) Endoscopic/Transorifice Dilation
One commenter identified eight ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) dilation of urinary system body parts that
generally would not require the resources of an operating room and can
be performed at the bedside. These eight ICD-10-PCS codes are shown in
the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0T767ZZ................... Dilation of right ureter, via natural or
artificial opening.
0T768ZZ................... Dilation of right ureter, via natural or
artificial opening endoscopic.
0T777ZZ................... Dilation of left ureter, via natural or
artificial opening.
0T778ZZ................... Dilation of left ureter, via natural or
artificial opening endoscopic.
0T7B7DZ................... Dilation of bladder with intraluminal
device, via natural or artificial opening.
0T7B7ZZ................... Dilation of bladder, via natural or
artificial opening.
0T7B8DZ................... Dilation of bladder with intraluminal
device, via natural or artificial opening
endoscopic.
[[Page 19861]]
0T7B8ZZ................... Dilation of bladder, via natural or
artificial opening endoscopic.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
eight ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(39) Endoscopic/Transorifice Excision
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving endoscopic/transorifice (via natural or
artificial opening) excision of urinary system body parts that the
commenter believed would generally not require the resources of an
operating room and can be performed at the bedside. These three ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0TBD7ZZ................... Excision of urethra, via natural or
artificial opening.
0TBD8ZZ................... Excision of urethra, via natural or
artificial opening endoscopic.
0TBDXZZ................... Excision of urethra, external approach.
------------------------------------------------------------------------
We disagree with the commenter because, depending on the medical
reason for the excision, the procedures may require an O.R. setting.
Therefore, we are proposing that the three ICD-10-PCS procedure codes
shown in the table above remain designated as O.R. procedures. We are
inviting public comments on our proposal.
(40) External/Transorifice Repair
One commenter identified three ICD-10-PCS procedure codes that
describe procedures involving external and transorifice (via natural or
artificial opening) repair of the vagina body part that generally would
not require the resources of an operating room and can be performed at
the bedside. These three ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
0UQG7ZZ................... Repair vagina, via natural or artificial
opening.
0UQGXZZ................... Repair vagina, external approach.
0UQMXZZ................... Repair vulva, external approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that these
three ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(41) Percutaneous Transfusion
One commenter identified 20 ICD-10-PCS procedure codes that
describe procedures involving percutaneous transfusion of bone marrow
and stem cells that generally would not require the resources of an
operating room and can be performed at the bedside. We agree with the
commenter. Therefore, we are proposing that the 20 ICD-10-PCS procedure
codes listed in Table 6P.4o. associated with this proposed rule (which
is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We
are inviting public comments on our proposal.
(42) External/Percutaneous/Transorifice Introduction
One commenter identified 51 ICD-10-PCS procedure codes that
describe procedures involving external, percutaneous and transorifice
(via natural or artificial opening) introduction of substances that
generally would not require the resources of an operating room and can
be performed at the bedside. We agree with the commenter. Therefore, we
are proposing that the 51 ICD-10-PCS procedure codes listed in Table
6P.4p. associated with this proposed rule (which is available via the
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as
non-O.R. procedures. We are inviting public comments on our proposal.
(43) Percutaneous/Diagnostic and Endoscopic/Transorifice Irrigation,
Measurement and Monitoring
One commenter identified 15 ICD-10-PCS procedure codes that
describe procedures involving percutaneous/diagnostic and endoscopic/
transorifice (via natural or artificial opening) irrigation,
measurement and monitoring of structures, pressures and flow that
generally would not require the resources of an operating room and can
be performed at the bedside. These 15 ICD-10-PCS codes are shown in the
table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
3E1N38X................... Irrigation of male reproductive using
irrigating substance, percutaneous
approach, diagnostic.
3E1N38Z................... Irrigation of male reproductive using
irrigating substance, percutaneous
approach.
3E1N78X................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening, diagnostic.
3E1N78Z................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening.
3E1N88X................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening endoscopic, diagnostic.
3E1N88Z................... Irrigation of male reproductive using
irrigating substance, via natural or
artificial opening endoscopic.
4A0635Z................... Measurement of lymphatic flow, percutaneous
approach.
4A063BZ................... Measurement of lymphatic pressure,
percutaneous approach.
4A0C35Z................... Measurement of biliary flow, percutaneous
approach.
[[Page 19862]]
4A0C3BZ................... Measurement of biliary pressure,
percutaneous approach.
4A0C75Z................... Measurement of biliary flow, via natural or
artificial opening.
4A0C7BZ................... Measurement of biliary pressure, via natural
or artificial opening.
4A0C85Z................... Measurement of biliary flow, via natural or
artificial opening endoscopic.
4A1635Z................... Monitoring of lymphatic flow, percutaneous
approach.
4A163BZ................... Monitoring of lymphatic pressure,
percutaneous approach.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
15 ICD-10-PCS procedure codes shown in the table above be designated as
non-O.R. procedures. We are inviting public comments on our proposal.
(44) Imaging
One commenter identified six ICD-10-PCS procedure codes that
describe procedures involving imaging with contrast of hepatobiliary
system body parts that generally would not require the resources of an
operating room and can be performed at the bedside. These six ICD-10-
PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
BF030ZZ................... Plain radiography of gallbladder and bile
ducts using high osmolar contrast.
BF031ZZ................... Plain radiography of gallbladder and bile
ducts using low osmolar contrast.
BF03YZZ................... Plain radiography of gallbladder and bile
ducts using other contrast.
BF0C0ZZ................... Plain radiography of hepatobiliary system,
all using high osmolar contrast.
BF0C1ZZ................... Plain radiography of hepatobiliary system,
all using low osmolar contrast.
BF0CYZZ................... Plain radiography of hepatobiliary system,
all using other contrast.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
six ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
(45) Prosthetics
One commenter identified five ICD-10-PCS procedure codes that
describe procedures involving the fitting and use of prosthetics and
assistive devices that would not require the resources of an operating
room. These five ICD-10-PCS codes are shown in the table below.
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
F0DZ8ZZ................... Prosthesis device fitting.
F0DZ9EZ................... Assistive, adaptive, supportive or
protective devices device fitting using
orthosis.
F0DZ9FZ................... Assistive, adaptive, supportive or
protective devices device fitting using
assistive, adaptive, supportive or
protective equipment.
F0DZ9UZ................... Assistive, adaptive, supportive or
protective devices device fitting using
prosthesis.
F0DZ9ZZ................... Assistive, adaptive, supportive or
protective devices device fitting.
------------------------------------------------------------------------
We agree with the commenter. Therefore, we are proposing that the
five ICD-10-PCS procedure codes shown in the table above be designated
as non-O.R. procedures. We are inviting public comments on our
proposal.
b. Revision of Neurostimulator Generator
We received a request to review three ICD-10-PCS procedure codes
that describe procedures for revision of a neurostimulator generator
that are currently designated as O.R. procedures and assigned to MS-
DRGs 252, 253 and 254 (Other Vascular Procedures with MCC, with CC and
without CC/MCC, respectively). The three codes are 0JWT0MZ (Revision of
stimulator generator in trunk subcutaneous tissue and fascia, open
approach), 0JWT3MZ (Revision of stimulator generator in trunk
subcutaneous tissue and fascia, percutaneous approach), and 0JWTXMZ
(Revision of stimulator generator in trunk subcutaneous tissue and
fascia, external approach).
The requester expressed concern with the MS-DRG assignments and
noted that although these codes are used to report revision of a
carotid sinus stimulator pulse generator and appropriately assigned to
MS-DRGs 252, 253 and 254 in MDC 5 (Diseases and Disorders of the
Circulatory System), they also are very frequently used for the
revision of the more common (for example, gastric, intracranial, sacral
and spinal) neurostimulator generators that would generally not require
the resources of an operating room.
The requestor also stated that the indication for revision of a
neurostimulator generator is typically due to a complication, which
would be reflected in a complication code such as ICD-10-CM diagnosis
code T85.734A (Infection and inflammatory reaction due to implanted
electronic neurostimulator, generator, initial encounter) or T85.890A
(Other specified complication of nervous system prosthetic devices,
implants and grafts, initial encounter). Because both of these
diagnosis codes are assigned to MDC 1 (Diseases and Disorders of the
Nervous System), when either code is reported in combination with one
of the three procedure codes that describe revision of neurostimulator
generator codes (currently assigned to MDC 5), the resulting MS-DRG
assignment is to MS-DRGs 981, 982 and 983 (Extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC,
respectively).
The requestor presented the following three options for
consideration.
Reclassify the ICD-10-PCS procedure codes from O.R.
Procedures to non-O.R. procedures that affect MS-DRG assignment only in
MDC 5. The requestor stated that, under this option, the procedure
codes would continue to appropriately group to MDC 5 when representing
cases involving carotid
[[Page 19863]]
sinus stimulators and the other types of neurostimulator cases would
appropriately group to medical MS-DRGs.
Add the ICD-10-PCS procedure codes to MDC 1, such as to
MS-DRGs 040, 041 and 042 (Peripheral, Cranial Nerve and Other Nervous
System Procedures with MCC, with CC or Peripheral Neurostimulator and
without CC/MCC, respectively) under MDC 1. The requestor stated that
this option would resolve the inconsistency between a revision of a
carotid sinus stimulator generator being classified as an O.R.
procedure, while the other comparable procedures involving a revision
of a regular neurostimulator generator are not. The requestor also
stated that this option would preclude cases being assigned to MS-DRGs
981 through 983.
Stop classifying the ICD-10-PCS procedure codes as O.R.
procedures entirely. The requestor stated that, under this option, all
cases would then group to medical MS-DRGs, regardless of the type of
neurostimulator generator.
We analyzed claims data for the three revision of neurostimulator
generator procedure codes from the December 2016 update of the FY 2016
MedPAR file and identified cases under MDC 1 (Diseases and Disorders of
the Nervous System) in MS-DRGs 025, 026, and 027 (Craniotomy and
Endovascular Intracranial Procedures with MCC, with CC and without CC/
MCC, respectively); MS-DRGs 029 and 030 (Spinal Procedures with CC or
Neurostimulators and Spinal Procedures without CC/MCC), respectively);
and MS-DRGs 041 and 042 (Peripheral, Cranial Nerve and Other Nervous
System Procedures with CC or Peripheral Neurostimulator and without CC/
MCC, respectively). We also identified cases in MS-DRGs 982 and 983
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with CC and
without CC/MCC, respectively). Lastly, we identified cases under MDC 5
(Diseases and Disorders of the Circulatory System) in MS-DRGs 252, 253
and 254 (Other Vascular Procedures with MCC, with CC and without CC/
MCC, respectively). Our findings are shown in the table below.
MS-DRGs for Revision of Neurostimulator Generator
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 025--All cases........................................... 18,442 9.1 $29,984
MS-DRG 025--Cases with revision of neurostimulator generator.... 1 12.0 73,716
MS-DRG 026--All cases........................................... 8,415 5.6 21,557
MS-DRG 026--Cases with revision of neurostimulator generator.... 1 6.0 4,537
MS-DRG 027--All cases........................................... 10,089 2.9 17,320
MS-DRG 027--Cases with revision of neurostimulator generator.... 4 1.8 13,906
MS-DRG 029--All cases........................................... 3,192 5.9 23,145
MS-DRG 029--Cases with revision of neurostimulator generator.... 6 3.5 32,799
MS-DRG 030--All cases........................................... 1,933 2.9 14,901
MS-DRG 030--Cases with revision of neurostimulator generator.... 11 2.2 18,294
MS-DRG 041--All cases........................................... 5,154 5.5 16,633
MS-DRG 041--Cases with revision of neurostimulator generator.... 1 1.0 14,145
MS-DRG 042--All cases........................................... 2,099 3.2 13,725
MS-DRG 042--Cases with revision of neurostimulator generator.... 2 2.0 28,587
MS-DRG 982--All cases........................................... 15,216 6.6 17,341
MS-DRG 982--Cases with revision of neurostimulator generator.... 11 3.0 15,336
MS-DRG 983--All cases........................................... 3,508 3.2 11,627
MS-DRG 983--Cases with revision of neurostimulator generator.... 9 4.2 19,951
MS-DRG 252--All cases........................................... 33,817 7.6 23,384
MS-DRG 252--Cases with revision of neurostimulator generator.... 1 7.0 18,740
MS-DRG 253--All cases........................................... 27,456 5.5 18,519
MS-DRG 253--Cases with revision of neurostimulator generator.... 7 2.4 19,078
MS-DRG 254--All cases........................................... 13,036 2.9 13,253
MS-DRG 254--Cases with revision of neurostimulator generator.... 3 3.0 11,981
----------------------------------------------------------------------------------------------------------------
As shown in the table above, the overall volume of cases reporting
revision of neurostimulator generator is low, with a total of only 57
cases found across all of the MS-DRGs reviewed. The average length of
stay for these cases reporting revision of neurostimulator generators
is, in most cases, consistent with the average length of stay for all
cases in the respective MS-DRG, with the majority having an average
length of stay below the average length of stay of all cases in the
respective MS-DRG. Finally, the average costs for cases reporting
revision of neurostimulator generator reflect a wide range, with a low
of $4,537 in MS-DRG 026 to a high of $73,716 in MS-DRG 025. It is clear
that, for MS-DRG 025 where the average costs of all cases were $29,984
and the average costs of the one case reporting revision of a
neurostimulator generator was $73,716, this is an atypical case. It is
also clear from the data that there were other procedures reported on
the claims where a procedure code for a revision of a neurostimulator
generator was assigned due to the various MS-DRG assignments.
After review of the claims data and discussion with our clinical
advisors, we agree with and support the requestor's first option--to
reclassify the three ICD-10-PCS procedure codes for revision of
neurostimulator generators from O.R. procedures to non-O.R. procedures
that affect the assignment for MS-DRGs 252, 253 and 254 to account for
the subset of patients undergoing revision of a carotid sinus
neurostimulator generator specifically. In cases where one of the more
common (for example, gastric, intracranial, sacral and spinal)
neurostimulator generators are undergoing revision, in the absence of
another O.R. procedure, these cases would group to a medical MS-DRG. We
are inviting public comments on our proposal.
c. External Repair of Hymen
We received a request to examine ICD-10-PCS procedure code 0UQKXZZ
(Repair Hymen, External Approach). This procedure code is currently
designated as an O.R. procedure in MS-DRGs 746 and 747 (Vagina, Cervix
and Vulva Procedures with CC/MCC and without CC/MCC, respectively)
under
[[Page 19864]]
MDC 13. The requestor provided examples and expressed concern that
procedure code 0UQKXZZ was assigned to MS-DRG 987 (Non-Extensive O.R.
Procedures Unrelated to Principal Diagnosis with MCC) when reported on
a maternal delivery claim. The requestor noted that when a similar code
was reported with an external approach (for example, procedure code
0UQMXZZ (Repair vulva, external approach)), the case was appropriately
assigned to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis).
The requestor stated that the physician documentation was simply more
specific to the location of the repair and this should not affect
assignment to one of the MS-DRGs for vaginal delivery.
We reviewed claims data involving the examples provided by the
requestor involving ICD-10-PCS procedure code 0UQKXZZ (Repair hymen,
external approach). Our clinical advisors agree with the requestor that
reporting of this procedure code should not affect assignment to one of
the MS-DRGs for vaginal delivery. As discussed earlier in section
II.F.15.a. of the preamble of this proposed rule, we are proposing to
change the designation for a number of procedure codes from O.R.
procedures to non-O.R. procedures. Included in that proposal are ICD-
10-PCS procedure codes 0UQGXZZ (Repair vagina, external approach) and
0UQMXZZ (Repair vulva, external approach). Consistent with the change
in designation for these procedure codes, we also are proposing to
designate ICD-10-PCS procedure code 0UQKXZZ (Repair hymen, external
approach) as a non-O.R. procedure. The procedure by itself would
generally not require the resources of an operating room. If the
procedure is performed following a vaginal delivery, it is the vaginal
delivery procedure code 10E0XZZ (Delivery of products of conception)
that determines the MS-DRG assignment because this code is designated
as a non-O.R. procedure affecting the MS-DRG.
Therefore, we are proposing to change the designation of ICD-10-PCS
procedure code 0UQKXZZ (Repair hymen, external approach) to a non-O.R.
procedure. This redesignation will enable more appropriate MS-DRG
assignment for these cases by eliminating erroneous assignment to MS-
DRGs 987 through 989. We are inviting public comments on our proposal.
d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases and
Disorders, Poorly Differentiated Neoplasms)
Under MDC 17 (Myeloproliferative Diseases and Disorders, Poorly
Differentiated Neoplasms), there are 11 surgical MS-DRGs. Of these 11
surgical MS-DRGs, there are 5 MS-DRGs containing GROUPER logic that
includes ICD-10-PCS procedure codes designated as O.R. procedures as
well as non-O.R. procedures that affect the MS-DRG. These five MS-DRGs
are MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute Leukemia with
Other O.R. Procedure with MCC, with CC and without CC/MCC,
respectively) and MS-DRGs 829 and 830 (Myeloproliferative Disorders or
Poorly Differentiated Neoplasms with Other O.R. Procedure with CC/MCC
and without CC/MCC, respectively). We refer the reader to the ICD-10
Version 34 MS-DRG Definitions Manual which is available via the
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the
complete list of ICD-10-PCS procedure codes assigned to these five MS-
DRGs under MDC 17.
We reviewed the list of 244 ICD-10-PCS non-O.R. procedure codes
currently assigned to these 5 MS-DRGs. Of these 244 procedure codes, we
determined that 55 of the procedure codes do not warrant being
designated as non-O.R. procedures that affect these MS-DRGs because
they describe procedures that would generally not require a greater
intensity of resources for facilities to manage the cases included in
the definition (logic) of these MS-DRGs. Therefore, we are proposing
that the 55 ICD-10-PCS procedure codes listed in Table 6P.3c.
associated with this proposed rule (which is available via the Internet
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be removed from the logic
for MS-DRGs 823, 824, 825, 829 and 830 as non-O.R. procedures affecting
the MS-DRG. We also are proposing to revise the titles for these five
MS-DRGs by deleting the reference to ``O.R.'' in the title.
Specifically, we are proposing to revise the titles for MS-DRGs 823,
824, and 825 to ``Lymphoma and Non-Acute Leukemia with Other Procedure
with MCC, with CC and without CC/MCC'', respectively and we are
proposing to revise the titles for MS-DRGs 829 and 830 to
``Myeloproliferative Disorders or Poorly Differentiated Neoplasms with
Other Procedure with CC/MCC and without CC/MCC'', respectively. We are
inviting public comments on our proposals.
G. Recalibration of the Proposed FY 2018 MS-DRG Relative Weights
1. Data Sources for Developing the Proposed Relative Weights
In developing the proposed FY 2018 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 2016 MedPAR data used in this proposed rule include
discharges occurring on October 1, 2015, through September 30, 2016,
based on bills received by CMS through December 31, 2016, from all
hospitals subject to the IPPS and short-term, acute care hospitals in
Maryland (which at that time were under a waiver from the IPPS). The FY
2016 MedPAR file used in calculating the proposed relative weights
includes data for approximately 9,607,103 Medicare discharges from IPPS
providers. Discharges for Medicare beneficiaries enrolled in a Medicare
Advantage managed care plan are excluded from this analysis. These
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on
the claim record is equal to ``1'' or when the MedPAR DRG payment
field, which represents the total payment for the claim, is equal to
the MedPAR ``Indirect Medical Education (IME)'' payment field,
indicating that the claim was an ``IME only'' claim submitted by a
teaching hospital on behalf of a beneficiary enrolled in a Medicare
Advantage managed care plan. In addition, the December 31, 2016 update
of the FY 2016 MedPAR file complies with version 5010 of the X12 HIPAA
Transaction and Code Set Standards, and includes a variable called
``claim type.'' Claim type ``60'' indicates that the claim was an
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,''
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME
claims, and HMO no-pay claims. Therefore, the calculation of the
proposed relative weights for FY 2018 also excludes claims with claim
type values not equal to ``60.'' The data exclude CAHs, including
hospitals that subsequently became CAHs after the period from which the
data were taken. We note that the proposed FY 2018 relative weights are
based on the ICD-
[[Page 19865]]
10-CM diagnoses and ICD-10-PCS procedure codes from the FY 2016 MedPAR
claims data, grouped through the ICD-10 version of the proposed FY 2018
GROUPER (Version 35).
The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the HCRIS.
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS
fiscal year. Specifically, we used cost report data from the December
31, 2016 update of the FY 2015 HCRIS for calculating the proposed FY
2018 cost-based relative weights.
2. Methodology for Calculation of the Proposed Relative Weights
As we explain in section II.E.2. of the preamble of this proposed
rule, we calculated the proposed FY 2018 relative weights based on 19
CCRs, as we did for FY 2017. The methodology we are proposing to use to
calculate the FY 2018 MS-DRG cost-based relative weights based on
claims data in the FY 2016 MedPAR file and data from the FY 2015
Medicare cost reports is as follows. We note that we have provided
additional precision in our description of the methodology for FY 2018.
To the extent possible, all the claims were regrouped
using the proposed FY 2018 MS-DRG classifications discussed in sections
II.B. and II.F. of the preamble of this proposed rule.
The transplant cases that were used to establish the
proposed 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 2016 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 $30.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
implantable devices charges, supplies and 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 and blood products charges, anesthesia charges, cardiac
catheterization charges, CT scan charges, and MRI charges were also
deleted.
At least 92.2 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric 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), 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 HAC cases are likely to be higher as well.
Therefore, 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 an ``N'' or a ``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.
In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013
and subsequent fiscal years, we finalized a policy to treat hospitals
that participate in the Bundled Payments for Care Improvement (BPCI)
initiative the same as prior fiscal years for the IPPS payment modeling
and ratesetting process without regard to hospitals' participation
within these bundled payment models (that is, as if hospitals were not
participating in those models under the BPCI initiative). The BPCI
initiative, developed under the authority of section 3021 of the
Affordable Care Act (codified at section 1115A of the Act), is
comprised of four broadly defined models of care, which link payments
for multiple services beneficiaries receive during an episode of care.
Under the BPCI initiative, organizations enter into payment
arrangements that include financial and performance accountability for
episodes of care. For FY 2018, we are are proposing to continue to
include all applicable data from subsection (d) hospitals participating
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in the BPCI initiative in our ratesetting
process. For additional information on
[[Page 19866]]
the BPCI initiative, we refer readers to the CMS' Center for Medicare
and Medicaid Innovation's Web site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the
preamble of the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through
53343).
The charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in proposed area wage
levels, IME and DSH payments, and for hospitals located in Alaska and
Hawaii, the applicable proposed 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
proposed 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 19 cost groups so that each MS-DRG had 19
standardized charge totals. Statistical outliers were then removed.
These charges were then adjusted to cost by applying the proposed
national average CCRs developed from the FY 2015 cost report data.
The 19 cost centers that we used in the proposed relative weight
calculation are shown in the following table. The table shows the lines
on the cost report and the corresponding revenue codes that we used to
create the proposed 19 national cost center CCRs. If stakeholders have
comments about the groupings in this table, we may consider those
comments as we finalize our policy.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cost from HCRIS Charges from HCRIS Medicare charges from
Revenue codes (Worksheet C, Part 1, (Worksheet C, Part 1, HCRIS (Worksheet D-
Cost center group name (19 MedPAR charge contained in Cost report line Column 5 and line Column 6 & 7 and line 3, Column & line
total) field MedPAR charge description number) Form CMS-2552- number) Form CMS-2552- number) Form CMS-2552-
field 10 10 10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Routine Days................. Private Room 011X and 014X... Adults & C_1_C5_30 C_1_C6_30 D3_HOS_C2_30
Charges. Pediatrics
(General
Routine Care).
Semi-Private 012X, 013X and
Room Charges. 016X-0''CCRs>>X.
Ward Charges.... 015X............
Intensive Days............... Intensive Care 020X............ Intensive Care C_1_C5_31 C_1_C6_31 D3_HOS_C2_31
Charges. Unit.
Coronary Care 021X............ Coronary Care C_1_C5_32 C_1_C6_32 D3_HOS_C2_32
Charges. Unit.
Burn Intensive C_1_C5_33 C_1_C6_33 D3_HOS_C2_33
Care Unit.
Surgical C_1_C5_34 C_1_C6_34 D3_HOS_C2_34
Intensive Care
Unit.
Other Special C_1_C5_35 C_1_C6_35 D3_HOS_C2_35
Care Unit.
Drugs........................ Pharmacy Charges 025X, 026X and Intravenous C_1_C5_64 C_1_C6_64 D3_HOS_C2_64
063X. Therapy.
C_1_C7_64 .....................
Drugs Charged to C_1_C5_73 C_1_C6_73 D3_HOS_C2_73
Patient.
C_1_C7_73
Supplies and Equipment....... Medical/Surgical 0270, 0271, Medical Supplies C_1_C5_71 C_1_C6_71 D3_HOS_C2_71
Supply Charges. 0272, 0273, Charged to
0274, 0277, Patients.
0279, and 0621,
0622, 0623.
C_1_C7_71
Durable Medical 0290, 0291, 0292 DME-Rented...... C_1_C5_96 C_1_C6_96 D3_HOS_C2_96
Equipment and 0294-0299.
Charges.
C_1_C7_96
Used Durable 0293............ DME-Sold........ C_1_C5_97 C_1_C6_97 D3_HOS_C2_97
Medical Charges.
C_1_C7_97 .....................
Implantable Devices.......... ................ 0275, 0276, Implantable C_1_C5_72 C_1_C6_72 D3_HOS_C2_72
0278, 0624. Devices Charged
to Patients.
C_1_C7_72
Therapy Services............. Physical Therapy 042X............ Physical Therapy C_1_C5_66 C_1_C6_66 D3_HOS_C2_66
Charges.
C_1_C7_66
Occupational 043X............ Occupational C_1_C5_67 C_1_C6_67 D3_HOS_C2_67
Therapy Charges. Therapy.
C_1_C7_67
Speech Pathology 044X and 047X... Speech Pathology C_1_C5_68 C_1_C6_68 D3_HOS_C2_68
Charges.
C_1_C7_68
Inhalation Therapy........... Inhalation 041X and 046X... Respiratory C_1_C5_65 C_1_C6_65 D3_HOS_C2_65
Therapy Charges. Therapy.
C_1_C7_65
Operating Room............... Operating Room 036X............ Operating Room.. C_1_C5_50 C_1_C6_50 D3_HOS_C2_50
Charges.
C_1_C7_50
071X Recovery Room C_1_C5_51 C_1_C6_51 D3_HOS_C2_51
C_1_C7_51
Labor & Delivery............. Operating Room 072X Delivery Room C_1_C5_52 C_1_C6_52 D3_HOS_C2_52
Charges and Labor Room
C_1_C7_52
Anesthesia................... Anesthesia 037X Anesthesiology C_1_C5_53 C_1_C6_53 D3_HOS_C2_53
Charges
C_1_C7_53
Cardiology................... Cardiology 048X and 073X Electrocardiolog C_1_C5_69 C_1_C6_69 D3_HOS_C2_69
Charges y
C_1_C7_69
[[Page 19867]]
Cardiac Catheterization...... 0481 Cardiac C_1_C5_59 C_1_C6_59 D3_HOS_C2_59
Catheterization
C_1_C7_59
Laboratory................... Laboratory 030X, 031X, and Laboratory C_1_C5_60 C_1_C6_60 D3_HOS_C2_60
Charges 075X
C_1_C7_60
PBP Clinic C_1_C5_61 C_1_C6_61 D3_HOS_C2_61
Laboratory
Services
C_1_C7_61
074X, 086X Electroencephalo C_1_C5_70 C_1_C6_70 D3_HOS_C2_70
graphy
C_1_C7_70
Radiology.................... Radiology 032X, 040X Radiology--Diagn C_1_C5_54 C_1_C6_54 D3_HOS_C2_54
Charges ostic
C_1_C7_54
028x, 0331, Radiology--Thera C_1_C5_55 C_1_C6_55 D3_HOS_C2_55
0332, 0333, peutic
0335, 0339,
0342
0343 and 344 Radioisotope C_1_C5_56 C_1_C6_56 D3_HOS_C2_56
C_1_C7_56
Computed Tomography (CT) Scan CT Scan Charges 035X Computed C_1_C5_57 C_1_C6_57 D3_HOS_C2_57
Tomography (CT)
Scan
C_1_C7_57
Magnetic Resonance Imaging MRI Charges 061X Magnetic C_1_C5_58 C_1_C6_58 D3_HOS_C2_58
(MRI). Resonance
Imaging (MRI)
C_1_C7_58
Emergency Room............... Emergency Room 045x Emergency C_1_C5_91 C_1_C6_91 D3_HOS_C2_91
Charges
C_1_C7_91
Blood and Blood Products..... Blood Charges 038x Whole Blood & C_1_C5_62 C_1_C6_62 D3_HOS_C2_62
Packed Red
Blood Cells
C_1_C7_62
Blood Storage/ 039x Blood Storing, C_1_C5_63 C_1_C6_63 D3_HOS_C2_63
Processing Processing, &
Transfusing
C_1_C7_63
Other Services............... Other Service 0002-0099, 022X,
Charge 023X,
024X,052X,053X
055X-060X, 064X-
070X, 076X-
078X, 090X-095X
and 099X
Renal Dialysis 0800X Renal Dialysis C_1_C5_74 C_1_C6_74 D3_HOS_C2_74
ESRD Revenue 080X and 082X- C_1_C7_74
Setting Charges 088X
Home Program C_1_C5_94 C_1_C6_94 D3_HOS_C2_94
Dialysis
C_1_C7_94
Outpatient 049X ASC (Non C_1_C5_75 C_1_C6_75 D3_HOS_C2_75
Service Charges Distinct Part)
Lithotripsy 079X C_1_C7_75
Charge
Other Ancillary C_1_C5_76 C_1_C6_76 D3_HOS_C2_76
C_1_C7_76
Clinic Visit 051X Clinic C_1_C5_90 C_1_C6_90 D3_HOS_C2_90
Charges
C_1_C7_90
Observation beds C_1_C5_92.01 C_1_C6_92.01 D3_HOS_C2_92.01
C_1_C7_92.01
Professional 096X, 097X, and Other Outpatient C_1_C5_93 C_1_C6_93 D3_HOS_C2_93
Fees Charges 098X Services
C_1_C7_93
Ambulance 054X Ambulance C_1_C5_95 C_1_C6_95 D3_HOS_C2_95
Charges
C_1_C7_95
Rural Health C_1_C5_88 C_1_C6_88 D3_HOS_C2_88
Clinic
C_1_C7_88
FQHC C_1_C5_89 C_1_C6_89 D3_HOS_C2_89
C_1_C7_89
--------------------------------------------------------------------------------------------------------------------------------------------------------
3. Development of Proposed National Average CCRs
We developed the proposed national average CCRs as follows:
Using the FY 2015 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 because we include 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
[[Page 19868]]
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-3 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-3. 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 19 cost centers by the corresponding national average CCR, we
summed the 19 ``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 proposed relative weight.
The proposed FY 2018 cost-based relative weights were then
normalized by a proposed adjustment factor of 1.736047 so that the
average case weight after recalibration was equal to the average case
weight before recalibration. The proposed 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 proposed 19 national average CCRs for FY 2018 are as follows:
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days............................................ 0.449
Intensive Days.......................................... 0.375
Drugs................................................... 0.197
Supplies & Equipment.................................... 0.300
Implantable Devices..................................... 0.327
Therapy Services........................................ 0.314
Laboratory.............................................. 0.116
Operating Room.......................................... 0.186
Cardiology.............................................. 0.108
Cardiac Catheterization................................. 0.115
Radiology............................................... 0.149
MRIs.................................................... 0.077
CT Scans................................................ 0.037
Emergency Room.......................................... 0.166
Blood and Blood Products................................ 0.309
Other Services.......................................... 0.352
Labor & Delivery........................................ 0.363
Inhalation Therapy...................................... 0.163
Anesthesia.............................................. 0.080
------------------------------------------------------------------------
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. We are proposing to use that same case
threshold in recalibrating the MS-DRG relative weights for FY 2018.
Using data from the FY 2016 MedPAR file, there were 10 MS-DRGs that
contain fewer than 10 cases. For FY 2018, because we do not have
sufficient MedPAR data to set accurate and stable cost relative weights
for these low-volume MS-DRGs, we are proposing to compute proposed
relative weights for the low-volume MS-DRGs by adjusting their final FY
2017 relative weights by the percentage change in the average weight of
the cases in other MS-DRGs. The crosswalk table is shown:
------------------------------------------------------------------------
Low[dash]volume MS-DRG MS-DRG title Crosswalk to MS-DRG
------------------------------------------------------------------------
016................... Autologous bone Final FY 2017 relative
marrow transplant w weight (adjusted by
CC/MCC. percent change in
average weight of the
cases in other MS-DRGs).
017................... Autologous bone Final FY 2017 relative
marrow transplant w/ weight (adjusted by
o CC/MCC. percent change in
average weight of the
cases in other MS-DRGs).
789................... Neonates, Died or Final FY 2017 relative
Transferred to weight (adjusted by
Another Acute Care percent change in
Facility. average weight of the
cases in other MS-DRGs).
790................... Extreme Immaturity or Final FY 2017 relative
Respiratory Distress weight (adjusted by
Syndrome, Neonate. percent change in
average weight of the
cases in other MS-DRGs).
791................... Prematurity with Final FY 2017 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
792................... Prematurity without Final FY 2017 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
793................... Full-Term Neonate Final FY 2017 relative
with Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
794................... Neonate with Other Final FY 2017 relative
Significant Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
795................... Normal Newborn....... Final FY 2017 relative
weight (adjusted by
percent change in
average weight of the
cases in other MS-DRGs).
------------------------------------------------------------------------
We are inviting public comments on our proposals.
H. Proposed Add-On Payments for New Services and Technologies for FY
2018
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 discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
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
[[Page 19869]]
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. Below we highlight some of the major statutory and
regulatory provisions relevant to the new technology add-on payment
criteria, as well as other information. For a complete discussion on
the new technology add-on payment criteria, we refer readers to the FY
2012 IPPS/LTCH PPS final rule (76 FR 51572 through 51574).
Under the first criterion, as reflected in Sec. 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. We note
that 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 or clearance, 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 or cleared by FDA and has been on the market for more than
2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43813 through 43814), we established criteria for evaluating whether a
new technology is substantially similar to an existing technology,
specifically: (1) Whether a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) whether a
product is assigned to the same or a different MS-DRG; and (3) 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. If
a technology meets all three of these criteria, it would be considered
substantially similar to an existing technology and would not be
considered ``new'' for purposes of new technology add-on payments. For
a detailed discussion of the criteria for substantial similarity, we
refer readers to the FY 2006 IPPS final rule (70 FR 47351 through
47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through
43814).
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 discharges involving the new medical service or technology must be
assessed for adequacy. Under the cost criterion, consistent with the
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, 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.
Table 10 that was released with the FY 2017 IPPS/LTCH PPS final rule
contains the final thresholds that we used to evaluate applications for
new medical service and new technology add-on payments for FY 2018. We
refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Tables.html to download and
view Table 10.
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 Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims
information that providers submit with applications for new medical
service and new technology add-on payments. We refer readers to the FY
2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on
this issue.
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 more detailed 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 or medical
service (if the estimated costs for the case including the new
technology or medical service 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, the additional Medicare payment is limited to
the full MS-DRG payment plus 50 percent of the estimated costs of the
new technology or new medical service.
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 longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We amended Sec. 412.87(c) to specify that all applicants
for new technology add-on payments must have FDA approval or clearance
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 and medical services
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 Center for
Clinical Standards and Quality (CCSQ) and the Director of the Center
for Medicare
[[Page 19870]]
(CM), who is also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local Medicare Administrative
Contractors (MACs) (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.
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 2010 and is available on
the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical services
or 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
[email protected].
We note that applicants for add-on payments for new medical
services or technologies for FY 2019 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 the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical
services or technologies under review before the publication of the
proposed rule for FY 2019, the CMS Web site also will post the tracking
forms completed by each applicant.
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 2018 prior
to publication of the FY 2018 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on November 9, 2016 (81 FR 78814), and
held a town hall meeting at the CMS Headquarters Office in Baltimore,
MD, on February 14, 2017. In the announcement notice for the meeting,
we stated that the opinions and presentations 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 2018 new medical service and technology add-on payment
applications before the publication of the FY 2018 IPPS/LTCH PPS
proposed rule.
Approximately 66 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We also live-streamed the town hall meeting and posted
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=9niqfxXe4oA&t=217s. We considered each applicant's presentation
made at the town hall meeting, as well as written comments submitted on
the applications that were received by the due date of February 24,
2017, in our evaluation of the new technology add-on payment
applications for FY 2018 in this proposed rule.
In response to the published notice and the February 14, 2017 New
Technology Town Hall meeting, we received written comments regarding
the applications for FY 2018 new technology add-on payments. We note
that we do not summarize comments that are unrelated to the
``substantial clinical improvement'' criterion. As explained above and
in the Federal Register notice announcing the New Technology Town Hall
meeting (81 FR78814 through 78816), the purpose of the meeting was
specifically to discuss the substantial clinical improvement criterion
in regard to pending new technology add-on payment applications for FY
2018. Therefore, we are not summarizing these comments in this proposed
rule. We summarize below a general comment that does not relate to a
specific application for FY 2018 new technology add-on payments. We
also summarize comments regarding individual applications, or, if
applicable, indicate that there were no comments received in section
II.H.5. of the preamble of this proposed rule at the end of each
discussion of the individual applications.
[[Page 19871]]
Comment: One commenter recommended that CMS: (1) Prohibit local
MACs from denying coverage and add-on payments for new medical services
or technologies approved by the Secretary; and (2) broaden the criteria
applied in making substantial clinical improvement determinations to
require, in addition to existing criteria, that the Secretary consider
whether the new technology or medical service meets one or more of the
following criteria: (a) Results in a reduction of the length of a
hospital stay; (b) improves patient quality of life; (c) creates long-
term clinical efficiencies in treatment; (d) addresses patient-centered
objectives as defined by the Secretary; or (e) meets such other
criteria as the Secretary may specify.
Response: We appreciate the commenter's comments and will consider
them in future rulemaking.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and
Technologies
As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49434), the
ICD-10-PCS includes a new section containing the new Section ``X''
codes, which began being used with discharges occurring on or after
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section
``X'' codes will be handled in the same manner as the decisions for all
of the other ICD-10-PCS code changes. That is, proposals to create,
delete, or revise Section ``X'' codes under the ICD-10-PCS structure
will be referred to the ICD-10 Coordination and Maintenance Committee.
In addition, several of the new medical services and technologies that
have been, or may be, approved for new technology add-on payments may
now, and in the future, be assigned a Section ``X'' code within the
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS Section ``X'' codes.
We encourage providers to view the material provided on ICD-10-PCS
Section ``X'' codes.
4. Proposal To Revise the Reference to an ICD-9-CM Code in Sec.
412.87(b)(2) of the Regulations
The existing regulations under Sec. 412.87(b)(2) state 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 service or technology (depending on
when a new code is assigned and data on the new service or technology
become available for DRG recalibration). After CMS has recalibrated the
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 of this section.
As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49454),
HIPAA covered entities are required, as of October 1, 2015, to use the
ICD-10 coding system (ICD-10-PCS codes for procedures and ICD-10-CM
codes for diagnoses), instead of the ICD-9-CM coding system, to report
diagnoses and procedures for Medicare hospital inpatient services
provided to Medicare beneficiaries as classified under the MS-DRG
system and paid for under the IPPS. The language in Sec. 412.87(b)(2)
only references an ``ICD-9-CM code.'' Therefore, we are proposing to
revise the regulations at Sec. 412.87(b)(2) to replace the term ``ICD-
9-CM code'' with the term ``inpatient hospital code,'' as defined in
section 1886(d)(5)(K)(iii) of the Act. Section 1886(d)(5)(K)(iii) of
the Act defines an ``inpatient hospital code'' as any code that is used
with respect to inpatient hospital services for which payment may be
made under this subsection of the Act and includes an alphanumeric code
issued under the International Classification of Diseases, 9th
Revision, Clinical Modification (``ICD-9-CM'') and its subsequent
revisions. We are inviting public comments on our proposal.
5. Proposed FY 2018 Status of Technologies Approved for FY 2017 Add-On
Payments
a. CardioMEMSTM HF (Heart Failure) Monitoring System
CardioMEMS, Inc. submitted an application for new technology add-on
payments for FY 2015 for the CardioMEMSTM HF (Heart Failure)
Monitoring System, which is an implantable hemodynamic monitoring
system comprised of an implantable sensor/monitor placed in the distal
pulmonary artery. Pulmonary artery hemodynamic monitoring is used in
the management of heart failure. The CardioMEMSTM HF
Monitoring System measures multiple pulmonary artery pressure
parameters for an ambulatory patient to measure and transmit data via a
wireless sensor to a secure Web site.
The CardioMEMSTM HF Monitoring System utilizes
radiofrequency (RF) energy to power the sensor and to measure pulmonary
artery (PA) pressure and consists of three components: An Implantable
Sensor with Delivery Catheter, an External Electronics Unit, and a
Pulmonary Artery Pressure Database. The system provides the physician
with the patient's PA pressure waveform (including systolic, diastolic,
and mean pressures) as well as heart rate. The sensor is permanently
implanted in the distal pulmonary artery using transcatheter techniques
in the catheterization laboratory where it is calibrated using a Swan-
Ganz catheter. PA pressures are transmitted by the patient at home in a
supine position on a padded antenna, pushing one button which records
an 18-second continuous waveform. The data also can be recorded from
the hospital, physician's office, or clinic.
The hemodynamic data, including a detailed waveform, are
transmitted to a secure Web site that serves as the Pulmonary Artery
Pressure Database, so that information regarding PA pressure is
available to the physician or nurse at any time via the Internet.
Interpretation of trend data allows the clinician to make adjustments
to therapy and can be used along with heart failure signs and symptoms
to adjust medications.
The applicant received FDA approval on May 28, 2014. After
evaluation of the newness, costs, and substantial clinical improvement
criteria for new technology add-on payments for the
CardioMEMSTM HF Monitoring System and consideration of the
public comments we received in response to the FY 2015 IPPS/LTCH PPS
proposed rule, we approved the CardioMEMSTM HF Monitoring
System for new technology add-on payments for FY 2015 (79 FR 49940).
Cases involving the CardioMEMSTM HF Monitoring System that
are eligible for new technology add-on payments are identified by
either ICD-10-PCS procedure code 02HQ30Z (Insertion of pressure sensor
monitoring device into right pulmonary artery, percutaneous approach)
or ICD-10-PCS procedure code 02HR30Z (Insertion of pressure sensor
monitoring device into left pulmonary artery, percutaneous approach).
With the new technology add-on payment application, the applicant
stated that the total operating cost of the CardioMEMSTM HF
Monitoring System is $17,750. Under Sec. 412.88(a)(2), we limit new
technology add-on payments 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 new technology add-on
payment for a case involving the CardioMEMSTM HF Monitoring
System is $8,875. We refer the reader to the FY 2015 IPPS/LTCH PPS
final rule (79 FR 49937) for complete details on the
CardioMEMSTM HF Monitoring System.
[[Page 19872]]
Our policy is 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 inpatient hospital code assigned to
the new service or technology. Our practice has been to begin and end
new technology add-on payments on the basis of a fiscal year, and we
have generally followed a guideline that uses a 6-month window before
and after the start of the fiscal year to determine whether to extend
the new technology add-on payment for an additional 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 onto the U.S. market
occurs in the latter half of the fiscal year (70 FR 47362).
With regard to the newness criterion for the
CardioMEMSTM HF Monitoring System, we considered the
beginning of the newness period to commence when the
CardioMEMSTM HF Monitoring System was approved by the FDA on
May 28, 2014. The 3-year anniversary date of the entry of the
CardioMEMSTM HF Monitoring System onto the U.S. market (May
28, 2017) will occur prior to the beginning of FY 2018. Therefore, we
are proposing to discontinue new technology add-on payments for this
technology for FY 2018. We are inviting public comments on this
proposal.
b. Defitelio[supreg] (Defibrotide)
Jazz Pharmaceuticals submitted an application for new technology
add-on payments for FY 2017 for defibrotide (Defitelio[supreg]), a
treatment for patients diagnosed with hepatic veno-occlusive disease
(VOD) with evidence of multiorgan dysfunction. VOD, also known as
sinusoidal obstruction syndrome (SOS), is a potentially life-
threatening complication of hematopoietic stem cell transplantation
(HSCT), with an incidence rate of 8 percent to 15 percent. Diagnoses of
VOD range in severity from what has been classically defined as a
disease limited to the liver (mild) and reversible, to a severe
syndrome associated with multi-organ dysfunction or failure and death.
Patients treated with HSCT who develop VOD with multi-organ failure
face an immediate risk of death, with a mortality rate of more than 80
percent when only supportive care is used. The applicant asserted that
Defitelio[supreg] improves the survival rate of patients diagnosed with
VOD with multi-organ failure by 23 percent.
Defitelio[supreg] was granted Orphan Drug Designation for the
treatment of VOD in 2003 and for the prevention of VOD in 2007. It has
been available to patients as an investigational drug through an
expanded access program since 2007. The applicant's New Drug
Application (NDA) for Defitelio[supreg] received FDA approval on March
30, 2016. The applicant confirmed that Defitelio[supreg] was not
available on the U.S. market as of the FDA NDA approval date of March
30, 2016. According to the applicant, commercial packaging could not be
completed until the label for Defitelio[supreg] was finalized with FDA
approval, and that commercial shipments of Defitelio[supreg] to
hospitals and treatment centers began on April 4, 2016. Therefore, we
agreed that, based on this information, the newness period for
Defitelio[supreg] begins on April 4, 2016, the date of its first
commercial availability.
The applicant received unique ICD-10-PCS procedure codes to
describe the use of Defitelio[supreg] that became effective October 1,
2016. The approved procedure codes are XW03392 (Introduction of
defibrotide sodium anticoagulant into peripheral vein, percutaneous
approach) and XW04392 (Introduction of defibrotide sodium anticoagulant
into central vein, percutaneous approach).
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
Defitelio[supreg] and consideration of the public comments we received
in response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved
Defitelio[supreg] for new technology add-on payments for FY 2017 (81 FR
56906). With the new technology add-on payment application, the
applicant estimated that the average Medicare beneficiary would require
a dosage of 25 mg/kg/day for a minimum of 21 days of treatment. The
recommended dose is 6.25 mg/kg given as a 2-hour intravenous infusion
every 6 hours. Dosing should be based on a patient's baseline body
weight, which is assumed to be 70 kg for an average adult patient. All
vials contain 200 mg at a cost of $825 per vial. Therefore, we
determined that cases involving the use of the Defitelio[supreg]
technology would incur an average cost per case of $151,800 (70 kg
adult x 25 mg/kg/day x 21 days = 36,750 mg per patient/200 mg vial =
184 vials per patient x $825 per vial = $151,800). Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
50 percent of the average cost of the technology or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum new technology add-on payment amount for a case involving the
use of Defitelio[supreg] is $75,900.
Because the 3-year anniversary date of the entry of
Defitelio[supreg] onto the U.S. market will occur after FY 2018 (April
4, 2019), we are proposing to continue new technology add-on payments
for this technology for FY 2018. The maximum payment for a case
involving Defitelio[supreg] would remain at $75,900 for FY 2018. We are
inviting public comments on our proposal to continue new technology
add-on payments for Defitelio[supreg].
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis (Gore IBE
Device)
W. L. Gore and Associates, Inc. submitted an application for new
technology add-on payments for the GORE[supreg] EXCLUDER[supreg] Iliac
Branch Endoprosthesis (GORE IBE device) for FY 2017. The device
consists of two components: The Iliac Branch Component (IBC) and the
Internal Iliac Component (IIC). The applicant indicated that each
endoprosthesis is pre-mounted on a customized delivery and deployment
system allowing for controlled endovascular delivery via bilateral
femoral access. According to the applicant, the device is designed to
be used in conjunction with the GORE[supreg] EXCLUDER[supreg] AAA
Endoprosthesis for the treatment of patients requiring repair of common
iliac or aortoiliac aneurysms. When deployed, the GORE IBE device
excludes the common iliac aneurysm from systemic blood flow, while
preserving blood flow in the external and internal iliac arteries.
With regard to the newness criterion, the applicant received pre-
market FDA approval of the GORE IBE device on February 29, 2016. The
applicant submitted a request for an unique ICD-10-PCS procedure code
and was granted approval for the following procedure codes to describe
to use of this technology: 04VC0EZ (Restriction of right common iliac
artery with branched or fenestrated intraluminal device, one or two
arteries, open approach); 04VC0FZ (Restriction of right common iliac
artery with branched or fenestrated intraluminal device, three or more
arteries, open approach); 04VC3EZ (Restriction of right common iliac
artery with branched or fenestrated intraluminal device, one or two
arteries, percutaneous approach); 04VC3FZ (Restriction of right common
iliac artery with branched or fenestrated intraluminal device, three or
more arteries, percutaneous approach); 04VC4EZ (Restriction of right
common iliac artery with branched or fenestrated intraluminal device,
one or two arteries, percutaneous approach); 04VC4FZ (Restriction of
right common iliac artery with branched or fenestrated intraluminal
device, three or more, arteries, percutaneous endoscopic, approach);
04VD0EZ (Restriction of left
[[Page 19873]]
common iliac artery with branched or fenestrated intraluminal device,
one or two arteries, open approach); 04VD0FZ (Restriction of left
common iliac artery with branched or fenestrated, intraluminal device,
three or more arteries, open approach); 04VD3EZ (Restriction of left
common iliac artery with branched or fenestrated intraluminal device,
one or two arteries, percutaneous approach); 04VD3FZ (Restriction of
left common iliac artery with branched or fenestrated intraluminal
device, three or more arteries, percutaneous approach); 04VD4EZ
(Restriction of left common iliac artery with branched or fenestrated
intraluminal device, one or two arteries, percutaneous endoscopic
approach); and 04VD4FZ (Restriction of left common iliac artery with
branched or fenestrated intraluminal device, three or more arteries,
percutaneous endoscopic approach). These new ICD-10-PCS procedure codes
became effective on October 1, 2016.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the GORE
IBE device and consideration of the public comments we received in
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved the
GORE IBE device for new technology add-on payments for FY 2017 (81 FR
56909). With the new technology add-on payment application, the
applicant indicated that the total operating cost of the GORE IBE
device is $10,500. Under Sec. 412.88(a)(2), we limit new technology
add-on payments 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 new technology add-on payment for a
case involving the GORE IBE device is $5,250.
With regard to the newness criterion for the GORE IBE device, we
considered the beginning of the newness period to commence when the
GORE IBE device received FDA approval on February 29, 2016. Because the
3-year anniversary date of the entry of the GORE IBE device onto the
U.S. market will occur after FY 2018 (February 28, 2019), we are
proposing to continue new technology add-on payments for this
technology for FY 2018. The maximum payment for a case involving the
GORE IBE device would remain at $5,250 for FY 2018. We are inviting
public comments on our proposal to continue new technology add-on
payments for the GORE IBE device.
d. Praxbind[supreg] Idarucizumab
Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application
for new technology add-on payments for FY 2017 for Praxbind[supreg]
Idarucizumab (Idarucizumab), a product developed as an antidote to
reverse the effects of PRADAXAR (Dabigatran), which is also
manufactured by Boehringer Ingelheim Pharmaceuticals, Inc.
Dabigatran is an oral direct thrombin inhibitor currently indicated
to: (1) Reduce the risk of stroke and systemic embolism in patients who
have been diagnosed with nonvalvular atrial fibrillation (NVAF); (2)
treat deep venous thrombosis (DVT) and pulmonary embolism (PE) in
patients who have been administered a parenteral anticoagulant for 5 to
10 days; and (3) reduce the risk of recurrence of DVT and PE in
patients who have been previously diagnosed with NVAF. Currently,
unlike the anticoagulant Warfarin, there is no specific way to reverse
the anticoagulant effect of Dabigatran in the event of a major bleeding
episode. Idarucizumab is a humanized fragment antigen binding (Fab)
molecule, which specifically binds to Dabigatran to deactivate the
anticoagulant effect, thereby allowing thrombin to act in blood clot
formation. The applicant stated that Idarucizumab represents a new
pharmacologic approach to neutralizing the specific anticoagulant
effect of Dabigatran in emergency situations.
Idarucizumab was approved by the FDA on October 16, 2015. Based on
the FDA indication for Idarucizumab, the product can be used in the
treatment of patients who have been diagnosed with NVAF and
administered Dabigatran to reverse life-threatening bleeding events, or
who require emergency surgery or medical procedures and rapid reversal
of the anticoagulant effects of Dabigatran is necessary and desired.
The applicant received unique ICD-10-PCS procedure codes that
became effective October 1, 2016, to describe the use of this
technology. The approved procedure codes are XW03331 (Introduction of
Idarucizumab, Dabigatran reversal agent into peripheral vein,
percutaneous approach, New Technology Group 1) and XW04331
(Introduction of Idarucizumab, Dabigatran reversal agent into central
vein, percutaneous approach, New Technology Group 1).
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
Idarucizumab and consideration of the public comments we received in
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved
Idarucizumab for new technology add-on payments for FY 2017 (81 FR
56897). With the new technology add-on payment application, the
applicant indicated that the total operating cost of Idarucizumab is
$3,500. Under Sec. 412.88(a)(2), we limit new technology add-on
payments to the lesser of 50 percent of the average cost of the
technology or 50 percent of the costs in excess of the MS-DRG payment
for the case. As a result, the maximum new technology add-on payment
for a case involving Idarucizumab is $1,750.
With regard to the newness criterion for Idarucizumab, we
considered the beginning of the newness period to commence when
Idarucizumab was approved by the FDA on October 16, 2015. Because the
3-year anniversary date of the entry of Idarucizumab onto the U.S.
market will occur after FY 2018 (October 15, 2018), we are proposing to
continue new technology add-on payments for this technology for FY
2018. The maximum payment for a case involving Idarucizumab would
remain at $1,750 for FY 2018. We are inviting public comments on our
proposal to continue new technology add-on payments for Idarucizumab.
e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and
In.PACTTM AdmiralTM Paclitaxel Coated
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
Two manufacturers, CR Bard Inc. and Medtronic, submitted
applications for new technology add-on payments for FY 2016 for
LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous Transluminal
Angioplasty (PTA) Catheter (LUTONIX[supreg]) and IN.PACTTM
AdmiralTM Paclitaxel Coated Percutaneous Transluminal
Angioplasty (PTA) Balloon Catheter (IN.PACTTM
AdmiralTM), respectively. Both of these technologies are
drug-coated balloon angioplasty treatments for patients diagnosed with
peripheral artery disease (PAD). Typical treatments for patients with
PAD include angioplasty, stenting, atherectomy and vascular bypass
surgery. PAD most commonly occurs in the femoropopliteal segment of the
peripheral arteries, is associated with significant levels of morbidity
and impairment in quality of life, and requires treatment to reduce
symptoms and prevent or treat ischemic events.\1\
[[Page 19874]]
Treatment options for symptomatic PAD include noninvasive treatment
such as medication and life-style modification (for example, exercise
programs, diet, and smoking cessation) and invasive options, which
include endovascular treatment and surgical bypass. The 2013 American
College of Cardiology and American Heart Association (ACC/AHA)
guidelines for the management of PAD recommend endovascular therapy as
the first-line treatment for femoropopliteal artery lesions in patients
suffering from claudication (Class I, Level A recommendation).\2\
---------------------------------------------------------------------------
\1\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzwalder U,
Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U., Local
delivery of paclitaxel to inhibit restenosis during angioplasty of
the leg, N Engl J Med 2008, 358: 689-99.
\2\ Anderson JL, Halperin JL, Albert NM, Bozkurt B, Brindis RG,
Curtis LH, DeMets D, Guyton RA, Hochman JS, Kovacs RJ, Ohman EM,
Pressler SJ, Sellke FW, Shen WK., Management of patients with
peripheral artery disease (compilation of 2005 and 2011 ACCF/AHA
guideline recommendations): A report of the American College of
Cardiology Foundation/American Heart Association Task Force on
Practice Guidelines, J Am Coll Cardiol 2013, 61:1555-70. Available
at: http://dx.doi.org/10.1016/j.jacc.2013.01.004.
---------------------------------------------------------------------------
According to both applicants, LUTONIX[supreg] and
IN.PACTTM AdmiralTM are the first drug coated
balloons that can be used for treatment of patients who are diagnosed
with PAD. In the FY 2016 IPPS/LTCH PPS final rule, we stated that
because cases eligible for the two devices would group to the same MS-
DRGs and we believe that these devices are substantially similar to
each other (that is, they are intended to treat the same or similar
disease in the same or similar patient population and are purposed to
achieve the same therapeutic outcome using the same or similar
mechanism of action), we evaluated both technologies as one application
for new technology add-on payments under the IPPS. The applicants
submitted separate cost and clinical data, and we reviewed and
discussed each set of data separately. However, we made one
determination regarding new technology add-on payments that applied to
both devices. We believe that this is consistent with our policy
statements in the past regarding substantial similarity. Specifically,
we have noted that approval of new technology add-on payments would
extend to all technologies that are substantially similar (66 FR
46915), and we believe that continuing our current practice of
extending a new technology add-on payment without a further application
from the manufacturer of the competing product or a specific finding on
cost and clinical improvement if we make a finding of substantial
similarity among two products is the better policy because we avoid--
Creating manufacturer-specific codes for substantially
similar products;
Requiring different manufacturers of substantially similar
products from having to submit separate new technology add-on payment
applications;
Having to compare the merits of competing technologies on
the basis of substantial clinical improvement; and
Bestowing an advantage to the first applicant representing
a particular new technology to receive approval (70 FR 47351).
CR Bard, Inc. received FDA approval for LUTONIX[supreg] on October
9, 2014. Commercial sales in the U.S. market began on October 10, 2014.
Medtronic received FDA approval for IN.PACTTM
AdmiralTM on December 30, 2014. Commercial sales in the U.S.
market began on January 29, 2015.
In accordance with our policy, we stated in the FY 2016 IPPS\LTCH
final rule (80 FR 49463) that we believe it is appropriate to use the
earliest market availability date submitted as the beginning of the
newness period. Accordingly, for both devices, we stated that the
beginning of the newness period will be October 10, 2014.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
LUTONIX[supreg] and IN.PACTTM AdmiralTM
technologies and consideration of the public comments we received in
response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved the
LUTONIX[supreg] and IN.PACTTM AdmiralTM
technologies for new technology add-on payments for FY 2016 (80 FR
49469). Cases involving the LUTONIX[supreg] and IN.PACTTM
AdmiralTM technologies that are eligible for new technology
add-on payments are identified using one of the ICD-10-PCS procedure
codes in the following table:
------------------------------------------------------------------------
ICD-10-PCS code Code description
------------------------------------------------------------------------
047K041................... Dilation of right femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047K0D1................... Dilation of right femoral artery with
intraluminal device using drug-coated
balloon, open approach.
047K0Z1................... Dilation of right femoral artery using drug-
coated balloon, open approach.
047K341................... Dilation of right femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047K3D1................... Dilation of right femoral artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047K3Z1................... Dilation of right femoral artery using drug-
coated balloon, percutaneous approach.
047K441................... Dilation of right femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047K4D1................... Dilation of right femoral artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047K4Z1................... Dilation of right femoral artery using drug-
coated balloon, percutaneous endoscopic
approach.
047L041................... Dilation of left femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047L0D1................... Dilation of left femoral artery with
intraluminal device using drug-coated
balloon, open approach.
047L0Z1................... Dilation of left femoral artery using drug-
coated balloon, open approach.
047L341................... Dilation of left femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047L3D1................... Dilation of left femoral artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047L3Z1................... Dilation of left femoral artery using drug-
coated balloon, percutaneous approach.
047L441................... Dilation of left femoral artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047L4D1................... Dilation of left femoral artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047L4Z1................... Dilation of left femoral artery using drug-
coated balloon, percutaneous endoscopic
approach.
047M041................... Dilation of right popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047M0D1................... Dilation of right popliteal artery with
intraluminal device using drug-coated
balloon, open approach.
047M0Z1................... Dilation of right popliteal artery using
drug-coated balloon, open approach.
047M341................... Dilation of right popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047M3D1................... Dilation of right popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047M3Z1................... Dilation of right popliteal artery using
drug-coated balloon, percutaneous approach.
047M441................... Dilation of right popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047M4D1................... Dilation of right popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
[[Page 19875]]
047M4Z1................... Dilation of right popliteal artery using
drug-coated balloon, percutaneous
endoscopic approach.
047N041................... Dilation of left popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, open approach.
047N0D1................... Dilation of left popliteal artery with
intraluminal device using drug-coated
balloon, open approach.
047N0Z1................... Dilation of left popliteal artery using drug-
coated balloon, open approach.
047N341................... Dilation of left popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous approach.
047N3D1................... Dilation of left popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous approach.
047N3Z1................... Dilation of left popliteal artery using drug-
coated balloon, percutaneous approach.
047N441................... Dilation of left popliteal artery with drug-
eluting intraluminal device using drug-
coated balloon, percutaneous endoscopic
approach.
047N4D1................... Dilation of left popliteal artery with
intraluminal device using drug-coated
balloon, percutaneous endoscopic approach.
047N4Z1................... Dilation of left popliteal artery using drug-
coated balloon, percutaneous endoscopic
approach.
------------------------------------------------------------------------
As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49469),
each of the applicants submitted operating costs for its DCB. The
manufacturer of the LUTONIX[supreg] stated that a mean of 1.37 drug-
coated balloons was used during the LEVANT 2 clinical trial. The
acquisition price for the hospital will be $1,900 per drug-coated
balloon, or $2,603 per case (1.37 x $1,900). The applicant projected
that approximately 8,875 cases will involve use of the LUTONIX[supreg]
for FY 2016. The manufacturer for the IN.PACTTM
AdmiralTM stated that a mean of 1.4 drug-coated balloons was
used during the IN.PACTTM AdmiralTM DCB arm. The
acquisition price for the hospital will be $1,350 per drug-coated
balloon, or $1,890 per case (1.4 x $1,350). The applicant projected
that approximately 26,000 cases will involve use of the
IN.PACTTM AdmiralTM for FY 2016.
For FY 2016, we based the new technology add-on payment for cases
involving these technologies on the weighted average cost of the two
DCBs described by the ICD-10-PCS procedure codes listed above (which
are not manufacturer specific). Because ICD-10 codes are not
manufacturer specific, we cannot set one new technology add-on payment
amount for IN.PACTTM AdmiralTM and a different
new technology add-on payment amount for LUTONIX[supreg]; both
technologies will be captured by using the same ICD-10-PCS procedure
code. As such, we stated that we believe that the use of a weighted
average of the cost of the standard DCBs based on the projected number
of cases involving each technology to determine the maximum new
technology add-on payment would be most appropriate. To compute the
weighted cost average, we summed the total number of projected cases
for each of the applicants, which equaled 34,875 cases (26,000 plus
8,875). We then divided the number of projected cases for each of the
applicants by the total number of cases, which resulted in the
following case-weighted percentages: 25 percent for the LUTONIX[supreg]
and 75 percent for the IN.PACTTM AdmiralTM. We
then multiplied the cost per case for the manufacturer specific DCB by
the case-weighted percentage (0.25 * $2,603 = $662.41 for
LUTONIX[supreg] and 0.75 * $1,890 = $1,409.03 for the
IN.PACTTM AdmiralTM). This resulted in a case-
weighted average cost of $2,071.45 for DCBs. Under Sec. 412.88(a)(2),
we limit new technology add-on payments 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 payment for a
case involving the LUTONIX[supreg] or IN.PACTTM
AdmiralTM DCBs is $1,035.72.
With regard to the newness criterion for the LUTONIX[supreg] and
IN.PACTTM AdmiralTM technologies, we considered
the beginning of the newness period to commence when LUTONIX[supreg]
gained entry onto the U.S. market on October 10, 2014. As discussed
previously in this section, in general, we extend new technology add-on
payments for an additional year only if the 3-year anniversary date of
the product's entry onto the U.S. market occurs in the latter half of
the upcoming fiscal year. Because the 3-year anniversary date of the
entry of LUTONIX[supreg] onto the U.S. market (October 10, 2017) will
occur in the first half of FY 2018, we are proposing to discontinue new
technology add-on payments for both the LUTONIX[supreg] and
IN.PACTTM AdmiralTM technologies for FY 2018. We
are inviting public comments on this proposal.
f. MAGEC[supreg] Spinal Bracing and Distraction System (MAGEC[supreg]
Spine)
Ellipse Technologies, Inc. submitted an application for new
technology add-on payments for FY 2017 for the MAGEC[supreg] Spine.
According to the applicant, the MAGEC[supreg] Spine has been developed
for use in the treatment of children diagnosed with severe spinal
deformities, such as scoliosis. The system can be used in the treatment
of skeletally immature patients less than 10 years of age who have been
diagnosed with severe progressive spinal deformities associated with or
at risk of Thoracic Insufficiency Syndrome (TIS).
The MAGEC[supreg] Spine consists of a (spinal growth) rod that can
be lengthened through the use of magnets that are controlled by an
external remote controller (ERC). The rod(s) can be implanted into
children as young as 2 years of age. According to the applicant, use of
the MAGEC[supreg] Spine has proven to be successfully used in the
treatment of patients diagnosed with scoliosis who have not been
responsive to other treatments.
The MAGEC[supreg] Spine initially received FDA clearance for use of
the predicate device, which used a Harrington Rod on February 27, 2014.
The applicant verified that, due to manufacturing delays, the
MAGEC[supreg] Spine was not available for implant until April 1, 2014.
Specifically, the complete MAGEC[supreg] Spine system was produced and
available for shipment for the first implant on April 1, 2014.
Therefore, the newness period for the MAGEC[supreg] Spine began on
April 1, 2014. Subsequent FDA clearance was granted for use of the
modified device, which uses a shorter 70 mm rod on September 18, 2014.
After minor modification of the product, the MAGEC[supreg] Spine
received FDA clearances on March 24, 2015, and May 29, 2015,
respectively.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
MAGEC[supreg] Spine and consideration of the public comments we
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we
approved the MAGEC[supreg] Spine for new technology add-on payments for
FY 2017 (81 FR 56891). Cases involving the MAGEC[supreg] Spine that are
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XNS0032 (Reposition of lumbar vertebra using
magnetically controlled growth rod(s), open approach); XNS0432
(Reposition of lumbar vertebra using magnetically controlled growth
[[Page 19876]]
rod(s), percutaneous endoscopic approach); XNS3032 (Reposition of
cervical vertebra using magnetically controlled growth rod(s), open
approach); XNS3432 (Reposition of cervical vertebra using magnetically
controlled growth rod(s), percutaneous endoscopic approach); XNS4032
(Reposition of thoracic vertebra using magnetically controlled growth
rod(s), open approach); and XNS4432 (Reposition of thoracic vertebra
using magnetically controlled growth rod(s).
With the new technology add-on payment application, the applicant
stated that the total operating cost of the MAGEC[supreg] Spine was
$17,500 for a single rod and $35,000 for a dual rod. It is historical
practice for CMS to make the new technology add-on payment based on the
average cost of the technology and not the maximum. For example, in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53358), we approved new
technology add-on payments for DIFICIDTM based on the
average dosage of 6.2 days, rather than the maximum 10-day dosage. The
applicant noted that 20 percent of cases use a single rod, while 80
percent of cases use a dual rod. As a result, the weighted average cost
for a single and dual MAGEC[supreg] Spine is $31,500 (((0.2 * $17,500)
+ (0.8 * $35,000))). Under Sec. 412.88(a)(2), we limit new technology
add-on payments 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 new technology add-on payment for a
case involving the MAGEC[supreg] Spine is $15,750. We refer the reader
to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56888) for complete
details on the MAGEC[supreg] Spine.
With regard to the newness criterion for the MAGEC[supreg] Spine,
we considered the beginning of the newness period to commence when the
MAGEC[supreg] Spine was produced and available for shipment for the
first implant on April 1, 2014. As discussed previously in this
section, in general, we extend new technology add-on payments for an
additional year only if the 3-year anniversary date of the product's
entry onto the U.S. market occurs in the latter half of the upcoming
fiscal year. Because the 3-year anniversary date of the entry of the
MAGEC[supreg] Spine onto the U.S. market (April 1, 2017) will occur
prior to the beginning of FY 2018, we are proposing to discontinue new
technology add-on payments for this technology for FY 2018. We are
inviting public comments on this proposal.
g. Vistogard\TM\ (Uridine Triacetate)
BTG International Inc., submitted an application for new technology
add-on payments for the VistogardTM for FY 2017.
VistogardTM was developed as an antidote to Fluorouracil
toxicity.
Chemotherapeutic agent 5-fluorouracil (5-FU) is used to treat
specific solid tumors. It acts upon deoxyribonucleic acid (DNA) and
ribonucleic acid (RNA) in the body, as uracil is a naturally occurring
building block for genetic material. Fluorouracil is a fluorinated
pyrimidine. As a chemotherapy agent, Fluorouracil is absorbed by cells
and causes the cell to metabolize into byproducts that are toxic and
used to destroy cancerous cells. According to the applicant, the
byproducts fluorodoxyuridine monophosphate (F-dUMP) and floxuridine
triphosphate (FUTP) are believed to do the following: (1) Reduce DNA
synthesis; (2) lead to DNA fragmentation; and (3) disrupt RNA
synthesis. Fluorouracil is used to treat a variety of solid tumors such
as colorectal, head and neck, breast, and ovarian cancer. With
different tumor treatments, different dosages, and different dosing
schedules, there is a risk for toxicity in these patients. Patients may
suffer from fluorouracil toxicity/death if 5-FU is delivered in slight
excess or at faster infusion rates than prescribed. The cause of
overdose can happen for a variety of reasons including: Pump
malfunction, incorrect pump programming or miscalculated doses, and
accidental or intentional ingestion.
VistogardTM is an antidote to Fluorouracil toxicity and
is a prodrug of uridine. Once the drug is metabolized into uridine, it
competes with the toxic byproduct FUTP in binding to RNA, thereby
reducing the impact FUTP has on cell death.
The VistogardTM received FDA approval on December 11,
2015. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56910), we stated
that we agreed with the manufacturer that, due to the delay in
availability, the date the newness period begins for
VistogardTM is March 2, 2016, instead of December 11, 2015.
The applicant noted that the VistogardTM is the first
FDA-approved antidote used to reverse fluorouracil toxicity. The
applicant received a unique ICD-10-PCS procedure code that became
effective October 1, 2016, to describe the use of this technology. The
approved procedure code is XW0DX82 (Introduction of Uridine Triacetate
into Mouth and Pharynx, External Approach, New Technology Group 2).
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
VistogardTM and consideration of the public comments we
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we
approved VistogardTM for new technology add-on payments for
FY 2017 (81 FR 56912). With the new technology add-on payment
application, the applicant stated that the total operating cost of
VistogardTM is $75,000. Under Sec. 412.88(a)(2), we limit
new technology add-on payments to the lesser of 50 percent of the
average cost of the technology or 50 percent of the costs in excess of
the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for a case involving VistogardTM
is $37,500.
As noted previously, with regard to the newness criterion for the
VistogardTM, we considered the beginning of the newness
period to commence on March 2, 2016. Because the 3-year anniversary
date of the entry of the VistogardTM onto the U.S. market
(March 2, 2019) will occur after FY 2018, we are proposing to continue
new technology add-on payments for this technology for FY 2018. The
maximum payment for a case involving the VistogardTM would
remain at $37,500 for FY 2018. We are inviting public comments on our
proposal to continue new technology add-on payments for the
VistogardTM.
h. Blinatumomab (BLINCYTO[supreg])
Amgen, Inc. submitted an application for new technology add-on
payments for FY 2016 for Blinatumomab (BLINCYTO[supreg]), a bi-specific
T-cell engager (BiTE) used for the treatment of Philadelphia
chromosome-negative (Ph-) relapsed or refractory (R/R) B-cell precursor
acute-lymphoblastic leukemia (ALL), which is a rare aggressive cancer
of the blood and bone marrow. Approximately 6,050 individuals are
diagnosed with Ph- R/R B-cell precursor ALL in the United States each
year, and approximately 2,400 individuals, representing 30 percent of
all new cases, are adults. Ph- R/R B-cell precursor ALL occurs when
there are malignant transformations of B-cell or T-cell progenitor
cells, causing an accumulation of lymphoblasts in the blood, bone
marrow, and occasionally throughout the body. As a bi-specific T-cell
engager, the BLINCYTO[supreg] technology attaches to a molecule on the
surface of the tumorous cell, as well as to a molecule on the surface
of normal T-cells, bringing the two into closer proximity and allowing
the normal T-cell to destroy the tumorous cell.
[[Page 19877]]
Specifically, the BLINCYTO[supreg] technology attaches to a cell
identified as CD19, which is present on all of the cells of the
malignant transformations that cause Ph- R/R B-cell precursor ALL and
helps attract the cell into close proximity of the T-cell CD3 with the
intent of getting close enough to allow the T-cell to inject toxins
that destroy the cancerous cell. According to the applicant, the
BLINCYTO[supreg] technology is the first, and the only, bi-specific
CD19-directed CD3 T-cell engager single-agent immunotherapy approved by
the FDA.
BLINCYTO[supreg] is administered as a continuous IV infusion
delivered at a constant flow rate using an infusion pump. A single
cycle of treatment consists of 28 days of continuous infusion, and each
treatment cycle is followed by 2 weeks without treatment prior to
administering any further treatments. A course of treatment would
consist of two phases. Phase 1 consists of initial inductions or
treatments intended to achieve remission followed by additional
inductions and treatments to maintain consolidation; or treatments
given after remission has been achieved to prolong the duration. During
Phase 1 of a single treatment course, up to two cycles of
BLINCYTO[supreg] are administered, and up to three additional cycles
are administered during consolidation. The recommended dosage of
BLINCYTO[supreg] administered during the first cycle of treatment is 9
mcg per day for the first 7 days of treatment. The dosage is then
increased to 28 mcg per day for 3 weeks until completion. During Phase
2 of the treatment course, all subsequent doses are administered as 28
mcg per day throughout the entire duration of the 28-day treatment
period.
With regard to the newness criterion, the BLINCYTO[supreg]
technology received FDA approval on December 3, 2014, for the treatment
of patients diagnosed with Ph- R/R B-cell precursor ALL, and the
product gained entry onto the U.S. market on December 17, 2014.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for
BLINCYTO[supreg] and consideration of the public comments we received
in response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved
BLINCYTO[supreg] for new technology add-on payments for FY 2016 (80 FR
49449). Cases involving BLINCYTO[supreg] that are eligible for new
technology add-on payments are identified using one of the following
ICD-10-PCS procedure codes: XW03351 (Introduction of Blinatumomab
antineoplastic immunotherapy into peripheral vein, percutaneous
approach, New Technology Group 1), or XW04351 (Introduction of
Blinatumomab antineoplastic immunotherapy into central vein,
percutaneous approach, New Technology Group 1).
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49449),
the applicant recommended that CMS consider and use the cost of the
full 28-day inpatient treatment cycle as the expected length of
treatment when determining the maximum new technology add-on payment
for cases involving the BLINCYTO[supreg], rather than the average cost
of lesser number of days used as other variables. For the reasons
discussed, we disagreed with the applicant and established the maximum
new technology add-on payment amount for a case involving the
BLINCYTO[supreg] technology for FY 2016 using the weighted average of
the cycle 1 and cycle 2 observed treatment length. Specifically, in the
Phase II trial, the most recent data available, 92 patients received
cycle 1 treatment for an average length of 21.2 days, and 52 patients
received cycle 2 treatment for an average length of 10.2 days. The
weighted average of cycle 1 and cycle 2 treatment length is 17 days. We
noted that a small number of patients also received 3 to 5 treatment
cycles. However, based on the data provided, these cases do not appear
to be typical at this point and we excluded them from this calculation.
We noted that, if we included all treatment cycles in this calculation,
the weighted average number of days of treatment is much lower, 10
days. Using the clinical data provided by the applicant, we stated that
we believe setting the maximum new technology add-on payment amount for
a case involving the BLINCYTO[supreg] technology for FY 2016 based on a
17-day length of treatment cycle is representative of historical and
current practice. We also stated that, for FY 2017, if new data on
length of treatment are available, we would consider any such data in
evaluating the maximum new technology add-on payment amount. However,
we did not receive any new data from the applicant to evaluate for FY
2017.
In the application, the applicant estimated that the average
Medicare beneficiary would require a dosage of 9mcg/day for the first 7
days under the first treatment cycle, followed by a dosage of 28mcg/day
for the duration of the treatment cycle, as well as all days included
in subsequent cycles. All vials contain 35mcg at a cost of $3,178.57
per vial. The applicant noted that all vials are single-use. Therefore,
we determined that cases involving the use of the BLINCYTO[supreg]
technology would incur an average cost per case of $54,035.69 (1 vial/
day x 17 days x $3,178.57/vial). Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 50 percent of the average
cost of the technology or 50 percent of the costs in excess of the MS-
DRG payment for the case. As a result, the maximum new technology add-
on payment amount for a case involving the use of the BLINCYTO[supreg]
is $27,017.85.
With regard to the newness criterion for BLINCYTO[supreg], we
consider the beginning of the newness period to commence when the
product gained entry onto the U.S. market on December 17, 2014. As
discussed previously in this section, in general, we extend new
technology add-on payments for an additional year only if the 3-year
anniversary date of the product's entry onto the U.S. market occurs in
the latter half of the upcoming fiscal year. Because the 3-year
anniversary date of the entry of the BLINCYTO[supreg] onto the U.S.
market will occur in the first half of FY 2018 (December 17, 2017), we
are proposing to discontinue new technology add-on payments for this
technology for FY 2018. We are inviting public comments on this
proposal.
6. FY 2018 Applications for New Technology Add-On Payments
We received nine applications for new technology add-on payments
for FY 2018. In accordance with the regulations under Sec. 412.87(c),
applicants for new technology add-on payments must have received FDA
approval or clearance by July 1 of the year prior to the beginning of
the fiscal year that the application is being considered. Three
applicants withdrew their applications prior to the issuance of this
proposed rule. We are addressing the remaining six applications below.
a. Bezlotoxumab (ZINPLAVATM)
Merck & Co., Inc. submitted an application for new technology add-
on payments for ZINPLAVATM for FY 2018.
ZINPLAVATM is indicated for use in adult patients who are
receiving antibacterial drug treatment for a diagnosis of Clostridium
difficile infection (CDI) who are at high risk for CDI recurrence.
ZINPLAVATM is not indicated for the treatment of the
presenting episode of CDI and is not an antibacterial drug.
Clostridium difficile (C-diff) is a disease-causing anaerobic,
spore forming bacteria that can affect the gastrointestinal (GI) tract.
Some people carry the C-diff bacterium in their intestines, but never
develop symptoms
[[Page 19878]]
of an infection. The difference between asymptomatic colonization and
pathogenicity is caused primarily by the production of an enterotoxin
(Toxin A) and/or a cytotoxin (Toxin B). The presence of either or both
toxins can lead to symptomatic CDI, which is defined as the acute onset
of diarrhea with a documented infection with toxigenic C-diff, or the
presence of either toxin A or B. The GI tract contains millions of
bacteria, commonly referred to as ``normal flora'' or ``good
bacteria,'' which play a role in protecting the body from infection.
Antibiotics can kill these good bacteria and allow the C-diff bacteria
to multiply and release toxins that damage the cells lining the
intestinal wall, resulting in a CDI. CDI is a leading cause of
hospital-associated gastrointestinal illnesses. Persons at increased
risk for CDI include people who are treated with current or recent
antibiotic use, people who have encountered current or recent
hospitalization, people who are older than 65 years, immunocompromised
patients, and people who have recently had a diagnosis of CDI. CDI
symptoms include, but are not limited to, diarrhea, abdominal pain, and
fever. CDI symptoms range in severity from mild (abdominal discomfort,
loose stools) to severe (profuse, watery diarrhea, severe pain, and
high fevers). Severe CDI can be life-threatening and, in rare cases,
can cause bowel rupture, sepsis and organ failure. CDI is responsible
for 14,000 deaths per year in the United States.
C-diff produces two virulent, pro-inflammatory toxins, Toxin A and
Toxin B, which target host colonocytes (that is, large intestine
endothelial cells) by binding to endothelial cell surface receptors via
combined repetitive oligopeptide (CROP) domains. These toxins cause the
release of inflammatory cytokines leading to intestinal fluid secretion
and intestinal inflammation. The applicant asserted that
ZINPLAVATM targets Toxin B sites within the CROP domain
rather than the C-diff organism itself. According to the applicant, by
targeting C-diff Toxin B, ZINPLAVATM neutralizes Toxin B,
prevents large intestine endothelial cell inflammation, symptoms
associated with CDI, and reduces the recurrence of CDI.
ZINPLAVATM binds to sites within the CROP domain, which
prevents Toxin B from binding to the host cell, thereby preventing the
inflammation and symptoms associated with CDI. ZINPLAVATM is
used concomitantly with standard of care (SOC) antibiotics. Typical
treatment of CDI includes antibiotic therapy using vancomycin,
metronidazole, fidaxomicin, or other antibiotics. Alternative therapies
include fecal microbiota transplant (FMT) and the use of probiotics.
The primary goal of CDI treatment is resolving the infection.
Antibacterial drug treatment remains the cornerstone of treatment of
CDI. However, this treatment option alone may not be adequate for
patients diagnosed with recurrent CDI. A major concern with respect to
a CDI is that even when treatment with an antibacterial drug of a
primary infection is successful, generally, 25 percent to 30 percent of
patients experience a recurrence of the infection within days or weeks
of the presenting episode's symptom resolution. The risk of recurrence
increases to 65 percent with subsequent CDI episodes. Disease
recurrence results from continued disruption of the intestinal
microbiota by SOC CDI antibiotics (or use of other antibiotics used to
treat non-gastrointestinal conditions), combined with persistence of
resistant C-diff spores (relapse) or acquisition of new spores from the
environment (reinfection).
Antibacterial drug use may inhibit the intestinal microbiota from
reestablishing itself, allowing C-diff spores potentially to germinate
and colonize the intestines when the antibacterial drug is
discontinued. If regrowth of C-diff overtakes the reestablishment of
the intestinal microbiota, then spore germination and toxin production
from vegetative C-diff may restart the cycle of CDI and the need for
subsequent treatment. These challenges highlight the need for
nonantibiotic therapies. ZINPLAVATM targets Toxin B rather
than the C-diff bacteria itself. According to the applicant, unlike
antibacterial drugs, ZINPLAVATM is a human monoclonal
antibody and does not affect the microbiota. According to the
applicant, ZINPLAVATM neutralizes C-diff Toxin B and reduces
recurrence of CDI. ZINPLAVATM is given concomitantly during
the course of SOC antibacterial treatment of a CDI.
With respect to the newness criterion, ZINPLAVATM
received FDA approval on October 21, 2016, for reduction of recurrence
of CDI in patients receiving antibacterial drug treatment for CDI and
who are at high risk of CDI recurrence. ZINPLAVATM is
anticipated to be commercially available as of February 2017. We note
that the applicant anticipates submitting a request for a unique ICD-
10-PCS code for the administration of ZINPLAVATM. Currently,
there is a pending ICD-10-CM request to differentiate CDI recurrence.
If approved, the codes will become effective on October 1, 2017 (FY
2018).
As discussed above, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome,
according to the applicant, ZINPLAVATM is a human monoclonal
antibody with an innovative mechanism of action. The applicant asserted
that ZINPLAVATM is a novel treatment, with a unique
mechanism of action relative to SOC CDI antibiotics that target C-diff.
The applicant explained that ZINPLAVATM is the first human
monoclonal antibody that targets and neutralizes C. diff Toxin B
because the technology specifically binds to and neutralizes C-diff
Toxin B (which is an exotoxin that contributes to intestinal tissue
damage and immune system effects that underlie the symptoms of CDI) and
inhibits binding of the toxin to mammalian cells. The applicant further
asserted that the administration of ZINPLAVATM, in addition
to standard of care antibacterial drug treatment, reduces CDI
recurrence by providing passive immunity against Toxin B resulting from
persistent or newly acquired C-diff spores. According to the applicant,
ZINPLAVATM is the only FDA-approved treatment indicated for
reducing CDI recurrence as adjunctive therapy in adult patients who are
receiving antibacterial drug treatment for CDI and who are at high risk
for CDI recurrence.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant maintained that
patients who may be eligible to receive treatment using
ZINPLAVATM could be in an acute-care hospital setting for a
wide variety of reasons and may develop a secondary CDI as a hospital-
acquired infection and, therefore, cases representing patients that may
be eligible for treatment using the technology can map to a wide range
of MS-DRGs. ZINPLAVATM is indicated for patients receiving
SOC treatment for CDI and who are at a high risk for CDI recurrence. In
order to identify the range of MS-DRGs for which cases representing
patients that may be eligible for treatment using ZINPLAVATM
may map to, the applicant identified all MS-DRGs containing cases that
represent patients presenting with CDI as a primary or secondary
diagnosis. The applicant used
[[Page 19879]]
FY 2015 MedPAR data to map the identified cases to 543 MS-DRGs, with 12
MS-DRGs accounting for approximately 40 percent of all cases. The
applicant segmented these cases based on age because patients 65 years
and older are at higher risk for CDI recurrence. Based on the FY 2015
MedPAR data, MS-DRG distribution was found to be similar, irrespective
of CDI status (primary or secondary), for patients over 65 years of age
and those under 65 years of age. The top 7 MS-DRGs across both age
groups account for nearly 54 percent (over 65 years of age) and 49
percent (under 65 years of age). The applicant further segmented these
cases to determine if status of CDI as a primary or secondary diagnosis
influenced MS-DRG mapping. Regardless of age, when CDI is the primary
diagnosis, approximately 98 percent of patient cases map to the same 3
MS-DRGs: MS-DRG 371 (Major Gastrointestinal Disorders and Peritoneal
Infections with MCC); MS-DRG 372 (Major Gastrointestinal Disorders and
Peritoneal Infections with CC); and MS-DRG 373 (Major Gastrointestinal
Disorders and Peritoneal Infections without CC/MCC), respectively.
Potential cases representing patients who may be eligible for treatment
with ZINPLAVATM would be assigned to the same MS-DRGs as
cases representing patients who receive SOC treatment for a diagnosis
of CDI.
With respect to the third criterion, 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, according to the
applicant, ZINPLAVATM is administered concomitantly or as
adjunctive therapy with SOC antibacterial treatment for recurrent CDI.
The applicant stated that ZINPLAVATM is indicated to reduce
recurrence of CDI in adult patients at high risk of CDI recurrence who
are receiving antibacterial drug treatment for CDI. According to the
applicant, the addition of ZINPLAVATM to SOC antibacterial
drug treatment reduces CDI recurrence by providing passive immunity
against Toxin B resulting from persistent or newly acquired C-diff
spores. ZINPLAVATM is used to treat the same or similar type
of disease (recurrent CDI) and a similar patient population receiving
SOC therapy for the treatment of recurrent CDI.
Based on the applicant's statements presented above, because
ZINPLAVATM has a unique mechanism of action, we do not
believe that the technology is substantially similar to existing
technologies and, therefore, meets the newness criterion. We are
inviting public comments on whether ZINPLAVATM meets the
newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that the technology meets the cost
criterion. In order to identify the range of MS-DRGs that cases
representing potential patients who may be eligible for treatment using
ZINPLAVATM may map to, the applicant identified all MS-DRGs
for patients diagnosed with CDI as a primary or secondary diagnosis.
Specifically, the applicant searched the FY 2015 MedPAR file for claims
that included target patients over 65 years of age and identified cases
reporting diagnoses of CDI by ICD-9-CM diagnosis code 008.45
(Intestinal infection due to Clostridium difficile) as a primary or
secondary diagnosis. This resulted in 139,135 cases across 543 MS-DRGs,
with approximately 40 percent of all cases mapping to the following 12
MS-DRGs: MS-DRG 177 (Respiratory Infections and Inflammations with
MCC); MS-DRG 193 (Simple Pneumonia and Pleurisy with MCC); MS-DRG
291(Heart Failure and Shock with MCC); MS-DRGs 371, 372, and 373 (Major
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC,
and without CC/MCC, respectively); MS-DRGs 682 and 683 (Renal Failure
with MCC and with CC, respectively); MS-DRG 853 (Infectious and
Parasitic Diseases with O.R. Procedure with MCC); MS-DRGs 870, 871, and
872 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours,
with MCC, and without MCC, respectively).
Using the 139,135 identified cases, the average unstandardized
case-weighted charge per case was $80,677. The applicant then
standardized the charges. The applicant did not remove charges for the
current treatment because, as discussed above, ZINPLAVATM
will be used concomitantly with SOC antibacterial treatments for the
treatment of CDI as an additive, or adjunctive treatment option, to
reduce the recurrence of CDI infection. The applicant then applied the
2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH final
rule (81 FR 57286) to inflate the charges from FY 2015 to FY 2017. The
applicant noted that the anticipated price for ZINPLAVATM
has yet to be determined; therefore, no charges for
ZINPLAVATM were added in the analysis. Based on the FY 2017
IPPS/LTCH PPS Table 10 thresholds, the average case-weighted threshold
amount was $56,871. The inflated average case-weighted standardized
charge per case was $78,929. Because the inflated average case-weighted
standardized charge per case exceeds the average case-weighted
threshold amount, the applicant maintained that the technology meets
the cost criterion. The applicant noted that the inflated average case-
weighted standardized charge per case exceeds the average case-weighted
threshold amount without the average per patient cost of the
technology. As such, the applicant anticipated that the inclusion of
the cost of ZINPLAVATM, at any price point, will further
increase charges above the average case-weighted threshold amount. We
are inviting public comments on whether ZINPLAVATM meets the
cost criterion.
With respect to the substantial clinical improvement criterion, the
applicant asserted that the addition of ZINPLAVATM to SOC
antibacterial drug treatment reduces CDI recurrence because it provides
passive immunity against Toxin B resulting from persistent or newly
acquired C-diff spores.
The applicant conducted two Phase III studies, MODIFY I and MODIFY
II. The primary endpoint of the studies was recurrent CDI within 12
weeks after completion of treatment with ZINPLAVATM. The
first study design initially included actoxumab, an antitoxin A
monoclonal antibody treatment arm that was later discontinued due to a
high failure rate and increase in mortality compared to other treatment
arms.\3\ Clinical data on ZINPLAVATM is provided exclusively
from the FDA briefing document available on the FDA Web site at: http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/Anti-InfectiveDrugsAdvisoryCommittee. Information is also provided in the
package insert by the manufacturer, Merck & Company, Inc. The FDA
briefing provided data on the safety and efficacy of
ZINPLAVATM. The FDA considered sustained clinical responses
defined as clinical cure of the initial CDI episode and the absence of
CDI recurrence as an appropriate endpoint to assess the efficacy of
ZINPLAVATM in the prevention of CDI recurrences.
---------------------------------------------------------------------------
\3\ Wilcox MH et al. Bezlotoxumab for Prevention of Recurrent
Clostridium difficile Infection. N Engl J Med. 2017 Jan
26;376(4):305-317.
---------------------------------------------------------------------------
In MODIFY I trial, the clinical cure rate of the presenting CDI
episode was lower in the ZINPLAVATM arm as compared to the
placebo arm, whereas in MODIFY II trial the clinical cure rate was
lower in the placebo arm as compared to the ZINPLAVATM arm.
Additional analyses showed that, by 3
[[Page 19880]]
weeks post study drug infusion, the clinical cure rates of the
presenting CDI episode were similar between treatment arms.
In MODIFY I, the rate of sustained clinical response was
numerically in favor of ZINPLAVATM (60.1 percent) in
comparison to placebo (55.2 percent) with an adjusted difference and 95
percent CI of 4.8 percent (-2.1 percent; 11.7 percent). In MODIFY II,
the proportion of subjects with sustained clinical response in the
ZINPLAVATM arm (66.8 percent) was also higher than in the
placebo arm (52.1 percent) with an adjusted difference of 14.6 percent
and 95 percent CI (7.8 percent; 21.4 percent). The treatment did not
significantly decrease mortality. Recurrence rates, including CDI-
related hospital readmission rates, reportedly were between 10 and 25
percent. No clinically meaningful differences in the exposure of
bezlotoxumab were found between patients 65 years of age and older and
patients under 65 years of age.
In the Phase III trials, the safety profile of
ZINPLAVATM was similar overall to that of placebo. However,
heart failure was reported more commonly in the two Phase III clinical
trials of ZINPLAVATM-treated patients compared to placebo-
treated patients. These adverse reactions occurred primarily in
patients with underlying congestive heart failure (CHF). In patients
with a history of CHF, 12.7 percent (15/118) of ZINPLAVATM-
treated patients and 4.8 percent (5/104) of placebo-treated patients
had the serious adverse reaction of heart failure during the 12-week
study period. In addition, in patients with a history of CHF, there
were more deaths in ZINPLAVATM-treated patients (19.5
percent (23/118)) than in placebo-treated patients (12.5 percent (13/
104)) during the 12-week study period. We are concerned regarding the
safety of ZINPLAVATM in patients diagnosed with CHF. In
regard to safety, data from the MODIFY I and MODIFY II studies suggest
few adverse events associated with ZINPLAVATM, with no
significant differences in the number of serious adverse events, deaths
or discontinuations of study drug that occurred between the
ZINPLAVATM and the placebo groups. However, both the
ZINPLAVATM and the ZINPLAVATM plus actoxumab
treatment groups experienced more episodes of cardiac failure (defined
as acute or chronic cardiac failure) then compared to the placebo group
(2.2 percent versus 1 percent). We are unsure if the cardiac failure
reported in the studies may be the result of a higher number of
baseline patients with heart failure in the treatment arms or the
result of an adverse effect to ZINPLAVATM. Therefore, we are
concerned with regard to the adverse event of cardiac failure of
ZINPLAVATM.
We are inviting public comments on whether ZINPLAVATM
meets the substantial clinical improvement criterion.
We did not receive any written public comments in response to the
New Technology Town Hall meeting notice regarding the application of
ZINPLAVATM for new technology add-on payments.
b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and
LivaNova Perceval Valve (Perceval)
Two manufacturers, Edwards Lifesciences and LivaNova, submitted
applications for new technology add-on payments for FY 2018 for the
INTUITY EliteTM Valve System (INTUITY) and the Perceval
Valve (Perceval), respectively. Both of these technologies are
prosthetic aortic valves inserted using surgical aortic valve
replacement (AVR). We note that, while Edwards Lifesciences submitted
an application for new technology add-on payments for FY 2017 for the
INTUITY valve, FDA approval was not received by July 1, 2016, and,
therefore, the device was not eligible for consideration for new
technology add-on payments for FY 2017.
Aortic valvular disease is relatively common, primarily manifested
by aortic stenosis. Most aortic stenosis is due to calcification of the
valve, either on a normal tri-leaflet valve or on a congenitally
bicuspid valve. The resistance to outflow of blood is progressive over
time, and as the size of the aortic orifice narrows, the heart must
generate increasingly elevated pressures to maintain blood flow.
Symptoms such as angina, heart failure, and syncope eventually develop,
and portend a very serious prognosis. There is no effective medical
therapy for aortic stenosis, so the diseased valve must be replaced or,
less commonly, repaired.
The INTUITY valve incorporates the expansion feature of a catheter
implanted valve, but is designed to be placed during cardiac surgery.
The manufacturer explained that the INTUITY valve requires fewer
stitches to hold the device in place because of the balloon expanded
design and, therefore, can be inserted more quickly than a standard
valve, and also facilitates minimally invasive cardiac surgery; that
is, use of a smaller incision to allow faster recovery. The
manufacturer of the INTUITY valve indicated that the device is
comprised of: (1) A bovine pericardial aortic bioprosthetic valve; (2)
a balloon expandable stainless steel frame; and (3) a textured sealing
cloth. The manufacturer of the Perceval valve indicated that the
Perceval valve device is comprised of: (1) Sizers used to determine the
correct size of the prosthesis; (2) a dual holder used for positioning
and deployment (available in two models, one for sternal approaches and
one for MIS); (3) a ``smart clip'' to assist during assembly of the
valve on the dual holder to prevent release during positioning; (4) a
dual collapser used to evenly reduce the diameter of the prosthesis
allowing it to mount onto the holder prior to implantation; (5) a dual
collapser base used to allow proper positioning; and (6) a postdilation
catheter used for in situ dilation of the prosthesis after implantation
(available in two models, one for sternal approaches and one for MIS).
According to both applicants, the INTUITY valve and the Perceval valve
are the first sutureless, rapid deployment aortic valves that can be
used for the treatment of patients who are candidates for surgical AVR.
The applicants indicated that the two new device innovations facilitate
MIS approaches through: (1) The device rapid deployment mechanisms; and
(2) the design of the prosthetic valve that allows for markedly fewer
to no sutures to securely fasten the prosthetic valve to the aortic
orifice. The applicants explained that both of these aspects of their
devices are credited with the reduction of operating time.
As noted, according to both applicants, the INTUITY valve and the
Perceval valve are the first sutureless, rapid deployment aortic valves
that can be used for the treatment of patients who are candidates for
surgical AVR. Because potential cases representing patients who are
eligible for treatment using the INTUITY and the Perceval aortic valve
devices would group to the same MS-DRGs, and we believe that these
devices are intended to treat the same or similar disease in the same
or similar patient population, and are purposed to achieve the same
therapeutic outcome using the same or similar mechanism of action, we
believe these two devices are substantially similar to each other and
that it is appropriate to evaluate both technologies as one application
for new technology add-on payments under the IPPS.
With respect to the newness criterion, the INTUITY valve received
FDA approval on August 12, 2016, and was commercially available on the
U.S. market on August 19, 2016. The Perceval valve received FDA
approval
[[Page 19881]]
on January 8, 2016, and was commercially available on the U.S. market
on February 29, 2016. We believe that, in accordance with our policy,
it is appropriate to use the earliest market availability date
submitted as the beginning of the newness period. Therefore, based on
our policy, with regard to both devices, if the technologies are
approved for new technology add-on payments, we believe that the
beginning of the newness period would be February 29, 2016. In
addition, both applicants indicated that ICD-10-PCS code X2RF032
(Replacement of Aortic Valve using Zooplastic Tissue, Rapid Deployment
Technique, Open Approach, New Technology Group 2) would identify
procedures involving the use of the devices when surgically implanted.
We previously stated that, because we believe these two devices are
substantially similar to each other, we believe it is appropriate to
evaluate both technologies as one application for new technology add-on
payment under the IPPS. The applicants submitted separate cost and
clinical data, and we reviewed and discuss each set of data separately.
However, we intend to make one determination regarding new technology
add-on payments that will apply to both devices. We believe that this
is consistent with our policy statements in the past regarding
substantial similarity. Specifically, we have noted that approval of
new technology add-on payments would extend to all technologies that
are substantially similar (66 FR 46915), and we believe that continuing
our current practice of extending new technology add-on payments
without a further application from the manufacturer of the competing
product, or a specific finding on cost and clinical improvement if we
make a finding of substantial similarity among two products is the
better policy because we avoid--
Creating manufacturer-specific codes for substantially
similar products;
Requiring different manufacturers of substantially similar
products to submit separate new technology applications;
Having to compare the merits of competing technologies on
the basis of substantial clinical improvement; and
Bestowing an advantage to the first applicant representing
a particular new technology to receive approval (70 FR 47351).
If these substantially similar technologies were submitted for
review in different (and subsequent) years, rather than the same year,
we would evaluate and make a determination on the first application and
apply that same determination to the second application. However,
because the technologies have been submitted for review in the same
year, we believe that it is appropriate to consider both sets of cost
data and clinical data in making a determination and we do not believe
that it is possible to choose one set of data over another set of data
in an objective manner.
As stated above, we believe that the INTUITY valve and the Perceval
valve are substantially similar to each other for purposes of analyzing
these two applications as one application. We also need to determine
whether the INTUITY valve and the Perceval valve are substantially
similar to existing technologies prior to their approval by the FDA and
their release on the market. As discussed earlier, if a technology
meets all three of the substantial similarity criteria, it would be
considered substantially similar to an existing technology and would
not be considered ``new'' for purposes of new technology add-on
payments.
With respect to the first criterion, whether a product uses the
same or a similar mechanism of action to achieve a therapeutic outcome,
the applicant for the INTUITY valve asserted that its unique design,
which utilizes features that were not previously included in
conventional aortic valves, constitutes a new mechanism of action. The
deployment mechanism allows for rapid deployment. The expandable frame
can reshape the native valve's orifice, creating a larger and more
efficiently shaped effective orifice area. In addition, the expandable
skirt allows for structural differentiation upon fixation of the valve
requiring 3 permanent, guiding sutures rather than the 12 to 18
permanent sutures used to fasten standard prosthetic aortic valves. The
applicant for the Perceval valve described the Perceval valve's
mechanism of action as including: (a) No permanent sutures; (b) a
dedicated delivery system that increases the surgeon's visibility; (c)
an enabler of minimally invasive approach; (d) a complexity reduction
and reproducibility of the procedure; and (e) a unique device assembly
and delivery systems.
With respect to the second and third criteria, whether a product is
assigned to the same or a different MS-DRG and 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, the applicant for
the INTUITY valve indicated that the technology is used in the
treatment of the same patient population and potential cases
representing patients that may be eligible for treatment using the
INTUITY valve would be assigned to the same MS-DRGs as cases involving
the use of other prosthetic aortic valves (that is, MS-DRGs 216
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization with MCC), 217 (Cardiac Valve & Other Major
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization with MCC),
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC). The applicant for the Perceval valve also indicated that the
Perceval valve device is used in the treatment of the same patient
population and potential cases representing patients that may be
eligible for treatment using the technology would be assigned to the
same MS-DRGs (MS-DRGs 216 through 221) as cases involving the use of
other prosthetic aortic valves.
After considering the materials included with both applications, we
remain concerned as to whether the mechanism of action described by the
applicants represents an improvement to an existing surgical technique
and technology or a new technology. While the INTUITY and Perceval
valves address some of the challenges posed by implantation of existing
valves, including improving the visibility of the orifice and the
physiological function of the valves, we do not believe that their
mechanisms of action are fundamentally different from that of other
aortic valves. As one of the applicants stated in its application, the
goal of the prosthetic aortic valve is to mimic the native valve that
it has replaced via the incorporation of three leaflets that open and
close in response to pressure gradients developed during the cardiac
cycle. We believe that the INTUITY and Perceval valves are the same or
similar to other prosthetic aortic valves used to treat the same or
similar diagnoses.
We are inviting public comments on whether the mechanisms of action
of the sutureless, rapid deployment of the INTUITY and Perceval valves
differs from the mechanism of action of standard AVR valves and whether
the technologies meet the newness criterion.
As we stated above, each applicant submitted separate analyses
regarding the cost criterion for each of their devices, and both
applicants maintained
[[Page 19882]]
that their device meets the cost criterion. We summarize each analysis
below.
With regard to the cost criterion, the INTUITY valve's applicant
researched the FY 2015 MedPAR claims data file to identify cases
representing patients who may be potential recipients of treatment
using the INTUITY valve. The applicant identified claims that reported
an ICD-9-CM diagnosis code of 424.1 (Aortic valve disorder), in
combination with an ICD-9-CM procedure code of 35.21 (Replacement of
aortic valve with tissue) or 35.22 (Open and other replacement of
aortic valve). The applicant also identified cases with or without a
coronary artery bypass graft (CABG) using the ICD-9-CM procedure codes
in the table below.
------------------------------------------------------------------------
ICD-9-CM code Code description
------------------------------------------------------------------------
36.10..................... Aortocoronary bypass for heart
revascularization, not otherwise specified.
36.11..................... (Aorto)coronary bypass of one coronary
artery.
36.12..................... (Aorto)coronary bypass of two coronary
arteries.
36.13..................... (Aorto)coronary bypass of three coronary
arteries.
36.14..................... (Aorto)coronary bypass of four or more
coronary arteries.
36.15..................... Single internal mammary-coronary artery
bypass.
36.16..................... Double internal mammary-coronary artery
bypass.
36.17..................... Abdominal-coronary artery bypass.
------------------------------------------------------------------------
The applicant identified a total of 25,173 cases that mapped to MS-
DRGs 216 through 221. Of these cases, the applicant identified 10,251
CABG cases and 14,922 non-CABG cases. According to the applicant,
patients that undergo a procedure without need of a concomitant CABG
are more likely to receive treatment with the INTUITY valve than
patients in need of a concomitant CABG. Therefore, the applicant
weighted the non-CABG cases at 90 percent of total cases and the CABG
cases at 10 percent of total cases under each of the six MS-DRGs. The
final case count is a weighted average of 14,455 cases.
The applicant calculated an average unstandardized charge per case
of $192,506 for all cases. The applicant then removed 100 percent of
the charges for pacemakers, investigational devices, and other implants
that would not be required for patients receiving treatment using the
INTUITY valve. The applicant standardized the charges and then applied
an inflation factor of 1.098446, which is the 2-year inflation factor
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286), to update the
charges from FY 2015 to FY 2017. The applicant calculated the average
expected charge for the INTUITY valve based on the current list price
of the device. Although the applicant submitted data related to the
cost of the INTUITY valve, the applicant noted that the cost of the
device is proprietary information. To add charges for the device, the
applicant assumed a hospital mark-up of approximately 3.00 percent,
based on the current average CCR for implantable devices (0.331) as
reported in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56876). Based
on the FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $170,321. The applicant computed an
inflated average case-weighted standardized charge per case of
$194,291, which is $23,970 above the average case-weighted threshold
amount. Because the inflated average case-weighted standardized charge
per case exceeds the average case-weighted threshold amount, the
applicant maintained that the technology meets the cost criterion.
We thank the applicant for the analysis above. However, we would
like more information from the applicant regarding how it decided upon
which cases to include in the sensitivity analysis, as well as further
details about how and on what basis the applicant weighted CABG and
non-CABG cases. We are inviting public comments on whether the INTUITY
valve meets the cost criterion.
With regard to the cost criterion in reference to the Perceval
valve, the applicant conducted the following analysis. The applicant
examined FY 2015 MedPAR claims data that included cases reporting an
ICD-9 procedure code of 35.21 or 35.22, in combination with diagnosis
code: 424.1. Noting that MS-DRGs 216 through 221 contained 97 percent
of these cases, the applicant limited its analysis to these 6 MS-DRGs.
The applicant identified 25,193 cases across these MS-DRGs, resulting
in an average case-weighted unstandardized charge per case of $173,477.
The applicant then standardized charges using FY 2015 standardization
factors and applied an inflation factor of 1.089846 from the FY 2017
IPPS/LTCH proposed rule (81 FR 25271). The applicant indicated that the
technology meets the cost criterion by applying the inflation factor
from the proposed rule and, therefore, would meet the cost criterion by
applying the higher inflation factor from the final rule.
Included in the average case-weighted standardized charge per case
were charges for the current valve prosthesis. Therefore, the applicant
removed all charges associated with revenue center 0278, and calculated
the adjusted average case-weighted standardized charge per case by
subtracting these charges from the standardized charge per case. The
applicant then added the charge for the new technology by taking the
anticipated hospital cost of the new technology and dividing it by the
national average implantable devices CCR of 0.331. The applicant then
added the charge for the new technology to the inflated average case-
weighted standardized charges per case to arrive at the final inflated
average case-weighted standardized charge per case, which was then
case-weighted based on the distribution of cases within the six MS-
DRGs. This resulted in an inflated average case-weighted standardized
charge per case of $206,109. Using the FY 2017 IPPS Table 10
thresholds, the average case-weighted threshold amount was $173,477.
Because the inflated average case-weighted standardized charge per case
exceeds the average case-weighted threshold amount, the applicant
maintained that the technology meets the cost criterion. We are
inviting public comments on whether the Perceval technology meets the
cost criterion.
With regard to substantial clinical improvement for the INTUITY
valve, the applicant asserted that several aspects of the valve system
represent a substantial clinical improvement over existing
technologies. The applicant believed that the flexible deployment arm
allows improved surgical access and visualization, making the surgery
less challenging for the surgeon, improving the likelihood that the
surgeon can use a minimally invasive approach. According to the
applicant, the assembly of the device only allows the correct valve
size to be fitted, which ensures that the valve does not slip or
[[Page 19883]]
migrate, which prevents paravalvular leaks and patient prosthetic
mismatch. The applicant indicated that the device improves clinical
outcomes for patients undergoing minimally invasive AVR and full-
sternotomy AVR. The applicant stated that the rapid deployment
technology enables reduced operative time, specifically cross-clamp
time, thereby reducing the period of myocardial ischemia. In addition,
the applicant indicated that the device offers a reduction in operative
time for full-sternotomy AVR. The applicant noted that clinical results
document significant patient outcome and utilization improvements,
including improved patient satisfaction, faster return to normal
activity, decreased post-operative pain, reduced mortality and
decreased complications, including need for reoperation due to
bleeding, reduced recovery time, reduced length of stay (both ICU and
overall), more access to minimally invasive surgery, and improved
hemodynamics.
The INTUITY valve has been tested clinically in several trials. In
the TRITON trial (Kocher et al., 2013 \4\), 287 patients diagnosed with
aortic stenosis underwent surgery in 1 of 6 European centers. The first
149 patients received the first generation Model 8300A valve, and the
next 138 patients received the second generation Model 8300AB. The
average age of the patients was 75.7 years. Early, 30-day mortality was
1.7 percent (5/287), the post-op valve gradient was low, and 75 percent
of the patients improved functionally. A total of 4 valves were
explanted in the final 30 days due to bleeding, and 3 were explanted
later for paravalvular leak, endocarditis, and aortic root aneurysms.
Follow-up extended to 3 years (mean 1.8 years).
---------------------------------------------------------------------------
\4\ Kocher AA, Laufer G, Haverich A, et al. One-year outcomes of
the surgical treatment of aortic stenosis with a next generation
surgical aortic valve (TRITON) trial: A prospective multicenter
study of rapid-deployment aortic valve replacement with the EDWARDS
INTUITY valve system. J Thorac Cardiovasc Surg 2013;145:110-116.
---------------------------------------------------------------------------
Implantation of the INTUITY valve using minimally invasive surgery
was compared with conventional aortic valve replacement via full
sternotomy in the CADENCE-MIS randomized trial (Borger et al., 2015
\5\) of 100 patients treated in 1 of 5 centers in Germany. The authors
found no significant difference in 30-day mortality, the need for
pacemaker implantation, significant paravalvular regurgitation, and
quality of life scores at 3 months. Aortic cross-clamp time was
significantly reduced from 54.0 to 41.3 minutes (p < 0.0001), and
cardiopulmonary bypass time was reduced from 74.4 to 68.8 minutes (p =
0.21). Early clinical outcomes were similar: No significant differences
in mortality, reoperation, or other clinical outcomes. The aortic valve
gradient was significantly lower in the MIS group: 8.5 versus 10.3
mmHg.
---------------------------------------------------------------------------
\5\ Borger MA, Moustafine V, Conradi L, et al. A randomized
multicenter trial of minimally invasive rapid deployment versus
conventional full sternotomy aortic valve replacement. Ann Thorac
Surg 2015; 99:17-25.
---------------------------------------------------------------------------
The TRANSFORM trial (Barnhart et al. 2017 \6\) was a single-arm,
non-randomized, multicenter trial, in which 839 patients underwent
rapid deployment AVR surgery. The average age of the patients was 73.5
years. The mean cross-clamp time and cardiopulmonary bypass times for
full sternotomy were 49.3 26.9 min and 69.2
34.7 min, respectively, and for MIS, 63.1 25.4 min and
84.6 33.5 min, respectively. The authors compared these
times to STS database comparators: For full sternotomy, 76.3 minutes
and 104.2 minutes, respectively, and for MIS, 82.9 minutes and 111.4
minutes, respectively. All cause early mortality was 0.8 percent, mean
EOA at 1 year was 1.7 cm\2\; mean gradient, 10.3 mmHg; and moderate and
severe PVL, 1.2 percent and 0.4 percent, respectively. The authors
indicated that the INTUITY valve ``. . . may lead to a relative
reduction in aortic cross-clamp time and cardiopulmonary bypass time''
and ``may confer benefits to patients, such as decreased mortality and
morbidity.'' The authors noted the possibility of potential bias
resulting from the level of experience of the study surgeons relative
to typical cardiac surgeons. In addition, long-term follow-up is not
available, and study comparators from the Society of Thoracic Surgeons
(STS) database were not matched.
---------------------------------------------------------------------------
\6\ Barnhart, G. A. et al. (2017). TRANSFORM (Multicenter
Experience with Rapid Deployment Edwards INTUITY Valve System for
Aortic Valve Replacement) US clinical trial: Performance of a rapid
deployment aortic valve. The Journal of Thoracic and Cardiovascular
Surgery, 153, 241-251.
---------------------------------------------------------------------------
In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25057), after
reviewing the studies provided by the applicant with its application
for FY 2017, we expressed some specific concerns. We indicated that we
were concerned that the INTUITY valve does not have sufficient
advantages over alternative surgically implanted valves to constitute a
substantial clinical improvement. We noted that, while some of the
studies included with the application demonstrate reduced aortic cross-
clamp time, conventional aortic valve replacement was used in the
comparison group. Therefore, it is unclear whether the reduced aortic
cross-clamp time is associated with the use of the INTUITY valve or as
a result of the MIS surgery in general.
In response to these concerns, the INTUITY valve's applicant stated
that the INTUITY valve is associated with significant clinical benefits
outside of the benefits achieved by use of an MIS approach. The
applicant referenced the sub-study of the TRANSFORM trial, which
compared the MISAVR with the INTUITY valve to MISAVR with a
conventional valve, stating that the results indicated reduced cross-
clamp time and other benefits that are not simply a function of the MIS
approach. The applicant also referenced trials that indicated that the
INTUITY valve had excellent hemodynamic performance (Haverich et
al.,\7\ Borger et al.,\8\ Barnhart et al.\9\), one of which found a
significant improvement in functional status (Haverich et al.).
---------------------------------------------------------------------------
\7\ Haverich, A, et al. (2014), Three-year hemodynamic
performance, left ventricular mass regression, and prosthetic-
patient mismatch after rapid deployment aortic valve replacement in
287 patients. J Thorac Cardiovasc Surg, 148(6), 2854-60.
\8\ Borger MA, Moustafine V, Concadi L, et al. A randomized
multicenter trial of minimally invasive rapid deployment versus
conventional full sternotomy aortic valve replacement. Ann Thorac
Surg 2015; 99:17-25.
\9\ Barnhart, G.A. et al. (2017). TRANSFORM (Multicenter
Experience with Rapid Deployment Edwards INTUITY Valve System for
Aortic Valve Replacement) US clinical trial: Performance of a rapid
deployment aortic valve. The Journal of Thoracic and Cardiovascular
Surgery, 153, 241-251.
---------------------------------------------------------------------------
After considering the studies provided by the INTUITY valve
applicant, we are concerned about the possibility of potential bias
resulting from the level of experience of the study surgeons relative
to typical cardiac surgeons, as well as the lack of long-term follow-up
in these studies.
With regard to substantial clinical improvement for the Perceval
valve, the applicant submitted several studies examining the Perceval
valve. The following discussion summarizes some of these studies.
Pollari and colleagues \10\ (2014) utilized a propensity score
analysis to examine 82 matched pairs as part of a larger trial that
included 566 patients treated with bioprosthetic aortic valve
replacement, 166 of which received treatment using the Perceval
sutureless valve and 400 of which received treatment using a stented
valve. Aortic cross-clamp, cardiopulmonary bypass, and operation times
were significantly shorter in the group that received treatment using
the Perceval sutureless
[[Page 19884]]
valve. The Perceval sutureless group also had shorter ICU stays,
hospital stays, and intubation times, and lower incidence of
postoperative atrial fibrillation and respiratory insufficiency. The
authors noted that, despite the promising preliminary results, longer
follow-up is warranted before drawing definite conclusions.
---------------------------------------------------------------------------
\10\ Pollari, F. (2014), Better short-term outcome by using
sutureless valves: a propensity-matched score analysis, Ann Thorac
Surg, 98; 611-6.
---------------------------------------------------------------------------
In a nonrandomized trial of 100 patients in a German hospital,
Santarpino and colleagues \11\ (2013) found that procedures completed
using the Perceval valve were associated with significantly shorter
cross-clamp and cardiopulmonary bypass times (40 13.8 and
69 19.1 versus 66 20.4 and 105
34.8) relative to conventional stented bioprosthetic valves, as well as
less frequent use of blood transfusions, shorter ICU stays and shorter
use of intubation. In contrast, Gilmanov and colleagues \12\ (2013)
found that a MIS approach resulted in improved outcomes, albeit longer
aortic cross-clamp times. A meta-analysis by Hurley and colleagues \13\
(2015) found reduced cross-clamp and cardiopulmonary bypass times, but
found a significantly higher permanent pacemaker rate with the use of
Perceval sutureless valves.
---------------------------------------------------------------------------
\11\ Santarpino, G. et al. (2013), The Perceval S aortic valve
has the potential of shortening surgical time: Does it also result
in improved outcome?, Ann Thorac Surg, 96, 77-81.
\12\ Gilmanov, D. (2013), Minimally invasive and conventional
aortic valve replacement: a propensity score analysis, Ann Thorac
Surg, 96, 837-843.
\13\ Hurley et al, ``A Meta[hyphen]Analysis Examining
Differences in Short[hyphen]Term Outcomes Between Sutureless and
Conventional Aortic Valve Prostheses,'' Innovations 2015; 10:375-
382.
---------------------------------------------------------------------------
A study conducted by Dalen and colleagues \14\ (2015) used
propensity score matching to examine early post-operative outcomes and
2-year survival between 171 pairs of patients who underwent
ministernotomy using the Perceval device or a full sternotomy with
stented prosthesis. There were no differences in 30-day mortality or 2-
year survival between the groups. The aortic cross-clamp time and
cardiopulmonary bypass time were shorter, and there were fewer blood
transfusions in the group that received treatment using the Perceval
device. However, this group was also at higher risk for post-operative
permanent pacemaker implantation.
---------------------------------------------------------------------------
\14\ Dal[eacute]n, M. (2015), Aortic valve replacement through
full sternotomy with a stented bioprosthesis versus minimally
invasive sternotomy with a sutureless bioprosthesis, Eur J
Cardiothorac Surg 2015; doi:10.1093/ejcts/ezv014.
---------------------------------------------------------------------------
After reviewing the publications submitted by the applicant, we are
concerned that the lack of randomization and blinded investigators may
have influenced the outcomes in many of the studies provided. For
example, in the discussion following Santarpino et al.'s 2013 study,
one of the participants suggested that medical decision-making
regarding ventilation times, ICU times, and blood transfusions may be
affected by the knowledge of investigators as to which valve the
patient received treatment using. Also, as indicated above with respect
to the INTUITY valve, the experience of the surgeons in these studies
may be confounding factors that may have influenced the length of
surgical procedures and/or surgical outcomes.
We are inviting public comments on whether rapid deployment valves,
specifically the INTUITY and Perceval valves, meet the substantial
clinical improvement criterion.
We did not receive any written public comments regarding the
INTUITY and Perceval valves in response to the New Technology Town Hall
meeting notice.
c. Ustekinumab (Stelara[supreg])
Janssen Biotech submitted an application for new technology add-on
payments for the Stelara[supreg] induction therapy for FY 2018.
Stelara[supreg] received FDA approval as an intravenous (IV) infusion
treatment of Crohn's disease (CD) on September 23, 2016, which added a
new indication for the use of Stelara[supreg] and route of
administration for this monoclonal antibody. IV infusion of
Stelara[supreg] is indicated for the treatment of adult patients (18
years and older) diagnosed with moderately to severely active CD who
have: (1) Failed or were intolerant to treatment using immunomodulators
or corticosteroids, but never failed a tumor necrosis factor (TNF)
blocker; or (2) failed or were intolerant to treatment using one or
more TNF blockers. Stelara[supreg] for IV infusion has only one
purpose, induction therapy. Stelara[supreg] must be administered
intravenously by a health care professional in either an inpatient
hospital setting or an outpatient hospital setting.
Stelara[supreg] for IV infusion is packaged in single 130mg vials.
Induction therapy consists of a single IV infusion dose using the
following weight-based dosing regimen: Patients weighing less than (<)
55kg are administered 260mg of Stelara[supreg] (2 vials); patients
weighing more than (>) 55kg, but less than (<) 85kg are administered
390mg of Stelara[supreg] (3 vials); and patients weighing more than (>)
85kg are administered 520mg of Stelara[supreg] (4 vials). An average
dose of Stelara[supreg] administered through IV infusion is 390mg (3
vials). Maintenance doses of Stelara[supreg] are administered at 90mg,
subcutaneously, at 8-week intervals and may occur in the outpatient
hospital setting.
CD is an inflammatory bowel disease of unknown etiology,
characterized by transmural inflammation of the gastrointestinal (GI)
tract. Symptoms of CD may include fatigue, prolonged diarrhea with or
without bleeding, abdominal pain, weight loss and fever. CD can affect
any part of the GI tract including the mouth, esophagus, stomach, small
intestine, and large intestine.
Conventional pharmacologic treatments of CD include antibiotics,
mesalamines, corticosteroids, immunomodulators, tumor necrosis alpha
(TNF[alpha]) inhibitors, and anti-integrin agents. Surgery may be
necessary for some patients diagnosed with CD in which conventional
therapies have failed. The applicant asserted that use of
Stelara[supreg] offers an alternative to conventional pharmacologic
treatments, and has been shown to be successful in the treatment of
patients who have failed treatment using the conventional agents
currently being used for a diagnosis of CD, including TNF[alpha]
inhibitors.
Although the precise cause of CD is unknown, the environment,
genetics, and the patient's immune system are thought to play a role in
this form of inflammatory bowel disease (IBD). Conventional
pharmacologic therapy is directed against many different inflammatory
mediators that produce inflammation and ultimately lead to
gastrointestinal damage. The applicant asserted that it is of paramount
importance to have a variety of pharmacologic agents that can address
the proper inflammatory mediator for a particular patient. The
applicant also asserted that, while the currently available anti-
inflammatory agents used in the treatment of a diagnosis of CD are
excellent medications, these agents do not successfully treat all
patients diagnosed with CD, nor do they reliably sustain disease
remission once a response has been achieved. The applicant believed
that the use of Stelara[supreg] offers an alternative to currently
available treatment options.
With regard to the newness criterion, Stelara[supreg] is not a
newly formulated drug. Stelara[supreg], administered subcutaneously,
received FDA approval in 2009 (September 25, 2009) for the treatment of
moderate to severe plaque psoriasis and psoriatic arthritis in adults.
Its IV use for the treatment of patients diagnosed with CD was approved
by the FDA in 2016 (September 23, 2016). With regard to the new use of
an existing technology, in the September 1, 2001 final rule (66 FR
46915), we stated that if the new use of an existing technology was for
treating patients not expected to
[[Page 19885]]
be assigned to the same MS-DRG as the patients receiving the existing
technology, it may be considered for approval, but it must also meet
the cost and substantial clinical improvement criteria in order to
qualify for the new technology add-on payment. We do not believe that
potential cases representing patients that may be eligible for
treatment with the new use of the Stelara[supreg] for IV treatment of a
diagnosis of CD would be assigned to the same MS-DRGs as cases treated
using the prior indications.
As discussed above, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, we
are concerned that Stelara[supreg]'s mechanism of action does not
appear to differ from the mechanism of action of other monoclonal
antibodies, which also target unique gastrointestinal-selective
cytokines. The applicant believed that the Stelara[supreg] uses a
different mechanism of action than other medications currently
available for the treatment of patients diagnosed with CD. However, we
believe that the mechanism of action for the new use of the
Stelara[supreg] may be similar to the mechanism of action of other
cytokine-selective monoclonal antibodies that disrupt cytokine mediated
signals crucial to the inflammatory process in patients diagnosed with
CD.
The applicant stated that the Stelara[supreg] is a human
IgG1[kappa] monoclonal antibody that binds with specificity to the p40
protein subunit, which is common to both the interleukin-12 (IL-12) and
interleukin (IL-23) cytokines. IL-12 and IL-23 are naturally occurring
cytokines that are involved in inflammatory and immune responses, such
as natural killer cell activation and CD4+ T-cell differentiation and
activation. In in vitro models, the Stelara[supreg] was shown to
disrupt IL-12 and IL-23 mediated signaling and cytokine cascades by
blocking the interaction of these cytokines with a shared cell-surface
receptor chain, IL-12R[beta]1. The cytokines IL-12 and IL-23 have been
implicated as important contributors to chronic inflammation. According
to the applicant, IV induction therapy quickly achieves optimal blood
levels of Stelara[supreg] so that blockade of IL-12 and IL-23 is most
effective. This level of blockade is not achieved with subcutaneous
administration.
The applicant further stated that other available CD anti-
inflammatory or immune modulator therapies do not target the IL-12/IL-
23p40 substrate. Rather, these therapies may target other integrin
pairs such as the alpha4- beta7 integrins. Therefore, the applicant
believed that the Stelara[supreg] drug is not substantially similar to
any other approved drug for the treatment of moderately to severely
active CD. As previously noted, the applicant asserted that, while the
currently available agents are excellent medications, these agents do
not successfully treat all patients diagnosed with CD, nor do these
agents reliably sustain remission once a clinical response has been
achieved. According to the applicant, the new use of the
Stelara[supreg] offers an alternative to currently available treatment
options, and has been shown to be successful in the treatment of
patients who have failed treatment with the conventional agents
currently being used for a diagnosis of CD, including TNF blockers. We
are concerned that the Stelara[supreg]'s mechanism of action is similar
to that of other immune system suppressors used in the treatment of
patients diagnosed with moderately to severely active CD because other
cytokine-selective monoclonal antibodies also disrupt cytokine mediated
signals crucial to the inflammatory process in patients diagnosed with
CD.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant maintained that MS-
DRGs 386, 387, and 385 (Inflammatory Bowel Disease with CC, without CC/
MCC, and with MCC, respectively) and MS-DRGs 330, 329 and 331 (Major
Small and Large Bowel Procedures with CC, without CC/MCC, and with MCC,
respectively) are used to identify cases representing patients who may
potentially be eligible for treatment using the Stelara[supreg]. The
applicant researched claims data from the FY 2015 MedPAR file and found
10,344 cases. About 85 percent of potentially eligible cases mapped to
MS-DRGs for inflammatory bowel disease and most of the remainder of
cases mapped to MS-DRGs for bowel surgery. We believe that potential
cases involving Stelara[supreg] induction therapy may be assigned to
the same MS-DRGs as cases representing patients who have been treated
using currently available treatment options.
With respect to the third criterion, 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, according to the
applicant, currently available pharmacologic treatments include
antibiotics, mesalamines, corticosteroids, immunomodulators, tumor
necrosis alfa (TNF[alpha]) inhibitors and anti-integrins. The applicant
stated that the new use of the Stelara[supreg] for IV infusion is
indicated for the treatment of adults (18 years and older) diagnosed
with moderately to severely active CD who have: (1) Failed or were
intolerant to treatment with immunomodulators or corticosteroids, but
never failed treatment using a TNF blocker; or (2) failed or were
intolerant to treatment with one or more TNF blockers. The applicant
asserted that Stelara[supreg] for induction therapy is not
substantially similar to other treatment options because it does not
involve the treatment of the same or similar type of patient
population. Patients who are eligible for treatment using the
Stelara[supreg] induction therapy have failed other CD treatment
modalities. The applicant believed that the subset of primary and
secondary nonresponder patients to TNF inhibitor treatments is a
patient population unresponsive to, or ineligible for, currently
available treatments for diagnoses of moderate to severe CD. Based on
the indications for the use of Stelara[supreg], there is a class of
patients who failed, or were intolerant to, treatment using
immunomodulators or corticosteroids, but never failed treatment using a
TNF blocker. The applicant indicated that, for those patients who never
failed treatment with a TNF blocker, this class of patients can be
recognized as two separate patient populations: One population of
patients who have never received treatment using a TNF blocker, or the
other population of patients who have received and responded to
treatment using a TNF blocker. We believe that, if the new use of the
Stelara[supreg] has the same mechanism of action as other immune system
suppressors such as TNF blockers, the patient population that did not
receive treatment using a TNF blocker may not be a new patient
population because those patients may be able to receive treatment
using, and would successfully respond to treatment using, a TNF
blocker. Moreover, if the mechanism of action is the same as other
immune system suppressors, we believe that the new use of the
Stelara[supreg] may be targeted at a new patient population in some
circumstances and instances, but we are concerned that it may not be
targeted at a new patient population in all circumstances and
instances.
[[Page 19886]]
We are inviting public comments on whether the Stelara[supreg]
meets the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis to demonstrate that Stelara[supreg] meets the cost
criterion. The applicant searched claims from the FY 2015 MedPAR file
for cases with a principal ICD-9-CM diagnosis of 555.x (Regional
Enteritis), which are cases of a diagnosis of Crohn's Disease that may
be eligible for treatment using Stelara[supreg].
The applicant identified 10,344 cases that mapped to 35 MS-DRGs.
Approximately 85 percent of cases mapped to the following Inflammatory
Bowel MS-DRGs: MS-DRGs 385 (Inflammatory Bowel Disease with MCC), 386
(Inflammatory Bowel Disease with CC), and 387 (Inflammatory Bowel
Disease without CC/MCC). Similarly, 11 percent of the cases mapped to
the following MS-DRGs for bowel surgery: MS-DRGs 329 (Major Small and
Large Bowel Procedures with MCC), 330 (Major Small and Large Bowel
Procedures with CC), and 331 (Major Small and Large Bowel Procedures
without CC/MCC). The remaining cases (4 percent) represented all other
digestive system disorders.
Using the 10,344 identified cases, the average unstandardized case-
weighted charge per case was $39,935. The applicant then standardized
the charges. The applicant did not remove charges for the current
treatment because as discussed above Stelara[supreg] is indicated for
use in patients who fail other treatments. The applicant then applied
the 2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH
final rule (81 FR 57286) to inflate the charges from FY 2015 to FY
2017. The applicant then added charges for the Stelara[supreg]
technology. Specifically, the applicant assumed that hospitals would
mark up Stelara[supreg] IV to the same extent that they currently mark-
up Stelara[supreg] SC (J3357, ustekinumab, 1 mg). The applicant used
the actual hospital mark-up based on charges in the 2017 OPPS proposed
rule file (OPPS claims incurred and paid in CY 2015). Based on the FY
2017 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted
threshold amount was $55,023. The inflated average case-weighted
standardized charge per case was $69,826. Because the inflated average
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount, the applicant maintained that the technology
meets the cost criterion. We are inviting public comments whether
Stelara[supreg] meets the cost criterion.
With regard to the third criterion, whether a technology represents
a substantial clinical improvement over existing technologies,
according to the applicant, the new use of the Stelara[supreg] has been
shown to produce clinical response and remission in patients diagnosed
with moderate to severe CD who have failed treatment using conventional
therapies, including antibiotics, mesalamine, corticosteroids,
immunomodulators, and TNF[alpha] inhibitors. Stelara[supreg] has been
commercially available on the U.S. market for the treatment of patients
diagnosed with psoriasis (PsO) since 2009 and the treatment of patients
diagnosed with psoriatic arthritis (PsA) since 2013, and the applicant
has maintained a safety registry, which enrolled over 12,000 patients
since 2007. According to the applicant, the drug has been extremely
well-tolerated, and the safety profile in patients diagnosed with CD
has been consistent with that experienced in cases representing
patients diagnosed with PsO and PsA.
The applicant presented the results of three pivotal trials
involving over 1,300 patients diagnosed with moderate to severe CD. All
three trials utilized a multicenter, double-blind, placebo controlled
study design. There were two single-dose IV induction trials, which
included patients who had failed treatment using one or more TNF[alpha]
inhibitors (UNITI-1) (N= 741), and patients who had failed treatment
using corticosteroids and/or immunomodulators (UNITI-2) (N =628).
Responders to the single IV induction dose were then eligible to be
enrolled in a maintenance trial (IM-UNITI) (N= 397), which began 8
weeks after administration of the single IV induction dose. IM-UNITI
patients were given subcutaneous Stelara[supreg] and were treated for
44 weeks. Over half of the patients treated with 90mg of
Stelara[supreg] every 12 weeks were able to achieve remission; a highly
significant response compared to placebo, according to the applicant.
The results of these trials have been published by the New England
Journal of Medicine and the applicant provided the published
studies.\15\ The published study supported the applicant's assertion
that Stelara[supreg] single IV dose induces response and remission in
patients diagnosed with moderately to severely active CD that is
refractory to either TNF antagonists or conventional therapy. Of the
patients in the IM-UNITI trial receiving subcutaneous Stelara[supreg]
at 8 weeks or 12 weeks, 53.1 percent and 48 percent, respectively, were
in remission at week 44 as compared with 35.9 percent of those patients
receiving treatment using placebo.
---------------------------------------------------------------------------
\15\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and
Maintenance Therapy for Crohn' Disease. The New England Journal of
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------
The applicant submitted published results of a multicenter, double-
blind, placebo controlled Phase III study of Stelara[supreg].\16\ We
are concerned that the study did not effectively establish the need for
Stelara[supreg] induction therapy. Also, the median age of patients in
the study was 37 years, and we are concerned that the study did not
include a significant amount of older patients.
---------------------------------------------------------------------------
\16\ Ibid.
---------------------------------------------------------------------------
We also are concerned that we do not have enough information to
determine that the new use of the Stelara[supreg] is a substantial
clinical improvement over existing technologies for the treatment of
moderate to severe CD. We note that the UNITI-1, UNITI-2, and IMUNITI
trials were completed to evaluate efficacy and safety of
Stelara[supreg], not superiority of Stelara[supreg] to current
conventional therapy. Our concerns are based on a lack of head-to-head
trials comparing IV induction and maintenance Stelara[supreg] therapy
with conventional therapy in patients diagnosed with moderate to severe
CD that are also primary and secondary nonresponders to treatment using
TNF alpha inhibitor \17\ therapy. We recognize the subset of primary
and secondary nonresponder patients to
---------------------------------------------------------------------------
\17\ Ibid.
---------------------------------------------------------------------------
TNF inhibitor treatments as a patient population unresponsive to,
or ineligible for, currently available treatments for diagnoses of
moderate to severe CD. However, we believe that this primary and
secondary TNF alpha inhibitor non-responder patient population
represents patients that experience a gap in treatment for diagnoses of
moderate to severe CD. Specifically, we recognize the nonresponder
patient population as described by Simon et al.\18\ as those patients
who are TNF inhibitor immunogenicity failures, pharmacokinetic
failures, and/or pharmacodynamics failures. We also note the supplement
data in Feagan et al.'s publication \19\ summarized the primary and
secondary nonresponders in UNITI-1. However, we are not clear how the
inclusion of the TNF alpha
[[Page 19887]]
inhibitor intolerant patients with primary and secondary TNF alpha
inhibitor failure patients impacts the final comparison of the placebo
and treatment arms. In addition, we note that in the UNITI-1, UNITI-2,
and IMUNITI studies all treatment arms were allowed to continue
conventional treatments for diagnoses of CD throughout the study. We
are concerned that it is difficult to determine whether the new use of
the Stelara[supreg] represents a substantial clinical improvement over
existing technologies with the concomitant use of other conventional CD
medications throughout the duration of the UNITI-1, UNITI-2, and
IMUNITI studies.
---------------------------------------------------------------------------
\18\ Simon E.G., et al., (2016) Ustekinumab for the treatment of
Crohn's disease: can it find its niche? Therapeutic Advances in
Gastroenterology. 2016 Jan; 9(1):26-36.
\19\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and
Maintenance Therapy for Crohn' Disease. The New England Journal of
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------
Also, as mentioned earlier, based on the indications for the use of
the Stelara[supreg], there is a class of patients who failed, or were
intolerant to, treatment with immunomodulators or corticosteroids, but
never failed treatment using a TNF blocker. According to the applicant,
for those patients who never failed treatment using a TNF blocker, this
patient population can be recognized as two separate patient
populations: one patient population representing patients who never
received treatment using a TNF blocker, or the other patient population
representing patients who received and responded to treatment using a
TNF blocker. In the patient population that did not receive treatment
using a TNF blocker, we are unsure if the new use of the
Stelara[supreg] represents a substantial clinical improvement because
it is possible that some patients will have a positive response to
treatment using a TNF blocker and will not respond successfully to
treatment using Stelara[supreg], or some patients may have a positive
response to both treatment using a TNF blocker and using
Stelara[supreg], or some patients may not respond to treatment using a
TNF blocker, but will have a positive response to treatment using
Stelara[supreg].
We are inviting public comments on whether the Stelara[supreg]
meets the substantial clinical improvement criterion.
We did not receive any written public comments in response to the
New Technology Town Hall meeting notice regarding the application of
Stelara[supreg] for new technology add-on payments.
d. KTE-C19 (Axicabtagene Ciloleucel)
Kite Pharma, Inc. submitted an application for new technology add-
on payments for KTE-C19 (axicabtagene ciloleucel) for FY 2018. The KTE-
C19 technology has not received FDA approval as of the time of the
development of this proposed rule. KTE-C19 is an engineered autologous
T-cell immunotherapy used for the treatment of adult patients with
relapsed/refractory aggressive B-cell non-Hodgkin lymphoma (NHL) who
are ineligible for autologous stem cell transplant (ASCT). KTE-C19 is a
single intravenous infusion of T-cell immunotherapy.
The applicant noted that KTE-C19 was granted Breakthrough Therapy
Designation by the FDA on December 3, 2015, for the treatment of
patients with refractory DLBCL, PMBCL, and TFL forms of aggressive B-
cell NHL. The applicant submitted a request for priority review by the
FDA in December 2016. The applicant stated that, when approved by the
FDA, KTE-C19 would represent the only FDA-approved treatment for adult
patients with relapsed refractory aggressive B-cell NHL who are
ineligible for ASCT. Currently, there are no ICD-10-CM/PCS codes that
describe the administration and use of KTE-C19. The applicant has
submitted an application for a unique ICD-10-PCS procedure code to
uniquely identify KTE-C19. If approved, the code will be effective
October 1, 2017 (FY 2018).
According to the applicant, adult NHL represents by a heterogeneous
group of B-cell malignancies with varying patterns of behavior and
response to treatment. B-cell NHL can be classified as either
aggressive, or indolent disease, with aggressive variants including
diffuse large B-cell lymphoma (DLBCL); primary mediastinal large B cell
lymphoma (PMBCL) and transformed follicular lymphoma (TFL). Within NHL,
DLBCL is the most common subtype of NHL, accounting for approximately
30 percent of patients with NHL, and survival without treatment is
measured in months.20 21
---------------------------------------------------------------------------
\20\ Food and Drug Administration. Available at: http://www.accessdata.fda.gov/scripts/opdlisting/oopd/.
\21\ SEER Stat Fact Sheets--NHL. (2016). Available at: http://seer.cancer.gov/statfacts/html/nhl.html.
---------------------------------------------------------------------------
The applicant stated that, since the 1970s, cyclophosphamide,
doxorubicin, vincristine, and prednisone (CHOP) has been the mainstay
of therapy with more intensive regimens failing to show improved
overall survival. The applicant further stated that the approval in
2006 of the anti-CD20 monoclonal antibody rituximab and its addition to
the traditional CHOP regimen, R-CHOP, for patients with newly diagnosed
aggressive NHL resulted in a dramatic improvement in NHL therapy. The
combination of CHOP and R-CHOP is now first-line therapy for treatment
of patients diagnosed with DLBCL with complete response rates upwards
of 76 percent.\22\ Data from the Surveillance, Epidemiology and End
Results (SEER) registries have reflected an observed increase of the
median overall survival from 20 to 47 months over the last two decades.
Despite the improved therapies, only 50 to 70 percent of newly
diagnosed patients are cured by standard first-line therapy alone.\23\
Furthermore, relapsed or refractory (r/r) disease continues to carry a
poor prognosis because only 50 percent of patients are eligible for
more intensive second-line regimens, followed by high dose chemotherapy
(HDT) and ASCT. Second-line chemotherapy regimens studied to date
include rituximab, ifosfamide, carboplatin and etoposide (R-ICE) and
rituximab, dexamethasone, cytarabine, and cisplatin (R-DHAP), followed
by consolidative HDT/ASCT. Both regimens offer similar overall response
rates (ORR) of 51 percent with 1 in 4 patients achieving long-term
complete response (CR) at the expense of increased toxicity.\24\ Given
the modest response to second line therapy and/or HDT/ASCT, the
population of patients with the highest unmet need is those with
chemorefractory disease, which include DLBCL, PMBCL and TFL. These
patients are defined as either progressive disease (PD) as best
response to chemotherapy, stable disease as best response following 4
cycles of first-line or 2 cycles of later-line therapy, or relapse
within 12 months of ASCT.25 26 Based on these definitions
and available data from a multicenter retrospective study (SCHOLAR-1),
chemorefractory disease treated with current and historical standards
of care has consistently poor
[[Page 19888]]
outcomes with an ORR of 26 percent and median OS of 6.6 months.
---------------------------------------------------------------------------
\22\ Coiffier B et al. (2002). CHOP chemotherapy plus rituximab
compared with CHOP alone in elderly patients with diffuse large B-
cell lymphoma. N Eng. J Med 2002; 346(4): 235-242.
\23\ Crump M, et al. (2016). Outcomes in refractory aggressive
diffuse large B-cell lymphoma (DLBCL): results from the
international SCHOLAR-1 study. Abstract 7516, poster and oral
presentation at American Society of Clinical Oncology (ASCO)
conference, June 2016
\24\ Matasar M, et al. (2013). Ofatumumab in combination with
ICE or DHAP chemotherapy in relapsed or refractory intermediate
grade B-cell lymphoma. Blood. 25 July 2013. Vol 122, No 4.
\25\ Crump M, et al. (2016). Outcomes in patients with
refractory aggressive diffuse large B-cell lymphoma (DLBCL): results
from the international scholar-1 study. Abstract and poster
presented at Pan Pacific Lymphoma Conference (PPLC), July 2016
\26\ Gisselbrecht C, et al. (2016). Results from SCHOLAR-1:
Outcomes in patients with refractory aggressive diffuse large B-cell
lymphoma (DLBCL). Oral presentation at European Hematology
Association conference, July 2016
---------------------------------------------------------------------------
According to the applicant, KTE-C19 is a different pathway to treat
patients diagnosed with relapsed or refractory disease. KTE-C19 is
supplied as a T-cell suspension for infusion. With KTE-C19 treatment, a
patient's own T-cells are harvested and engineered ex vivo by
retroviral transduction of a chimeric antigen receptor (CAR) construct
encoding an anti-CD19 CD28/CD3-zeta. The anti-CD19 CAR T-cells are
expanded and infused back into the patient. The new anti-CD19 CAR T-
cells can recognize and eliminate CD19 antigen expressing target cells,
an antigen also expressed on the cell surface of B-cell lymphomas and
leukemias. According to the applicant, prior to KTE-C19 immunotherapy,
the patient would have received outpatient administration of a non-
myeloablative conditioning chemotherapy regimen consisting of
cyclophosphamide 500 mg/m2 IV and fludarabine 30 mg/m2 IV for 3 days at
days -5, -4, and -3 before the infusion of KTE-C19 at Day 0. The
applicant noted that, if KTE-C19 infusion is delayed more than 2 weeks,
readministration of the conditioning chemotherapy regimen may be
required. Hospitalization is recommended for the infusion of KTE-C19.
As discussed earlier, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, the applicant stated that KTE-
C19 does not use the same or similar mechanism of action to achieve a
therapeutic outcome as any other drug or therapy assigned to the same
or a different MS-DRG. The applicant further stated that KTE-C19 is the
first engineered autologous cellular immunotherapy comprised of CAR T-
cells that recognizes CD19 express cancer cells and normal B-cells;
therefore, the applicant believed that KTE-C19's mechanism of action is
distinct and unique from any other cancer drug or biologic that is
currently approved for use in the treatment of aggressive B-cell NHL,
namely single-agent or combination chemotherapy regimens.
With regard to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant noted that based on
the 2014 and 2015 100 Percent Inpatient Standard Analytic files, cases
potentially eligible for treatment using the KTE-C19 and representing
the target patient population span 50 unique MS-DRGs and 73 percent of
all of the cases within these 50 unique MS-DRGs that represent
potentially eligible cases for treatment using KTE-C19 map to the
following 4 MS-DRGs: MS-DRG 840 (Lymphoma & Non-Acute Leukemia with
MCC); MS-DRG 841 (Lymphoma & Non-Acute Leukemia with CC); MS-DRG 846
(Chemotherapy without Acute Leukemia as Secondary Diagnosis with MCC);
and MS-DRG 847 (Chemotherapy without Acute Leukemia as Secondary
Diagnosis with CC). The applicant stated that, with the assignment of
the unique KTE-C19-specific ICD-10-PCS code, patient cases where KTE-
C19 is used will be distinguishable. However, patient cases where KTE-
C19 is used and patient cases that are treated for DLBCL map to the
same MS-DRGs.
With regard to the third criterion, 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, the applicant
asserted that when approved by the FDA, KTE-C19 would represent the
only FDA-approved treatment for adult patients diagnosed with relapsed
or refractory aggressive B-cell NHL who are ineligible for ASCT. As a
result, the applicant stated that KTE-C19 is not substantially similar
to any existing technology and meets the newness criterion. CMS is
concerned the CAR technology used in KTE-C19 may have a mechanism of
action similar to that seen with the use of bispecific T cell engager
(BiTE) technology.
We are inviting public comments on whether KTE-C19 meets the
substantial similarity criteria and the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that KTE-C19 meets the cost criterion. The
applicant used the 2014 and 2015 100 Percent Inpatient Standard
Analytic File (SAF) to assess the MS-DRGs that are most relevant to
patients that may be potentially eligible for treatment using KTE-C19.
The sample was restricted to patients discharged in FY 2015. The
applicant searched for cases with an ICD-9-CM diagnosis code from the
series of 200.7x (large cell lymphoma).
The applicant sought to ensure that claims included in the cost
criterion analysis reflected charges for treating patients diagnosed
with DLBCL and, therefore, minimized the chance that charges were
related to other conditions. Therefore, the applicant searched for
cases with the following criteria:
A primary diagnosis with a ICD-9-CM diagnosis code from
the series of 200.7x (large cell lymphoma) to identify cases of DLBCL
with or without chemotherapy; or
A secondary diagnosis with a ICD-9-CM diagnosis code from
the series of 200.7x (large cell lymphoma) combined with an ICD-9-CM
diagnosis code of V58.11, or V58.12, or ICD-9-CM procedure code 99.25,
99.28, 00.15 or 00.10 to identify cases of DLBCL that received
chemotherapy during their hospitalization.
The applicant excluded claims where the MS-DRG was missing,
Medicare was not the primary payer, there were zero covered charges or
zero covered days, or the provider was not in the FY 2017 IPPS/LTCH PPS
Final Rule Impact File. Additionally, patients under age 18 were
excluded to align with the proposed label that is being prepared for
submission with the KTE-C19 Biologics License Application (BLA). After
applying the trims above, the results showed 762 cases that mapped to
50 MS-DRGs with 11 MS-DRGs containing more than 10 cases. The 11 MS-
DRGs contained a total of 702 cases.
The applicant noted that MS-DRGs 840, 841, 846, and 847 accounted
for 554 (73 percent) of the 762 cases in the cohort.
Using the 702 identified cases, the average unstandardized case-
weighted charge per case was $71,725. The applicant then standardized
the charges. The applicant noted that adult patients with relapsed/
refractory aggressive B-cell NHL who are ineligible for ASCT would
generally not be receiving treatment with both chemotherapy and KTE-
C19. Therefore, all charges listed in the chemotherapy revenue centers
(331, 332, and 335) were removed. The applicant then applied the 2-year
inflation factor of 1.098446 from the FY 2017 IPPS/LTCH final rule (81
FR 57286) to inflate the charges from FY 2015 to FY 2017. Based on the
FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted
threshold amount was $55,023. The inflated average case-weighted
standardized charge per case was $69,826. Because the inflated average
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount, the applicant maintained that the technology
meets the cost criterion. The applicant noted that it was not necessary
to take into account the average per patient cost of the technology
because the inflated average case-weighted standardized charge per case
exceeds the average case-weighted threshold amount without the average
per patient cost of the technology.
The applicant provided the following three sensitivity analyses to
further demonstrate that the technology meets
[[Page 19889]]
the cost criterion. The three sensitivity analyses consisted of: (1)
cases representing patients identified with an ICD-9-CM diagnosis code
200.7x (large cell lymphoma) and cases representing patients identified
with a secondary DLBCL diagnosis who did not receive chemotherapy; (2)
cases representing patients identified with a primary or secondary ICD-
9-CM diagnosis code from the series of 200.7x (large cell lymphoma) who
received chemotherapy; and (3) cases representing patients under a
broader ICD-9-CM diagnosis code range to capture other types of
lymphoma. In all three of the sensitivity analyses, the inflated
average case-weighted standardized charge per case exceeded the average
case-weighted threshold amount. We are inviting public comments on
whether KTE-C19 meets the cost criterion.
According to the applicant, KTE-C19 represents a substantial
clinical improvement over existing technologies used in the treatment
of patients with aggressive B-cell NHL. The applicant asserted that
KTE-C19 can benefit the patient population with the highest unmet need,
patients with refractory or relapsed disease after failure of first-
line or second-line therapy, and patients who have failed or are
ineligible for ASCT. These patients otherwise have adverse outcomes as
demonstrated by historical control data.
Regarding clinical data for KTE-C19, the applicant stated that
historical control data was the only ethical and feasible comparison
information for these chemorefractory, aggressive NHL patients who have
no other available treatment options and have a very short lifespan
without therapy. According to the applicant, based on meta-analysis of
outcomes in chemorefractory DLBCL, there are no curative options for
aggressive B-cell NHL patients regardless of refractory subgroup, line
of therapy, and disease stage with their median overall survival being
6.6 months.
The applicant provided clinical data from the pivotal Study 1
(ZUMA-1, KTE-C19-101), Phase I and II. The applicant also provided
supportive evidence from Study 2 (NCI 009-C-0082). Study 1 is a Phase
I-II multicenter, open label study evaluating the safety and efficacy
of the use of KTE-C19 in patients diagnosed with aggressive refractory
NHL. The trial consists of two distinct phases designed as Phase I
(n=7) and Phase II (n=92). Phase II is a multi-cohort open label study
evaluating the efficacy of KTE-C19. Study 1 subjects were treated with
cyclophosphamide and fludarabine conditioning chemotherapy, followed by
a target dose of 2 x 10 anti-CD19 CAR T-cells per kg body weight. Study
2 subjects were treated with cryopreserved autologous anti-CD19 CAR T
cells, which were manufactured by a similar, but different process than
that used for KTE-C19. The applicant noted that, as of the analysis
cutoff date for the interim analysis, the results of Study 1
demonstrated rapid and substantial improvement in objective, or overall
response rate. The overall response rate was 79 percent (49 responders
among 62 subjects), with 76 percent overall response rate in Cohort 1
(39 responders among 51 subjects) and 91 percent in Cohort 2 (10
responders among 11 subjects) versus historical control of 26 percent.
According to the applicant, Study 1 overall response rates were
consistent across all age groups, with those patients greater than 65
years of age responding at the rates consistent with those under age 65
years and consistent with earlier, positive results from Study 2. The
applicant further stated that pre-specified criteria for demonstration
of early efficacy were met and an independent safety monitoring board
(DSMB) confirmed the efficacy results and found no additional safety
signals.
The applicant further stated that evidence of substantial
improvement regarding the efficacy of KTE-C19 for the treatment of
chemorefractory, aggressive B-cell NHL is supported by the complete
response rates of KTE-C19 in Study 1 (52 percent) versus the historical
control (8 percent). Additionally, the applicant noted that the results
of Study 1 have demonstrated that treated patients experienced a rapid
response to KTE-C19 with 52 percent showing complete response at 3
months, and 41 percent at 1 month.
As noted above, the applicant cited data results from Study 2,
which is an ongoing Phase 1 safety and efficacy study in which anti-
CD19 CAR T-cells were manufactured using a process similar to, but
different from, KTE-C19 to yield cryopreserved autologous anti-CD19 CAR
T cells. From Study 2, a subset of 13 patients with a diagnosis of
DLBCL/PMBCL was noted to be comparable to those treated in Study 1. The
applicant noted that all patients were diagnosed with refractory DLBCL,
received similar doses of conditioning chemotherapy, and were infused
with the cryopreserved autologous anti-CD19 CAR T-cells (which have
been shown to result in an immunotherapy comparable to KTE-C19). The
applicant noted that the results from Study 2 demonstrated the
following: (a) an overall response rate of 69 percent (9 responders
among 13 patients) (95 percent CI 38.6, 90.9); (b) 47 percent of
patients had complete response at month 3 (ongoing 6+ to 20+ months);
and (c) complete response was observed as early as 1 month in 57
percent of patients in Study 2. According to the applicant, further
results will be reported in February 2017.
The applicant also cited safety results from the pivotal Study 1,
Phase II. According to the applicant, almost all patients in Study 1
(95 percent) experienced Grade 3 or higher adverse events with onset on
or after commencement of conditioning chemotherapy, including
cytopenias (Grade 3 and 4 anemia, neutropenia, thrombocytopenia, and
lymphopenia were 40 percent, 40 percent, 29 percent, and 5 percent
respectively), and infection (Grade 3 or worse urinary tract infection,
clostridium difficile colitis and lung infection were 5 percent, 5
percent, and 6 percent respectively). All patients were treated
according to standard of care. The clinical trial protocol stipulated
that patients were infused with KTE-C19 in the hospital inpatient
setting and were monitored in the inpatient setting for at least 7 days
for early identification and treatment of KTE-C19 related toxicities,
which primarily include cytokine release syndrome and neurotoxicities.
The applicant stated that KTE-C19 is expected to be administered in the
hospital inpatient setting to assure appropriate monitoring of patient
adverse events. The applicant noted that the interim analysis of Study
1 showed the following: length of stay following KTE-C19 infusion was a
median of 15 days; cytokine release syndrome (Grade 3 or higher, 18
percent) and neurotoxicity (Grade 3 or higher, 34 percent) were self-
limiting and generally reversible; two patients died from KTE-C19
related adverse events (hemophagocytic lymphohistiocytosis and cardiac
arrest in the setting of cytokine release syndrome). The medications
most often used to treat KTE-C19 clinical trial complications included
growth factors, blood products, anti-infectives, steroids, tocilizumab,
and vasopressors. In the majority of patients (92 percent), the
applicant noted that predominant toxicities associated with the use of
KTE-C19, cytokine release syndrome and neurologic events, resolved by
data cutoff. Median days to resolution of cytokine release syndrome
complications post-KTE-C19 infusion was 9 days, with median days to
resolution of KTE-C19-related
[[Page 19890]]
neurologic events post-KTE-C19 infusion of 18 days. According to the
applicant, there were no clinically important differences in adverse
event rates across age groups (younger than 65; 65 or older), including
cytokine release syndrome and neurotoxicity, and KTE-C19-related
adverse events in Study 1 were consistent with the earlier Study 2
experience.
The applicant further noted that by the cutoff date for the interim
analysis of Study 1, among all KTE-C19 treated patients, 12 patients in
Study 1, Phase II, including 10 from Cohort 1 and 2 from Cohort 2,
died. Eight of these deaths were due to disease progression. One
subject had disease progression after KTE-C19 treatment and
subsequently had ASCT. After ASCT, the subject died due to sepsis. Two
subjects (3 percent) died due to KTE-C19 related AEs (Grade 5
hemophagocytic lymphohistiocytosis event and Grade 5 anoxic brain
injury), and one died due to an AE deemed unrelated to KTE-C19 (Grade 5
pulmonary embolism), without disease progression.
We are concerned that there are no published results showing any
survival benefit from the treatment. We also are concerned with the
limited number of subjects (n=82) that were studied after infusion of
KTE-C19 T-cell immunotherapy. Although the applicant references Study
2, we are concerned that the applicant has included data on DLBCL/PMBCL
patients that did not specifically receive KTE-C19. Additionally, we
are concerned that Study 2 was based on 13 patients which can result in
skewed outcomes due to a small patient population. Finally, we note
that, for Study 1 and Study 2, the data on overall survival are not
reported.
We are inviting public comments on whether KTE-C19 meets the
substantial clinical improvement criterion.
Comment: The applicant stated that it has been notified by the
United States Adopted Names Council (USAN Council) that the
technology's name for KTE-C19 has been revised from ``axicabtagene
ciloretroleucel'' to ``axicabtagene ciloleucel.'' In addition, the
applicant requested that all references by CMS to the technology's name
of KTE-C19 use this final naming convention of ``axicabtagene
ciloleucel.''
Response: We appreciate the applicant's updated information and
have correlated the name of the technology throughout the discussion
above.
e. VYXEOSTM (Cytarabine and Daunorubicin Liposome for
Injection)
Celator Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for VYXEOSTM for FY 2018. The
proposed indication for the use of VYXEOSTM, which has not
received FDA approval as of the time of the development of this
proposed rule, is the treatment of adult patients diagnosed with acute
myeloid leukemia (AML).
AML is a type of cancer in which the bone marrow makes abnormal
myeloblasts (immature bone marrow white blood cells), red blood cells,
and platelets. If left untreated, AML progresses rapidly. Normally, the
bone marrow makes blood stem cells that develop into mature blood cells
over time. Stem cells have the potential to develop into many different
cell types in the body. Stem cells can act as an internal repair
system, dividing, essentially without limit, to replenish other cells.
When a stem cell divides, each new cell has the potential to either
remain a stem cell or become a specialized cell, such as a muscle cell,
a red blood cell or a brain cell, etc. A blood stem cell may become a
myeloid stem cell or a lymphoid stem cell. Lymphoid stem cells become
white blood cells. A myeloid stem cell becomes one of three types of
mature blood cells: (1) red blood cells that carry oxygen and other
substances to body tissues; (2) white blood cells that fight infection;
or (3) platelets that form blood clots and help to control bleeding. In
patients diagnosed with AML, the myeloid stem cells usually become a
type of myeloblast. The myeloblasts in patients diagnosed with AML are
abnormal and do not become healthy white blood cells. Sometimes in
patients diagnosed with AML, too many stem cells become abnormal red
blood cells or platelets. These abnormal cells are called leukemia
cells or blasts.
AML is defined by the World Health Organization (WHO) as >20
percent blasts in the bone marrow or blood. AML can also be diagnosed
if the blasts are found to have a chromosome change that occurs only in
a specific type of AML, even if the blast percentage does not reach 20
percent. Leukemia cells can build up in the bone marrow and blood,
resulting in less room for healthy white blood cells, red blood cells,
and platelets. When this occurs, infection, anemia, or increased risk
for bleeding may result. Leukemia cells can spread outside the blood to
other parts of the body, including the central nervous system (CNS),
skin, and gums.
Treatment of AML diagnoses usually consists of two phases;
remission induction and post-remission therapy. Phase one, remission
induction, is aimed at eliminating as many myeloblasts as possible. The
most common used remission induction regimens for AML diagnoses are the
``7+3'' regimens using an antineoplastic and an anthracycline.
Cytarabine and daunorubicin are two commonly used drugs for ``7+3''
remission induction therapy. Cytarabine is continuously administered
intravenously over the course of 7 days, while daunorubicin is
intermittently administered intravenously for the first 3 days. The
``7+3'' regimen typically achieves a 70 to 80 percent complete
remission (CR) rate in most patients under 60 years of age.
High rates of CR are not generally seen in older patients for a
number of reasons, such as different leukemia biology, much higher
incidence of adverse cytogenetic abnormalities, higher rate of
multidrug resistant leukemic cells, and comparatively lower patient
performance status (the standard criteria for measuring how the disease
impacts a patient's daily living abilities). Intensive induction
therapy has worse outcomes in this patient population.\27\ The
applicant asserted that many older adults diagnosed with AML have a
poor performance status \28\ at presentation and multiple medical
comorbidities that make the use of intensive induction therapy quite
difficult or contraindicated altogether. Moreover, the CR rates of
poor-risk patients diagnosed with AML are substantially higher in
patients >60 years old; owing to a higher proportion of secondary AML,
disease developing in the setting of a prior myeloid disorder, or prior
cytotoxic chemotherapy. Therefore, less than half of older adults
diagnosed with AML achieve CR with combination induction regimens.\29\
---------------------------------------------------------------------------
\27\ Juliusson G, Lazarevic V, Horstedt AS, Hagberg O, Hoglund
M. Acute myeloid leukemia in the real world: why population-based
registries are needed. Blood. 2012 Apr 26; 119(17):3890-9.
\28\ Stone RM, et al. (2004). Acute myeloid leukemia. Hematology
Am Soc Hematol Educ Program. 2004:98-117.
\29\ Appelbaum FR, Gundacker H, Head DR. ``Age and acute myeloid
leukemia.'' Blood 2006; 107:3481-3485.
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The combination of cytarabine and an anthracycline, either as
``7+3'' regimens or as part of a different regimen incorporating other
cytotoxic agents, may be used as so-called ``salvage'' induction
therapy in the treatment of adults diagnosed with AML who experience
relapse in an attempt to
[[Page 19891]]
achieve CR. According to the applicant, while CR rates of success vary
widely depending on underlying disease biology and host factors, there
is a lower success rate overall in achievement of CR with ``7+3''
regimens compared to VYXEOSTM therapy. In addition, ``7+3''
regimens produce a CR rate of approximately 50 percent in younger adult
patients who have relapsed, but were in CR for at least 1 year.\30\
---------------------------------------------------------------------------
\30\ Kantarjian H, Rayandi F, O'Brien S et al. ``Intensive
chemotherapy does not benefit most older patients (age 70 years and
older) with acute myeloid leukemia.'' Blood 2010; 116(22):4422.
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VYXEOSTM is a nano-scale liposomal formulation
containing a fixed combination of cytarabine and daunorubicin in a 5:1
molar ratio. This formulation was developed by the applicant using a
proprietary system known as CombiPlex. According to the applicant,
CombiPlex addresses several fundamental shortcomings of conventional
combination regimens, specifically the conventional ``7+3'' free drug
dosing, as well as the challenges inherent in combination drug
development, by identifying the most effective synergistic molar ratio
of the drugs being combined in vitro, and fixing this ratio in a nano-
scale drug delivery complex to maintain the optimized combination after
administration and ensuring exposure of this ratio to the tumor.
Cytarabine and daunorubicin are co-encapsulated inside the
VYXEOSTM liposome at a fixed ratiometrically, optimized 5:1
cytarabine:daunorubicin molar ratio. According to the applicant,
encapsulation maintains the synergistic ratios, reduces degradation,
and minimizes the impact of drug transporters and the effect of known
resistant mechanisms. The applicant stated that the 5:1 molar ratio has
been shown, in vitro, to maximize synergistic antitumor activity across
multiple leukemic and solid tumor cell lines, including AML, and in
animal model studies to be optimally efficacious compared to other
cytarabine:daunorubicin ratios. In addition, the applicant stated that
in clinical studies, the use of VYXEOSTM has demonstrated
consistently more efficacious results than the conventional ``7+3''
free drug dosing. VYXEOSTM is intended for intravenous
administration after reconstitution with 19 mL sterile water for
injection. VYXEOSTM is administered as a 90-minute
intravenous infusion on days 1, 3, and 5 (induction therapy), as
compared to the ``7+3'' free drug dosing, which consists of two
individual drugs administered on different days, including 7 days of
continuous infusion.
With regard to the ``newness'' criterion, the applicant indicated
that the rolling New Drug Application (NDA) submission to the FDA for
VYXEOSTM began on September 30, 2016. The applicant stated
that it intends to request Priority Review from the FDA.
VYXEOSTM is currently available in the United States only on
an investigational basis, under an Investigational New Drug (IND)
designation. Breakthrough Therapy designation was granted on May 19,
2016, for the treatment of adults diagnosed with therapy-related AML
(t-AML) or AML with myelodysplasia-related changes (AML-MRC). Fast
Track designation was granted by the FDA in January 2015 for the
treatment of elderly patients diagnosed with secondary AML. Orphan Drug
designation was granted by the FDA on August 22, 2008, for the
treatment of acute AML. VYXEOSTM had not received pre-market
(PMA) approval from the FDA at the time of development of this proposed
rule. However, the applicant anticipates receiving approval from the
FDA by July 1, 2017. The applicant also has submitted a request for a
unique ICD-10-PCS code, beginning with FY 2018.
As discussed earlier, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, the
applicant asserted that VYXEOSTM does not use the same or
similar mechanism of action to achieve a therapeutic outcome as any
other drug assigned to the same or a different DRG. The applicant
stated that no other AML treatment is designed, nor is able, to deliver
a fixed, ratiometrically optimized and synergistic drug:drug ratio of
5:1 cytarabine to daunorubicin, and selectively target and accumulate
at the site of malignancy, while minimizing unwanted exposure, which
the applicant based on the data results of preclinical and clinical
studies of the use of VYXEOSTM. The applicant indicated that
VYXEOSTM is a nano-scale liposomal formulation of a fixed
combination of cytarabine and daunorubicin. Further, the applicant
stated that the rationale for the development of VYXEOSTM is
based on prolonged delivery of synergistic drug ratios utilizing the
applicant's proprietary, ratiometric CombiPlex technology. According to
the applicant, conventional ``7+3'' free drug dosing has no delivery
complex, and these individual drugs are administered without regard to
their ratio dependent interaction. According to the applicant,
enzymatic inactivation and imbalanced drug efflux and transporter
expression reduce drug levels in the cell. Decreased cytotoxicity leads
to cell survival, emergence of drug resistant cells, and decreased
overall survival.
The applicant provided the results of clinical studies to
demonstrate that the CombiPlex technology and the ratiometric dosing of
VYXEOSTM represent a shift in anticancer agent delivery,
whereby the fixed, optimized dosing provides less drug to achieve
improved efficacy, while maintaining a favorable risk-benefit profile.
The results of this ratiometric dosing approach are in contrast to the
typical combination chemotherapy development that establishes the
recommended dose of one agent and then adds subsequent drugs to the
combination at increasing concentrations until the aggregate effects of
toxicity are considered to be limiting (the ``7+3'' drug regimen).
According to the applicant, this current approach to combination
chemotherapy development assumes that maximum therapeutic activity will
be achieved with maximum dose intensity for all drugs in the
combination, and ignores the possibility that more subtle
concentration-dependent drug interactions could result in frankly
synergistic outcomes.
The applicant maintained that, while VYXEOSTM contains
no novel active agents, its innovative drug delivery mechanism appears
to be a superior way to deliver the two active compounds in an effort
to optimize their efficacy in killing leukemic blasts. However, we are
concerned it is possible that VYXEOSTM may use a similar
mechanism of action compared to current treatment because both the
current treatment regimen and VYXEOSTM are used in the
treatment of AML by intravenous administration of cytarabin and
daunorubicin.
With respect to the second criterion, whether a product is assigned
to the same or a different MS-DRG, the applicant maintained that based
on the 2014 and 2015 100 Percent Inpatient Standard Analytic files,
cases representing patients potentially eligible for treatment using
VYXEOSTM and the target patient population span 134 unique
MS-DRGs, and 78 percent of all of the cases within these 134 unique MS-
DRGs map to the following 4 MS-DRGs: 834 (Acute Leukemia Without Major
O.R. Procedure With MCC), 837 (Chemotherapy With Acute Leukemia as SDX
or With High Dose Chemotherapy
[[Page 19892]]
Agent with MCC), 838 (Chemotherapy With Acute Leukemia as SDX With CC
or High Dose Chemotherapy Agent), and 839 (Chemotherapy With Acute
Leukemia as SDX Without CC/MCC). We believe that these are the same MS-
DRGs that identify cases representing patients who are treated for AML.
With respect to the third criterion, 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, the applicant
asserted that VYXEOSTM is indicated for the use in patients
diagnosed with high-risk AML. However, we believe that
VYXEOSTM involves the treatment of the same patient
population as other AML treatment therapies.
We are inviting public comments on whether VYXEOSTM is
substantially similar to existing technology, including whether the
mechanism of action of VYXEOSTM differs from the mechanism
of action of the current treatment regimen. We also are inviting public
comments on whether VYXEOSTM meets the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis. The applicant used the 2014 and 2015 100 Percent
Inpatient Standard Analytic Files (SAFs) to assess the MS-DRGs assigned
for hospitalizations most likely to represent patients that may be
eligible for treatment with VYXEOSTM. The sample of claims
was limited to discharges occurring in FY 2015 (that is, from October
1, 2014 to September 30, 2015).
The applicant identified patients as potential VYXEOSTM
candidates by searching for cases indicating a diagnosis of AML.
Specifically, the applicant searched for cases that met the following
criteria:
Had an ICD-9-CM diagnosis code of 205.00 (Acute myeloid
leukemia, without mention of having achieved remission), or 205.02
(Acute myeloid leukemia, in relapse); or
The patient received chemotherapy during their hospital
stay as indicated by the following principal/secondary ICD-9-CM
diagnosis codes or ICD-9-CM procedure codes: V58.11 (Encounter for
antineoplastic chemotherapy); V58.12 (Encounter for antineoplastic
immunotherapy; 00.10 (Implantation of chemotherapeutic agent); 00.15
(High-Dose infusion interleukin-2); 99.25 (Injection or Infusion of
cancer chemotherapeutic substance); or 99.28 (Injection or infusion of
biological response modifier as an antineoplastic agent); and
Excluded cases that had a bone marrow transplant based on
the following ICD-9-CM procedure codes: 41.00 (Bone marrow transplant,
not otherwise specified); 41.01 (Autologous bone marrow transplant
without purging); 41.02 (Allogeneic bone marrow transplant with
purging); 41.03 (Allogeneic bone marrow transplant without purging);
41.04 (Autologous hematopoietic stem cell transplant without purging);
41.05 (Allogeneic hematopoietic stem cell transplant without purging);
41.06 (Cord blood stem cell transplant); 41.07 (Autologous
hematopoietic stem cell transplant with purging); 41.08 (Allogeneic
hematopoietic stem cell transplant); and 41.09 (Autologous bone marrow
transplant with purging).
According to the applicant, the eligible cases span 134 unique MS-
DRGs, 14 of which contain more than 10 cases. The most common MS-DRGs
are MS-DRGs 834, 837, 838, and 839. These 4 MS-DRGs account for 3,601
(78 percent) of the 4,613 potential eligible cases.
Using the 4,613 identified cases, the average unstandardized case-
weighted charge per case was $203,234. The applicant then standardized
the charges. The applicant removed charges for the current treatment.
The applicant then applied the 2-year inflation factor of 1.098446 from
the FY 2017 IPPS/LTCH final rule (81 FR 57286) to inflate the charges
from FY 2015 to FY 2017. Based on the FY 2017 IPPS/LTCH PPS Table 10
thresholds, the average case-weighted threshold amount was $84,639. The
inflated average case-weighted standardized charge per case was
$178,392. Because the inflated average case-weighted standardized
charge per case exceeds the average case-weighted threshold amount, the
applicant maintained that the technology meets the cost criterion.
The applicant noted that the average case-weighted standardized
charge per case for the applicable MS-DRGs exceeds the average case-
weighted threshold amount without taking into account the average per
patient cost of the technology to the hospital. Therefore, the analysis
above did not include the cost of VYXEOSTM.
As previously stated, according to the applicant, the potentially
eligible cases used for the cost criterion analysis included patients
diagnosed with AML who received chemotherapy during their hospital
stay, but did not receive a bone marrow transplant. The applicant
asserted that this patient cohort is inclusive of all likely potential
patients that may be eligible for treatment using VYXEOSTM.
The applicant conducted the same analysis, but excluded all pharmacy
and IV therapy charges. Additionally, to test the sensitivity of cohort
specification, the applicant conducted the following four additional
sensitivity analyses that used alternative cohort definitions: (1)
Included AML cases with ICD-9-CM diagnosis code 205.00 and
chemotherapy; (2) included AML cases with ICD-9-CM diagnosis code
205.02 and chemotherapy; (3) included cases with AML principal
diagnosis and chemotherapy; and (4) included AML cases without
requiring chemotherapy. In all of these analyses, the inflated average
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount. We are inviting public comments whether
VYXEOSTM meets the cost criterion.
With regard to substantial clinical improvement, according to the
applicant, clinical data results have shown that the use of
VYXEOSTM represents a substantial clinical improvement for
the treatment of AML in newly diagnosed high-risk, older (60 years and
older) patients, marked by statistically significant improvements in
overall survival, event free survival and response rates, and in
relapsed patients age 18 to 65 years of age, where a statistically
significant improvement in overall survival was documented for the
poor-risk subset of patients as defined by the European Prognostic
Index. In both groups of patients, the applicant stated that there was
significant improvement in survival for the high-risk patient group.
The applicant provided the following specific clinical data results.
The applicant stated the clinical data results show that
treatment with VYXEOSTM in older patients (60 years of age
and older) diagnosed with untreated, high-risk AML will result in
superior survival rates, as compared to patients treated with
conventional ``7+3'' free drug dosing. The applicant provided a summary
of the pivotal Phase III Study 301 in which 309 patients were enrolled,
with 153 patients randomized to the VYXEOSTM arm and 156 to
the ``7+3'' free drug dosing arm. Among patients aged 60 to 69 years,
there were 96 patients in the VYXEOSTM arm and 102 in the
``7+3'' free drug dosing arm; for patients aged 70 to 75 years, there
were 57 and 54 patients in each arm, respectively. The applicant noted
that the data results from the Phase III Study 301 demonstrated that
first-line treatment of patients diagnosed with high-risk AML in the
VYXEOSTM arm resulted in substantially greater median
overall survival of 9.56 months versus 5.95 months in the ``7+3'' free
drug dosing arm (hazard ratio of 0.69; p =0.005).
[[Page 19893]]
The applicant further asserted that high-risk, older
patients (60 years of age and older) previously untreated for diagnoses
of AML will have a lower risk of early death when treated with
VYXEOSTM than those treated with the conventional ``7+3''
free drug dosing. The applicant cited Medeiros, et al. 2015,\31\ which
reported a large observational study of Medicare beneficiaries and
noted the following: The data result of the study showed that 50 to 60
percent of elderly patients diagnosed with AML remain untreated
following diagnosis; treated patients were more likely younger, male,
and married, and less likely to have secondary diagnoses of AML, poor
performance indicators, and poor comorbidity scores compared to
untreated patients; and in multivariate survival analyses, treated
patients exhibited a significant 33 percent lower risk of death
compared to untreated patients.
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\31\ Medeiros B, et al. (2015). Big data analysis of treatment
patterns and outcomes among elderly acute myeloid leukemia patients
in the United States. Ann Hematol. 2015; 94(7): 1127-1138.
---------------------------------------------------------------------------
Based on data from the Phase III Study 301,\32\ the applicant cited
the following results: The rate of 60-day mortality was less in the
VYXEOSTM arm (13.7 percent) versus the ``7+3'' free drug
dosing arm (21.2 percent); the reduction in early mortality was due to
fewer deaths from refractory AML (3.3 percent versus 11.3 percent),
with very similar rates of 60-day mortality due to adverse events (10.4
percent versus 9.9 percent); there were fewer deaths in the
VYXEOSTM arm versus the ``7+3'' free drug dosing arm during
the treatment phase (7.8 percent versus 11.3 percent); and there were
fewer deaths in the VYXEOSTM arm during the follow-up phase
than in the ``7+3'' free drug dosing arm (59.5 percent versus 71.5
percent).
---------------------------------------------------------------------------
\32\ Lancet J, et al. (2016). Final results of a Phase III
randomized trial of VYXEOS (CPX-351) versus 7+3 in older patients
with newly diagnosed, high-risk (secondary) AML. Abstract and oral
presentation at American Society of Clinical Oncology (ASCO), June
2016.
---------------------------------------------------------------------------
The applicant asserted that high-risk, older patients (60
years of age and older) previously untreated for a diagnosis of AML
exhibited statistically significant improvements in response rates
after treatment with VYXEOSTM versus treatment with the
conventional ``7+3'' free drug chemotherapy dosing, suggesting that the
use of VYXEOSTM is a superior pre-transplant induction
treatment versus ``7+3'' free drug dosing. Restoration of normal
hematopoiesis is the ultimate goal of any therapy for AML diagnoses.
The first phase of treatment consists of induction chemotherapy, in
which the goal is to ``empty'' the bone marrow of all hematopoietic
elements (both benign and malignant), and to allow repopulation of the
marrow with normal cells, thereby yielding remission. According to the
applicant, post-induction response rates were significantly higher
following the use of VYXEOSTM, which elicited a 47.7 percent
total response rate and a 37.3 percent rate for CR, whereas the total
response and CR rates for the ``7+3'' free drug dosing arm were 33.3
percent and 25.6 percent, respectively. The CR + CRi rates for patients
aged 60 to 69 years were 50.0 percent in the VYXEOSTM arm
and 36.3 percent in the ``7+3'' free drug dosing arm, with an odds
ratio of 1.76 (95 percent CI, 1.00-3.10). For patients aged 70 to 75,
the rates of CR + CRi were 43.9 percent in the VYXEOSTM arm
and 27.8 percent in the ``7+3'' free drug dosing arm.
The applicant asserted that VYXEOSTM treatment
will enable high-risk, older patients (60 years of age and older) to
bridge to allogeneic transplant, and VYXEOSTM responding
patients will have markedly better outcomes following transplant. The
applicant stated that diagnoses of secondary AML are considered
incurable with standard chemotherapy approaches and, as with other
high-risk hematological malignancies, transplantation is a useful
treatment alternative. The applicant further stated that autologous
HSCT has limited effectiveness and at this time, only allogeneic HSCT
with full intensity conditioning has been reported to produce long-term
remissions. However, the applicant stated that the clinical study by
Medeiros et al., 2015, reported that, while the use of allogeneic HSCT
is considered a potential cure for AML, its use is limited in older
patients because of significant baseline comorbidities and increased
transplant-related morbidity and mortality. Patients in either arm of
the Phase III Study 301 responding to induction with a CR or CR+CRi
(n=125) were considered for allogeneic hematopoietic cell transplant
(HCT) when possible. In total, 91 patients were transplanted: 52 (34
percent) from the VYXEOSTM arm and 39 (25 percent) from the
``7+3'' free drug dosing arm. Patient and AML characteristics were
similar according to randomized arm, including percentage of patients
in each arm that underwent transplant in CR+CRi status. However, the
applicant noted that the VYXEOSTM arm contained a higher
percentage of older patients (aged 70 or greater) who were transplanted
(VYXEOSTM, 31 percent; ``7+3'' free drug dosing, 15
percent).\33\
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\33\ Stone Hematology 2004; Gordon AACR 2016; NCI, cancer.gov.
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According to the applicant, patient outcome following transplant
strongly favored patients in the VYXEOSTM arm. The Kaplan-
Meier analysis of the 91 transplanted patients landmarked at the time
of HCT showed that patients in the VYXEOSTM arm had markedly
better overall survival (hazard ratio 0.46; p=0.0046). The time-
dependent Adjustment Model (Cox proportional hazard ratio) was used to
evaluate the contribution of VYXEOSTM to overall survival
rate after adjustment for transplant and showed that
VYXEOSTM remained a significant contributor, even after
adjusting for transplant. The time-dependent Cox hazard ratio for
overall survival rates in the VYXEOSTM arm versus the
``7+3'' free drug dosing arm was 0.51 (95 percent CI, 0.35-0.75;
P=.0007).
The applicant asserted that VYXEOSTM treatment
of previously untreated older patients (60 years of age and older)
diagnosed with high-risk AML increases the response rate and improves
survival compared to conventional ``7+3'' free drug dosing in patients
diagnosed with FLT3 mutation. The applicant noted the following:
approximately 20 to 30 percent of AML patients harbor some form of FLT3
mutation, AML patients with a FLT3 mutation have a higher relapse rate
and poorer prognosis than the overall population diagnosed with AML,
and the most common type of mutation is internal tandem duplication
(ITD) mutation localized to a membrane region of the receptor.
The applicant cited Gordon et al., 2016,\34\ which reported on the
significant anti-leukemic activity of VYXEOSTM in AML blasts
exhibiting high-risk characteristics, including FLT3-ITD, that are
typically associated with poor outcomes when treated with conventional
``7+3'' free drug dosing. To determine whether the improved complete
remission and overall survival rates of VYXEOSTM as compared
to conventional ``7+3'' free drug dosing are attributable to liposome-
mediated altered drug PK or direct cellular interactions with specific
AML blast samples, the authors evaluated cytotoxicity in 53 AML patient
specimens. Cytotoxicity results were correlated with patient
characteristics,
[[Page 19894]]
as well as VYXEOSTM cellular uptake and molecular phenotype
status including FLT3-ITD, which is a predictor of poor patient
outcomes to conventional ``7+3'' free drug dosing. The applicant stated
that a notable result from this research was the observation that AML
blasts exhibiting the FLT3-ITD phenotype exhibited some of the lowest
IC50 (the 50 percent inhibitory concentration) values and,
as a group, were five-fold more sensitive to VYXEOSTM than
those with wild type FLT3. In addition, there was evidence that
increased sensitivity to VYXEOSTM was associated with
increased uptake of the drug-laden liposomes by the patient-derived AML
blasts. The applicant noted that Gordon, et al. 2016, concluded taken
together, the data are consistent with clinical observations where
VYXEOSTM retains significant anti-leukemic activity in AML
patients exhibiting high-risk characteristics. The applicant also noted
that a sub analysis of Phase III Study 301 identified 22 patients
diagnosed with FLT3 mutation in the VYXEOSTM arm and 20 in
the ``7+3'' free drug dosing arm, which resulted in the following
response rates of FLT3 mutated patients, which were higher with
VYXEOSTM (15 of 22, 68.2 percent) versus ``7+3'' free drug
dosing (5 of 20, 25.0 percent); and the Kaplan-Meier analysis of the 42
FLT3 mutated patients showed that patients in the VYXEOSTM
arm had a trend towards better overall survival rates (hazard ratio
0.57; p=0.093).
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\34\ Gordon M, Tardi P, Lawrence MD et al. ``CPX-351
cytotoxicity against fresh AML blasts increased for FLT3-ITD+ cells
and correlates with drug uptake and clinical outcomes.'' Abstract
287 and poster presented at AACR (American Association for Cancer
Research). April 2016.
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The applicant asserted that younger patients (18 to 65
years of age) with poor risk first relapse AML have shown higher
response rates with VYXEOSTM versus conventional ``salvage''
chemotherapy. Overall, the applicant stated that the use of
VYXEOSTM had an acceptable safety profile in this patient
population based on 60-day mortality data. Study 205 \35\ was a
randomized study comparing VYXEOSTM against the
investigator's choice of first ``salvage'' chemotherapy in patients
diagnosed with relapsed AML after a first remission lasting greater
than 1 month (VYXEOSTM arm, n=81 and ``7+3'' free drug
dosing arm, n=44; ages 18 to 65 year of age). Investigator's choice was
almost always based on cytarabine + anthracycline, usually with the
addition of one or two new agents. According to the applicant,
VYXEOSTM demonstrated a higher rate of morphological
leukemia clearance among all patients, 43.2 percent versus 40.0
percent, and the advantage was most apparent in poor-risk patients,
78.7 percent versus 44.4 percent, as defined by the European Prognostic
Index (EPI). In the subset analysis of this EPI poor-risk patient
subset, the applicant stated there was a significant improvement in
survival rate (6.6 versus 4.2 months median, hazard ratio=0.55, p=0.02)
and improved response rate (39.3 percent versus 27 percent). The
applicant also noted the following: the safety profile for the use of
VYXEOSTM was qualitatively similar to that of control
``salvage'' therapy, with nearly identical 60-day mortality rates (14.8
percent versus 15.9 percent); among VYXEOSTM treated
patients, those with no history of prior HSCT (n=59) had higher
response rates (54.2 percent versus 37.8 percent) and lower 60-day
mortality (10.2 percent versus 16.2 percent); overall, the use of
VYXEOSTM had acceptable safety based on 60-day mortality
data, with somewhat higher frequency of neutropenia and
thrombocytopenia-related grade 3-4 adverse events. Even though these
patients are younger (18 to 65 years of age) than the population
studied in Phase III Study 301 (60 years and older), Study 205 patients
were at a later stage of disease and almost all had responded to first-
line therapy (cytarabine + anthracycline) and had relapsed. The
applicant also cited Cortes, et al. 2015,\36\ which reported that
patients diagnosed with first relapse AML have limited likelihood of
response and short expected survival following ``salvage'' treatment
with the results from literature showing that:
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\35\ Cortes J, et al. (2011). Significance of prior HSCT on the
outcome of salvage therapy with CPX-351 or conventional chemotherapy
among first relapse AML patients. Abstract and poster presented at
ASH 2011.
\36\ Cortes J, et al. (2015). Phase II, multicenter, randomized
trial of CPX-351 (cytarabine:daunorubicin) liposome injection versus
intensive salvage therapy in adults with first relapse AML. Cancer.
January 2015, 234-42.
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Mitoxantrone, etoposide, and cytarabine induced response
in 23 percent of patients, with median overall survival of only 2
months.
Modulation of deoxycitidine kinase by fludarabine led to
the combination of fludarabine and cytarabine, resulting in a 36
percent CR rate with median remission duration of 39 weeks.
First salvage gemtuzumab ozogamicin induced CR+CRp (or
CR+CRi) response in 30 percent of patients with CD33+ AML and, for
patients with short first CR durations, appeared to be superior to
cytarabine-based therapy.
The applicant noted that Study 205 results showed the use of
VYXEOSTM retained greater anti-leukemic efficacy in patients
diagnosed with poor-risk first relapse AML, and produced higher
morphological leukemia clearance rates (78.7 percent) compared to
conventional ``salvage'' therapy (44 percent). The applicant further
noted that, overall, the use of VYXEOSTM had acceptable
safety profile in this patient population based on 60-day mortality
data.
Based on all of the data presented above, the applicant concluded
that VYXEOSTM represents a substantial clinical improvement
over existing technologies. However, we are concerned that, although
there was an improvement in a number of outcomes in Phase III Study
301, specifically overall survival rate, lower risk of early death,
improved response rates, better outcomes following transplant,
increased response rate and overall survival in patients diagnosed with
FLT3 mutation, and higher response rates versus conventional
``salvage'' chemotherapy in younger patients diagnosed with poor-risk
first relapse, the improved outcomes may not be statistically
significant. Furthermore, we are concerned that the overall improvement
in survival from 5.95 months to 9.56 months may not represent a
substantial clinical improvement. In addition, the rate of adverse
events in both arms of Study 205, given the theoretical benefit of
reduced toxicity with the liposomal formulation, was similar for both
the VYXEOSTM and ``7+3'' free drug treatment groups.
Therefore, we also are concerned that there is a similar rate of
adverse events, such as febrile neutropenia (68 percent versus 71
percent), pneumonia (20 percent versus 15 percent), and hypoxia (13
percent versus 15 percent), with the use of VYXEOSTM as
compared with the conventional ``7+3'' free drug regimen.
We are inviting public comments on whether the VYXEOSTM
meets the substantial clinical improvement criterion.
Below we summarize and respond to comments submitted on
VYXEOSTM during the open comment period in response to the
New Technology Town Hall meeting notice.
Comment: The applicant provided a written response regarding the
definition of ``free drug'' as ``Unbound drug pharmacology;'' an active
drug or other compound that is not bound to a carrier protein-for
example, albumin or alpha[hyphen]1[hyphen]acid glycoprotein. The
applicant explained that the term ``free[hyphen]drug dosing'' is used
to describe the two different non[hyphen]encapsulated, separately
administered drugs in the ``7+3'' free drug regimen (cytarabine and
daunorubicin), each an unrestricted uniform aqueous solution of the
drug in water for continuous administration of cytarabine and separate
intravenous
[[Page 19895]]
administration of daunorubicin according to the ``7+3'' dosing
schedule. The applicant then stated that the fixed molar drug ratio
delivered by VYXEOSTM is not relevant to the conventional
dosing of the two free drugs, cytarabine and daunorubicin. The
applicant explained that the doses of cytarabine and daunorubicin used
in the conventional ``7+3'' free drug dosing regimen were based on the
maximum tolerated dose of the two agents, not on any concept related to
a drug ratio that provides optimal synergy. Finally, the ratio of
cytarabine and daunorubicin administered in free (non[hyphen]liposomal)
form is irrelevant because the administered ratio cannot be maintained
when these drugs are infused separately. This is because the drugs will
be distributed and eliminated differentially and independently of one
another and the ratio will change rapidly and continuously.
Consequently, according to the applicant, the inability to control drug
ratios following administration in conventional dosage forms likely
results in exposure of tumor cells to antagonistic drug ratios with a
corresponding loss of therapeutic activity.
Response: We appreciate the applicant's comments. We will take
these comments into consideration when deciding whether to approve new
technology add-on payments for VYXEOSTM.
f. GammaTileTM
Isoray Medical, Inc. & GammaTile, LLC submitted an application for
new technology add-on payments for FY 2018 for the
GammaTileTM. The GammaTileTM is a brachytherapy
technology for use in the treatment of patients diagnosed with brain
tumors using cesium-131 radioactive sources embedded in a collagen
matrix. GammaTileTM is designed to provide adjuvant
radiation therapy to eliminate remaining tumor cells in patients who
required surgical resection of brain tumors. According to the
applicant, the GammaTileTM is a new vehicle of delivery for
and inclusive of cesium-131 brachytherapy sources embedded within the
product. The applicant stated that the technology has been manufactured
for use in the setting of a craniotomy resection site where there is a
high chance of local recurrence of a CNS or dual-based tumor. The
applicant asserted that the use of GammaTileTM provides a
new, unique modality for treating patients who require radiation
therapy to augment surgical resection of malignancies of the brain. By
offsetting the radiation sources with a 3mm gap of a collagen matrix,
the applicant asserted that the use of GammaTileTM resolves
issues with ``hot'' and ``cold'' spots associated with brachytherapy,
improves safety, and potentially offers a treatment option for patients
with limited, or no other, available options. The
GammaTileTM is biocompatible and bioabsorbable, and is left
in the body permanently without need for future surgical removal. The
applicant asserted that the commercial manufacturing of the product
will significantly improve on the process of constructing customized
implants with greater speed, efficiency, and accuracy than is currently
available, and require less surgical expertise in placement of the
radioactive sources, allowing a greater number of surgeons to utilize
brachytherapy techniques in a wider variety of hospital settings.
The applicant for GammaTileTM has applied for FDA
approval and anticipated FDA approval by the spring of 2017. In its
application, the applicant indicated that it anticipated that the
product would be approved by the FDA for use in both the primary and
salvage treatment of radiosensitive malignances of the brain. However,
the applicant had not received FDA approval at the time of development
of this proposed rule. In subsequent discussions with the applicant,
the applicant indicated that it is only seeking FDA approval for use in
the salvage treatment of recurrent radiosensitive malignances of the
brain. The applicant submitted a request for a unique ICD-10-PCS code
for the administration of GammaTileTM. If approved, the
procedure codes will be effective October 1, 2017 (FY 2018).
As discussed earlier, if a technology meets all three of the
substantial similarity criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments.
With regard to the first criterion, whether a product uses the same
or a similar mechanism of action to achieve a therapeutic outcome, the
applicant stated that when compared to treatment using external beam
radiation therapy, GammaTileTM uses a new and unique
mechanism of action to achieve a therapeutic outcome. The applicant
explained that the GammaTileTM is fundamentally different in
structure, function, and safety from all external beam radiation
therapies, and delivers treatment through a different mechanism of
action. In contrast to external beam radiation modalities, the
applicant further explained that the GammaTileTM is a form
of internal radiation termed brachytherapy. Brachytherapy treatments
are performed using radiation sources positioned very close to the area
requiring radiation treatment and only deliver radiation to the tissues
that are immediately adjacent to the margin of the surgical resection.
For this reason, brachytherapy is a current standard of care treatment
for many non-central nervous system tumors, including breast, cervical,
and prostate cancers.
Due to the custom positioning of the radiological sources and the
use of the cesium-131 isotope, the applicant noted that the
GammaTileTM focuses therapeutic levels of radiation on an
extremely small area of the brain. Unlike all external beam techniques,
the applicant stated that this radiation does not pass externally
inward through the skull and healthy areas of the brain to reach the
targeted tissue and, therefore, may limit neurocognitive deficits seen
with the use of external beam techniques. Because of the rapid
reduction in radiation intensity that is characteristic of cesium-131,
the applicant asserted that the GammaTileTM can target the
margin of the excision with greater precision than any alternative
treatment option, while sparing healthy brain tissue from unnecessary
and potentially damaging radiation exposure.
The applicant also stated that, when compared to other types of
brain brachytherapy, GammaTileTM uses a new and unique
mechanism of action to achieve a therapeutic outcome. The applicant
explained that cancerous cells at the margins of a tumor resection
cavity can also be irradiated with the placement of brachytherapy
sources in the tumor cavity. However, the applicant asserted that the
GammaTileTM is a pioneering form of brachytherapy for the
treatment of brain tumors that uses the isotope cesium-131 embedded in
a collagen implant that is customized to the geometry of the brain
cavity. According to the applicant, use of cesium-131 and the custom
distribution of seeds in a three-dimensional collagen device result in
a unique and highly effective delivery of radiation therapy to brain
tissue.
With regard to the second criterion, whether a product is assigned
to the same or a different MS-DRG, GammaTileTM is a
treatment option for patients diagnosed with brain tumors that progress
locally after initial treatment with external beam radiation therapy,
and cases representing patients that may be eligible for treatment
involving this technology are assigned to the same MS-DRGs (MS-DRGs 25,
26, and 27 (Craniotomy & Endovascular Intracranial Procedure with MCC,
with CC, and without CC/MCC), respectively)
[[Page 19896]]
as other current treatment forms of brachytherapy and external beam
radiation therapy.
With regard to third criterion, 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, the applicant
stated that the GammaTileTM offers a treatment option for a
patient population with limited, or no other, available treatment
options. The applicant explained that treatment options for patients
diagnosed with brain tumors that progress locally after initial
treatment with external beam radiation therapy are limited, and there
is no current standard of care in this setting. According to the
applicant, surgery alone for recurrent tumors may provide symptom
relief, but does not remove all of the cancer cells. The applicant
further stated that repeating external beam radiation therapy for
adjuvant treatment is hampered by an increasing risk of brain injury
because additional external beam radiation therapy will increase the
total dose of radiation to brain tissue, as well as increase the total
volume of irradiated brain tissue. Secondary treatment with external
beam radiation therapy is often performed with a reduced and,
therefore, less effective dose. The applicant asserted that
brachytherapy with GammaTileTM may be the only effective
treatment option for these patients.
Based on the above, the applicant concluded that the
GammaTileTM is not substantially similar to other existing
technologies and meets the newness criterion. However, we are concerned
that the mechanism of action for this device may be the same or similar
to current forms of radiation or brachytherapy. Specifically, while the
placement of the cesium-131 source (or any radioactive source) in a
collagen matrix offset may constitute a new delivery vehicle, we are
concerned that this sort of improvement in brachytherapy for use in the
salvage treatment of radiosensitive malignances of the brain may not
represent a new mechanism of action. We also have concerns as to
whether GammaTileTM would represent the first approved use
of offset radioactive material in brachytherapy for recurrent brain
malignancies. The applicant cited studies that used a similar predicate
device, but did not indicate whether these researchers or institutions
are seeking separate FDA approval.
We are inviting public comments on whether GammaTileTM
meets the substantial similarity criteria and the newness criterion.
With regard to the cost criterion, the applicant conducted the
following analysis. The applicant worked with the Barrow Neurological
Institute at St. Joseph's Hospital and Medical Center (St. Joseph's) to
obtain actual claims for craniotomies using a prototype brain
brachytherapy device of stranded cesium-131 seeds held in place with a
collagen tile. The application found a total of 23 claims from FY 2001
through FY 2016 data that used a cesium-131 brachytherapy predicate
device. All 23 claims were assigned to MS-DRGs 25 through 27. Of the 23
cases, 13 cases were assigned to MS-DRG 25, 4 cases were assigned to
MS-DRG 26, and 6 cases were assigned to MS-DRG 27. Using hospital data,
the applicant estimated and then subtracted all charges for the
predicate device and all charges for ancillary services associated with
the device delivery for each case. The applicant standardized the
remaining charges for each case and inflated each case's charges by
applying the FY 2017 IPPS/LTCH PPS final rule outlier charge inflation
factor of 1.043957 by the age of each case (that is, the factor was
applied to FY 2011 claims six times, to FY 2012 claims five times,
etc.). The applicant then calculated the average inflated standardized
charges for the cases assigned to MS-DRG 25 ($124,064), MS-DRG 26
($131,677) and MS-DRG 27 ($90,615). The applicant then calculated an
estimate for ancillary charges associated with placement of the
GammaTileTM device, as well as standardized charges for the
GammaTileTM device itself. The applicant determined it meets
the cost criterion because the final average case-weighted standardized
charge per case (including the charges associated with the
GammaTileTM device) of $226,741 exceeds the average case-
weighted threshold amount of $95,783.
We are concerned that the applicant submitted a small sample of
cases to determine it meets the cost criterion. A small sample size may
not be statistically significant to determine if the
GammaTileTM meets the cost criterion. We also note that,
while the applicant has attributed reduced operating room times as a
significant benefit to the GammaTileTM, a reduction in the
associated costs does not appear to be reflected in its calculations.
We are inviting public comments on whether the GammaTileTM
meets the cost criterion.
With regard to substantial clinical improvement, the applicant
stated that the GammaTileTM offers a treatment option for a
patient population unresponsive to, or ineligible for, currently
available treatments and significantly improves clinical outcomes when
compared to currently available treatment options. The applicant
explained that therapeutic options for patients diagnosed with large or
recurrent brain metastases are limited. However, according to the
applicant, the GammaTileTM provides a treatment option for
patients diagnosed with radiosensitive recurrent brain tumors that are
not eligible for treatment with any other currently available treatment
option. Specifically, the applicant stated that GammaTileTM
may provide the only radiation treatment option for patients diagnosed
with tumors located close to sensitive vital brain sites (for example,
brain stem); patients diagnosed with recurrent brain tumors may not be
eligible for additional treatment involving the use of external beam
radiation therapy. There is a lifetime limit for the amount of
radiation therapy a specific area of the body can receive. Patients
whose previous treatment includes external beam radiation therapy may
be precluded from receiving high doses of radiation associated with
subsequent external beam radiation therapy, and the
GammaTileTM can also be used to treat tumors that are too
large for treatment with external beam radiation therapy. These large
tumors are not eligible for treatment with external beam radiation
therapy because the radiation dose to healthy brain tissue would be too
high.
The applicant described how the GammaTileTM improves
clinical outcomes compared to existing treatment options, including
external beam radiation therapy and other forms of brain brachytherapy.
To demonstrate that the GammaTileTM represents a substantial
clinical improvement over existing technologies, the applicant
submitted data from three abstracts, with one associated paper
demonstrating feasibility or superior progression-free survival
compared to the patient's own historical control rate.
In a presentation at the Society for Neuro-Oncology in November
2014 (Dardis, Christopher; Surgery and permanent intraoperative
brachytherapy improves time to progression of recurrent intracranial
neoplasms), the outcomes of 20 patients diagnosed with 27 tumors
covering a variety of histological types treated with the
GammaTileTM prototype were presented. The applicant noted
the following with regard to the patients: (1) All tumors were
intracranial, supratentorial masses and included low and high-grade
meningiomas, metastases from various primary cancers, high-grade
gliomas, and others;
[[Page 19897]]
(2) all treated masses were recurrent following treatment with surgery
and/or radiation and the group averaged two prior craniotomies and two
prior courses of external beam radiation treatment; and (3) following
surgical excision, prototype GammaTilesTM were placed in the
resection cavity to deliver a dose of 60 Gray to a depth of 5 mm of
tissue; and all patients had previously experienced re-growth of their
tumors at the site of treatment and the local control rate of patients
entering the study was 0 percent.
With regard to outcomes, the applicant stated that, after their
initial treatment, patients had a median progression-free survival time
of 5.8 months; post treatment with prototype GammaTilesTM,
at the time of this analysis, only one patient had progressed at the
treatment site, for a local control rate of 96 percent; and median
progression-free survival time, a measure of how long a patient lives
without recurrence of the treated tumor, has not been reached (as this
value can only be calculated when more than 50 percent of treated
patients have failed the prescribed treatment).
A second set of outcomes on prototype GammaTilesTM was
presented at the Society for Neuro-Oncology Conference on Meningioma in
June 2016 (Brachman, David; Surgery and permanent intraoperative
brachytherapy improves time to progress of recurrent intracranial
neoplasms). This study enrolled 16 patients with 20 recurrent grade 2
or 3 meningiomas, who had undergone prior surgical excision external
beam radiation therapy. These patients underwent surgical excision of
the tumor, followed by adjuvant radiation therapy with prototype
GammaTilesTM. The applicant noted the following outcomes:
(1) Of the 20 treated tumors, 19 showed no evidence of radiographic
progression at last follow-up, yielding a local control rate of 95
percent; two of the 20 patients exhibited radiation necrosis (one
symptomatic, one asymptomatic); and (2) the median time to failure from
the prior treatment with external beam radiation therapy was 10.3
months and after treatment with prototype GammaTilesTM only
one patient failed at 18.2 months. Therefore, the median time to same
site failure after prototype GammaTileTM treatment has not
yet been reached (average follow up of 16.7 months, range 1-37 months).
A third prospective study was accepted for presentation at the
November 2016 Society for Neuro-Oncology annual meeting (Youssef, Emad;
Cs131 implants for salvage therapy of recurrent high grade gliomas). In
this study, 13 patients diagnosed with recurrent high-grade gliomas (9
with glioblastoma and 4 with grade 3 astrocytoma) were treated in an
identical manner to the cases described above. Previously, all patients
had failed the international standard treatment for high-grade glioma,
a combination of surgery, radiation therapy, and chemotherapy referred
to as the ``Stupp regimen.'' For the prior therapy, the median time to
failure was 9.2 months (range 1-40 months). After therapy with a
prototype GammaTileTM, the applicant noted the following:
(1) The median time to same site local failure has not been reached and
one failure was seen at 18 months (local control 92 percent); and (2)
with a median follow-up time of 8.1 months (range 1-23 months) one
symptomatic patient (8 percent) and two asymptomatic patients (15
percent) had radiation-related MRI changes. However, no patients
required re-operation for radiation necrosis or wound breakdown.
The applicant asserted that, when considered in total, the data
reported in these three studies support the conclusion that a
significant therapeutic effect results from the addition of
GammaTileTM radiation therapy to the site of surgical
removal. According to the applicant, the fact that these patients had
failed prior best available treatments (aggressive surgical and
adjuvant radiation management) presents the unusual scenario of a
salvage therapy outperforming the current standard-of-care. The
applicant noted that follow-up data continues to accrue on these
patients. The applicant further noted that, although these reported
experiences with the GammaTileTM are as a salvage therapy in
patients who currently have no standard treatment options, it is
anticipated GammaTileTM will also be used as first-line
therapy due to these promising results.
The applicant stated that the use of GammaTileTM reduces
rates of mortality compared to alternative treatment options. The
applicant explained that clinical studies on GammaTileTM
have shown improved local control of tumor recurrence. According to the
applicant, the results of these studies showed local control rates of
92 percent to 96 percent for tumor sites that had local control rates
of 0 percent from previous treatment. The applicant noted that these
studies also have not reached median progression-free survival time
with follow-up times ranging from 1 to 37 months. Previous treatment at
these same sites resulted in median progression-free survival times of
5.8 to 10.3 months.
The applicant further stated that the use of GammaTileTM
reduces rates of radiation necrosis compared to alternative treatment
options. The applicant explained that the rate of symptomatic radiation
necrosis in the GammaTileTM clinical studies of 5 to 8
percent is substantially lower than the 26 percent to 57 percent rate
of symptomatic radiation necrosis requiring re-operation historically
associated with brain brachytherapy, and lower than the rates reported
for initial treatment of similar tumors with modern external beam and
stereotactic radiation techniques. The applicant indicated that this is
consistent with the customized and ideal distribution of radiation
therapy provided by GammaTileTM.
The applicant also asserted that the use of GammaTileTM
reduces the need for re-operation compared to alternative treatment
options. The applicant explained that patients receiving a craniotomy,
followed by external beam radiation therapy or brachytherapy, could
require re-operation in the following three scenarios:
Tumor recurrence at the excision site could require
additional surgical removal;
Symptomatic radiation necrosis could require excision of
the affected tissue; and
Certain forms of brain brachytherapy require the removal
of brachytherapy sources after a given period of time.
However, according to the applicant, because of the high local
control rates, low rates of symptomatic radiation necrosis, and short
half-life of cesium-131, GammaTileTM will reduce the need
for re-operation compared to external beam radiation therapy and other
forms of brain brachytherapy.
Additionally, the applicant stated that the use of
GammaTileTM reduces the need for additional hospital visits
and procedures compared to alternative treatment options. The applicant
noted that the GammaTileTM is placed during surgery, and
does not require any additional visits or procedures. The applicant
contrasted this improvement with external beam radiation therapy, which
is often delivered in multiple fractions that must be administered over
multiple days. The applicant provided an example where WBRT is
delivered over 2 to 3 weeks, while the placement of
GammaTileTM occurs during the craniotomy and does not add
any time to a patient's recovery.
The applicant further stated that the GammaTileTM's high
local control rates and low rates of symptomatic radiation necrosis
will reduce the need for
[[Page 19898]]
additional hospital visits and procedures, and provides a more rapid
initiation and complement of the treatment compared to alternative
treatment options.
Based on consideration of all of the data presented above, the
applicant believed that the use of GammaTileTM represents a
substantial clinical improvement over existing technologies. The
studies were limited to patients diagnosed with recurrent tumors after
previous surgical rescission. As previously discussed, the applicant
explained that it is seeking FDA approval for the use of the
GammaTileTM in the treatment of recurrent malignancies.
We are inviting public comments on whether GammaTileTM
meets the substantial clinical improvement criterion.
We did not receive any written public comments in response to the
New Technology Town Hall meeting notice regarding the application of
GammaTileTM for new technology add-on payments.
III. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
A. Background
1. Legislative Authority
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary 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. We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the proposed FY 2018 hospital wage index based
on the statistical areas appears under sections III.A.2. and G. of the
preamble of this proposed rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. (CMS collects
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, and IV. The OMB control number for approved
collection of this information is 0938-0050.) This provision also
requires that any updates or adjustments to the wage index be made in a
manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The proposed adjustment for
FY 2018 is discussed in section II.B. of the Addendum to this proposed
rule.
As discussed in section III.J. of the preamble of this proposed
rule, 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),
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The proposed budget neutrality adjustment for FY 2018 is discussed in
section II.A.4.b. of the Addendum to this proposed 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 proposing to
apply to the FY 2018 wage index, appears under sections III.E.3. and F.
of the preamble of this proposed rule.
2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2018
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. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate
hospital labor market areas based on OMB-established Core-Based
Statistical Areas (CBSAs). The current statistical areas (which were
implemented beginning with FY 2015) are based on revised OMB
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01.
OMB Bulletin No. 13-01 established revised delineations for
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and
Combined Statistical Areas in the United States and Puerto Rico based
on the 2010 Census, and provided guidance on the use of the
delineations of these statistical areas using standards published on
June 28, 2010 in the Federal Register (75 FR 37246 through 37252). We
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951
through 49963) for a full discussion of our implementation of the OMB
labor market area delineations beginning with the FY 2015 wage index.
Generally, OMB issues major revisions to statistical areas every 10
years, based on the results of the decennial census. However, OMB
occasionally issues minor updates and revisions to statistical areas in
the years between the decennial censuses through OMB Bulletins. On July
15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to
and supersedes OMB Bulletin No. 13-01 that was issued on February 28,
2013. The attachment to OMB Bulletin No. 15-01 provides detailed
information on the update to statistical areas since February 28, 2013.
The updates provided in OMB Bulletin No. 15-01 are based on the
application of the 2010 Standards for Delineating Metropolitan and
Micropolitan Statistical Areas to Census Bureau population estimates
for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin
No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage
index. For a complete discussion of the adoption of the updates set
forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule.
For FY 2018, we are continuing to use the OMB delineations that we
adopted beginning with FY 2015 to calculate the area wage indexes, with
updates as reflected in OMB Bulletin No. 15-01 specified in the FY 2017
IPPS/LTCH PPS final rule.
3. Codes for Constituent Counties in CBSAs
CBSAs are made up of one or more constituent counties. Each CBSA
and constituent county has its own unique identifying codes. There are
two different lists of codes associated with counties: Social Security
Administration (SSA) codes and Federal Information Processing Standard
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county
codes to identify and crosswalk counties to CBSA codes for purposes of
the hospital wage index. We have learned that SSA county codes are no
longer being maintained and updated. However, the FIPS codes continue
to be maintained by the U.S. Census Bureau. The Census Bureau's most
current statistical area information is derived from ongoing census
data received since 2010; the most recent data are from 2015. For the
purposes of crosswalking counties to CBSAs, we are proposing to
discontinue the use of SSA county codes and begin using only the FIPS
county codes.
[[Page 19899]]
The Census Bureau maintains a complete list of changes to counties
or county equivalent entities on the Web site at: https://www.census.gov/geo/reference/county-changes.html. In our proposed
transition to using only FIPS codes for counties for the hospital wage
index, we are proposing to update the FIPS codes used for crosswalking
counties to CBSAs for the hospital wage index to incorporate changes to
the counties or county equivalent entities included in the Census
Bureau's most recent list. Based on information included in the Census
Bureau's Web site, since 2010, the Census Bureau has made the following
updates to the FIPS codes for counties or county equivalent entities:
Petersburg Borough, AK (FIPS State County Code 02-195),
CBSA 02, was created from part of former Petersburg Census Area (02-
195) and part of Hoonah-Angoon Census Area (02-105). The CBSA code
remains 02.
The name of La Salle Parish, LA (FIPS State County Code
22-059), CBSA 14, is now LaSalle Parish, LA (FIPS State County Code 22-
059). The CBSA code remains as 14.
The name of Shannon County, SD (FIPS State County Code 46-
113), CBSA 43, is now Oglala Lakota County, SD (FIPS State County Code
46-102). The CBSA code remains as 43.
We believe that it is important to use the latest counties or
county equivalent entities in order to properly crosswalk hospitals
from a county to a CBSA for purposes of the hospital wage index used
under the IPPS. In addition, we believe that using the latest FIPS
codes will allow us to maintain a more accurate and up-to-date payment
system that reflects the reality of population shifts and labor market
conditions. Therefore, we are proposing to implement these FIPS code
updates, effective October 1, 2017, beginning with the FY 2018 wage
indexes. We are proposing to use these update changes to calculate area
wage indexes in a manner that is generally consistent with the CBSA-
based methodologies finalized in the FY 2005 IPPS final rule and the FY
2015 IPPS/LTCH PPS final rule. We note that while the county update
changes listed earlier changed the county names, the CBSAs to which
these counties map did not change from the prior counties. Therefore,
there is no impact or change to hospitals in these counties; they
continue to be considered rural for the hospital wage index under these
changes. For FY 2018, Tables 2 and 3 associated with this proposed rule
and the County to CBSA Crosswalk File and Urban CBSAs and Constituent
Counties for Acute Care Hospitals File posted on the CMS Web site
reflect these county changes. We are inviting public comments on our
proposals.
B. Worksheet S-3 Wage Data for the Proposed FY 2018 Wage Index
The proposed FY 2018 wage index values are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 2014 (the FY 2017 wage indexes
were based on data from cost reporting periods beginning during FY
2013).
1. Included Categories of Costs
The proposed FY 2018 wage index includes all of 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 include
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 through 47317)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2017, the
proposed wage index for FY 2018 also excludes the direct and overhead
salaries and hours for services not subject to IPPS payment, such as
skilled nursing facility (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 proposed FY 2018 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 through 45398).
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute
Care Hospitals Under the IPPS
Data collected for the IPPS wage index also are currently used to
calculate wage indexes applicable to suppliers and other providers,
such as SNFs, home health agencies (HHAs), ambulatory surgical centers
(ASCs), 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 indexes of any supplier or provider except IPPS
providers and LTCHs. Such comments should be made in response to
separate proposed rules for those suppliers and providers.
C. Verification of Worksheet S-3 Wage Data
The wage data for the proposed FY 2018 wage index were obtained
from Worksheet S-3, Parts II and III of the Medicare cost report (Form
CMS-2552-10) for cost reporting periods beginning on or after October
1, 2013, and before October 1, 2014. For wage index purposes, we refer
to cost reports during this period as the ``FY 2014 cost report,'' the
``FY 2014 wage data,'' or the ``FY 2014 data.'' Instructions for
completing the wage index sections of Worksheet S-3 are included in the
Provider Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter
40, Sections 4005.2 through 4005.4. The data file used to construct the
proposed FY 2018 wage index includes FY 2014 data submitted to us as of
February 10, 2017. As in past years, we performed an extensive review
of the wage data, mostly through the use of edits designed to identify
aberrant data.
We asked our MACs to revise or verify data elements that result in
specific edit failures. For the proposed FY 2018 wage index, we
identified and excluded 51 providers with aberrant data that should not
be included in the wage index, although if data elements for some of
these providers are corrected, we intend to include data from those
providers in the final FY 2018 wage index. We also adjusted certain
aberrant data and included these data in the proposed wage index. For
example, in situations where a hospital did not have documentable
salaries, wages, and hours for housekeeping and dietary services, we
imputed estimates, in accordance with policies established in the FY
2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We
instructed MACs to complete their data verification of questionable
data elements and to transmit any changes to
[[Page 19900]]
the wage data no later than March 24, 2017. The revised data will be
reflected in the FY 2018 IPPS/LTCH PPS final rule.
In constructing the proposed FY 2018 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2014, 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 believed 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 through 45398). For the this
proposed rule, we removed 7 hospitals that converted to CAH status on
or after January 22, 2016, the cut-off date for CAH exclusion from the
FY 2017 wage index, and through and including January 23, 2017, the
cut-off date for CAH exclusion from the FY 2018 wage index. After
excluding CAHs and hospitals with aberrant data, we calculated the
proposed wage index using the Worksheet S-3, Part II and III wage data
of 3,325 hospitals.
For the proposed FY 2018 wage index, we allotted the wages and
hours data for a multicampus hospital among the different labor market
areas where its campuses are located in the same manner that we
allotted such hospitals' data in the FY 2017 wage index (81 FR 56915).
Table 2, which contains the proposed FY 2018 wage index associated with
proposed rule (available via the Internet on the CMS Web site),
includes separate wage data for the campuses of 9 multicampus
hospitals.
D. Method for Computing the Proposed FY 2018 Unadjusted Wage Index
1. Proposed Methodology for FY 2018
The method used to compute the proposed FY 2018 wage index without
an occupational mix adjustment follows the same methodology that we
used to compute the proposed wage indexes without an occupational mix
adjustment since FY 2012 (76 FR 51591 through 51593).
As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``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, 2013, through April 15,
2015, for private industry hospital workers from the BLS' Compensation
and Working Conditions. 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 proposing any changes to the usage of the
ECI for FY 2018. The factors used to adjust the hospital's data were
based on the midpoint of the cost reporting period, as indicated in the
following table.
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
Adjustment
After Before factor
------------------------------------------------------------------------
10/14/2013......................... 11/15/2013............ 1.02310
11/14/2013......................... 12/15/2013............ 1.02155
12/14/2013......................... 01/15/2014............ 1.02004
01/14/2014......................... 02/15/2014............ 1.01866
02/14/2014......................... 03/15/2014............ 1.01740
03/14/2014......................... 04/15/2014............ 1.01615
04/14/2014......................... 05/15/2014............ 1.01482
05/14/2014......................... 06/15/2014............ 1.01339
06/14/2014......................... 07/15/2014............ 1.01193
07/14/2014......................... 08/15/2014............ 1.01048
08/14/2014......................... 09/15/2014............ 1.00905
09/14/2014......................... 10/15/2014............ 1.00761
10/14/2014......................... 11/15/2014............ 1.00614
11/14/2014......................... 12/15/2014............ 1.00463
12/14/2014......................... 01/15/2015............ 1.00309
01/14/2015......................... 02/15/2015............ 1.00155
02/14/2015......................... 03/15/2015............ 1.00000
03/14/2015......................... 04/15/2015............ 0.99845
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2014, and ending December 31, 2014, is June 30, 2014. An
adjustment factor of 1.01193 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as previously described, the proposed FY 2018
national average hourly wage (unadjusted for occupational mix) is
$42.0043.
Previously, we also would provide a Puerto Rico overall average
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid
based on 75 percent of the national standardized amount and 25 percent
of the Puerto Rico-specific standardized amount. As a result, we
calculated a Puerto Rico-specific wage index that was applied to the
labor share of the Puerto Rico-specific standardized amount. Section
601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113)
amended section 1886(d)(9)(E) of the Act to specify that the payment
calculation with respect to operating costs of inpatient hospital
services of a subsection (d) Puerto Rico hospital for inpatient
hospital discharges on or after January 1, 2016, shall use 100 percent
of the national standardized amount. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56915 through 56916), because Puerto Rico
hospitals are no longer paid with a Puerto Rico-specific standardized
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act,
as amended by section 601 of the Consolidated Appropriations Act, 2016,
there is no longer a need to calculate a Puerto Rico-specific average
hourly wage and wage index. Hospitals in Puerto Rico are now paid 100
percent of the national standardized amount and, therefore, are subject
to the national average hourly wage (unadjusted for occupational mix)
(which is $42.0043 for this FY 2018 proposed rule) and the national
wage index, which is applied to the national labor share of the
national standardized amount. For FY 2018, we are not proposing a
Puerto Rico-specific overall average hourly wage or wage index.
2. Clarification of Other Wage Related Costs in the Wage Index
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index based on a survey of hospitals' costs that are
attributable to wages and wage-related costs. In the September 1, 1994
IPPS final rule (59 FR 45356), we developed a list of ``core'' wage-
related costs that hospitals may report on Worksheet S-3, Part II of
the Medicare hospital cost report in order to include those costs in
the wage index. Core wage-related costs include categories of
retirement cost, plan administrative costs, health and insurance costs,
taxes, and other specified costs such as tuition reimbursement. In
addition to these categories of core wage-related costs, we allow
hospitals to report wage-related costs other than those on the core
list if the other wage-related costs meet certain criteria. The
criteria for including other wage-related costs in the wage index are
discussed in the September 1, 1994 IPPS final rule (59 FR 45357) and
also are listed in the Provider Reimbursement Manual (PRM), Part II,
Chapter 40, Sections 4005.2 through 4005.4), Line 18 of the Medicare
cost report (Form CMS-2552-10, OMB control number 0938-0050).
Specifically, ``other'' wage-related costs are allowable for the wage
index if the cost for employees whose services are paid under the IPPS
exceeds 1 percent of the total adjusted salaries net of
[[Page 19901]]
excluded area salaries, is a fringe benefit as defined by the IRS and
has been reported to the IRS (as income to the employees or
contractors), is not being furnished for the convenience of the
provider, and is not listed on Worksheet S-3, Part IV.
We note that other wage-related costs are not to include benefits
already included in Line 1 salaries on Worksheet S-3, Part II (refer to
the cost report instructions for Worksheet S-3, Part II, Line 18, which
state, `` `Other' wage-related costs do not include wage-related costs
reported on line 1 of this worksheet.''). We also note that the 1-
percent test is conducted by dividing each individual category of the
other wage-related cost (that is, the numerator) by the sum of the
following lines on the Medicare hospital cost report (Form CMS-2552-
10): Worksheet S-3, Part II, Lines 11, 12, 13, and 14, Column 4, and
Worksheet S-3, Part III, Line 3, Column 4 (that is, the denominator).
The other wage-related costs associated with contract labor and home
office/related organization personnel are included in the numerator
because these other wage-related costs are allowed in the wage index
(in addition to other wage related costs for direct employees),
assuming the requirements for inclusion in the wage index are met. For
example, if a hospital is trying to include a parking garage as an
other-wage related cost that is reported on the W-2 or 1099 form, when
running the 1-percent test, include in the numerator all the parking
garage other wage-related cost for direct salary employees, contracted
employees, and home office employees and divide by the sum of Worksheet
S-3, Part II, Lines 11, 12, 13, and 14, Column 4, and Worksheet S-3,
Part III, Line 3, Column 4. For the category of parking other wage-
related costs, the 1-percent test would be run only one time, inclusive
of other wage related costs for employee salaries, contracted
employees, and home office employees. We intend to clarify the hospital
cost report instructions to reflect that contract labor and home
office/related organization salaries should be added to the subtotal of
salaries on Worksheet S-3, Part III, Line 3, Column 4 (Line 3 is the
difference of net salaries minus excluded area salaries) for purposes
of performing the 1-percent test. If a hospital has more than one other
wage-related cost, the 1-percent must be conducted separately for each
other wage-related cost (for example, parking and cafeteria separately;
do not sum all the different types of other wage-related costs together
and then run the 1-percent test). If the 1-percent test is met for a
particular type of other wage-related costs, and the other criteria
listed earlier are met as well, the other wage-related cost may be
reported on Worksheet S-3, Part II, Line 18 of the hospital cost
report.
We originally allowed for the inclusion of wage-related costs other
than those on the core list because we were concerned that individual
hospitals might incur unusually large wage-related costs that are not
reflected on the core list but that may represent a significant wage-
related cost. However, we are reconsidering allowing other wage-related
costs to be included in the wage index because recent internal reviews
of the FY 2018 wage data show that only a small minority of hospitals
are reporting other wage-related costs that meet the 1-percent test
described earlier. In the calculation of the proposed FY 2018 wage
index, for each hospital reporting other wage-related costs on Line 18
of Worksheet S-3, we performed the 1-percent test. We then made
internal edits removing other wage-related costs on Line 18 where
hospitals reported data that failed to meet the mathematical
requirement that other wage-related costs must exceed 1 percent of
total adjusted salaries net of excluded area salaries. After this
review, only approximately 80 hospitals of approximately 3,320
hospitals had other wage-related costs on Line 18 meeting the 1-percent
test. We believe that such a limited number of hospitals nationally
reporting and meeting the 1-percent test may indicate that other wage-
related costs might not constitute an appropriate part of a relative
measure of wage costs in a particular labor market area, a longstanding
tenet of the wage index. In other words, while other wage-related costs
may represent costs that may have an impact on an individual hospital's
average hourly wage, we do not believe that costs reported by only a
very small minority of hospitals accurately reflect the economic
conditions of the labor market areas in which those hospitals are
located. Therefore, it is possible that inclusion of other wage-related
costs in the wage index in such a limited manner may distort the
average hourly wage of a particular labor market area so that its wage
index does not accurately represent that labor market area's current
wages relative to national wages.
Furthermore, the open-ended nature of the types of other wage-
related costs that may be included on Line 18 of Worksheet S-3, in
contrast to the concrete list of core wage-related costs, may hinder
consistent and proper reporting of fringe benefits. Our internal review
indicates widely divergent types of costs that hospitals are reporting
as other wage-related costs on Line 18. We are concerned that
inconsistent reporting of other wage-related costs on Line 18 further
compromises the accuracy of the wage index as a representation of the
relative average hourly wage for each labor market area. Our intent in
creating a core list of wage-related costs in the September 1, 1994
IPPS final rule was to promote consistent reporting of fringe benefits,
and we are increasingly concerned that inconsistent reporting of wage-
related costs on Line 18 of Worksheet S-3 undermines this effort.
Specifically, we expressed in the September 1, 1994 IPPS final rule
that since we began including fringe benefits in the wage index, we
have been concerned with the inconsistent reporting of fringe benefits,
whether because of a lack of provider proficiency in identifying fringe
benefit costs or varying interpretations across fiscal intermediaries
of the definition for fringe benefits in PRM-I, Section 2144.1 (59 FR
45356).
We believe that the limited and inconsistent use of Line 18 of
Worksheet S-3 for reporting wage-related costs other than the core list
might indicate that including other wage-related costs in the wage
index compromises the accuracy of the wage index as a relative measure
of wages in a given labor market area. Therefore, we are seeking public
comments on whether we should, in future rulemaking, propose to only
include the wage-related costs on the core list in the calculation of
the wage index and not to include any other wage-related costs in the
calculation of the wage index.
Meanwhile, in this FY 2018 IPPS/LTCH PPS proposed rule, we are
clarifying that, under our current policy, an other wage-related cost
(which we define as the value of a benefit) must be a fringe benefit as
described by the IRS (refer to IRS Publication 15-B) and must be
reported to the IRS on employees' or contractors' W-2 or 1099 forms as
taxable income in order to be considered an other wage-related cost on
Line 18 of Worksheet S-3 and for the wage index. That is, other wage-
related costs that are not reported to the IRS on employees' or
contractors' W-2 or 1099 forms as taxable income, even if not required
to be reported to the IRS according to IRS requirements, will not be
included in the wage index. This is consistent with current cost report
instructions for Line 18 of Worksheet S-3, Part II of the Medicare cost
report, Form 2552-10, which state that, to be considered an allowable
other wage-related costs, the cost ``has been
[[Page 19902]]
reported to the IRS.'' We will apply this policy to the process for
calculating the wage index for FY 2019, including the FY 2019 desk
reviews beginning in September 2017.
We believe this clarification is necessary because some hospitals
have incorrectly interpreted prior manual and existing preamble
language to mean that a cost could be considered an other wage-related
cost if the provider's reporting (or not reporting) of the cost was in
accordance with IRS requirements, rather than if the cost was actually
reported on an employee's or contractor's W-2 or 1099 form as taxable
income. We believe that such an interpretation of our policy would
require an analysis of whether the reporting or not reporting of the
cost to the IRS was done properly in accordance with IRS regulations
and guidance in order to allow the cost as an other wage-related cost.
We believe that the determinations regarding the proper or improper
reporting of certain other wage-related costs to the IRS for the
purpose of inclusion in the Medicare wage index are impractical for CMS
and the MACs because we do not have the expertise and fluency in IRS
regulations and tax law sufficient to perform such technical reviews of
hospital wage-related costs. In contrast, our current policy of
including an amount as an other wage-related cost for wage index
purposes only if the amount was actually reported to the IRS on
employees' or contractors' W-2 or 1099 forms as taxable income is a
straightforward policy that we believe provides clarity to all involved
parties. The brightline test of allowing an other wage-related cost to
be included in the wage index only if it has been reported on an
employee's or contractor's W-2 or 1099 form as taxable income helps
ensure consistent treatment of other wage-related costs for all
hospitals. Considering the variety of types of costs that may be
included on Line 18 of Worksheet S-3 of the cost report for other wage-
related costs (assuming the 1-percent test is met and other criteria
are met), we believe that a straightforward policy that is simple for
hospitals and CMS to apply is particularly important.
In addition, we believe the policy we are clarifying in this
proposed rule, that an other wage-related cost can be included in the
wage index only if it was reported to the IRS as taxable income on the
employee's or contractor's W-2 or 1099, is consistent with CMS'
longstanding position that a fringe benefit is not furnished for the
convenience of the employer or otherwise excludable from income as a
fringe benefit (such as a working condition fringe) and that
inappropriate types of costs may not be included in the wage index. In
response to a comment when we finalized the criteria for other wage-
related costs in the September 1, 1994 IPPS final rule (59 FR 45359),
we stated that ``items such as the unrecovered cost of employee meals,
tuition reimbursement, and auto allowances will only be allowed as a
wage-related cost for purposes of the wage index if properly reported
to the IRS on an employee's W-2 form as a fringe benefit.'' (We note
that the September, 1 1994 IPPS final rule does not mention the 1099
form for contractors, as contract labor was not allowed at that time in
the wage index. Consistent with our treatment of costs for contract
labor similar to that of employees for the wage index, we are
clarifying that the requirement that a cost be reported to the IRS to
be allowed as a wage-related cost for the wage index also applies to
contract labor, which must be reported on the contractor's 1099 to be
allowed as a wage-related cost for the wage index.) We believe that
requiring other wage-related costs to be reported on employees' or
contractors' W-2 or 1099 forms to be allowable for Line 18 of Worksheet
S-3 of the Medicare cost report is consistent with the requirement that
the cost is not being furnished for the convenience of the employer. A
cost reported on an employee's or contractor's W-2 or 1099 form as
taxable income is clearly a wage-related cost that is provided solely
for the benefit of the employee. We believe that the requirement that
other wage-related costs be a benefit to the employee also guarantees
that administrative costs such as overhead and capitalized costs are
excluded from other wage-related costs in the wage index.
Therefore, for the reasons discussed above, we are clarifying that
a cost must be a fringe benefit as described by the IRS and must be
reported to the IRS on employees' or contractors' W-2 or 1099 forms as
taxable income in order to be considered an other wage-related cost on
Line 18 of Worksheet S-3 and for the wage index. In addition, as
discussed earlier, we are seeking public comments on whether we should
consider in future rulemaking removing other wage-related costs from
the wage index.
Because some hospitals have incorrectly interpreted prior manual
and existing preamble language, as stated earlier, we are restating the
criteria from the September 1, 1994 IPPS final rule (59 FR 45357) for
allowing other wage-related costs for the wage index, with
clarifications. The criteria follow below, and we intend to update the
manual with these clarifications:
Other Wage-Related Costs. A hospital may be able to report a wage-
related cost (defined as the value of the benefit) that does not appear
on the core list if it meets all of the following criteria:
The wage-related cost is provided at a significant
financial cost to the employer. To meet this test, the individual wage-
related cost must be greater than 1 percent of total salaries after the
direct excluded salaries are removed (the sum of Worksheet S-3, Part
II, Lines 11, 12, 13, 14, column 4, and Worksheet S-3, Part III, Line
3, Column 4).
The wage-related cost is a fringe benefit as described by
the IRS and is reported to the IRS on an employee's or contractor's W-2
or 1099 form as taxable income.
The wage-related cost is not furnished for the convenience
of the provider or otherwise excludable from income as a fringe benefit
(such as a working condition fringe).
We note that those wage-related costs reported as salaries on Line
1 (for example, loan forgiveness and sick pay accruals) should not be
included as other wage-related costs on Line 18.
E. Proposed Occupational Mix Adjustment to the FY 2018 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. Use of 2013 Occupational Mix Survey for the FY 2018 Wage Index
Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub.
L. 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
[[Page 19903]]
Medicare program. We collected data in 2013 to compute the occupational
mix adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. A
new measurement of occupational mix is required for FY 2019.
The 2013 survey included the same data elements and definitions as
the previous 2010 survey and provided for the collection of hospital-
specific wages and hours data for nursing employees for calendar year
2013 (that is, payroll periods ending between January 1, 2013 and
December 31, 2013). We published the 2013 survey in the Federal
Register on February 28, 2013 (78 FR 13679 through 13680). This survey
was approved by OMB on May 14, 2013, and is available on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. The 2013 Occupational Mix Survey
Hospital Reporting Form CMS-10079 for the Wage Index Beginning FY 2016
(in Excel format) is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. Hospitals were required to submit
their completed 2013 surveys to their MACs by July 1, 2014. The
preliminary, unaudited 2013 survey data were posted on the CMS Web site
on July 11, 2014. As with the Worksheet S-3, Parts II and III cost
report wage data, we asked our MACs to revise or verify data elements
in hospitals' occupational mix surveys that result in certain edit
failures.
2. Use of the 2016 Medicare Wage Index Occupational Mix Survey for the
FY 2019 Wage Index
As stated earlier, a new measurement of occupational mix is
required for FY 2019. The FY 2019 occupational mix adjustment will be
based on a new calendar year (CY) 2016 survey. The CY 2016 survey (CMS
Form CMS-10079) received OMB approval on September 27, 2016. The final
CY 2016 Occupational Mix Survey Hospital Reporting Form is available on
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/2016-Occupational-Mix-Survey-Hospital-Reporting-Form-CMS-10079-for-the-Wage-Index-Beginning-FY-2019.html. Hospitals are required to submit their
completed 2016 surveys to their MACs by July 3, 2017. The preliminary,
unaudited CY 2016 survey data will be posted on the CMS Web site in
mid-July 2017. As with the Worksheet S-3, Parts II and III cost report
wage data, as part of the FY 2019 desk review process, the MACs will
revise or verify data elements in hospitals' occupational mix surveys
that result in certain edit failures.
3. Calculation of the Proposed Occupational Mix Adjustment for FY 2018
For FY 2018, we are proposing to calculate the occupational mix
adjustment factor using the same methodology that we have used since
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the
occupational mix adjustment to 100 percent of the FY 2018 wage index.
Because the statute requires that the Secretary measure the earnings
and paid hours of employment by occupational category not less than
once every 3 years, all hospitals that are subject to payments under
the IPPS, or any hospital that 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 2018 wage index. For the proposed FY 2018 wage index, we are
using the Worksheet S-3, Parts II and III wage data of 3,325 hospitals,
and we are using the occupational mix surveys of 3,128 hospitals for
which we also have Worksheet S-3 wage data, which represented a
``response'' rate of 94 percent (3,128/3,325). For the proposed FY 2018
wage index, we are applying proxy data for noncompliant hospitals, new
hospitals, or hospitals that submitted erroneous or aberrant data in
the same manner that we applied proxy data for such hospitals in the FY
2012 wage index occupational mix adjustment (76 FR 51586). As a result
of applying this methodology, the proposed FY 2018 occupational mix
adjusted national average hourly wage is $41.9599.
F. Analysis and Implementation of the Proposed Occupational Mix
Adjustment and the Proposed FY 2018 Occupational Mix Adjusted Wage
Index
As discussed in section III.E. of the preamble of this proposed
rule, for FY 2018, we are proposing to apply the occupational mix
adjustment to 100 percent of the FY 2018 wage index. We calculated the
proposed occupational mix adjustment using data from the 2013
occupational mix survey data, using the methodology described in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51582 through 51586). Using the
occupational mix survey data and applying the occupational mix
adjustment to 100 percent of the FY 2017 wage index results in a
proposed national average hourly wage of $41.9599.
The proposed FY 2018 national average hourly wages for each
occupational mix nursing subcategory as calculated in Step 2 of the
occupational mix calculation are as follows:
------------------------------------------------------------------------
Average
Occupational mix nursing subcategory hourly wage
------------------------------------------------------------------------
National RN............................................. $38.84760578
National LPN and Surgical Technician.................... 22.72715122
National Nurse Aide, Orderly, and Attendant............. 15.94890269
National Medical Assistant.............................. 17.97139786
National Nurse Category................................. 32.84544016
------------------------------------------------------------------------
The proposed national average hourly wage for the entire nurse
category as computed in Step 5 of the occupational mix calculation is
$32.84544016. 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 2013 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 42.6 percent,
and the national percentage of hospital employees in the all other
occupations category is 57.4 percent. At the CBSA level, the percentage
of hospital employees in the nurse category ranged from a low of 25.7
percent in one CBSA to a high of 73.5 percent in another CBSA.
We compared the FY 2018 proposed occupational mix adjusted wage
indexes for each CBSA to the unadjusted wage indexes for each CBSA. As
a result of applying the proposed occupational mix adjustment to the
wage data, the proposed wage index values for 223 (54.7 percent) urban
areas and 23 (48.9 percent) rural areas would increase. The proposed
wage index values for 108 (26.5 percent) urban areas would increase by
greater than or equal to 1 percent but less than 5 percent, and the
proposed wage index values for 6 (1.5 percent) urban areas would
increase by 5 percent or more. The proposed wage index values for 10
(21.3 percent) rural areas would increase by greater than or equal to 1
percent but less than 5
[[Page 19904]]
percent, and no rural areas' proposed wage index values would increase
by 5 percent or more. However, the proposed wage index values for 184
(45.1 percent) urban areas and 24 (51.1 percent) rural areas would
decrease. The proposed wage index values for 85 (20.8 percent) urban
areas would decrease by greater than or equal to 1 percent but less
than 5 percent, and no urban areas' final wage index value would
decrease by 5 percent or more. The proposed wage index values of 8
(17.0 percent) rural areas would decrease by greater than or equal to 1
percent and less than 5 percent, and no rural areas' final wage index
values would decrease by 5 percent or more. The largest proposed
positive impacts would be 17.4 percent for an urban area and 2.9
percent for a rural area. The largest proposed negative impacts would
be 4.9 percent for an urban area and 2.3 percent for a rural area. One
urban area's proposed wage index, but no rural area wage indexes, would
remain unchanged by application of the occupational mix adjustment.
These results indicate that a larger percentage of urban areas (54.7
percent) would benefit from the occupational mix adjustment than would
rural areas (48.9 percent).
G. Proposed Application of the Rural, Imputed, and Frontier Floors
1. Proposed Rural Floor
Section 4410(a) 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. This provision is referred to as the ``rural floor''.
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. Based
on the proposed FY 2018 wage index associated with this proposed rule
(which is available via the Internet on the CMS Web site), we estimated
that 366 hospitals would receive an increase in their FY 2018 proposed
wage index due to the application of the rural floor.
2. Proposed Expiration of the Imputed Floor Policy
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the ``imputed floor'' policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy seven times,
the last of which was adopted in the FY 2017 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2017. (We refer readers to
further discussions of the imputed floor in the FY 2014, FY 2015, FY
2016, and FY 2017 IPPS/LTCH PPS final rules (78 FR 50589 through 50590,
79 FR 49969 through 49970, 80 FR 49497 through 49498, and 81 FR 56921
through 56922, respectively) and to the regulations at 42 CFR
412.64(h)(4).) Currently, there are three all-urban States--Delaware,
New Jersey, and Rhode Island--with a range of wage indexes assigned to
hospitals in these States, including through reclassification or
redesignation. (We refer readers to discussions of geographic
reclassifications and redesignations in section III.J. of the preamble
of this proposed rule.)
In computing the imputed floor for an all-urban State under the
original methodology, which was established beginning in FY 2005, we
calculated the ratio of the lowest-to-highest CBSA wage index for each
all-urban State as well as the average of the ratios of lowest-to-
highest CBSA wage indexes of those all-urban States. We then compared
the State's own ratio to the average ratio for all-urban States and
whichever is higher is multiplied by the highest CBSA wage index value
in the State--the product of which established the imputed floor for
the State. As of FY 2012, there were only two all-urban States--New
Jersey and Rhode Island-- and only New Jersey benefitted under this
methodology. Under the previous OMB labor market area delineations,
Rhode Island had only one CBSA (Providence-New Bedford-Fall River, RI-
MA) and New Jersey had 10 CBSAs. Therefore, under the original
methodology, Rhode Island's own ratio equaled 1.0, and its imputed
floor was equal to its original CBSA wage index value. However, because
the average ratio of New Jersey and Rhode Island was higher than New
Jersey's own ratio, this methodology provided a benefit for New Jersey,
but not for Rhode Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), we retained the imputed floor calculated under the original
methodology as discussed above, and established an alternative
methodology for computing the imputed floor wage index to address the
concern that the original imputed floor methodology guaranteed a
benefit for one all-urban State with multiple wage indexes (New Jersey)
but could not benefit the other all-urban State (Rhode Island). The
alternative methodology for calculating the imputed floor was
established using data from the application of the rural floor policy
for FY 2013. Under the alternative methodology, we first determined the
average percentage difference between the post-reclassified, pre-floor
area wage index and the post-reclassified, rural floor wage index
(without rural floor budget neutrality applied) for all CBSAs receiving
the rural floor. (Table 4D associated with the FY 2013 IPPS/LTCH PPS
final rule (which is available via the Internet on the CMS Web site)
included the CBSAs receiving a State's rural floor wage index.) The
lowest postreclassified wage index assigned to a hospital in an all-
urban State having a range of such values then is increased by this
factor, the result of which establishes the State's alternative imputed
floor. We amended Sec. 412.64(h)(4) of the regulations to add new
paragraphs to incorporate the finalized alternative methodology, and to
make reference and date changes. In summary, for the FY 2013 wage
index, we did not make any changes to the original imputed floor
methodology at Sec. 412.64(h)(4) and, therefore, made no changes to
the New Jersey imputed floor computation for FY 2013. Instead, for FY
2013, we adopted a second, alternative methodology for use in cases
where an all-urban State has a range of wage indexes assigned to its
hospitals, but the State cannot benefit under the original methodology.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through
50590), we extended the imputed floor policy (both the original
methodology and the alternative methodology) for 1 additional year,
through September 30, 2014, while we continued to explore potential
wage index reforms.
In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49969 through
49970), for FY 2015, we adopted a policy to extend the imputed floor
policy (both the original methodology and alternative methodology) for
another year, through September 30, 2015, as we continued to explore
potential wage index reforms. In that final rule, we revised the
regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect the 1-year
extension of the imputed floor.
As discussed in section III.B. of the preamble of that FY 2015
final rule, we adopted the new OMB labor market area delineations
beginning in FY 2015. Under the new OMB delineations, Delaware became
an all-urban State, along with New Jersey and Rhode Island. Under the
new OMB delineations, Delaware has three CBSAs, New Jersey has seven
CBSAs, and Rhode Island continues to have only one CBSA (Providence-
Warwick, RI-MA). We refer readers to a detailed discussion of our
adoption of the new
[[Page 19905]]
OMB labor market area delineations in section III.B. of the preamble of
the FY 2015 IPPS/LTCH PPS final rule. Therefore, under the adopted new
OMB delineations discussed in section III.B. of the preamble of the FY
2015 IPPS/LTCH PPS final rule, Delaware became an all-urban State and
was subject to an imputed floor as well for FY 2015.
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49497 through
49498), for FY 2016, we extended the imputed floor policy (under both
the original methodology and the alternative methodology) for 1
additional year, through September 30, 2016. In that final rule, we
revised the regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect
this additional 1-year extension.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56921 through
56922), for FY 2017, we extended the imputed floor policy (under both
the original methodology and the alternative methodology) for 1
additional year, through September 30, 2017. In that final rule, we
revised the regulations at Sec. 412.64(h)(4) and (h)(4)(vi) to reflect
this additional 1-year extension.
The imputed floor is set to expire effective October 1, 2017, and
we are not proposing to extend the imputed floor policy. In the FY 2005
IPPS final rule (69 FR 49110), we adopted the imputed floor policy for
all-urban States under the authority of section 1886(d)(3)(E) of the
Act, which gives the Secretary broad authority to 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 for area differences in hospital wage levels
by a factor (established by the Secretary). However, we have expressed
reservations about establishment of an imputed floor, considering that
the imputed rural floor methodology creates a disadvantage in the
application of the wage index to hospitals in States with rural
hospitals but no urban hospitals receiving the rural floor (72 FR 24786
and 72 FR 47322). As we discussed in the FY 2008 IPPS final rule (72 FR
47322), the application of the rural and imputed floors requires
transfer of payments from hospitals in States with rural hospitals but
where the rural floor is not applied to hospitals in States where the
rural or imputed floor is applied. For this reason, in this proposed
rule, we are proposing not to apply an imputed floor to wage index
calculations and payments for hospitals in all-urban States for FY 2018
and subsequent years. That is, hospitals in New Jersey, Delaware, and
Rhode Island (and in any other all-urban State) would receive a wage
index that is calculated without applying an imputed floor for FY 2018
and subsequent years. Therefore, only States containing both rural
areas and hospitals located in such areas (including any hospital
reclassified as rural under the provisions of Sec. 412.103 of the
regulations) would benefit from the rural floor, in accordance with
section 4410 of Public Law 105-33. In addition, we would no longer
include the imputed floor as a factor in the national budget neutrality
adjustment. Therefore, the proposed wage index and impact tables
associated with this FY 2018 IPPS/LTCH PPS proposed rule (which are
available via the Internet on the CMS Web site) do not reflect the
imputed floor policy, and there is no proposed national budget
neutrality adjustment for the imputed floor for FY 2018. We are
inviting public comments on our proposal not to extend the imputed
floor for FY 2018 and subsequent years.
3. Proposed State Frontier Floor for FY 2018
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000.
(We refer readers to the regulations at 42 CFR 412.64(m) and to a
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) Fifty-two hospitals
would receive the frontier floor value of 1.0000 for their FY 2018 wage
index in this proposed rule. These hospitals are located in Montana,
Nevada, North Dakota, South Dakota, and Wyoming. We are not proposing
any changes to the frontier floor policy for FY 2018. The areas
affected by the proposed rural and frontier floor policies for the
proposed FY 2018 wage index are identified in Table 2 associated with
this proposed rule, which is available via the Internet on the CMS Web
site.
H. Proposed FY 2018 Wage Index Tables
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807
through 49808), we finalized a proposal to streamline and consolidate
the wage index tables associated with the IPPS proposed and final rules
for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage
index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C,
4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the Internet
on the CMS Web site. Effective beginning FY 2016, with the exception of
Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B,
4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). We
refer readers to section VI. of the Addendum to this proposed rule for
a discussion of the proposed wage index tables for FY 2018.
I. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications
1. General Policies and Effects of Reclassification and Redesignation
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 not later than 13
months prior to the start of the fiscal year for which reclassification
is sought (usually 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. (We refer readers to a discussion in the FY 2002 IPPS final
rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage
for purposes of the proximity requirements.) The general policies for
reclassifications and redesignations and the policies for the effects
of hospitals' reclassifications and redesignations on the wage index
are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012
final wage index (76 FR 51595 and 51596). In addition, in the FY 2012
IPPS/LTCH PPS final rule, we discussed the effects on the wage index of
urban hospitals reclassifying to rural areas under 42 CFR 412.103.
Hospitals that are geographically located in States without any rural
areas are ineligible to apply for rural reclassification in accordance
with the provisions of 42 CFR 412.103.
On April 21, 2016, we published an interim final rule with comment
period (IFC) in the Federal Register (81 FR 23428 through 23438) that
included provisions amending our regulations to allow hospitals
nationwide to have simultaneous Sec. 412.103 and MGCRB
reclassifications. For reclassifications effective beginning FY 2018, a
hospital may acquire rural status under Sec. 412.103 and subsequently
apply for a reclassification under the MGCRB using distance and average
hourly wage criteria designated for rural hospitals. In
[[Page 19906]]
addition, we provided that a hospital that has an active MGCRB
reclassification and is then approved for redesignation under Sec.
412.103 will not lose its MGCRB reclassification; such a hospital
receives a reclassified urban wage index during the years of its active
MGCRB reclassification and is still considered rural under section
1886(d) of the Act and for other purposes.
We discussed that when there is both a Sec. 412.103 redesignation
and an MGCRB reclassification, the MGCRB reclassification controls for
wage index calculation and payment purposes. We exclude hospitals with
Sec. 412.103 redesignations from the calculation of the reclassified
rural wage index if they also have an active MGCRB reclassification to
another area. That is, if an application for urban reclassification
through the MGCRB is approved, and is not withdrawn or terminated by
the hospital within the established timelines, we consider the
hospital's geographic CBSA and the urban CBSA to which the hospital is
reclassified under the MGCRB for the wage index calculation. We refer
readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930) for a full
discussion of the effect of simultaneous reclassifications under both
the Sec. 412.103 and the MGCRB processes on wage index calculations.
2. MGCRB Reclassification and Redesignation Issues for FY 2018
a. FY 2018 Reclassification Requirements and Approvals
As previously stated, 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 regulations under 42 CFR 412.230 through
412.280.
At the time this proposed rule was constructed, the MGCRB had
completed its review of FY 2018 reclassification requests. Based on
such reviews, there are 375 hospitals approved for wage index
reclassifications by the MGCRB starting in FY 2018. Because MGCRB wage
index reclassifications are effective for 3 years, for FY 2018,
hospitals reclassified beginning in FY 2016 or FY 2017 are eligible to
continue to be reclassified to a particular labor market area based on
such prior reclassifications for the remainder of their 3-year period.
There were 257 hospitals approved for wage index reclassifications in
FY 2016 that will continue for FY 2018, and 274 hospitals approved for
wage index reclassifications in FY 2017 that will continue for FY 2018.
Of all the hospitals approved for reclassification for FY 2016, FY
2017, and FY 2018, based upon the review at the time of this proposed
rule, 906 hospitals are in a MGCRB reclassification status for FY 2018.
Under the regulations at 42 CFR 412.273, hospitals that have been
reclassified by the MGCRB are permitted to withdraw their applications
if the request for withdrawal is received by the MGCRB within 45 days
of the publication of CMS' annual notice of proposed rulemaking
concerning changes to the inpatient hospital prospective payment system
and proposed payment rates for the fiscal year for which the
application has been filed. (We note that in section III.I.4. of the
preamble of this proposed rule, we are proposing to revise the above
described regulation text to specify that written notice to the MGCRB
must be provided within 45 days from the date of public display of the
proposed rule at the Office of the Federal Register. If finalized, that
proposal would be effective beginning with the FY 2019 IPPS/LTCH PPS
proposed rule.) For information about withdrawing, terminating, or
canceling a previous withdrawal or termination of a 3-year
reclassification for wage index purposes, we refer readers to Sec.
412.273, as well as the FY 2002 IPPS final rule (66 FR 39887 through
39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066).
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 2018 will be incorporated
into the wage index values published in the FY 2018 IPPS/LTCH PPS final
rule. These changes affect not only the wage index value for specific
geographic areas, but also the wage index value that 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.
Applications for FY 2019 reclassifications are due to the MGCRB by
September 1, 2017 (the first working day of September 2017). 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 2017, via the Internet on the CMS Web
site at: https://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html, 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.
Under previous regulations at 42 CFR 412.256(a)(1), applications
for reclassification were required to be mailed or delivered to the
MGCRB, with a copy to CMS, and were not allowed to be submitted through
the facsimile (FAX) process or by other electronic means. Because we
believed this previous policy was outdated and overly restrictive and
to promote ease of application for FY 2018 and subsequent years, in the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56928), we revised this policy
to require applications and supporting documentation to be submitted
via the method prescribed in instructions by the MGCRB, with an
electronic copy to CMS. We revised Sec. 412.256(a)(1) to specify that
an application must be submitted to the MGCRB according to the method
prescribed by the MGCRB, with an electronic copy of the application
sent to CMS. We specified that CMS copies should be sent via email to
[email protected].
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56928), we
reiterated that MGCRB application requirements will be published
separately from the rulemaking process, and paper applications will
likely still be required. The MGCRB makes all initial determinations
for geographic reclassification requests, but CMS requests copies of
all applications to assist in verifying a reclassification status
during the wage index development process. We stated that we believed
that requiring electronic versions would better aid CMS in this
process, and would reduce the overall burden upon hospitals.
b. Extension of PRA Information Collection Requirement Approval for
MGCRB Applications
As stated earlier, 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
[[Page 19907]]
procedures and rules that apply to the geographic reclassification
process are outlined in the regulations under 42 CFR 412.230 through
412.280. The current information collection requirements for the MGCRB
procedures and criteria and supporting regulations in 42 CFR 412.256
subject to the Paperwork Reduction Act provisions are currently
approved under OMB Control Number 0938-0573 and expired on February 28,
2017. An extension of the currently approved collection is required in
time for applications due to the MGCRB September 1, 2017 for FY 2019
reclassifications. As discussed in section XIII.B. of the preamble of
this proposed rule, a request for an extension of the current
information collection requirements for the MGCRB procedures and
criteria and supporting regulations is currently awaiting approval by
OMB and can be accessed at: https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201612-0938-023.
c. Proposed Deadline for Submittal of Documentation of Sole Community
Hospital (SCH) and Rural Referral Center (RRC) Classification Status to
the MGCRB
The regulations at 42 CFR 412.230(a)(3), consistent with section
1886(d)(10)(D)(i)(III) of the Act, set special rules for sole community
hospitals (SCHs) and rural referral centers (RRCs) that are
reclassifying under the MGCRB. Specifically, a hospital that is an RRC
or an SCH, or both, does not have to demonstrate a close proximity to
the area to which it seeks redesignation. If a hospital that is an RRC
or an SCH, or both, qualifies for urban redesignation, it is
redesignated to the urban area that is closest to the hospital. If the
hospital is closer to another rural area than to any urban area, it may
seek redesignation to either the closest rural or the closest urban
area.
In addition, section 1886(d)(10)(D)(iii) of the Act, as implemented
in the regulations at Sec. 412.230(d)(3)(i), provides an exception to
certain wage comparison criteria for RRCs and former RRCs reclassifying
under the MGCRB. Under Sec. 412.230(d)(3)(i), if a hospital was ever
an RRC, it does not have to demonstrate that it meets the average
hourly wage criterion at Sec. 412.230(d)(1)(iii), which would require
that the hospital's average hourly wage be at least 106 percent for
rural hospitals and at least 108 percent for urban hospitals of the
average hourly wage of all other hospitals in the area in which the
hospital is located. Rather, as codified at Sec. 412.230(d)(3)(ii),
consistent with our authority under section 1886(d)(10)(D)(i) of the
Act, if a hospital was ever an RRC, it is required to meet only the
criterion for rural hospitals at Sec. 412.230(d)(1)(iv), which
requires that the hospital's 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. The regulations at Sec. 412.96 set forth the
criteria that a hospital must meet in order to qualify as an RRC.
For a hospital to use the special rules at Sec. 412.230(a)(3) for
SCHs and RRCs, the existing regulation at Sec. 412.230(a)(3) requires
that the hospital be an active SCH or an RRC as of the date of the
MGCRB's review. In addition, for a hospital to use the RRC exceptions
at Sec. 412.230(d)(3), a hospital must either be an RRC at the time of
the MGCRB's review or have previously been classified as an RRC in the
past. In other words, under the existing regulations, if a hospital is
approved by CMS as an SCH or an RRC but the approval is not yet
effective at the time of the MGCRB's review, the hospital's status as
an SCH or an RRC would not be considered in the MGCRB's decision,
unless the hospital was a former RRC, in which case it would be able to
use the RRC exceptions at Sec. 412.230(d)(3).
The MGCRB currently accepts supporting documentation of SCH and RRC
classification (the CMS approval letter) up until the date of MGCRB's
review, which varies annually. A hospital may apply at any time for
classification as an SCH, and the classification is effective 30 days
after the date of CMS' written notification of approval, in accordance
with Sec. 412.92. Considering that the MGCRB usually meets in early
February, hospitals typically seek to obtain SCH approval letters no
later than early January (30 days prior to the date of MGCRB review)
for the SCH status to be effective as of the date of the MGCRB's
review. However, consistent with section 1886(d)(5)(C)(i) of the Act, a
hospital must submit its application for RRC status during the quarter
before the first quarter of the hospital's cost reporting period, to be
effective at the beginning of the next cost reporting period. The
existing regulation at Sec. 412.230(a)(3), combined with the statutory
timeframe for RRC classification, require that a hospital's cost
reporting period as an RRC begin on or before the date of the MGCRB's
review in order to be considered an RRC by the MGCRB for purposes of
the special rules under Sec. 412.230(a)(3). Similarly, in order to use
the RRC exceptions under Sec. 412.230(d)(3), a hospital's RRC status
must be effective on the date of the MGCRB's review, or (unlike Sec.
412.230(a)(3)) the hospital must have had RRC status in the past. For
example, a hospital with a cost reporting period beginning in March
would obtain RRC approval, in accordance with the statutory timeframe,
during the December through February quarter (potentially before the
MGCRB's decision), but would not be considered an RRC by the MGCRB
because the approval would not be effective until the next cost
reporting period begins in March, after the MGCRB's decision (unless,
for purposes of Sec. 412.230(d)(3), the hospital had previously been
classified as an RRC in the past).
The current practice of accepting SCH and RRC approvals up until
the date of MGCRB review does not ensure adequate time for the MGCRB to
include SCH and RRC approvals in its review. We note that many
hospitals now obtain SCH or RRC status based on a Sec. 412.103
reclassification in order to reclassify using the special rules and
exceptions under the MGCRB following the April 21, 2016 IFC (81 FR
23428), which revised the regulations to allow hospitals nationwide to
reclassify based on acquired rural status. We believe that the
additional volume of SCH and RRC approvals submitted to the MGCRB
increases the need for an earlier deadline for documentation of SCH and
RRC classifications to be submitted to the MGCRB for purposes of the
special rules at Sec. 412.230(a)(3) and the exception for RRCs at
Sec. 412.230(d)(3). In addition, because the date of the MGCRB's
review varies annually, we believe hospitals would benefit from the
certainty of a set date by which documentation of RRC or SCH status
must be submitted in order to have that status considered by the MGCRB
under 412.230(a)(3) and Sec. 412.230(d)(3).
Therefore, to ensure sufficient time for the MGCRB to include SCH
and RRC status approvals in its review and increase clarity for
hospitals, while allowing as much time and flexibility as possible for
hospitals applying for RRC status to be considered RRCs by the MGCRB,
we are proposing to revise the regulations at Sec. 412.230(a)(3) and
Sec. 412.230(d)(3). We are proposing to revise the regulations at
Sec. 412.230(a)(3) in two ways. First, we are proposing to establish a
deadline of the first business day after January 1 for hospitals to
submit to the MGCRB documentation of SCH or RRC status approval (the
CMS approval letter) in order to take advantage of the special rules
under Sec. 412.230(a)(3) when reclassifying under the MGCRB. We
believe that this date of the first business day after January 1 would
provide sufficient time for the MGCRB to consider documentation of
[[Page 19908]]
SCH or RRC status approval in its review, without negatively affecting
hospitals seeking to obtain SCH or RRC status, as explained below.
Second, we are proposing to revise Sec. 412.230(a)(3) to require
hospitals to submit documentation of SCH or RRC status approval (the
CMS approval letter) by the deadline above, rather than to have SCH or
RRC classification that is effective as of the date of MGCRB review, in
order to use the special rules for SCHs and RRCs under Sec.
412.230(a)(3). Likewise, we are proposing to revise the regulations at
Sec. 412.230(d)(3) so that a hospital qualifies for these RRC
exceptions if it was ever approved as a RRC. In other words, the
exceptions at Sec. 412.230(d)(3) would continue to apply to hospitals
that were ever classified as RRCs, but consistent with our authority
under section 1886(d)(10)(D)(i) of the Act to publish guidelines to be
utilized by the MGCRB, we would also extend these exceptions to
hospitals that were ever approved as RRCs. Similar to Sec.
412.230(a)(3), we also are proposing to establish a deadline of the
first business day after January 1 for hospitals to submit
documentation of RRC status approval (the CMS approval letter) in order
to take advantage of the exception under Sec. 412.230(d)(3) when
reclassifying under the MGCRB. These proposed revisions would more
appropriately allow the MGCRB to prepare for its review and would allow
hospitals obtaining SCH or RRC status approval as late as the first
business day after January 1 to have these classifications considered
by the MGCRB under Sec. 412.230(a)(3) and (d)(3), irrespective of the
effective date of these classifications. These proposals would not
substantially affect hospitals seeking SCH classification for purposes
of reclassifying under the MGCRB because a hospital must obtain SCH
status approval by early January under the existing regulation in order
to have that classification effective 30 days later by the time the
Board usually meets in early February. For hospitals seeking RRC
classification for purposes of reclassifying under the MGCRB, however,
the proposed deadline of no later than the first business day after
January 1, in concert with our proposal to accept documentation of
approval (the CMS approval letter) instead of requiring the hospital to
be an active RRC at the time of the MGCRB review in order to take
advantage of the special rules and exceptions under Sec. 412.230(a)(3)
and (d)(3), is beneficial. The proposed revisions to the regulations at
Sec. 412.230(a)(3) and (d)(3) accommodate more hospitals with various
cost reporting year ends by allowing hospitals with cost reporting
periods beginning soon after the MGCRB's decision to have RRC status
approvals included in the MGCRB's review. Under the proposals, the
MGCRB would consider an RRC status approval obtained as late as the
first business day after January 1 instead of requiring the RRC
classification to be effective by the time the Board meets, which has
been in February in past years. For example, a hospital with a cost
reporting period beginning as late as March, which could apply for RRC
status approval in accordance with the statutory timeframe starting in
December, would be considered an RRC by the MGCRB if it submits
documentation of approval of RRC status no later than the first
business day after January 1, even though the approval would not be
effective until after the MGCRB's decision.
For the reasons discussed above, consistent with our authority
under section 1886(d)(10)(D)(i) of the Act to publish guidelines to be
utilized by the MGCRB, we are proposing to revise the regulations at
Sec. 412.230(a)(3) to specify that, to be redesignated under the
special rules in that paragraph, the hospital must submit documentation
of the approval of SCH or RRC status to the MGCRB no later than the
first business day after January 1. In addition, we are proposing
conforming revisions to paragraphs (a)(3)(i) and (ii) of Sec. 412.230
to reflect that these paragraphs apply to hospitals with SCH and RRC
approval as specified above (and not only effective status).
Specifically, we are proposing to revise Sec. 412.230(a)(3)(i) to
specify that a hospital that is approved as an RRC or SCH, or both,
does not have to demonstrate a close proximity to the area to which it
seeks redesignation; and to revise Sec. 412.230(a)(3)(ii) to specify
that this paragraph applies if a hospital that is approved as an RRC or
SCH, or both, qualifies for urban redesignation. We note that we are
proposing additional revisions to Sec. 412.230(a)(3)(ii) as discussed
in section III.I.2.d. of the preamble of this proposed rule.
In addition, for the reasons discussed above, consistent with our
authority under section 1886(d)(10)(D)(i) of the Act to publish
guidelines to be utilized by the MGCRB, we are proposing to revise the
regulations at Sec. 412.230(d)(3). Specifically, we are proposing to
add introductory language to Sec. 412.230(d)(3) to specify that for
the exceptions in this paragraph to apply, the hospital must submit
documentation of the approval of RRC status (current or past) to the
MGCRB no later than the first business day after January 1. In
addition, we are proposing to revise Sec. 412.230(d)(3)(i) to specify
that if a hospital was ever approved as an RRC, it does not have to
demonstrate that it meets the average hourly wage criterion set forth
in Sec. 412.230(d)(1)(iii); and to revise Sec. 412.230(d)(3)(ii) to
specify that if a hospital was ever approved as an RRC, it is required
to meet only the criterion that applies to rural hospitals under Sec.
412.230(d)(1)(iv), regardless of its actual location in an urban or
rural area.
We are inviting public comments on these proposals.
d. Clarification of Special Rules for SCHs and RRCs Reclassifying to
Geographic Home Area
Following issuance of the April 21, 2016 IFC (81 FR 23428),
hospitals may simultaneously be redesignated as rural under Sec.
412.103 and reclassified under the MGCRB. An urban hospital seeking
benefits of rural status, such as rural payments for disproportionate
share hospitals (DSH) and eligibility for the 340B Drug Pricing Program
administered by HRSA, without the associated rural wage index may be
redesignated as rural under Sec. 412.103 (if it meets the applicable
requirements) and also reclassify under the MGCRB to an urban area
(again, if it meets the applicable requirements). As discussed earlier
and in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through
56927), a hospital with simultaneous Sec. 412.103 redesignation and
MGCRB reclassification receives the wage index of the CBSA to which it
is reclassified under the MGCRB while still maintaining Sec. 412.103
reclassified rural status for other purposes.
Hospitals that are redesignated under Sec. 412.103 may seek MGCRB
reclassification to their geographic home area. Such hospitals
automatically meet the criteria for proximity, but must still
demonstrate that they meet the wage comparison requirements using the
criteria for rural hospitals at Sec. 412.230(d). Specifically, a
hospital with a Sec. 412.103 redesignation seeking reclassification
under the MGCRB must demonstrate 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 in accordance with Sec.
412.230(d)(1)(iii), and the hospital's 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, in accordance with Sec.
412.230(d)(1)(iv). In this case, both the area in which the hospital is
located and
[[Page 19909]]
the area to which it seeks redesignation are the geographic home area.
If a hospital with a Sec. 412.103 rural redesignation also has SCH
or RRC status based on its acquired rural status, the hospital may use
the exception at Sec. 412.230(d)(3) for RRCs seeking reclassification
under the MGCRB and the special reclassification rules at Sec.
412.230(a)(3) for SCHs and RRCs. Specifically, under Sec.
412.230(d)(3)(ii), an RRC or former RRC must only 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.
In other words, a hospital with RRC status based on a Sec. 412.103
rural redesignation that is seeking additional reclassification under
the MGCRB to its geographic home area must only demonstrate that its
average hourly wage is equal to at least 82 percent of the average
hourly wage of hospitals in its geographic home area. The proximity
requirement is waived under Sec. 412.230(a)(3) for SCHs and RRCs, and
SCHs and RRCs are redesignated to the urban area that is closest to the
hospital (or if the hospital is closer to another rural area than to
any urban area, it may seek redesignation to either the closest rural
area or the closest urban area).
The existing regulation at Sec. 412.230(a)(3)(ii) states that if
an SCH or RRC qualifies for urban redesignation, it is redesignated to
the urban area that is closest to the hospital. As currently worded, we
believe it is unclear how this provision would apply to a hospital with
a Sec. 412.103 rural redesignation and SCH or RRC status. If the urban
area that is closest to the hospital is interpreted to mean the
hospital's geographic home area, a hospital with a Sec. 412.103 rural
redesignation and SCH or RRC status would not be able to reclassify to
any closest area outside of the hospital's geographic home area, but
would only be allowed to reclassify to the geographic home area.
Alternatively, if the urban area that is closest to the hospital is
interpreted to mean the closest urban area to the hospital's geographic
home area, the hospital would seem to be precluded from reclassifying
under the MGCRB to its geographic home area. In other words, under the
existing language of this regulation, the urban area that is closest to
the hospital can either be interpreted to mean the hospital's
geographic home area, or the closest area outside of the hospital's
geographic home area.
We believe it would be appropriate to revise Sec.
412.230(a)(3)(ii) to clarify that it allows for redesignation to either
the hospital's geographic home area or to the closest area outside of
the hospital's geographic home area. Prior to the April 21, 2016
interim final rule with comment period (IFC) (81 FR 23428), it was not
possible for a hospital with Sec. 412.103 rural redesignation to seek
reclassification to its geographic home area or to the closest area
outside its geographic home area under the MGCRB because dual
reclassification under Sec. 412.103 and under the MGCRB was not
permitted. However, the IFC allowed dual Sec. 412.103 and MGCRB
reclassifications, so a hospital may now reclassify to a rural area
under Sec. 412.103 and then reclassify back to its geographic home
area or another area under the MGCRB for wage index purposes (if it
meets all criteria). Thus, depending on the circumstances, a hospital
may seek to reclassify to either its geographic home area or the
closest area outside of its geographic home area.
Therefore, we are proposing to revise the regulations at Sec.
412.230(a)(3)(ii) to clarify that a hospital with a Sec. 412.103 rural
redesignation and SCH or RRC approval may reclassify under the MGCRB to
its geographic home area or to the closest area outside of its
geographic home area. Specifically, we are proposing to revise Sec.
412.230(a)(3)(ii) to state that if a hospital that is approved as an
RRC or an SCH, or both, qualifies for urban redesignation, it is
redesignated to the urban area that is closest to the hospital or to
the hospital's geographic home area. If the hospital is closer to
another rural area than to any urban area, it may seek redesignation to
either the closest rural or the closest urban area.
3. Redesignations Under Section 1886(d)(8)(B) of the Act
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS effective for the
fiscal year in which the hospital receives the out-migration
adjustment. In addition, we adopted a minor procedural change that
would allow a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45
days from the publication of the proposed rule) to waive its urban
status for the full 3-year period for which its out-migration
adjustment is effective. (We note that, in section III.I.4. of the
preamble of this proposed rule, we are proposing to revise this policy
to require a Lugar hospital that qualifies for and accepts the out-
migration adjustment, or that no longer wishes to accept the out-
migration adjustment and instead elects to return to its deemed urban
status, to notify CMS within 45 days from the date of public display of
the proposed rule at the Office of the Federal Register.) By doing so,
such a Lugar hospital would no longer be required during the second and
third years of eligibility for the out-migration adjustment to advise
us annually that it prefers to continue being treated as rural and
receive the out-migration adjustment. In the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56930), we again clarified that such a request to
waive Lugar status, received within 45 days of the publication of the
proposed rule, is valid for the full 3-year period for which the
hospital's out-migration adjustment is effective. We further clarified
that if a hospital wishes to reinstate its urban status for any fiscal
year within this 3-year period, it must send a request to CMS within 45
days of publication of the proposed rule for that particular fiscal
year. We indicated that such reinstatement requests may be sent
electronically to [email protected]. We wish to further clarify
that both requests to waive and to reinstate ``Lugar'' status may be
sent to this mailbox. To ensure proper accounting, we request hospitals
to include their CCN, and either ``waive Lugar'' or ``reinstate
Lugar'', in the subject line of these requests.
4. Proposed Changes to the 45-Day Notification Rules
Certain Medicare regulations specify that hospitals have 45 days
from the publication of the annual proposed rule for the hospital
inpatient prospective payment system to inform CMS or the MGCRB of
certain requested reclassification/redesignation and out-migration
adjustment changes relating to the development of the hospital wage
index. Specifically, 42 CFR 412.64(i)(3)(iii), which provides for
adjusting the wage index to account for commuting patterns of hospital
workers, and 42 CFR 412.211(f)(3)(iii), which provides for the same
adjustment for hospitals in Puerto Rico, state that a hospital may
waive the application of this wage index adjustment by notifying CMS in
writing within 45 days after the publication of the annual notice of
proposed rulemaking for the hospital inpatient prospective payment
system. The regulations at Sec. 412.273(c) concerning withdrawing an
MGCRB application, terminating an approved 3-year reclassification, or
canceling a previous withdrawal or termination, also state
(specifically Sec. 412.273(c)(1)(ii)
[[Page 19910]]
and (2)) that a request for withdrawal or termination must be received
by the MGCRB within 45 days of publication of CMS' annual notice of
proposed rulemaking concerning changes to the inpatient hospital
prospective payment system and proposed payment rates. Similarly, the
policy outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599
through 51600) allows a Lugar hospital that qualifies for and accepts
the out-migration adjustment, or that no longer wishes to accept the
out-migration adjustment and instead elects to return to its deemed
urban status to notify CMS within 45 days from the publication of the
proposed rule.
We are proposing to revise the above described regulation text and
policies as follows to specify that written notification to CMS or the
MGCRB (as applicable) must be provided within 45 days from the date of
public display of the annual proposed rule for the hospital inpatient
prospective payment system at the Office of the Federal Register. We
believe that the public has access to the necessary information from
the date of public display of the proposed rule at the Office of the
Federal Register and on its Web site in order to make the decisions at
issue. Specifically, we are proposing to revise the regulations at
Sec. 412.64(i)(3)(iii) and Sec. 412.211(f)(3)(iii) to provide that a
hospital may waive the application of the wage index adjustment by
notifying CMS within 45 days of the date of public display of the
annual notice of proposed rulemaking for the hospital inpatient
prospective payment system at the Office of the Federal Register. In
addition, we are proposing to revise the regulations at Sec.
412.273(c)(1)(ii) and (c)(2) to provide that a request for withdrawal
or termination of an MGCRB reclassification must be received by the
MGCRB within 45 days of the date of public display at the Office of the
Federal Register of the annual notice of proposed rulemaking concerning
changes to the inpatient hospital prospective payment system and
proposed payment rates for the fiscal year for which the application
has been filed (in the case of a withdrawal under Sec.
412.273(c)(1)(ii)), or for the fiscal year for which the termination is
to apply (under Sec. 412.273(c)(2)). We also are proposing to revise
our policy outlined in the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) (as described above) to require a Lugar hospital
that qualifies for and accepts the out-migration adjustment, or that no
longer wishes to accept the out-migration adjustment and instead elects
to return to its deemed urban status to notify CMS within 45 days from
the date of public display of the proposed rule at the Office of the
Federal Register. We are inviting public comments on these proposals.
J. Proposed Out-Migration Adjustment Based on Commuting Patterns of
Hospital Employees
In accordance with section 1886(d)(13) of the Act, as added by
section 505 of Pub. L. 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.
Section 1886(d)(13)(B) of the Act requires the Secretary to use
data the Secretary determines to be appropriate to establish the
qualifying counties. When the provision of section 1886(d)(13) of the
Act was implemented for the FY 2005 wage index, we analyzed commuting
data compiled by the U.S. Census Bureau that were derived from a
special tabulation of the 2000 Census journey-to-work data for all
industries (CMS extracted data applicable to hospitals). These data
were compiled from responses to the ``long-form'' survey, which the
Census Bureau used at the time and which contained questions on where
residents in each county worked (69 FR 49062). However, the 2010 Census
was ``short form'' only; information on where residents in each county
worked was not collected as part of the 2010 Census. The Census Bureau
worked with CMS to provide an alternative dataset based on the latest
available data on where residents in each county worked in 2010, for
use in developing a new out-migration adjustment based on new commuting
patterns developed from the 2010 Census data beginning with FY 2016.
To determine the out-migration adjustments and applicable counties
for FY 2016, we analyzed commuting data compiled by the Census Bureau
that were derived from a custom tabulation of the American Community
Survey (ACS), an official Census Bureau survey, utilizing 2008 through
2012 (5-Year) Microdata. The data were compiled from responses to the
ACS questions regarding the county where workers reside and the county
to which workers commute. As we discussed in the FY 2016 and FY 2017
IPPS/LTCH PPS final rules (80 FR 49501 and 81 FR 56930, respectively),
the same policies, procedures, and computation that were used for the
FY 2012 out-migration adjustment were applicable for FY 2016 and FY
2017, and we are proposing to use them again for FY 2018. We have
applied the same policies, procedures, and computations since FY 2012,
and we believe they continue to be appropriate for FY 2018. We refer
readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49500 through
49502) for a full explanation of the revised data source.
For FY 2018, until such time that CMS finalizes out-migration
adjustments based on the next Census, the out-migration adjustment
continues to be based on the data derived from the custom tabulation of
the ACS utilizing 2008 through 2012 (5-Year) Microdata. For FY 2018, we
are not proposing any changes to the methodology or data source that we
used for FY 2016 (81 FR 25071). (We refer readers to a full discussion
of the out-migration adjustment, including rules on deeming hospitals
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51601 through 51602).) Table 2 associated with
this proposed rule (which is available via the Internet on the CMS Web
site) includes the proposed out-migration adjustments for the FY 2018
wage index.
K. Reclassification From Urban to Rural Under Section 1886(d)(8)(E) of
the Act, Implemented at 42 CFR 412.103
Under section 1886(d)(8)(E) of the Act, a qualifying prospective
payment hospital located in an urban area may apply for rural status
for payment purposes separate from reclassification through the MGCRB.
Specifically, section 1886(d)(8)(E) of the Act provides that, not later
than 60 days after the receipt of an application (in a form and manner
determined by the Secretary) from a subsection (d) hospital that
satisfies certain criteria, the Secretary shall treat the hospital as
being located in the rural area (as defined in paragraph (2)(D)) of the
State in which the hospital is located. We refer readers to the
regulations at 42 CFR 412.103 for the general criteria and application
requirements for a subsection (d) hospital to reclassify from urban to
rural status in accordance with section 1886(d)(8)(E) of the Act. The
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes
our policies
[[Page 19911]]
regarding the effect of wage data from reclassified or redesignated
hospitals.
Hospitals must meet the criteria to be reclassified from urban to
rural status under Sec. 412.103, as well as fulfill the requirements
for the application process. There may be one or more reasons that a
hospital applies for the urban to rural reclassification, and the
timeframe that a hospital submits an application is often dependent on
those reason(s). Because the wage index is part of the methodology for
determining the prospective payments to hospitals for each fiscal year,
we believe there should be a definitive timeframe within which a
hospital should apply for rural status in order for the
reclassification to be reflected in the next Federal fiscal year's wage
data used for setting payment rates.
Therefore, after notice of proposed rulemaking and consideration of
public comments, in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56931
through 56932), we revised Sec. 412.103(b) by adding paragraph (6) to
specify that, in order for a hospital to be treated as rural in the
wage index and budget neutrality calculations under Sec.
412.64(e)(1)(ii), (e)(2), (e)(4), and (h) for payment rates for the
next Federal fiscal year, the hospital's filing date must be no later
than 70 days prior to the second Monday in June of the current Federal
fiscal year and the application must be approved by the CMS Regional
Office in accordance with the requirements of Sec. 412.103. We refer
readers to the FY 2017 IPPS/LTCH PPS final rule for a full discussion
of this policy. We clarified that the lock-in date does not affect the
timing of payment changes occurring at the hospital-specific level as a
result of reclassification from urban to rural under Sec. 412.103.
This lock-in date also does not change the current regulation that
allows hospitals that qualify under Sec. 412.103(a) to request, at any
time during a cost reporting period, to reclassify from urban to rural.
A hospital's rural status and claims payment reflecting its rural
status continue to be effective on the filing date of its
reclassification application, which is the date the CMS Regional Office
receives the application, in accordance with Sec. 412.103(d). The
hospital's IPPS claims will be paid reflecting its rural status on the
filing date (the effective date) of the reclassification, regardless of
when the hospital applies.
L. Clarification of Application Deadline for Rural Referral Center
(RRC) Classification
Section 1886(d)(5)(C)(i) of the Act, implemented at 42 CFR 412.96,
provides for the classification and special treatment of rural referral
centers (RRCs). The regulations at Sec. 412.96 set forth the criteria
that a hospital must meet in order to qualify as an RRC. Under Sec.
412.96(b)(1)(ii), a hospital may qualify as an RRC if it is located in
a rural area and has 275 or more beds during its most recently
completed cost reporting period. The hospital also can obtain RRC
status by showing that at least 50 percent of its Medicare patients are
referred from other hospitals or from physicians not on the staff of
the hospital, and at least 60 percent of the hospital's Medicare
patients live more than 25 miles from the hospital, and at least 60
percent of all the services that the hospital furnishes to Medicare
beneficiaries are furnished to beneficiaries who live more than 25
miles from the hospital (Sec. 412.96(b)(2)), or by showing that the
hospital meets the alternative criteria at Sec. 412.96(c). We refer
readers to 42 CFR 412.96 for a full description of the criteria for
classification as an RRC.
Consistent with section 1886(d)(5)(C)(i) of the Act, the hospital
must submit its application for RRC status during the last quarter of
the hospital's cost reporting period, to be effective with the
beginning of the next cost reporting period. Specifically, section
1886(d)(5)(C)(i) of the Act provides that an appeal allowed under this
paragraph must be submitted to the Secretary (in such form and manner
as the Secretary may prescribe) during the quarter before the first
quarter of the hospital's cost reporting period (or, in the case of a
cost reporting period beginning during October 1984, during the first
quarter of that period), and the Secretary must make a final
determination with respect to such appeal within 60 days after the date
the appeal was submitted. Any payment adjustments necessitated by a
reclassification based upon the appeal will be effective at the
beginning of such cost reporting period. Therefore, in this proposed
rule, we are clarifying that applications for RRC status must be
submitted during this timeframe. That is, applications for RRC status
must be submitted during the last quarter of the cost reporting period
before the first quarter of a hospital's cost reporting year. If
approved, the RRC status is effective with the beginning of the
hospital's cost reporting period occurring after the last quarter of
the cost reporting period in which the hospital submits an application.
We also are clarifying in this proposed rule that, while RRC
applications must be submitted only within the timeframe described
above, applications for urban-to-rural reclassification under Sec.
412.103 may be submitted at any time for the hospital to be approved
for rural reclassification. This includes hospitals seeking rural
reclassification under Sec. 412.103(a)(3), which states that a
hospital meets criteria for urban-to-rural reclassification if the
hospital would qualify as a RRC as set forth in Sec. 412.96, or as an
SCH as set forth in Sec. 412.92, if the hospital were located in a
rural area. A hospital seeking RRC status based on a rural
reclassification under Sec. 412.103, including Sec. 412.103(a)(3),
must still submit an application for RRC status during the last quarter
of its cost reporting year before the next cost reporting period in
accordance with section 1886(d)(5)(C)(i) of the Act. While the Sec.
412.103 rural redesignation would be effective as of the date of filing
the application, in accordance with Sec. 412.103(d), the RRC status
would be effective beginning with the hospital's cost reporting period
occurring after the last quarter of the cost reporting period in which
the hospital submits an application.
Because a hospital may only apply for RRC status during the last
quarter of its cost reporting year in accordance with section
1886(d)(5)(C)(i) of the Act, hospitals seeking RRC status, in order to
reclassify through the MGCRB using the special rules for SCHs and RRCs
at Sec. 412.230(a)(3) and the exceptions at Sec. 412.230(d)(3) for
RRCs, may be disadvantaged due to their cost reporting year end. As
discussed in section III.I.2. of the preamble of this proposed rule, we
are proposing to revise the regulations at Sec. 412.230(a)(3) and
(d)(3) to allow hospitals to submit documentation of the approval of
SCH or RRC status (as applicable) to the MGCRB no later than the first
business day after January 1. We believe our proposal to accept
documentation of approval of RRC classification, instead of requiring
that the hospital be classified as a RRC at the time of Board review,
would accommodate more hospitals with various cost reporting period
endings. We refer readers to section III.I.2. of the preamble of this
proposed rule for further discussion of this proposal.
M. Process for Wage Index Data Corrections
1. Process for Hospitals To Request Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data files for the
proposed FY 2018 wage index were made available on May 16, 2016, and
the preliminary CY 2013 occupational
[[Page 19912]]
mix data files on May 16, 2016, through the Internet on the CMS Web
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html.
On January 30, 2017, we posted a public use file (PUF) at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html containing FY 2018 wage index data available as of January
29, 2017. This PUF contains a tab with the Worksheet S-3 wage data
(which includes Worksheet S-3, Parts II and III wage data from cost
reporting periods beginning on or after October l, 2013 through
September 30, 2014; that is, FY 2014 wage data), a tab with the
occupational mix data (which includes data from the CY 2013
occupational mix survey, Form CMS-10079), a tab containing the
Worksheet S-3 wage data of hospitals deleted from the January 30, 2017
wage data PUF, and a tab containing the CY 2013 occupational mix data
(if any) of the hospitals deleted from the January 30, 2017 wage data
PUF. In a memorandum dated January 27, 2017, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
January 30, 2017 wage index data PUFs, and the process and timeframe
for requesting revisions in accordance with the FY 2018 Wage Index
Timetable.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional PUF on our
Web site that reflects the actual data that are used in computing the
proposed wage index. The release of this file does not alter the
current wage index process or schedule. We notify 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
encourage hospitals to sign up for automatic notifications of
information about hospital issues and about the dates of the Hospital
Open Door Forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
In a memorandum dated May 16, 2016, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
wage index data files and the process and timeframe for requesting
revisions. We also instructed the 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 May 16, 2016 wage data files and May 16, 2016 occupational mix data
files, the hospital had to submit corrections along with complete,
detailed supporting documentation to its MAC by September 2, 2016.
Hospitals were notified of this deadline and of all other deadlines and
requirements, including the requirement to review and verify their data
as posted in the preliminary wage index data files on the Internet,
through the letters sent to them by their MACs.
November 4, 2016 was the date by when MACs notified State hospital
associations regarding hospitals that failed to respond to issues
raised during the desk reviews. The MACs notified the hospitals by mid-
January 2017 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' revision requests.
The MACs also submitted the revised data to CMS by January 20, 2017.
CMS published the wage index PUFs that included hospitals' revised wage
index data on January 30, 2017. Hospitals had until February 17, 2017,
to submit requests to the MACs for reconsideration of adjustments made
by the MACs as a result of the desk review, and to correct errors due
to CMS' or 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, MACs were
required to transmit to CMS any additional revisions resulting from the
hospitals' reconsideration requests by March 24, 2017. Under our
current policy, the deadline for a hospital to request CMS intervention
in cases where a hospital disagreed with a MAC's policy interpretation
was April 5, 2017. Beginning next year (that is, April 2018 for wage
data revisions for the FY 2019 wage index), we are proposing to require
that a hospital that seeks to challenge the MAC's handling of wage data
on any basis (including a policy, factual, or any other dispute) must
request CMS to intervene by the date in April that is specified as the
deadline for hospitals to appeal MAC determinations and request CMS'
intervention in cases where the hospital disagrees with the MAC's
determination (the wage index timetable would be updated to reflect the
specified date). We note that, as we did for the FY 2017 wage index,
for the FY 2018 wage index, in accordance with the FY 2018 wage index
timeline posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html, the April appeals have to be
sent via mail and email. We refer readers to the wage index timeline
for complete details.
Hospitals are given the opportunity to examine Table 2, which is
listed in section VI. of the Addendum to this proposed rule and
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html. Table 2 contains each
hospital's proposed adjusted average hourly wage used to construct the
wage index values for the past 3 years, including the FY 2014 data used
to construct the proposed FY 2018 wage index. We note that the proposed
hospital average hourly wages shown in Table 2 only reflect changes
made to a hospital's data that were transmitted to CMS by early
February 2017.
We plan to post the final wage index data PUFs in late April 2017
on the Internet at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html. The April 2017 PUFs are made available solely for
the limited purpose of identifying any potential errors made by CMS or
the MAC in the entry of the final wage index data that resulted from
the correction process previously described (revisions submitted to CMS
by the MACs by March 24, 2017).
After the release of the April 2017 wage index data PUFs, changes
to the wage and occupational mix data can only be made in those very
limited situations involving an error by the MAC or CMS that the
hospital could not have known about before its review of the final wage
index data files. Specifically, neither the MAC nor CMS will approve
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 the
MACs on or before March 24, 2017.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the January 30,
2017 wage index PUFs.
Requests to revisit factual determinations or policy
interpretations made by the MAC or CMS during the wage index data
correction process.
If, after reviewing the April 2017 final wage index data PUFs, a
hospital believes that its wage or occupational
[[Page 19913]]
mix data were incorrect due to a MAC or CMS error in the entry or
tabulation of the final data, the hospital is given the opportunity to
notify both its MAC and CMS regarding why the hospital believes an
error exists and provide all supporting information, including relevant
dates (for example, when it first became aware of the error). The
hospital is required to send its request to CMS and to the MAC no later
than May 30, 2017. Similar to the April appeals, beginning with the FY
2015 wage index, in accordance with the FY 2018 wage index timeline
posted on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY2018-Wage-Index-Home-Page.html, the May appeals must be sent via mail
and email to CMS and the MACs. We refer readers to the wage index
timeline for complete details.
Verified corrections to the wage index data received timely by CMS
and the MACs (that is, by May 30, 2017) will be incorporated into the
final FY 2018 wage index, which will be effective October 1, 2017.
We created the processes previously described to resolve all
substantive wage index data correction disputes before we finalize the
wage and occupational mix data for the FY 2018 payment rates.
Accordingly, hospitals that do 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 MAC's decision with respect to
requested changes. Specifically, our policy is that hospitals that do
not meet the procedural deadlines set forth above (requiring requests
to MACs by the specified date in February and, where such requests are
unsuccessful, requests for intervention by CMS by the specified date in
April) will not be permitted to challenge later, before the PRRB, the
failure of CMS to make a requested data revision. We refer readers also
to the FY 2000 IPPS final rule (64 FR 41513) for a discussion of the
parameters for appeals to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
earlier provides hospitals with sufficient opportunity to bring errors
in their wage and occupational mix data to the MAC's attention.
Moreover, because hospitals have access to the final wage index data
PUFs by late April 2017, they have the opportunity to detect any data
entry or tabulation errors made by the MAC or CMS before the
development and publication of the final FY 2018 wage index by August
2017, and the implementation of the FY 2018 wage index on October 1,
2017. Given these processes, 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 May 30,
2017, 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
regulations, we make midyear corrections to the wage index for an area
only if a hospital can show that: (1) 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 May
deadline for making corrections to the wage data for the following
fiscal year's wage index (for example, May 30, 2017 for the FY 2018
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,
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 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 through 47387 and
47485), 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 CMS determines all of the following:
(1) 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 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 May 30, 2017 deadline for the
FY 2018 wage index); and (3) CMS agreed before October 1 that 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 May 30, 2017 deadline for the FY 2018 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or 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 situations where our policies would
allow midyear corrections other than those specified in 42 CFR
412.64(k)(2)(ii), 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 final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.
2. Process for Data Corrections by CMS After the January Public Use
File (PUF)
The process set forth with the wage index timeline discussed in
section III.M.1. of the preamble of this proposed rule allows hospitals
to request corrections to their wage index data within prescribed
timeframes. In addition to hospitals' opportunity to request
corrections of wage index data errors or MACs' mishandling of data, CMS
has the authority under section 1886(d)(3)(E) of the Act to make
corrections to hospital wage index and occupational mix data in order
to ensure the accuracy of the wage index. As we explained in the FY
2016 IPPS/LTCH PPS final rule (80 FR 49490 through 49491) and the FY
2017 IPPS/LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of
the Act requires the Secretary to adjust the proportion of hospitals'
costs attributable to wages and wage-related costs for area differences
reflecting the relative hospital wage level in the geographic areas of
the hospital compared to the national average hospital wage level. We
believe that, under section 1886(d)(3)(E) of the Act, we have
discretion to make
[[Page 19914]]
corrections to hospitals' data to help ensure that the costs
attributable to wages and wage-related costs in fact accurately reflect
the relative hospital wage level in the hospitals' geographic areas.
We have an established multistep, 15-month process for the review
and correction of the hospital wage data that is used to create the
IPPS wage index for the upcoming fiscal year. Since the origin of the
IPPS, the wage index has been subject to its own annual review process,
first by the MACs, and then by CMS. As a standard practice, after each
annual desk review, CMS reviews the results of the MACs' desk reviews
and focuses on items flagged during the desk review, requiring that, if
necessary, hospitals provide additional documentation, adjustments, or
corrections to the data. This ongoing communication with hospitals
about their wage data may result in the discovery by CMS of additional
items that were reported incorrectly or other data errors, even after
the posting of the January PUF, and throughout the remainder of the
wage index development process. In addition, the fact that CMS analyzes
the data from a regional and even national level, unlike the review
performed by the MACs that review a limited subset of hospitals, can
facilitate additional editing of the data that may not be readily
apparent to the MACs. In these occasional instances, an error may be of
sufficient magnitude that the wage index of an entire CBSA is affected.
Accordingly, CMS uses its authority to ensure that the wage index
accurately reflects the relative hospital wage level in the geographic
area of the hospital compared to the national average hospital wage
level, by continuing to make corrections to hospital wage data upon
discovering incorrect wage data, distinct from instances in which
hospitals request data revisions.
We note that CMS corrects errors to hospital wage data as
appropriate, regardless of whether that correction will raise or lower
a hospital's average hourly wage. For example, as discussed in section
III.D.2. of the preamble of this proposed rule, in the calculation of
the proposed FY 2018 wage index, upon discovering that hospitals
reported other wage-related costs on Line 18 of Worksheet S-3, despite
those other wage-related costs failing to meet the requirement that
other wage related costs must exceed 1 percent of total adjusted
salaries net of excluded area salaries, CMS made internal edits to
remove those other wage-related costs from Line 18. Conversely, if CMS
discovers after conclusion of the desk review, for example, that a MAC
inadvertently failed to incorporate positive adjustments resulting from
a prior year's wage index appeal to a hospital's wage related costs
such as pension, CMS would correct that data error and the hospital's
average hourly wage would likely increase as a result.
While we maintain CMS' authority to conduct additional review and
make resulting corrections at any time during the wage index
development process, we are proposing a process for hospitals to
request further review of a correction made by CMS starting with the FY
2019 wage index. In order to allow opportunity for input from hospitals
concerning corrections made by CMS after the posting of the January
PUF, we are proposing a process similar to the existing process in
which hospitals may request corrections to wage index data displayed in
the January PUF. Instances where CMS makes a correction to a hospital's
data after the January PUF based on a different understanding than the
hospital about certain reported costs, for example, could potentially
be resolved using this proposed process before the final wage index is
calculated. We believe this proposed process and timeline (as descrbed
above) would bring additional transparency to instances where CMS makes
data corrections after the January PUF, and would provide opportunities
for hospitals to request further review of CMS changes in time for the
most accurate data to be reflected in the final wage index
calculations.
Effective beginning with the FY 2019 wage index development cycle,
we are proposing to use existing appeal deadlines (in place for
hospitals to appeal determinations made by the MAC during the desk
review process) for hospitals to dispute corrections made by CMS after
posting of the January PUF that do not arise from a hospital request
for a wage data revision. Starting with the April appeal deadline,
hospitals would use the soonest approaching appeal deadline to dispute
any adjustments made by CMS. However, if a hospital was notified of an
adjustment within 14 days of an appeal deadline, the hospital would
have until the next appeal deadline to dispute any adjustments. We
believe this would give hospitals sufficient time to prepare an appeal
of adjustments made by CMS after the January PUF. Specifically, for any
adjustments made by CMS between the date the January PUF is posted and
at least 14 calendar days before the April appeals deadline, we are
proposing that hospitals would have until the April appeals deadline
(which, for example, is April 5 in the FY 2018 Wage Index Timetable) to
dispute the adjustments. For any adjustments made by CMS between 13
calendar days before the April appeals deadline and 14 calendar days
before the May appeals deadline, we are proposing that hospitals would
have until the May appeals deadline (which, for example, is May 30 in
the FY 2018 Wage Index Timetable) to dispute the adjustments. In cases
where hospitals disagree with CMS adjustments of which they were
notified 13 calendar days before the May appeals deadline or later, the
hospitals could appeal to the PRRB with no need for further review by
CMS before such appeal.
We are using dates from the FY 2018 Wage Index Timetable in the
following example (we reiterate that this appeals process would be
effective beginning with the FY 2019 wage index cycle, but for
illustrative purposes, we are using dates from the FY 2018 Wage Index
Timetable, the most recently published wage index timetable): A
hospital that is notified by the MAC or CMS of an adjustment to its
wage data after the release of the January 30, 2017 PUF could use the
April 5, 2017 appeals deadline to dispute the adjustment. If the
hospital is notified of an adjustment by CMS or the MAC to its wage
data after March 22, 2017 (that is, less than 14 days prior to the
April 5 appeals deadline), it could use the May 30, 2017 appeals
deadline to dispute the adjustment. If the hospital is first notified
about the adjustment after May 16, 2017 (that is, less than 14 days
prior to the May 30 deadline), and disagrees with the adjustment, the
hospital could appeal directly to the PRRB.
As with the existing process for requesting wage data corrections,
we are proposing that a hospital disputing an adjustment made by CMS
after the posting of the January PUF would be required to request a
correction by the first applicable deadline. For example, if a hospital
was notified on March 20 of an adjustment to its data by CMS and does
not appeal by April 5, the hospital would not be able to appeal by May
30 or bring the case before the PRRB. That is, hospitals that did not
meet the procedural deadlines set forth above would not be afforded a
later opportunity to submit wage index data corrections or to dispute
CMS' decision with respect to requested changes. As with the existing
process for hospitals to request wage data corrections, our policy is
that hospitals that do not meet the procedural deadlines set forth
earlier would not be permitted to challenge later, before the PRRB, the
failure of CMS to make a requested data revision.
[[Page 19915]]
In summary, under the statute, CMS has discretion to make
corrections and revisions to hospitals' wage data throughout the
multistep wage index development process, and we are proposing a
pathway for hospitals to request additional review of corrections to
their wage data made by CMS. Beginning with the development of the FY
2019 wage index, we are proposing a process whereby CMS could continue
to correct data after the posting of the January PUF, while allowing
hospitals to appeal changes made by CMS using existing deadlines from
the process for hospitals to request wage data corrections. As with the
existing process, a hospital would be required to appeal by the first
applicable deadline, if relevant, to maintain the right to appeal to
the PRRB to dispute a correction to its wage data made by CMS.
We are inviting public comments on our proposals.
N. Proposed Labor Market Share for the Proposed FY 2018 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 and to 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. Thus, 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 2014 IPPS/LTCH PPS final rule (78 FR 50596 through
50607), we rebased and revised the hospital market basket. We
established a FY 2010-based IPPS hospital market basket to replace the
FY 2006-based IPPS hospital market basket, effective October 1, 2013.
In that final rule, we presented our analysis and conclusions regarding
the frequency and methodology for updating the labor-related share for
FY 2014. Using the FY 2010-based IPPS market basket, we finalized a
labor-related share for FY 2014, FY 2015, FY 2016, and FY 2017 of 69.6
percent. In addition, in FY 2014, we implemented this revised and
rebased labor-related share in a budget neutral manner (78 FR 51016).
However, 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 1.0000
being paid using a labor-related share lower than the labor-related
share of hospitals with a wage index greater than 1.0000.
For FY 2018, as described in section IV. of the preamble of this
proposed rule, we are proposing to rebase and revise the IPPS market
basket reflecting 2014 data. We also are proposing to recalculate the
labor-related share for discharges occurring on or after October 1,
2017 using the proposed 2014-based IPPS market basket. As discussed in
Appendix A of this proposed rule, we are proposing this revised and
rebased labor-related share in a budget neutral manner. However,
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 1.0000 being paid
using a labor-related share lower than the labor-related share of
hospitals with a wage index greater than 1.0000.
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. We include a cost category in the labor-related share if the
costs are labor intensive and vary with the local labor market. As
described in section IV. of the preamble of this proposed rule, we are
proposing to include in the labor-related share the national average
proportion of operating costs that are attributable to Wages and
Salaries, Employee Benefits, Professional Fees: Labor-Related,
Administrative and Facilities Support Services, Installation,
Maintenance, and Repair Services, and All Other: Labor-Related Services
as measured in the proposed 2014-based IPPS market basket. Therefore,
for FY 2018, we are proposing to use a labor-related share of 68.3
percent for discharges occurring on or after October 1, 2017.
Prior to January 1, 2016, Puerto Rico hospitals were paid based on
75 percent of the national standardized amount and 25 percent of the
Puerto Rico-specific standardized amount. As a result, we applied the
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub.
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that
the payment calculation with respect to operating costs of inpatient
hospital services of a subsection (d) Puerto Rico hospital for
inpatient hospital discharges on or after January 1, 2016, shall use
100 percent of the national standardized amount. Because Puerto Rico
hospitals are no longer paid with a Puerto Rico-specific standardized
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as
amended by section 601 of the Consolidated Appropriations Act, 2016,
there is no longer a need for us to calculate a Puerto Rico-specific
labor-related share percentage and nonlabor-related share percentage
for application to the Puerto Rico-specific standardized amount.
Hospitals in Puerto Rico are now paid 100 percent of the national
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied
to the national standardized amount. Accordingly, for FY 2018, we are
not proposing a Puerto Rico-specific labor-related share percentage or
a nonlabor-related share percentage.
Tables 1A and 1B, which are published in section VI. of the
Addendum to this FY 2018 IPPS/LTCH PPS proposed rule and available via
the Internet on the CMS Web site, reflect the proposed national labor-
related share, which is also applicable to Puerto Rico hospitals. For
FY 2018, for all IPPS hospitals (including Puerto Rico hospitals) whose
wage indexes are less than or equal to 1.0000, we are proposing to
apply the wage index to a labor-related share of 62 percent of the
national standardized amount. For all hospitals (including Puerto Rico
hospitals) whose wage indexes are greater than 1.0000, for FY 2018, we
are proposing to apply the wage index to a proposed labor-related share
of 68.3 percent of the national standardized amount.
[[Page 19916]]
IV. Proposed Rebasing and Revising of the Hospital Market Baskets for
Acute Care Hospitals
A. Background
Effective for cost reporting periods beginning on or after July 1,
1979, we developed and adopted a hospital input price index (that is,
the hospital market basket for operating costs). Although ``market
basket'' technically describes the mix of goods and services used in
providing hospital care, this term is also commonly used to denote the
input price index (that is, cost category weights and price proxies
combined) derived from that market basket. Accordingly, the term
``market basket'' as used in this document refers to the hospital input
price index.
The percentage change in the market basket reflects the average
change in the price of goods and services hospitals purchase in order
to provide inpatient care. We first used the market basket to adjust
hospital cost limits by an amount that reflected the average increase
in the prices of the goods and services used to provide hospital
inpatient care. This approach linked the increase in the cost limits to
the efficient utilization of resources.
Since the inception of the IPPS, the projected change in the
hospital market basket has been the integral component of the update
factor by which the prospective payment rates are updated every year.
An explanation of the hospital market basket used to develop the
prospective payment rates was published in the Federal Register on
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2014
IPPS/LTCH PPS final rule (78 FR 50596) in which we discussed the most
recent previous rebasing of the hospital input price index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the quantity or mix of goods and services (that
is, intensity) purchased over time are not measured.
The index itself is constructed in three steps. First, a base
period is selected (in this proposed rule, we are proposing to use 2014
as the base period) and total base period expenditures are estimated
for a set of mutually exclusive and exhaustive spending categories,
with the proportion of total costs that each category represents being
calculated. These proportions are called ``cost weights'' or
``expenditure weights.'' Second, each expenditure category is matched
to an appropriate price or wage variable, referred to as a ``price
proxy.'' In almost every instance, these price proxies are derived from
publicly available statistical series that are published on a
consistent schedule (preferably at least on a quarterly basis).
Finally, the expenditure weight for each cost category is multiplied by
the level of its respective price proxy. The sum of these products
(that is, the expenditure weights multiplied by their price index
levels) for all cost categories yields the composite index level of the
market basket in a given period. Repeating this step for other periods
produces a series of market basket levels over time. Dividing an index
level for a given period by an index level for an earlier period
produces a rate of growth in the input price index over that timeframe.
As noted above, the market basket is described as a fixed-weight
index because it represents the change in price over time of a constant
mix (quantity and intensity) of goods and services needed to provide
hospital services. The effects on total expenditures resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. For example, a hospital hiring more
nurses to accommodate the needs of patients would increase the volume
of goods and services purchased by the hospital, but would not be
factored into the price change measured by a fixed-weight hospital
market basket. Only when the index is rebased would changes in the
quantity and intensity be captured, with those changes being reflected
in the cost weights. Therefore, we rebase the market basket
periodically so that the cost weights reflect recent changes in the mix
of goods and services that hospitals purchase (hospital inputs) to
furnish inpatient care between base periods.
We last rebased the hospital market basket cost weights effective
for FY 2014 (78 FR 50596), with FY 2010 data used as the base period
for the construction of the market basket cost weights. For this FY
2018 IPPS/LTCH PPS proposed rule, we are proposing to rebase the cost
structure for the IPPS hospital index from FY 2010 to 2014, as
discussed below.
B. Rebasing and Revising the IPPS Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in this proposed rule, we are proposing to shift
the base year cost structure for the IPPS hospital index from FY 2010
to 2014). We note that we are no longer referring to the market basket
as a ``FY 2014-based'' market basket and instead refer to the proposed
market basket as simply ``2014-based''. We are proposing this change in
naming convention for the market basket because the base year cost
weight data for the proposed market basket does not reflect only fiscal
year data. For example, the proposed 2014-based IPPS market basket uses
Medicare cost report data and other government data that reflect 2014
fiscal year, 2014 calendar year, and 2014 State fiscal year expenses to
determine the base year cost weights. Given that it is based on a mix
of classifications of 2014 data, we are proposing to refer to the
market basket as ``2014-based'' instead of ``FY 2014-based'' or ``CY
2014-based''.
``Revising'' means changing data sources or price proxies used in
the input price index. As published in the FY 2006 IPPS final rule (70
FR 47387), in accordance with section 404 of Public Law 108-173, CMS
determined a new frequency for rebasing the hospital market basket. We
established a rebasing frequency of every 4 years and, therefore, for
the FY 2018 IPPS update, we are proposing to rebase and revise the IPPS
market basket from FY 2010 to 2014. We are inviting public comments on
our proposed methodology.
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data
The major source of expenditure data for developing the proposed
rebased and revised hospital market basket cost weights is the 2014
Medicare cost reports. These 2014 Medicare cost reports are for cost
reporting periods beginning on and after October 1, 2013 and before
October 1, 2014. We note that while these dates appear to reflect
fiscal year data, in order to be classified as a ``2014 cost report,''
a hospital's cost reporting period must begin between these dates. For
example, we found that of the 2014 Medicare cost reports for IPPS
hospitals, approximately 40 percent of the reports had a begin date on
January 1, 2014, approximately 30 percent had a begin date on July 1,
2014, and approximately 18 percent had a begin date on October 1, 2013.
For this reason, we are defining the base year of the market basket as
``2014-based'' instead of ``FY 2014-based''. We are proposing to use
2014 as the base year because we believe that the 2014 Medicare cost
reports represent the most recent, complete set of Medicare cost report
data available to develop cost weights for IPPS hospitals. As was done
[[Page 19917]]
in previous rebasings, these cost reports are from IPPS hospitals only
(hospitals excluded from the IPPS and CAHs are not included) and are
based on IPPS Medicare-allowable operating costs. IPPS Medicare-
allowable operating costs are costs that are eligible to be paid under
the IPPS. For example, the IPPS market basket excludes home health
agency (HHA) costs as these costs would be paid under the HHA PPS and,
therefore, these costs are not IPPS Medicare-allowable costs.
We are proposing to derive costs for eight major expenditures or
cost categories for the 2014-based IPPS market basket from the CMS
Medicare cost reports (Form 2552-10, OMB Control Number 0938-0050):
Wages and Salaries, Employee Benefits, Contract Labor, Pharmaceuticals,
Professional Liability Insurance (Malpractice), Blood and Blood
Products, Home Office Contract Labor, and a residual ``All Other''
category. The residual ``All Other'' category reflects all remaining
costs that are not captured in the other seven cost categories. We are
proposing that, for the 2014-based IPPS market basket, we obtain costs
for one additional major cost category from the Medicare cost reports
compared to the FY 2010-based IPPS market basket--Home Office Contract
Labor Costs. We describe below the detailed methodology for obtaining
costs for each of the seven cost categories directly determined from
the Medicare cost reports.
(1) Wages and Salaries Costs
To derive wages and salaries costs for the Medicare allowable cost
centers, we are proposing to first calculate total unadjusted wages and
salaries costs as reported on Worksheet S-3, part II. We are then
proposing to remove the wages and salaries attributable to non-Medicare
allowable cost centers (that is, excluded areas) as well as a portion
of overhead wages and salaries attributable to these excluded areas.
Specifically, wages and salaries costs are equal to total wages and
salaries as reported on Worksheet S-3, Part II, Column 4, Line 1, less
excluded area wages and salaries (reported on Worksheet S-3, Part II,
Column 4, Lines 3 and 5 through 10) and less overhead wages and
salaries attributable to the excluded areas.
Overhead wages and salaries are attributable to the entire IPPS
facility. Therefore, we are proposing to only include the proportion
attributable to the Medicare allowable cost centers. We are proposing
to estimate the proportion of overhead wages and salaries that are not
attributable to Medicare allowable costs centers (that is, excluded
areas) by multiplying the ratio of excluded area wages and salaries (as
defined earlier) to total wages and salaries (Worksheet S-3, part II,
Column 4, Line 1) by total overhead wages and salaries (Worksheet A,
Column 1, Lines 4 through 18). A similar methodology was used to derive
wages and salaries costs in the FY 2010-based IPPS market basket.
(2) Employee Benefits Costs
We are proposing to derive employee benefits costs using a similar
methodology as the wages and salaries costs; that is, reflecting
employee benefits costs attributable to the Medicare allowable cost
centers. First, we calculate total unadjusted employee benefits costs
as the sum of Worksheet S-3, Part II, Column 4, Lines 17, 18, 20, and
22. We then exclude those employee benefits attributable to the
overhead wages and salaries for the non-Medicare allowable cost centers
(that is, excluded areas). Employee benefits attributable to the non-
Medicare allowable cost centers are derived by multiplying the ratio of
total employee benefits (equal to the sum of Worksheet S-3, Part II,
Column 4, Lines 17 through 25) to total wages and salaries (Worksheet
S-3, Part II, Column 4, Line 1) by excluded overhead wages and salaries
(as derived above for wages and salaries costs). A similar methodology
was used in the FY 2010-based IPPS market basket.
(3) Contract Labor Costs
Contract labor costs are primarily associated with direct patient
care services. Contract labor costs for services such as accounting,
billing, and legal are estimated using other government data sources as
described below. We are proposing to derive contract labor costs for
the 2014-based IPPS market basket as the sum of Worksheet S-3, Part II,
Column 4, Lines 11, 13 and 15. A similar methodology was used in the FY
2010-based IPPS market basket.
(4) Professional Liability Insurance Costs
We are proposing that professional liability insurance (PLI) costs
(often referred to as malpractice costs) be equal to premiums, paid
losses, and self-insurance costs reported on Worksheet S-2, Part I,
Columns 1 through 3, Line 118.01. A similar methodology was used for
the FY 2010-based IPPS market basket.
(5) Pharmaceuticals Costs
We are proposing to calculate pharmaceuticals costs using nonsalary
costs reported for the Pharmacy cost center (Worksheet A, Column 2,
Line 15) and Drugs Charged to Patients cost center (Worksheet A, Column
2, Line 73) less estimated employee benefits attributable to these two
cost centers. We are proposing to estimate these employee benefits
costs by multiplying the ratio of total employee benefits (equal to the
sum of Worksheet S-3, Part II, Column 4, Lines 17 through 25) to total
wages and salaries (Worksheet S-3, Part II, Column 4, Line 1) by total
wages and salaries costs for the Pharmacy and Drugs Charged to Patients
cost centers (equal to the sum of Worksheet A, Column 1, Lines 15 and
73). A similar methodology was used for the FY 2010-based IPPS market
basket.
(6) Blood and Blood Products Costs
We are proposing to calculate blood and blood products costs using
nonsalary costs reported for the Whole Blood & Packed Red Blood Cells
cost center (Worksheet A, Column 2, Line 62) and the Blood Storing,
Processing, & Transfusing cost center (Worksheet A, Column 2, Line 63)
less estimated employee benefits attributable to these two cost
centers. We estimate these employee benefits costs by multiplying the
ratio of total employee benefits (equal to the sum of Worksheet S-3,
Part II, Column 4, Lines 17 through 25) to total wages and salaries
(Worksheet S-3, Part II, Column 4, Line 1) by total wages and salaries
for the Whole Blood & Packed Red Blood Cells and Blood Storing,
Processing, & Transfusing cost centers (equal to the sum of Worksheet
A, Column 1, Lines 62 and 63). A similar methodology was used for the
FY 2010-based IPPS market basket.
(7) Home Office Contract Labor Costs
We are proposing to determine home office contract labor costs
using data reported on Worksheet S-3, Part II, Column 4, line 14.
Specifically, we are proposing to determine the Medicare allowable
portion of these costs by multiplying them by the ratio of total
Medicare allowable operating costs (as defined below in section
IV.B.1.b. of the preamble to this proposed rule) to total operating
costs (calculated as Worksheet B, Part I, Column 26, Line 202, less
Worksheet B, Part I, Column 0, Lines 1 through 3). Home office contract
labor costs in the FY 2010-based IPPS market basket were calculated
using the U.S. Census Bureau's Bureau of Economic Analysis (BEA)
Benchmark Input-Output (I-O) data, as described below in section
IV.B.1.c. of the preamble to this proposed rule.
[[Page 19918]]
b. Final Major Cost Category Computation
After we derived costs for the seven major cost categories for each
provider using the Medicare cost report data as previously described,
we address data outliers using the following steps. First, we divide
the costs for each of the seven categories by total Medicare allowable
operating costs calculated for the provider to obtain cost weights for
each PPS hospital. We are proposing that total Medicare allowable
operating costs are equal to noncapital costs (Worksheet B, part I,
Column 26 less Worksheet B, part II, Column 26) that are attributable
to the Medicare allowable cost centers of the hospital. Medicare
allowable cost centers are Lines 30 through 35, 50, 51, 53 through 60,
62 through 76, 90, 91, 92.01 and 93.
We then remove those providers whose derived cost weights fall in
the top and bottom five percent of provider-specific cost weights to
ensure the removal of outliers. After the outliers have been removed,
we sum the costs for each category across all remaining providers. We
then divide this by the sum of total Medicare allowable operating costs
across all remaining providers to obtain a cost weight for the proposed
2014-based IPPS market basket for the given category. Finally, we
calculate the residual ``All Other'' cost weight that reflects all
remaining costs that are not captured in the seven cost categories
listed.
Table IV-01 below shows the major cost categories and their
respective cost weights as derived from the Medicare cost reports for
this proposed rule.
Table IV-01--Major Cost Categories as Derived From the Medicare Cost
Reports
------------------------------------------------------------------------
Major cost categories FY 2010 Proposed 2014
------------------------------------------------------------------------
Wages and Salaries...................... 45.8 42.1
Employee Benefits....................... 12.7 12.0
Contract Labor.......................... 1.8 1.8
Professional Liability Insurance 1.3 1.2
(Malpractice)..........................
Pharmaceuticals......................... 5.4 5.9
Blood and Blood Products................ 1.1 0.8
Home Office Contract Labor *............ .............. 4.2
``All Other'' Residual.................. 31.9 32.0
------------------------------------------------------------------------
* Home office contract labor costs were included in the ``All Other''
residual cost weight of the FY 2010-based IPPS market basket.
From FY 2010 to 2014, the Wages and Salaries and Employee Benefits
cost weights as calculated directly from the Medicare cost reports
decreased by approximately 3.7 and 0.7 percentage points, respectively,
while the Contract Labor cost weight was unchanged. The decrease in the
Wages and Salaries cost weight occurred among most cost centers and in
aggregate for the General Service (overhead), Inpatient Routine
Service, Ancillary Service, and Outpatient Service cost centers.
As we did for the FY 2010-based IPPS market basket (78 FR 50597),
we are proposing to allocate contract labor costs to the Wages and
Salaries and Employee Benefits cost weights based on their relative
proportions for employed labor under the assumption that contract labor
costs are comprised of both wages and salaries and employee benefits.
The contract labor allocation proportion for wages and salaries is
equal to the Wages and Salaries cost weight as a percent of the sum of
the Wages and Salaries cost weight and the Employee Benefits cost
weight. Using the 2014 Medicare cost report data, this percentage is 78
percent. Therefore, we are proposing to allocate approximately 78
percent of the Contract Labor cost weight to the Wages and Salaries
cost weight and 22 percent to the Employee Benefits cost weight. The FY
2010-based IPPS market basket also allocated 78 percent of the Contract
Labor cost weight to the Wages and Salaries cost weight.
Table IV-02 below shows the Wages and Salaries and Employee
Benefits cost weights after contract labor allocation for the FY 2010-
based IPPS market basket and the proposed 2014-based IPPS market
basket.
Table IV-02--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
FY 2010-based Proposed 2014-
Major cost categories IPPS market based IPPS
basket market basket
------------------------------------------------------------------------
Wages and Salaries...................... 47.2 43.4
Employee Benefits....................... 13.1 12.4
------------------------------------------------------------------------
c. Derivation of the Detailed Cost Weights
To further divide the ``All Other'' residual cost weight estimated
from the 2014 Medicare cost report data into more detailed cost
categories, we are proposing to use the 2007 Benchmark I-O ``Use
Tables/Before Redefinitions/Purchaser Value'' for NAICS 622000,
Hospitals, published by the BEA. These data are publicly available at
the following Web site: http://www.bea.gov/industry/io_annual.htm. The
BEA Benchmark I-O data are generally scheduled for publication every 5
years on a lagged basis, with the most recent data available for 2007.
The 2007 Benchmark I-O data are derived from the 2007 Economic Census
and are the building blocks for BEA's economic accounts. Therefore,
they represent the most comprehensive and complete set of data on the
economic processes or mechanisms by which output is produced and
distributed.\37\ BEA also produces Annual I-O estimates. However, while
based on a similar methodology, these estimates reflect less
comprehensive and less detailed data sources and are subject to
revision when benchmark data become available. Instead of using the
less detailed Annual I-O data, we are proposing to
[[Page 19919]]
inflate the detailed 2007 Benchmark I-O data forward to 2014 by
applying the annual price changes from the respective price proxies to
the appropriate market basket cost categories that are obtained from
the 2007 Benchmark I-O data. In our calculations for this proposed
rule, we repeated this practice for each year. We then calculated the
cost shares that each cost category represents of the 2007 data
inflated to 2014. These resulting 2014 cost shares were applied to the
``All Other'' residual cost weight to obtain the detailed cost weights
for the proposed 2014-based IPPS market basket. For example, the cost
for Food: Direct Purchases represents 7.3 percent of the sum of the
``All Other'' 2007 Benchmark I-O Hospital Expenditures inflated to
2014. Therefore, the Food: Direct Purchases cost weight represents 7.3
percent of the proposed 2014-based IPPS market basket's ``All Other''
cost category (32.0 percent), yielding a Food: Direct Purchases
proposed cost weight of 2.3 percent in the proposed 2014-based IPPS
market basket (0.073 x 32.0 percent = 2.3 percent). For the FY 2010-
based IPPS market basket (78 FR 50597), we used the same methodology
utilizing the 2002 Benchmark I-O data (aged to FY 2010).
---------------------------------------------------------------------------
\37\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------
Using this methodology, we are proposing to derive 18 detailed cost
categories from the proposed 2014-based IPPS market basket residual
cost weight (32.0 percent). These categories are: (1) Fuel: Oil and
Gas; (2) Electricity; (3) Water and Sewerage; (4) Food: Direct
Purchases; (5) Food: Contract Services; (6) Chemicals; (7) Medical
Instruments; (8) Rubber and Plastics; (9) Paper and Printing Products;
(10) Miscellaneous Products; (11) Professional Fees: Labor-Related;
(12) Administrative and Facilities Support Services; (13) Installation,
Maintenance, and Repair Services; (14) All Other: Labor-Related
Services; (15) Professional Fees: Nonlabor-Related; (16) Financial
Services; (17) Telephone Services; and (18) All Other: Nonlabor-Related
Services.
Similar to the 2013-based LTCH market basket, the proposed 2014-
based IPPS market basket does not include separate cost categories for
Apparel, Machinery and Equipment, and Postage. Due to the small weights
associated with these detailed categories and relatively stable price
growth in the applicable price proxy, we believe that consolidating
these smaller cost category weights with other cost categories in the
proposed market basket that experience similar price increases
eliminates unnecessary complexity to the market basket without having a
material impact on the total market basket increase. Therefore, we are
proposing to include Apparel and Machinery and Equipment in the
Miscellaneous Products cost category and Postage in the All-Other:
Nonlabor-Related Services cost category. We note that the machinery and
equipment expenses are for equipment that is paid for in a given year
and not depreciated over the asset's useful life. Depreciation expenses
for movable equipment are reflected in the proposed 2014-based Capital
Input Price Index (described in section IV.D. of the preamble of this
proposed rule). For the proposed 2014-based IPPS market basket, we also
are proposing to include a separate cost category for Installation,
Maintenance, and Repair Services in order to proxy these costs by a
price index that better reflects the price changes of labor associated
with maintenance-related services.
2. Selection of Proposed Price Proxies
After computing the proposed 2014 cost weights for the IPPS market
basket, it was necessary to select appropriate wage and price proxies
to reflect the rate of price change for each expenditure category. With
the exception of the proxy for professional liability insurance (PLI),
all the proxies we are proposing are based on Bureau of Labor
Statistics (BLS) data and are grouped into one of the following BLS
categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure price changes for goods sold in markets other than the retail
market. PPIs are preferable price proxies for goods and services that
hospitals purchase as inputs because PPIs better reflect the actual
price changes encountered by hospitals. For example, we are proposing
to use a PPI for prescription drugs, rather than the Consumer Price
Index (CPI) for prescription drugs, because hospitals generally
purchase drugs directly from a wholesaler. The PPIs that we are
proposing to use measure price changes at the final stage of
production.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by the
typical consumer. Because they may not represent the price faced by a
producer, we are proposing to use CPIs only if an appropriate PPI is
not available, or if the expenditures are more like those faced by
retail consumers in general rather than by purchasers of goods at the
wholesale level. For example, the CPI for food purchased away from home
is proposed to be used as a proxy for contracted food services.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. Appropriately, they are not affected by shifts in
employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. We believe the proposed PPIs, CPIs, and ECIs selected meet
these criteria.
Below we present a detailed explanation of the price proxies that
we are proposing for each cost category weight. We note that many of
the proxies that we are proposing to use for the 2014-based IPPS market
basket are the same as those used for the FY 2010-based IPPS market
basket.
(1) Wages and Salaries
We are proposing to use the ECI for Wages and Salaries for All
Civilian Workers in Hospitals (BLS series code CIU1026220000000I) to
measure the price growth of this cost category. This is the same price
proxy used in the FY 2010-based IPPS market basket.
(2) Employee Benefits
We are proposing to use the ECI for Total Benefits for All Civilian
Workers in Hospitals to measure the price growth of this cost category.
This ECI is calculated using the ECI for Total Compensation for All
Civilian Workers in Hospitals (BLS series code CIU1016220000000I) and
the relative importance of wages and salaries within total
compensation. This is the same price proxy used in the FY 2010-based
IPPS market basket.
(3) Fuel: Oil and Gas
We are proposing to change the proxy used for the Fuel: Oil and Gas
cost category. The FY 2010-based IPPS market basket uses the PPI
Industry for Petroleum Refineries (BLS series code PCU32411-32411-) to
proxy these expenses.
For the proposed 2014-based IPPS market basket, we are proposing to
use a blend of the PPI Industry for Petroleum Refineries (BLS series
code
[[Page 19920]]
PCU32411-32411-) and the PPI Commodity for Natural Gas (BLS series code
WPU0531). Our analysis of the BEA 2007 Benchmark I-O data (use table
before redefinitions, purchaser's value for NAICS 622000 [Hospitals])
shows that petroleum refineries expenses account for approximately 70
percent and Natural Gas expenses account for approximately 30 percent
of the Fuel: Oil and Gas expenses. Therefore, we are proposing a
blended proxy of 70 percent of the PPI Industry for Petroleum
Refineries (BLS series code PCU32411-32411-) and 30 percent of the PPI
Commodity for Natural Gas (BLS series code WPU0531). We believe that
these two price proxies are the most technically appropriate indices
available to measure the price growth of the Fuel: Oil and Gas cost
category in the proposed 2014-based IPPS market basket.
(4) Electricity
We are proposing to use the PPI Commodity for Commercial Electric
Power (BLS series code WPU0542) to measure the price growth of this
cost category. This is the same price proxy used in the FY 2010-based
IPPS market basket.
(5) Water and Sewerage
We are proposing to use the CPI for Water and Sewerage Maintenance
(All Urban Consumers) (BLS series code CUUR0000SEHG01) to measure the
price growth of this cost category. This is the same price proxy used
in the FY 2010-based IPPS market basket.
(6) Professional Liability Insurance
We are proposing to proxy price changes in hospital professional
liability insurance premiums (PLI) using percentage changes as
estimated by the CMS Hospital Professional Liability Index. To generate
these estimates, we collected commercial insurance premiums for a fixed
level of coverage while holding nonprice factors constant (such as a
change in the level of coverage). This is the same price proxy used in
the FY 2010-based IPPS market basket.
(7) Pharmaceuticals
We are proposing to use the PPI Commodity for Pharmaceuticals for
Human Use, Prescription (BLS series code WPUSI07003) to measure the
price growth of this cost category. This is the same price proxy used
in the FY 2010-based IPPS market basket.
(8) Food: Direct Purchases
We are proposing to use the PPI Commodity for Processed Foods and
Feeds (BLS series code WPU02) to measure the price growth of this cost
category. This is the same price proxy used in the FY 2010-based IPPS
market basket.
(9) Food: Contract Services
We are proposing to use the CPI for Food Away From Home (All Urban
Consumers) (BLS series code CUUR0000SEFV) to measure the price growth
of this cost category. This is the same price proxy used in the FY
2010-based IPPS market basket.
(10) Chemicals
We are proposing to continue to use a four-part blended index
composed of the PPI Industry for Industrial Gas Manufacturing (BLS
series code PCU325120325120P), the PPI Industry for Other Basic
Inorganic Chemical Manufacturing (BLS series code PCU32518-32518-), the
PPI Industry for Other Basic Organic Chemical Manufacturing (BLS series
code PCU32519-32519-), and the PPI Industry for Soap and Cleaning
Compound Manufacturing (BLS series code PCU32561-32561-). We are
proposing to update the blended weights using 2007 Benchmark I-O data,
which we also are proposing to use for the proposed 2014-based IPPS
market basket. The FY 2010-based IPPS market basket included the same
blended chemical price proxy, but used the 2002 Benchmark I-O data to
determine the weights of the blended chemical price index. The 2007
Benchmark I-O data has a higher weight for organic chemical products
and a lower weight for the other chemical products compared to the 2002
Benchmark I-O data.
Table IV-03 below shows the proposed weights for each of the four
PPIs used to create the blended index compared to those used for the FY
2010-based IPPS market basket.
Table IV-03--Blended Chemical Weights
----------------------------------------------------------------------------------------------------------------
FY 2010-based Proposed 2014-
Name IPPS weights based IPPS NAICS
(%) weights (%)
----------------------------------------------------------------------------------------------------------------
PPI for Industrial Gas Manufacturing............................ 35 32 325120
PPI for Other Basic Inorganic Chemical Manufacturing............ 25 17 325180
PPI for Other Basic Organic Chemical Manufacturing.............. 30 45 325190
PPI for Soap and Cleaning Compound Manufacturing................ 10 6 325610
----------------------------------------------------------------------------------------------------------------
(11) Blood and Blood Products
We are proposing to use the PPI Industry for Blood and Organ Banks
(BLS series code PCU621991621991) to measure the price growth of this
cost category. This is the same price proxy used in the FY 2010-based
IPPS market basket.
(12) Medical Instruments
We are proposing to use a blended price proxy for the Medical
Instruments cost category. The 2007 Benchmark Input-Output data shows
an approximate 50/50 split between Surgical and Medical Instruments and
Medical and Surgical Appliances and Supplies for this cost category.
Therefore, we are proposing a blend composed of 50 percent of the PPI
Commodity for Surgical and Medical Instruments (BLS series code
WPU1562) and 50 percent of the PPI Commodity for Medical and Surgical
Appliances and Supplies (BLS series code WPU1563). The FY 2010-based
IPPS market basket used the single, higher level PPI Commodity for
Medical, Surgical, and Personal Aid Devices (BLS series code WPU156).
We believe that the proposed price proxy better reflects the mix of
expenses for this cost category as obtained from the 2007 Benchmark I-O
data.
(13) Rubber and Plastics
We are proposing to use the PPI Commodity for Rubber and Plastic
Products (BLS series code WPU07) to measure the price growth of this
cost category. This is the same price proxy used in the FY 2010-based
IPPS market basket.
[[Page 19921]]
(14) Paper and Printing Products
We are proposing to use the PPI Commodity for Converted Paper and
Paperboard Products (BLS series code WPU0915) to measure the price
growth of this cost category. This is the same price proxy used in the
FY 2010-based IPPS market basket.
(15) Miscellaneous Products
We are proposing to use the PPI Commodity for Finished Goods Less
Food and Energy (BLS series code WPUFD4131) to measure the price growth
of this cost category. This is the same price proxy used in the FY
2010-based IPPS market basket.
(16) Professional Fees: Labor-Related
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Professional and Related (BLS series code
CIU2010000120000I) to measure the price growth of this category. It
includes occupations such as legal, accounting, and engineering
services. This is the same price proxy used in the FY 2010-based IPPS
market basket.
(17) Administrative and Facilities Support Services
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Office and Administrative Support (BLS series code
CIU2010000220000I) to measure the price growth of this category. This
is the same price proxy used in the FY 2010-based IPPS market basket.
(18) Installation, Maintenance, and Repair Services
We are proposing to use the ECI for Total Compensation for All
Civilian Workers in Installation, Maintenance, and Repair (BLS series
code CIU1010000430000I) to measure the price growth of this new cost
category. Previously these costs were included in the All Other: Labor-
Related Services category and were proxied by the ECI for Total
Compensation for Private Industry Workers in Service Occupations (BLS
series code CIU2010000300000I). We believe that this index better
reflects the price changes of labor associated with maintenance-related
services and its incorporation represents a technical improvement to
the market basket.
(19) All Other: Labor-Related Services
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Service Occupations (BLS series code
CIU2010000300000I) to measure the price growth of this cost category.
This is the same price proxy used in the FY 2010-based IPPS market
basket.
(20) Professional Fees: Nonlabor-Related
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Professional and Related (BLS series code
CIU2010000120000I) to measure the price growth of this category. This
is the same price proxy that we are proposing to use for the
Professional Fees: Labor-Related cost category and the same price proxy
used in the FY 2010-based IPPS market basket.
(21) Financial Services
We are proposing to use the ECI for Total Compensation for Private
Industry Workers in Financial Activities (BLS series code
CIU201520A000000I) to measure the price growth of this cost category.
This is the same price proxy used in the FY 2010-based IPPS market
basket.
(22) Telephone Services
We are proposing to use the CPI for Telephone Services (BLS series
code CUUR0000SEED) to measure the price growth of this cost category.
This is the same price proxy used in the FY 2010-based IPPS market
basket.
(23) All Other: Nonlabor-Related Services
We are proposing to use the CPI for All Items Less Food and Energy
(BLS series code CUUR0000SA0L1E) to measure the price growth of this
cost category. We believe that using the CPI for All Items Less Food
and Energy avoids double counting of changes in food and energy prices
as they are already captured elsewhere in the market basket. This is
the same price proxy used in the FY 2010-based IPPS market basket.
Table IV-04 below sets forth the proposed 2014-based IPPS market
basket, including the cost categories and their respective weights and
price proxies. For comparison purposes, the corresponding FY 2010-based
IPPS market basket cost weights also are listed.
Table IV-04--Proposed 2014-Based IPPS Market Basket Cost Categories, Cost Weights, and Price Proxies Compared to
FY 2010-Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
FY Proposed
2010[dash]based 2014[dash]based
Cost categories IPPS market IPPS market Proposed 2014-based IPPS market
basket cost basket cost basket price proxies
weights weights
----------------------------------------------------------------------------------------------------------------
1. Compensation.............................. 60.3 55.8 ...............................
A. Wages and Salaries \1\................ 47.2 43.4 ECI for Wages and Salaries for
All Civilian Workers in
Hospitals.
B. Employee Benefits \1\................. 13.1 12.4 ECI for Total Benefits for All
Civilian Workers in Hospitals.
2. Utilities................................. 2.2 2.5 ...............................
A. Fuel: Oil and Gas..................... 0.4 1.3 Blend of PPIs for Petroleum
Refineries and Natural Gas.
B. Electricity........................... 1.7 1.0 PPI Commodity for Commercial
Electric Power.
C. Water and Sewerage.................... 0.1 0.1 CPI for Water and Sewerage
Maintenance (All Urban
Consumers).
3. Professional Liability Insurance.......... 1.3 1.2 CMS Hospital Professional
Liability Insurance Premium
Index.
4. All Other................................. 36.1 40.5 ...............................
A. All Other Products.................... 19.5 17.4 ...............................
(1.) Pharmaceuticals................. 5.4 5.9 PPI Commodity for
Pharmaceuticals for Human Use,
Prescription.
(2.) Food: Direct Purchases.......... 4.2 2.3 PPI Commodity for Processed
Foods and Feeds.
[[Page 19922]]
(3.) Food: Contract Services......... 0.6 1.3 CPI for Food Away From Home
(All Urban Consumers).
(4.) Chemicals....................... 1.5 0.9 Blend of Chemical PPIs.
(5.) Blood and Blood Products........ 1.1 0.8 PPI Industry for Blood and
Organ Banks.
(6.) Medical Instruments............. 2.6 2.9 Blend of PPI for Surgical and
Medical Instruments and PPI
for Medical and Surgical
Appliances and Supplies.
(7.) Rubber and Plastics............. 1.6 0.8 PPI Commodity for Rubber and
Plastic Products.
(8.) Paper and Printing Products..... 1.5 1.5 PPI Commodity for Converted
Paper and Paperboard Products.
(9.) Miscellaneous Products \2\...... 1.0 1.1 PPI Commodity for Finished
Goods less Food and Energy.
B. Labor-Related Services................ 9.2 12.5 ...............................
(1.) Professional Fees: Labor-Related 5.5 6.8 ECI for Total Compensation for
Private Industry Workers in
Professional and Related.
(2.) Administrative and Facilities 0.6 1.0 ECI for Total Compensation for
Support Services. Private Industry Workers in
Office and Administrative
Support.
(3.) Installation, Maintenance and ............... 2.4 ECI for Total Compensation for
Repair Services. Civilian Workers in
Installation, Maintenance, and
Repair.
(4.) All Other: Labor-Related 3.1 2.3 ECI for Total Compensation for
Services. Private Industry Workers in
Service Occupations.
C. Nonlabor-Related Services............. 7.4 10.7 ...............................
(1.) Professional Fees: Nonlabor- 3.7 5.1 ECI for Total Compensation for
Related. Private Industry Workers in
Professional and Related.
(2.) Financial Services.............. 1.2 3.0 ECI for Total Compensation for
Private Industry Workers in
Financial Activities.
(3.) Telephone Services.............. 0.6 0.8 CPI for Telephone Services.
(4.) All Other: Nonlabor-Related 1.9 1.7 CPI for All Items less Food and
Services \3\. Energy.
------------------
Total............................ 100.0 100.0
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
one decimal and therefore, the detail may not add to the total due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee benefits based on the share of total
compensation that each category represents.
\2\ The FY 2010-based IPPS market basket Miscellaneous Products cost category also includes Apparel and
Machinery and Equipment cost categories. These costs were not broken out separately in the 2014-based IPPS
market basket.
\3\ The FY 2010-based IPPS market basket All Other: Nonlabor-Related Services cost category also includes the
Postage cost category. These costs were not broken-out separately in the 2014-based IPPS market basket.
Table IV-05 below compares both the historical and forecasted
percent changes in the FY 2010-based IPPS market basket and the
proposed 2014-based IPPS market basket. The forecasted growth rates in
Table IV-05 are based on IHS Global Insight, Inc.'s (IGI) fourth
quarter 2016 forecast with historical data through third quarter 2016.
Table IV-05.--FY 2010-Based and Proposed 2014-Based IPPS Hospital
Operating Index Percent Change, FY 2013 Through FY 2020
------------------------------------------------------------------------
FY 2010-based Proposed 2014-
IPPS market based IPPS
Fiscal Year (FY) basket percent market basket
change percent change
------------------------------------------------------------------------
Historical data:
FY 2013............................. 2.0 2.0
FY 2014............................. 1.8 1.8
FY 2015............................. 1.8 1.6
FY 2016............................. 1.7 1.7
Average FYs 2013-2016............... 1.8 1.8
Forecast:
FY 2017............................. 2.6 2.7
FY 2018............................. 2.9 2.9
FY 2019............................. 3.0 3.0
FY 2020............................. 3.0 3.0
[[Page 19923]]
Average FYs 2017-2020............... 2.9 2.9
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 4th Quarter 2016 forecast.
There is no difference between the average percent change in the FY
2010-based and the proposed 2014-based IPPS market basket over the FY
2013 through FY 2016 time period. For FY 2018, the increase is 2.9
percent for both the FY 2010-based and proposed 2014-based IPPS market
baskets.
3. Labor-Related Share
Under section 1886(d)(3)(E) of the Act, the Secretary estimates
from time to time the proportion of payments that are labor-related.
Section 1886(d)(3)(E) of the Act states that 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 proportion
of hospitals' costs that are attributable to wages and wage-related
costs as the ``labor-related share.''
The labor-related share is used to determine the proportion of the
national PPS base payment rate to which the area wage index is applied.
We include a cost category in the labor-related share if the costs are
labor intensive and vary with the local labor market. For the FY 2018
IPPS/LTCH PPS proposed rule, we are proposing to include in the labor-
related share the national average proportion of operating costs that
are attributable to the following cost categories in the proposed 2014-
based IPPS market basket: Wages and Salaries, Employee Benefits,
Professional Fees: Labor-Related, Administrative and Facilities Support
Services, Installation, Maintenance, and Repair Services, and All
Other: Labor-Related Services, as we did in the FY 2014 IPPS/LTCH PPS
final rule (78 FR 50594). As noted in section IV.B.1.c. of the preamble
of this proposed rule, for the proposed 2014-based IPPS market basket,
we are proposing the creation of a separate cost category for
Installation, Maintenance, and Repair Services. These expenses were
previously included in the All Other: Labor-Related Services cost
category in the FY 2010-based IPPS market basket, along with other
services, including, but not limited to, janitorial, waste management,
security, and dry cleaning/laundry services. Because these services
tend to be labor-intensive and are mostly performed at the facility
(and, therefore, unlikely to be purchased in the national market), we
continue to believe that they meet our definition of labor-related
services.
Similar to the FY 2010-based IPPS market basket, we are proposing
that the Professional Fees: Labor-Related cost category includes
expenses associated with advertising and a proportion of legal
services, accounting and auditing, engineering, management consulting,
and management of companies and enterprises expenses. As was done in
the FY 2010-based IPPS market basket rebasing, we are proposing to
determine the proportion of legal, accounting and auditing,
engineering, and management consulting services that meet our
definition of labor-related services based on a survey of hospitals
conducted by CMS in 2008. We notified the public of our intent to
conduct this survey on December 9, 2005 (70 FR 73250) and received no
comments (71 FR 8588).
A discussion of the composition of the survey and
poststratification can be found in the FY 2010 IPPS/LTCH PPS final rule
(74 FR 43850 through 43856). Based on the weighted results of the
survey, we determined that hospitals purchase, on average, the
following portions of contracted professional services outside of their
local labor market:
34 percent of accounting and auditing services;
30 percent of engineering services;
33 percent of legal services; and
42 percent of management consulting services.
We are proposing to apply each of these percentages to its
respective Benchmark I-O cost category underlying the professional fees
cost category. This is the methodology that we used to separate the FY
2010-based IPPS market basket professional fees cost category into
Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related cost categories. We are proposing to use the same methodology
and survey results to separate the professional fees costs for the
2014-based IPPS market basket into Professional Fees: Labor-Related and
Professional Fees: Nonlabor-Related cost categories. We believe these
survey results are appropriate to use for the 2014-based IPPS market
basket as they empirically determine the proportion of contracted
professional services purchased by the industry that is attributable to
local firms and the proportion that is purchased from national firms.
In the proposed 2014-based IPPS market basket, nonmedical
professional fees that were subject to allocation based on these survey
results represent 4.9 percent of total operating costs (and are limited
to those fees related to Accounting & Auditing, Legal, Engineering, and
Management Consulting services). Based on our survey results, we are
proposing to apportion 3.1 percentage points of the 4.9 percentage
point figure into the Professional Fees: Labor-Related share cost
category and designating the remaining 1.8 percentage point into the
Professional Fees: Nonlabor-Related cost category.
In addition to the professional services listed earlier, we also
classify a proportion of the home office expenses into the Professional
Fees: Labor-Related cost category as was done in the previous rebasing.
For the FY 2010-based IPPS market basket, we obtained home office
expenses from the Benchmark I-O data for the NAICS 55 industry
(Management of Companies and Enterprises). As stated in section
IV.B.1.a. of the preamble to this proposed rule, for the 2014-based
IPPS market basket, we are proposing to obtain these data from the
Medicare cost reports. We believe that many of the home office costs
are labor-intensive and vary with the local labor market. However, data
indicate that not all IPPS hospitals with home offices have home
offices located in their local labor market. Therefore, we are
proposing to include in the labor-related share only a proportion of
the home office expenses based on the methodology described below.
[[Page 19924]]
For the FY 2010-based IPPS market basket, we used data primarily
from the Medicare cost reports and a CMS database of Home Office
Medicare Records (HOMER) (a database that provides city and state
information (addresses) for home offices). We determined the proportion
of costs that should be allocated to the labor-related share based on
the percent of hospital home office compensation as reported in
Worksheet S-3, Part II. Using this methodology, we determined that 62
percent of hospitals' home office compensation costs were for home
offices located in their respective local labor markets (defined as the
same Metropolitan Statistical Area (MSA)). Therefore, we classified 62
percent of these costs into the Professional Fees: Labor-Related
Services cost category and the remaining 38 percent into the
Professional Fees: Nonlabor-Related Services cost category for the FY
2010-based IPPS market basket. For a detailed discussion of this
analysis, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78
FR 50601).
For the proposed 2014-based IPPS market basket, we conducted a
similar analysis of home office data. For consistency, we believe that
it is important for our analysis on home office data to be conducted on
the same IPPS hospitals used to derive the proposed 2014-based IPPS
market basket cost weights. The Medicare cost report requires a
hospital to report information regarding their home office provider.
Approximately 64 percent of IPPS hospitals reported some type of home
office information on their Medicare cost report for 2014 (for example,
city, State, and zip code). Using the data reported on the Medicare
cost report, we compared the location of the hospital with the location
of the hospital's home office. We then determined the proportion of
costs that should be allocated to the labor-related share based on the
percent of total hospital home office compensation costs for those
hospitals that had home offices located in their respective local labor
markets--defined as being in the same MSA. We determined a hospital's
and home office's MSAs using their zip code information from the
Medicare cost report.
Similar to the FY 2010-based IPPS market basket, we determined the
proportion of costs that should be allocated to the labor-related share
based on the percent of hospital home office compensation as reported
in Worksheet S-3, Part II. Using this methodology, we determined that
60 percent of hospitals' home office compensation costs were for home
offices located in their respective local labor markets. Therefore, we
are proposing to allocate 60 percent of home office expenses to the
labor-related share.
In the proposed 2014-based IPPS market basket, home office expenses
that were subject to allocation based on the home office allocation
methodology represent 4.2 percent of total operating costs. Based on
the results of the home office analysis discussed above, we are
apportioning 2.5 percentage points of the 4.2 percentage points figure
into the Professional Fees: Labor-Related cost category and designating
the remaining 1.7 percentage points into the Professional Fees:
Nonlabor-Related cost category. In summary, based on the two
allocations mentioned above, we apportioned 5.6 percentage points of
the professional fees and home office cost weights into the
Professional Fees: Labor-Related cost category. This amount is added to
the portion of professional fees that we already identified as labor-
related using the I-O data such as contracted advertising and marketing
costs (approximately 1.2 percentage point of total operating costs)
resulting in a Professional Fees: Labor-Related cost weight of 6.8
percent.
Below is a table comparing the proposed 2014-based labor-related
share and the FY 2010-based labor-related share. As discussed in
section IV.B.1.b. of the preamble of this proposed rule, the Wages and
Salaries and Employee Benefits cost weights reflect contract labor
costs.
Table IV-06--Comparision of the FY 2010-Based Labor-Related Share and
the Proposed 2014-Based Labor-Related Share
------------------------------------------------------------------------
FY 2010-based Proposed 2014-
IPPS market based IPPS
basket cost market basket
weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 47.2 43.4
Employee Benefits....................... 13.1 12.4
Professional Fees: Labor-Related........ 5.5 6.8
Administrative and Facilities Support 0.6 1.0
Services...............................
Installation, Maintenance, and Repair .............. 2.4
Services\1\............................
All Other: Labor-Related Services....... 3.1 2.3
-------------------------------
Total Labor-Related Share........... 69.6 68.3
------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Installation, Maintenance, and Repair Services costs were previously
included in the All Other: Labor-Related Services cost category of the
FY 2010-based IPPS market basket.
Using the cost category weights from the proposed 2014-based IPPS
market basket, we calculated a labor-related share of 68.3 percent,
approximately 1.3 percentage points lower than the current labor-
related share of 69.6 percent. Therefore, we are proposing to use a
labor-related share of 68.3 percent for discharges occurring on or
after October 1, 2017. We continue to believe, as we have stated in the
past, that these operating cost categories are related to, influenced
by, or vary with the local markets. Therefore, our definition of the
labor-related share continues to be consistent with section 1886(d)(3)
of the Act. We note that section 403 of Pub. L. 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
62 percent would result in lower payments to a hospital than would
otherwise be made.
C. Market Basket for Certain Hospitals Presently Excluded From the IPPS
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we
adopted the use of the FY 2006-based IPPS operating market basket
percentage
[[Page 19925]]
increase to update the target amounts for children's hospitals, PPS-
excluded cancer hospitals and religious nonmedical health care
institutions (RNHCIs). Children's hospitals and PPS-excluded cancer
hospitals and RNHCIs are still reimbursed solely under the reasonable
cost-based system, subject to the rate-of-increase limits. Under these
limits, an annual target amount (expressed in terms of the inpatient
operating cost per discharge) is set for each hospital based on the
hospital's own historical cost experience trended forward by the
applicable rate-of-increase percentages.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50603), under the
broad authority in sections 1886(b)(3)(A) and (B), 1886(b)(3)(E), and
1871 of the Act and section 4454 of the BBA, consistent with our use of
the IPPS operating market basket percentage increase to update target
amounts, we adopted the use of the FY 2010-based IPPS operating market
basket percentage increase to update the target amounts for children's
hospitals, PPS-excluded cancer hospitals, and RNHCIs that are paid on
the basis of reasonable cost subject to the rate-of-increase limits
under Sec. 413.40. In addition, as discussed in the FY 2015 IPPS/LTCH
PPS final rule (79 FR 50156 through 50157), consistent with Sec. Sec.
412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we also have
used the percentage increase in the FY 2010-based IPPS operating market
basket to update the target amounts for short-term acute care hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). These hospitals also are
paid on the basis of reasonable cost, subject to the rate-of-increase
limits under Sec. 413.40.
Due to the small number of children's and cancer hospitals and
RNHCIs and hospitals located outside the 50 States, the District of
Columbia, and Puerto Rico and because these facilities provide limited
Medicare cost report data, we are unable to create a separate market
basket specifically for these facilities. Due to the limited cost
report data available, we believe that the proposed 2014-based IPPS
operating market basket most closely represents the cost structure of
children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and
hospitals located outside the 50 States, the District of Columbia, and
Puerto Rico. We believe this is appropriate as the IPPS operating
market basket would reflect the input price growth for providing
inpatient hospital services (similar to the services provided by the
above excluded facilities) based on the specific mix of goods and
services required. Therefore, we are proposing to use the 2014-based
IPPS market basket percentage increase to update the target amounts for
children's hospitals, PPS-excluded cancer hospitals, RNHCIs, and
hospitals located outside the 50 States, the District of Columbia, and
Puerto Rico that are paid on the basis of reasonable cost subject to
the rate-of-increase limits under Sec. 413.40. We believe it is the
best available measure of the average increase in the prices of the
goods and services purchased by children's hospitals, the cancer
hospitals, RNHCIs, and hospitals located outside the 50 States, the
District of Columbia, and Puerto Rico in order to provide care.
D. Rebasing and Revising the Capital Input Price Index (CIPI)
The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final rules. The FY 2014 IPPS/LTCH
PPS final rule (78 FR 50603 through 50607) described the most recent
rebasing and revision of the CIPI to a FY 2010 base year, which
reflected the capital cost structure of IPPS hospitals available at
that time.
For the FY 2018 IPPS update, we are proposing to rebase and revise
the CIPI to a 2014 base year to reflect a more current structure of
capital costs for IPPS hospitals. This proposed 2014-based CIPI was
derived using 2014 cost reports for IPPS hospitals, which includes
providers whose cost reporting period began on or after October 1,
2013, and prior to September 30, 2014. While we proposed and finalized
the title of the current CIPI in the FY 2014 IPPS/LTCH proposed and
final rules as ``FY 2010-based CIPI'', for the proposed CIPI, we are
now proposing to simply refer to the proposed CIPI as ``2014-based
CIPI'' (dropping the reference to FY). As discussed in section IV.B. of
the preamble of this proposed rule, for the 2014-based IPPS operating
market basket, we are proposing this change in naming convention for
the market basket because the base year cost weight data for the
proposed market basket do not reflect only fiscal year data. Similarly,
the proposed 2014-based CIPI uses Medicare cost report data and other
government data that reflect 2014 fiscal year, 2014 calendar year, and
2014 State fiscal year expenses to determine the base year cost weights
and vintage weights. Given that it is based on a mix of classifications
of 2014 data, we are proposing to refer to the CIPI as ``2014-based''
instead of ``FY 2014-based'' or ``CY 2014-based''. However, the methods
and data used to derive each of these CIPI are similar. As with the FY
2010-based index, we are proposing to develop two sets of weights to
derive the proposed 2014-based CIPI. The first set of weights
identifies the proportion of hospital capital expenditures attributable
to each expenditure category, while the second set of weights is a set
of relative vintage weights for depreciation and interest. The set of
vintage weights is used to identify the proportion of capital
expenditures within a cost category that is attributable to each year
over the useful life of the capital assets in that category. A more
thorough discussion of vintage weights is provided later in this
section.
Using 2014 Medicare cost reports, we are able to group capital
costs into the following categories: Depreciation, Interest, Lease, and
Other. For each of these categories, we are proposing to determine what
proportion of total capital costs the category represents using the
data reported by IPPS hospitals on Worksheet A-7, which is the same
methodology used for the FY 2010-based CIPI. As shown in the left
column of Table IV-07, in 2014 depreciation expenses accounted for 66.4
percent of total capital costs, interest expenses accounted for 16.3
percent, leasing expenses accounted for 11.8 percent, and other capital
expenses accounted for 5.5 percent.
We also are proposing to allocate lease costs across each of the
remaining capital cost categories as was done in the FY 2010-based
CIPI. This would result in three primary capital cost categories in the
proposed 2014-based CIPI: Depreciation, Interest, and Other. Lease
costs are unique in that they are not broken out as a separate cost
category in the proposed 2014-based CIPI. Rather, we are proposing to
proportionally distribute leasing costs among the cost categories of
Depreciation, Interest, and Other, reflecting the assumption that the
underlying cost structure of leases is similar to that of capital costs
in general. As was done for the FY 2010-based CIPI, we are proposing to
assume that 10 percent of the lease costs as a proportion of total
capital costs represents overhead and to assign those costs to the
Other capital cost category accordingly. Therefore, we are assuming
that approximately 1.2 percent (11.8 percent x 0.1) of total capital
costs represent lease costs attributable to overhead, and we are
proposing to add this 1.2 percent to the 5.5 percent Other cost
category weight. We are then proposing to distribute the remaining
lease costs
[[Page 19926]]
(10.6 percent, or 11.8 percent-1.2 percent) proportionally across the
three cost categories (Depreciation, Interest, and Other) based on the
proportion that these categories comprise of the sum of the
Depreciation, Interest, and Other cost categories (excluding lease
expenses). For example, the Other cost category represented 6.3 percent
of all three cost categories (Depreciation, Interest, and Other) prior
to any lease expenses being allocated. This 6.3 percent is applied to
the 10.6 percent of remaining lease expenses so that another 0.7
percent of lease expenses as a percent of total capital costs is
allocated to the Other cost category. Therefore, the resulting proposed
Other cost weight is 7.4 percent (5.5 percent + 1.2 percent + 0.7
percent). This is the same methodology used for the FY 2010-based CIPI.
The resulting cost weights of the proposed allocation of lease expenses
are shown in the right column of Table IV-07.
Table IV-07--Proposed Allocation of Lease Expenses for the Proposed 2014-Based CIPI
----------------------------------------------------------------------------------------------------------------
Proposed cost shares Proposed cost shares
obtained from medicare after allocation of
Cost categories cost reports (percent lease expenses (percent
of total capital costs) of total capital costs)
----------------------------------------------------------------------------------------------------------------
Depreciation.................................................. 66.4 74.4
Interest...................................................... 16.3 18.2
Lease......................................................... 11.8 .......................
Other......................................................... 5.5 7.4
----------------------------------------------------------------------------------------------------------------
Finally, we are proposing to further divide the Depreciation and
Interest cost categories. We are proposing to separate the Depreciation
cost category into the following two categories: (1) Building and Fixed
Equipment and (2) Movable Equipment. We also are proposing to separate
the Interest cost category into the following two categories: (1)
Government/Nonprofit; and (2) For-profit.
To disaggregate the depreciation cost weight, we needed to
determine the percent of total depreciation costs for IPPS hospitals
(after the allocation of lease costs) that are attributable to building
and fixed equipment, which we hereafter refer to as the ``fixed
percentage.'' Based on Worksheet A-7 data from the 2014 IPPS Medicare
cost reports, we have determined that depreciation costs for building
and fixed equipment account for approximately 49 percent of total
depreciation costs, while depreciation costs for movable equipment
account for approximately 51 percent of total depreciation costs. As
was done for the FY 2010-based CIPI, we are proposing to apply this
fixed percentage to the depreciation cost weight (after leasing costs
are included) to derive a Depreciation cost weight attributable to
Building and Fixed Equipment and a Depreciation cost weight
attributable to Movable Equipment.
To disaggregate the interest cost weight, we needed to determine
the percent of total interest costs for IPPS hospitals that are
attributable to government and nonprofit facilities, which we hereafter
refer to as the ``nonprofit percentage,'' because interest price
pressures tend to differ between nonprofit and for-profit facilities.
We are proposing to use interest costs data from Worksheet A-7 of the
2014 Medicare cost reports for IPPS hospitals, which is the same
methodology used for the FY 2010-based CIPI. The nonprofit percentage
determined using this method is 86 percent. Table IV-08 provides a
comparison of the FY 2010-based CIPI cost weights and the proposed
2014-based CIPI cost weights.
After the capital cost category weights were computed, it was
necessary to select appropriate price proxies to reflect the rate-of-
increase for each expenditure category. We are proposing to apply the
same price proxies as were used in the FY 2010-based CIPI, which are
listed below and provided in Table IV-08. We also are proposing to
continue to vintage weight the capital price proxies for Depreciation
and Interest to capture the long-term consumption of capital. This
vintage weighting method is the same method that was used for the FY
2010-based CIPI and is described below.
We are proposing to continue to proxy the: Depreciation--Building
and Fixed Equipment cost category by the BEA Chained Price Index for
Private Fixed Investment in Structures, Nonresidential, Hospitals and
Special Care (BEA Table 5.4.4. Price Indexes for Private Fixed
Investment in Structures by Type). As stated in the FY 2010 IPPS/LTCH
final rule (74 FR 43860), for the FY 2006-based CIPI we finalized the
use of this index to measure the price growth of this cost category.
This BEA index is intended to capture prices for construction of
facilities such as hospitals, nursing homes, hospices, and
rehabilitation centers. For the Depreciation--Movable Equipment cost
category, we are proposing to continue to measure the price growth
using the PPI Commodity for Machinery and Equipment (BLS series code
WPU11). This price index reflects price inflation associated with a
variety of machinery and equipment that would be utilized by hospitals
including but not limited to communication equipment, computers, and
medical equipment. For the Nonprofit Interest and For-profit Interest
cost categories, we are proposing to continue to measure the price
growth using the average yield on domestic municipal bonds (Bond Buyer
20-bond index) and the average yield on Moody's Aaa bonds (Federal
Reserve), respectively. As stated above, we are proposing two proxies
because interest price pressures tend to differ between nonprofit and
for-profit facilities. For the Other capital cost category (including
insurances, taxes, and other capital-related costs), we are proposing
to continue to measure the price growth using the CPI for Rent of
Primary Residence (All Urban Consumers) (BLS series code CUUS0000SEHA),
which would reflect the price growth of these costs. We believe that
these price proxies continue to be the most appropriate proxies for
IPPS capital costs that meet our selection criteria of relevance,
timeliness, availability, and reliability.
[[Page 19927]]
Table IV-08--Proposed 2014-Based CIPI Cost Weights and Price Proxies With FY 2010-Based CIPI Cost Weights
Included for Comparision
----------------------------------------------------------------------------------------------------------------
FY 2010 cost Proposed 2014
Cost categories weights cost weights Proposed price proxy
----------------------------------------------------------------------------------------------------------------
Total..................................... 100.0 100.0 ..................................
Depreciation.......................... 74.0 74.4 ..................................
Building and Fixed Equipment...... 36.2 36.7 BEA's Chained Price Index for
Private Fixed Investment in
Structures, Nonresidential,
Hospitals and Special Care.
Movable Equipment................. 37.9 37.7 PPI Commodity for Machinery and
Equipment.
Interest.............................. 19.2 18.2 ..................................
Government/Nonprofit.............. 17.1 15.7 Average Yield on Domestic
Municipal Bonds (Bond Buyer 20-
Bond Index).
For-Profit........................ 2.1 2.5 Average Yield on Moody's Aaa
Bonds.
Other..................................... 6.8 7.4 CPI for Rent of Primary Residence.
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
one decimal and therefore, the detail may not add to the total due to rounding.
Because capital is acquired and paid for over time, capital
expenses in any given year are determined by both past and present
purchases of physical and financial capital. The proposed vintage-
weighted 2014-based CIPI is intended to capture the long-term
consumption of capital, using vintage weights for depreciation
(physical capital) and interest (financial capital). These vintage
weights reflect the proportion of capital purchases attributable to
each year of the expected life of building and fixed equipment, movable
equipment, and interest. We are proposing to use vintage weights to
compute vintage-weighted price changes associated with depreciation and
interest expenses.
Vintage weights are an integral part of the CIPI. Capital costs are
inherently complicated and are determined by complex capital purchasing
decisions, over time, based on such factors as interest rates and debt
financing. In addition, capital is depreciated over time instead of
being consumed in the same period it is purchased. By accounting for
the vintage nature of capital, we are able to provide an accurate and
stable annual measure of price changes. Annual nonvintage price changes
for capital are unstable due to the volatility of interest rate changes
and, therefore, do not reflect the actual annual price changes for IPPS
capital costs. The CIPI reflects the underlying stability of the
capital acquisition process.
To calculate the vintage weights for depreciation and interest
expenses, we first needed a time series of capital purchases for
building and fixed equipment and movable equipment. We found no single
source that provides an appropriate time series of capital purchases by
hospitals for all of the above components of capital purchases. The
early Medicare cost reports did not have sufficient capital data to
meet this need. Data we obtained from the American Hospital Association
(AHA) did not include annual capital purchases. However, we were able
to obtain data on total expenses back to 1963 from the AHA.
Consequently, we are proposing to use data from the AHA Panel Survey
and the AHA Annual Survey to obtain a time series of total expenses for
hospitals. We then are proposing to use data from the AHA Panel Survey
supplemented with the ratio of depreciation to total hospital expenses
obtained from the Medicare cost reports to derive a trend of annual
depreciation expenses for 1963 through 2014. We are proposing to
separate these depreciation expenses into annual amounts of building
and fixed equipment depreciation and movable equipment depreciation as
determined earlier. From these annual depreciation amounts, we derived
annual end-of-year book values for building and fixed equipment and
movable equipment using the expected life for each type of asset
category. We used the AHA data and similar methodology to derive the FY
2010-based IPPS capital market basket (78 FR 50604).
To continue to calculate the vintage weights for depreciation and
interest expenses, we also needed to account for the expected lives for
building and fixed equipment, movable equipment, and interest for the
proposed 2014-based CIPI. We are proposing to calculate the expected
lives using Medicare cost report data. The expected life of any asset
can be determined by dividing the value of the asset (excluding fully
depreciated assets) by its current year depreciation amount. This
calculation yields the estimated expected life of an asset if the rates
of depreciation were to continue at current year levels, assuming
straight-line depreciation. Using this proposed method, we determined
the average expected life of building and fixed equipment to be equal
to 27 years, and the average expected life of movable equipment to be
equal to 12 years. For the expected life of interest, we believe that
vintage weights for interest should represent the average expected life
of building and fixed equipment because, based on previous research
described in the FY 1997 IPPS final rule (61 FR 46198), the expected
life of hospital debt instruments and the expected life of buildings
and fixed equipment are similar. We note that the FY 2010-based CIPI
was based on an expected average life of building and fixed equipment
of 26 years and an expected average life of movable equipment of 12
years.
Multiplying these expected lives by the annual depreciation amounts
results in annual year-end asset costs for building and fixed equipment
and movable equipment. We then calculated a time series, beginning in
1964, of annual capital purchases by subtracting the previous year's
asset costs from the current year's asset costs.
For the building and fixed equipment and movable equipment vintage
weights, we are proposing to use the real annual capital-related
purchase amounts for each asset type to capture the actual amount of
the physical acquisition, net of the effect of price inflation. These
real annual capital-related purchase amounts are produced by deflating
the nominal annual purchase amount by the associated price proxy as
provided earlier in this proposed rule. For the interest vintage
weights, we are proposing to use the total nominal annual capital-
related purchase amounts to capture the value of the debt instrument
(including, but not limited to, mortgages and bonds). Using these
capital purchases time series specific to each asset type, we are
proposing to calculate the vintage weights for building and fixed
[[Page 19928]]
equipment, for movable equipment, and for interest.
The vintage weights for each asset type are deemed to represent the
average purchase pattern of the asset over its expected life (in the
case of building and fixed equipment and interest, 27 years, and in the
case of movable equipment, 12 years). For each asset type, we are
proposing to use the time series of annual capital purchases amounts
available from 2014 back to 1964. These data allow us to derive twenty-
five 27-year periods of capital purchases for building and fixed
equipment and interest, and forty 12-year periods of capital purchases
for movable equipment. For each 27-year period for building and fixed
equipment and interest, or 12-year period for movable equipment, we are
proposing to calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of
purchases over the entire 27-year or 12-year period. This calculation
was done for each year in the 27-year or 12-year period and for each of
the periods for which we have data. We then calculated the average
vintage weight for a given year of the expected life by taking the
average of these vintage weights across the multiple periods of data.
The vintage weights for the proposed 2014-based CIPI and the FY
2010-based CIPI are presented in Table IV-09 below.
Table IV-09--Proposed 2014-Based CIPI and FY 2010-Based CIPI Vintage Weights
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year \1\ Proposed 2014- FY 2010-based Proposed 2014- FY 2010-based Proposed 2014- FY 2010-based
based 27 years 26 years based 12 years 12 years based 27 years 26 years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.024 0.023 0.062 0.064 0.012 0.012
2....................................................... 0.025 0.024 0.064 0.068 0.014 0.013
3....................................................... 0.027 0.026 0.070 0.071 0.015 0.015
4....................................................... 0.028 0.028 0.074 0.073 0.017 0.017
5....................................................... 0.030 0.029 0.078 0.076 0.019 0.018
6....................................................... 0.031 0.031 0.082 0.078 0.021 0.021
7....................................................... 0.033 0.032 0.086 0.084 0.023 0.023
8....................................................... 0.034 0.034 0.088 0.088 0.025 0.025
9....................................................... 0.035 0.036 0.092 0.092 0.027 0.028
10...................................................... 0.036 0.038 0.097 0.098 0.029 0.030
11...................................................... 0.037 0.040 0.102 0.103 0.030 0.033
12...................................................... 0.039 0.041 0.105 0.106 0.033 0.036
13...................................................... 0.040 0.042 .............. .............. 0.035 0.038
14...................................................... 0.040 0.042 .............. .............. 0.037 0.040
15...................................................... 0.039 0.043 .............. .............. 0.037 0.043
16...................................................... 0.039 0.044 .............. .............. 0.040 0.045
17...................................................... 0.040 0.044 .............. .............. 0.041 0.047
18...................................................... 0.042 0.044 .............. .............. 0.045 0.048
19...................................................... 0.042 0.044 .............. .............. 0.048 0.051
20...................................................... 0.042 0.044 .............. .............. 0.050 0.052
21...................................................... 0.043 0.045 .............. .............. 0.052 0.056
22...................................................... 0.043 0.045 .............. .............. 0.054 0.057
23...................................................... 0.042 0.045 .............. .............. 0.055 0.060
24...................................................... 0.042 0.046 .............. .............. 0.057 0.062
25...................................................... 0.043 0.045 .............. .............. 0.059 0.064
26...................................................... 0.043 0.045 .............. .............. 0.061 0.066
27...................................................... 0.043 .............. .............. .............. 0.062 ..............
-----------------------------------------------------------------------------------------------
Total............................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.
\1\ Vintage weight in the last year (for example, year 27 for the proposed 2014-based CIPI) is applied to the most recent data point and prior vintage
weights are applied going back in time. For example, year 27 vintage weight would be applied to the 2018q3 fixed price proxy level, year 26 vintage
weight would be applied to the 2017q3 fixed price proxy level, etc.
The process of creating vintage-weighted price proxies requires
applying the vintage weights to the price proxy index where the last
applied vintage weight in Table IV-09 is applied to the most recent
data point. We have provided on the CMS Web site an example of how the
vintage weighting price proxies are calculated, using example vintage
weights and example price indices. The example can be found under the
following CMS Web site link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file
titled ``Weight Calculations as described in the IPPS FY 2010 Proposed
Rule.''
Table IV-10 below compares both the historical and forecasted
percent changes in the FY 2010-based CIPI and the proposed 2014-based
CIPI.
[[Page 19929]]
Table IV-10--Comparison of FY 2010-Based and Proposed 2014-Based Capital
Input Price Index, Percent Change, FY 2013 Through FY 2020
------------------------------------------------------------------------
CIPI, FY 2010- Proposed CIPI,
Fiscal year based 2014-based
------------------------------------------------------------------------
Historical Data:
FY 2013............................. 1.1 1.0
FY 2014............................. 1.2 1.2
FY 2015............................. 1.2 1.1
FY 2016............................. 1.1 1.0
Average FYs 2013-2016............... 1.2 1.1
Forecast:
FY 2017............................. 1.1 1.0
FY 2018............................. 1.3 1.2
FY 2019............................. 1.5 1.4
FY 2020............................. 1.5 1.5
Average FYs 2017-2020............... 1.4 1.3
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 4th quarter 2016 forecast.
IHS Global Insight, Inc. forecasts a 1.2 percent increase in the
proposed 2014-based CIPI for FY 2018, as shown in Table IV-10. The
underlying vintage-weighted price increases for depreciation (including
building and fixed equipment and movable equipment) and interest
(including government/nonprofit and for-profit) based on the proposed
2014-based CIPI are included in Table IV-11.
Table IV-11--Proposed 2014-Based Capital Input Price Index Percent Changes, Total and Depreciation and Interest
Components--FYs 2013 Through 2020
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
Historical Data: .............. .............. ..............
FY 2013..................................................... 1.0 1.7 -2.5
FY 2014..................................................... 1.2 1.8 -1.8
FY 2015..................................................... 1.1 1.8 -2.7
FY 2016..................................................... 1.0 1.7 -3.0
Forecast: .............. .............. ..............
FY 2017..................................................... 1.0 1.6 -2.7
FY 2018..................................................... 1.2 1.6 -1.6
FY 2019..................................................... 1.4 1.6 -0.6
FY 2020..................................................... 1.5 1.6 0.1
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 4th quarter 2016 forecast.
Rebasing the CIPI from FY 2010 to 2014 decreased the percent change
in the forecasted update for FY 2018 by 0.1 percentage point, from 1.3
percent to 1.2 percent, as shown in Table IV-10. The lower FY 2018
update is primarily due to a change in the vintage weights for the
proposed 2014-based CIPI, which includes updating the asset purchase
data through 2014 and changing the building and fixed equipment and
interest asset lives from 26 years to 27 years. This lower update is
only partially offset by the change in the base year weights, which
produce a faster increase due to more weight being given to the
Depreciation cost category and less weight being given to the Interest
cost category. As shown in Table IV-11, for FY 2018, vintage-weighted
price growth is projected to be positive for the Depreciation cost
category and negative for Interest cost category.
V. Other Decisions and Proposed Changes to the IPPS for Operating
System
A. Proposed Changes to MS-DRGs Subject to the Postacute Care Transfer
and MS-DRG Special Payment Policies (Sec. 412.4)
1. Background
Existing regulations at 42 CFR 412.4(a) define discharges under the
IPPS as situations in which a patient is formally released from an
acute care hospital or dies in the hospital. Section 412.4(b) defines
acute care transfers, and Sec. 412.4(c) defines postacute care
transfers. Our policy set forth in Sec. 412.4(f) provides that when a
patient is transferred and his or her length of stay is less than the
geometric mean length of stay for the MS-DRG to which the case is
assigned, the transferring hospital is generally paid based on a
graduated per diem rate for each day of stay, not to exceed the full
MS-DRG payment that would have been made if the patient had been
discharged without being transferred.
The per diem rate paid to a transferring hospital is calculated by
dividing the full MS-DRG payment by the geometric mean length of stay
for the MS-DRG. Based on an analysis that showed that the first day of
hospitalization is the most expensive (60 FR 45804), our policy
generally provides for payment that is twice the per diem amount for
the first day, with each subsequent day paid at the per diem amount up
to the full MS-DRG payment (Sec. 412.4(f)(1)). Transfer cases also are
eligible for outlier payments. In general, the outlier threshold for
transfer cases, as described in Sec. 412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic
variations in costs), divided by the geometric mean length of stay for
the MS-DRG, and multiplied by the length of stay for the case, plus 1
day.
[[Page 19930]]
We established the criteria set forth in Sec. 412.4(d) for
determining which DRGs qualify for postacute care transfer payments in
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The
determination of whether a DRG is subject to the postacute care
transfer policy was initially based on the Medicare Version 23.0
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is
revised, we use the current version of the Medicare GROUPER and the
most recent complete year of MedPAR data to determine if the DRG is
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds
the 55th percentile for all MS-DRGs and the proportion of short-stay
discharges to postacute care to total discharges in the MS-DRG exceeds
the 55th percentile for all MS-DRGs, CMS will apply the postacute care
transfer policy to that MS-DRG and to any other MS-DRG that shares the
same base MS-DRG. The statute directs us to identify MS-DRGs based on a
high volume of discharges to postacute care facilities and a
disproportionate use of postacute care services. As discussed in the FY
2006 IPPS final rule (70 FR 47416), we determined that the 55th
percentile is an appropriate level at which to establish these
thresholds. In that same final rule (70 FR 47419), we stated that we
will not revise the list of DRGs subject to the postacute care transfer
policy annually unless we are making a change to a specific MS-DRG.
To account for MS-DRGs subject to the postacute care policy that
exhibit exceptionally higher shares of costs very early in the hospital
stay, Sec. 412.4(f) also includes a special payment methodology. For
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment,
plus the single per diem payment, for the first day of the stay, as
well as a per diem payment for subsequent days (up to the full MS-DRG
payment (Sec. 412.4(f)(6)). For an MS-DRG to qualify for the special
payment methodology, the geometric mean length of stay must be greater
than 4 days, and the average charges of 1-day discharge cases in the
MS-DRG must be at least 50 percent of the average charges for all cases
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level
group will qualify under the MS-DRG special payment methodology policy
if any one of the MS-DRGs that share that same base MS-DRG qualifies
(Sec. 412.4(f)(6)).
2. Proposed Changes for FY 2018
Based on our annual review of MS-DRGs, we have identified three MS-
DRGs that we are proposing to be included on the list of MS-DRGs
subject to the special payment transfer policy. As we discuss in
section II.F. of the preamble of this proposed rule, in response to
public comments and based on our analysis of FY 2016 MedPAR claims
data, we are proposing to make changes to MS-DRGs, effective for FY
2018.
As discussed in section II.F.14.b. of the preamble of this proposed
rule, we are proposing to delete MS-DRGs 984, 985, and 986 (Prostatic
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and
without CC/MCC, respectively) and reassign the procedure codes
currently assigned to these three MS-DRGs to MS-DRGs 987, 988, and 989
(Non-Extensive O.R. Procedure Unrelated to Principal Diagnosis with
MCC, with CC and without CC/MCC, respectively).
In light of these proposed changes to the MS-DRGs for FY 2018,
according to the regulations under Sec. 412.4(d), we evaluated
proposed revised MS-DRGs 987, 988, and 989 (which would contain the
proposed reassigned procedures from MS-DRGs 984, 985, and 986) against
the general postacute care transfer policy criteria using the FY 2016
MedPAR data. If an MS-DRG qualified for the postacute care transfer
policy, we also evaluated that MS-DRG under the special payment
methodology criteria according to regulations at Sec. 412.4(f)(6). We
continue to believe it is appropriate to reassess MS-DRGs when
proposing reassignment of procedure or diagnosis codes that would
result in material changes to an MS-DRG. MS-DRGs 987, 988, and 989 are
currently subject to the postacute care transfer policy. As a result of
our review, the proposed revised MS-DRGs 987, 988, and 989 continue to
qualify to be included on the list of MS-DRGs that are subject to the
postacute care transfer policy. We are not proposing to change the
postacute care transfer policy status for MS-DRGs 987, 988, and 989.
List of Proposed Revised MS-DRGs Subject To Review of Postacute Care Transfer Policy Status for FY 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of
short-stay
Postacute care postacute care
transfers Short-stay transfers to Postacute care transfer
Proposed revised MS-DRG MS-DRG title Total cases (55th postacute care all cases policy status
percentile: transfers (55th
1,419) percentile:
8.01068%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
987........................ Non-Extensive O.R. Procedure 8,131 4,210 1,355 16.66462 YES.
Unrelated to Principal
Diagnosis with MCC.
988........................ Non-Extensive O.R. Procedure 8,239 3,416 706 8.56900 YES.
Unrelated to Principal
Diagnosis with CC.
989........................ Non-Extensive O.R. Procedure 2,216 * 499 47 * 2.12094 ** YES.
Unrelated to Principal
Diagnosis without MCC/CC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet.
** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all qualify under the postacute care transfer
policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.
We also have determined that proposed revised MS-DRGs 987, 988, and
989 would meet the criteria for the MS-DRG special payment methodology.
MS-DRGs 987, 988, and 989 are not currently listed as being subject to
the special payment policy. Therefore, we are proposing that these
three proposed revised MS-DRGs would be subject to
[[Page 19931]]
the MS-DRG special payment methodology, effective FY 2018.
List of Proposed Revised MS-DRGs Subject To Review of Special Payment Policy Status for FY 2018
----------------------------------------------------------------------------------------------------------------
50 Percent of
Average average
Proposed revised MS-DRG title Geometric mean charges of 1- charges for Special payment
MS-DRG length of stay day all cases policy status
discharges within MS-DRG
----------------------------------------------------------------------------------------------------------------
987................ Non-Extensive O.R. 8.1 $36,526 $53,449 * YES.
Procedure Unrelated
to Principal
Diagnosis with MCC.
988................ Non-Extensive O.R. 8.6 35,629 29,119 YES.
Procedure Unrelated
to Principal
Diagnosis with CC.
989................ Non-Extensive O.R. 2.2 0 0 * YES.
Procedure Unrelated
to Principal
Diagnosis without
MCC/CC.
----------------------------------------------------------------------------------------------------------------
* As described in the policy at 42 CFR 412.4(d)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify
under the MS-DRG special payment policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.
The proposed postacute care transfer policy status and special
payment policy status of these MS-DRGs are reflected in Table 5
associated with this proposed rule, which is listed in section VI. of
the Addendum to this proposed rule and available via the Internet on
the CMS Web site.
B. Proposed Changes in the Inpatient Hospital Update for FY 2018 (Sec.
412.64(d))
1. Proposed FY 2018 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient hospital
operating costs by a factor called the ``applicable percentage
increase.'' For FY 2018, we are setting the applicable percentage
increase by applying the adjustments listed in this section in the same
sequence as we did for FY 2017. Specifically, consistent with section
1886(b)(3)(B) of the Act, as amended by sections 3401(a) and 10319(a)
of the Affordable Care Act, we are setting the applicable percentage
increase by applying the following adjustments in the following
sequence. The applicable percentage increase under the IPPS is equal to
the rate-of-increase in the hospital market basket for IPPS hospitals
in all areas, subject to--
(a) A reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals that fail to submit quality information
under rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act;
(b) A reduction of three-quarters of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals not considered to be meaningful EHR users
in accordance with section 1886(b)(3)(B)(ix) of the Act;
(c) An adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment); and
(d) An additional reduction of 0.75 percentage point as required by
section 1886(b)(3)(B)(xii) of the Act.
Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added
by section 3401(a) of the Affordable Care Act, state that application
of the MFP adjustment and the additional FY 2018 adjustment of 0.75
percentage point may result in the applicable percentage increase being
less than zero.
We note that, in compliance with section 404 of the MMA, in this
proposed rule, we are proposing to replace the FY 2010-based IPPS
operating and capital market baskets with the revised and rebased 2014-
based IPPS operating and capital market baskets for FY 2018.
We are proposing to base the proposed FY 2018 market basket update
used to determine the applicable percentage increase for the IPPS on
IHS Global Insight, Inc.'s (IGI's) fourth quarter 2016 forecast of the
proposed 2014-based IPPS market basket rate-of-increase with historical
data through third quarter 2016, which is estimated to be 2.9 percent.
We are proposing that if more recent data subsequently become available
(for example, a more recent estimate of the market basket and the MFP
adjustment), we would use such data, if appropriate, to determine the
FY 2018 market basket update and the MFP adjustment in the final rule.
For FY 2018, depending on whether a hospital submits quality data
under the rules established in accordance with section
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital
that submits quality data) and is a meaningful EHR user under section
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that
is a meaningful EHR user), there are four possible applicable
percentage increases that can be applied to the standardized amount as
specified in the table that appears later in this section.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
MFP adjustment. As we explained in that rule, section
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the
Affordable Care Act, defines this productivity adjustment as equal to
the 10-year moving average of changes in annual economy-wide, private
nonfarm business MFP (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, calendar year, cost
reporting period, or other annual period). The Bureau of Labor
Statistics (BLS) publishes the official measure of private nonfarm
business MFP. We refer readers to the BLS Web site at http://www.bls.gov/mfp for the BLS historical published MFP data.
MFP is derived by subtracting the contribution of labor and capital
input growth from output growth. The projections of the components of
MFP are currently produced by IGI, a nationally recognized economic
forecasting firm with which CMS contracts to forecast the components of
the market baskets and MFP. As we discussed in the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49509), beginning with the FY 2016 rulemaking
cycle, the MFP adjustment is calculated using the revised series
developed by IGI to proxy the aggregate capital inputs. Specifically,
in order to generate a forecast of MFP, IGI forecasts BLS aggregate
capital inputs using a
[[Page 19932]]
regression model. A complete description of the MFP projection
methodology is available on the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. As discussed in
the FY 2016 IPPS/LTCH PPS final rule, if IGI makes changes to the MFP
methodology, we will announce them on our Web site rather than in the
annual rulemaking.
For FY 2018, we are proposing an MFP adjustment of 0.4 percentage
point. Similar to the market basket update, for the proposed rule, we
used IGI's fourth quarter 2016 forecast of the MFP adjustment with
historical data through third quarter 2016 to compute the proposed MFP
adjustment. We are proposing that if more recent data subsequently
become available, we would use such data, if appropriate, to determine
the FY 2018 market basket update and MFP adjustment for the final rule.
Based on these data, for this proposed rule, we have determined
four proposed applicable percentage increases to the standardized
amount for FY 2018, as specified in the following table:
Proposed FY 2018 Applicable Percentage Increases for the IPPS
----------------------------------------------------------------------------------------------------------------
Hospital Hospital Hospital did Hospital did
submitted submitted NOT submit NOT submit
quality data quality data quality data quality data
FY 2018 and is a and is NOT a and is a and is NOT a
meaningful EHR meaningful EHR meaningful EHR meaningful EHR
user user user user
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket Rate-of-Increase......... 2.9 2.9 2.9 2.9
Proposed Adjustment for Failure to Submit 0.0 0.0 -0.725 -0.725
Quality Data under Section 1886(b)(3)(B)(viii)
of the Act.....................................
Proposed Adjustment for Failure to be a 0.0 -2.175 0.0 -2.175
Meaningful EHR User under Section
1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section -0.4 -0.4 -0.4 -0.4
1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section -0.75 -0.75 -0.75 -0.75
1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied 1.75 -0.425 1.025 -1.15
to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------
We are proposing to revise the existing regulations at 42 CFR
412.64(d) to reflect the current law for the FY 2018 update.
Specifically, in accordance with section 1886(b)(3)(B) of the Act, we
are proposing to revise paragraph (vii) of Sec. 412.64(d)(1) to
include the applicable percentage increase to the FY 2018 operating
standardized amount as the percentage increase in the market basket
index, subject to the reductions specified under Sec. 412.64(d)(2) for
a hospital that does not submit quality data and Sec. 412.64(d)(3) for
a hospital that is not a meaningful EHR user, less an MFP adjustment
and less an additional reduction of 0.75 percentage point.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs equals the
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of
the Act (that is, the same update factor as for all other hospitals
subject to the IPPS). Therefore, the update to the hospital-specific
rates for SCHs also is subject to section 1886(b)(3)(B)(i) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
As discussed in section V.H. of the preamble of this proposed rule,
section 205 of the Medicare Access and CHIP Reauthorization Act of 2015
(MACRA) (Pub. L. 114-10, enacted on April 16, 2015) extended the MDH
program (which, under previous law, was to be in effect for discharges
on or before March 31, 2015 only) for discharges occurring on or after
April 1, 2015, through FY 2017 (that is, for discharges occurring on or
before September 30, 2017). Therefore, under current law, the MDH
program will expire at the end of FY 2017.
For FY 2018, we are proposing the following updates to the
hospital-specific rates applicable to SCHs: A proposed update of 1.75
percent for a hospital that submits quality data and is a meaningful
EHR user; a proposed update of 1.025 percent for a hospital that fails
to submit quality data and is a meaningful EHR user; a proposed update
of -0.425 percent for a hospital that submits quality data and is not a
meaningful EHR user; and a proposed update of -1.15 percent for a
hospital that fails to submit quality data and is not a meaningful EHR
user. As mentioned previously, for this FY 2018 proposed rule, we are
using IGI's fourth quarter 2016 forecast of the proposed 2014-based
IPPS market basket update with historical data through third quarter
2016. Similarly, we are using IGI's fourth quarter 2016 forecast of the
MFP adjustment. We are proposing that if more recent data subsequently
become available (for example, a more recent estimate of the market
basket increase and the MFP adjustment), we would use such data, if
appropriate, to determine the update in the final rule.
2. Proposed FY 2018 Puerto Rico Hospital Update
As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56937
through 56938), prior to January 1, 2016, Puerto Rico hospitals were
paid based on 75 percent of the national standardized amount and 25
percent of the Puerto Rico-specific standardized amount. Section 601 of
Public Law 114-113 amended section 1886(d)(9)(E) of the Act to specify
that the payment calculation with respect to operating costs of
inpatient hospital services of a subsection (d) Puerto Rico hospital
for inpatient hospital discharges on or after January 1, 2016, shall
use 100 percent of the national standardized amount. Because Puerto
Rico hospitals are no longer paid with a Puerto Rico-specific
standardized amount under the amendments to section 1886(d)(9)(E) of
the Act, there is no longer a need for us to propose an update to the
Puerto Rico standardized amount. Hospitals in Puerto Rico are now paid
100 percent of the national standardized amount and, therefore, are
subject to the same update to the national standardized amount
discussed under section V.B.1. of the preamble of this proposed rule.
Accordingly, for FY 2018, we are proposing an applicable percentage
increase of 1.75 to the standardized amount for hospitals located in
Puerto Rico.
We note that section 1886(b)(3)(B)(viii) of the Act, which
specifies the adjustment to the
[[Page 19933]]
applicable percentage increase for ``subsection (d)'' hospitals that do
not submit quality data under the rules established by the Secretary,
is not applicable to hospitals located in Puerto Rico.
In addition, section 602 of Public Law 114-113 amended section
1886(n)(6)(B) of the Act to specify that Puerto Rico hospitals are
eligible for incentive payments for the meaningful use of certified EHR
technology, effective beginning FY 2016, and also to apply the
adjustments to the applicable percentage increase under section
1886(b)(3)(B)(ix) of the Act to Puerto Rico hospitals that are not
meaningful EHR users, effective FY 2022. Accordingly, because the
provisions of section 1886(b)(3)(B)(ix) of the Act are not applicable
to hospitals located in Puerto Rico until FY 2022, the adjustments
under this provision are not applicable for FY 2018.
C. Proposed Change to Volume Decrease Adjustment for Sole Community
Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals (MDHs)
(Sec. 412.92)
1. Background
Sections 1886(d)(5)(D) and (d)(5)(G) of the Act provide special
payment protections under the IPPS to sole community hospitals (SCHs)
and Medicare-dependent, small rural hospitals (MDHs), respectively.
Section 1886(d)(5)(D)(iii) of the Act defines an SCH in part as a
hospital that the Secretary determines 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 inpatient hospital services reasonably available to Medicare
beneficiaries. The regulations at 42 CFR 412.92 set forth the criteria
that a hospital must meet to be classified as a SCH. For more
information on SCHs, we refer readers to the FY 2009 IPPS/LTCH PPS
final rule (74 FR 43894 through 43897).
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 (that is, not
less than 60 percent of its inpatient days or discharges during the
cost reporting period beginning in FY 1987 or two of the three most
recently audited cost reporting periods for which the Secretary has a
settled cost report were attributable to inpatients entitled to
benefits under Part A). The regulations at 42 CFR 412.108 set forth the
criteria that a hospital must meet to be classified as an MDH. The MDH
program is not authorized by statute beyond September 30, 2017.
Therefore, beginning October 1, 2017, all hospitals that previously
qualified for MDH status under section 1886(d)(5)(G) of the Act will no
longer have MDH status and will be paid based on the IPPS Federal rate.
For additional information on the MDH program and the payment
methodology, we refer readers to the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51683 through 51684).
2. Proposed Changes to the Volume Decrease Adjustment Calculation
Methodology for SCHs
Section 1886(d)(5)(D)(ii) and section 1886(d)(5)(G)(iii) of the Act
require that the Secretary adjust the payments made to an SCH and MDH,
respectively, as may be necessary to fully compensate the hospital for
the fixed costs it incurs in providing inpatient hospital services,
including the reasonable cost of maintaining necessary core staff and
services, when it experiences a decrease of more than 5 percent in its
total number of inpatient discharges due to circumstances beyond its
control. These adjustments are known as ``volume decrease
adjustments.''
The regulations governing volume decrease adjustments are found at
Sec. 412.92(e) for SCHs and Sec. 412.108(d) for MDHs. As noted
earlier, the MDH program is set to expire as of October 1, 2017. As
such, we are not proposing specific amendments to the regulations at
Sec. 412.108(d) for MDHs. However, we are proposing that if the MDH
program ends up being extended by law, similar to how it was extended
by section 205 of the MACRA (Pub. L. 114-10) and prior legislation, the
following proposed changes to the volume decrease adjustment
methodology and the proposed amendment to Sec. 412.92(e)(3) for SCHs
would also be made to the parallel requirements for MDHs under Sec.
412.108(d)(3).
To qualify for a volume decrease adjustment, the SCH must: (a)
Submit documentation demonstrating the size of the decrease in
discharges and the resulting effect on per discharge costs; and (b)
show that the decrease is due to circumstances beyond the hospital's
control. If an SCH demonstrates to the MAC's satisfaction that it has
suffered a qualifying decrease in total inpatient discharges, the MAC
determines the appropriate amount, if any, due to the SCH as an
adjustment.
As we have noted in the PRM and in adjudications rendered by the
PRRB and the CMS Administrator, under the current methodology, the MAC
determines a volume decrease adjustment amount not to exceed the cap
calculated as the difference between the lesser of (1) the hospital's
current year's Medicare inpatient operating costs or (2) its prior
year's Medicare inpatient operating costs multiplied by the appropriate
IPPS update factor and the hospital's total MS-DRG revenue for
inpatient operating costs (including outlier payments, DSH payments,
and IME payments). In determining the volume decrease adjustment
amount, the MAC considers the individual hospital's needs and
circumstances, including the reasonable cost of maintaining necessary
core staff and services in view of minimum staffing requirements
imposed by State agencies; the hospital's fixed costs (including
whether any semi-fixed costs are to be considered fixed) other than
those costs paid on a reasonable cost basis; and the length of time the
hospital has experienced a decrease in utilization.
We have set forth interpretive guidance regarding volume decrease
adjustments in the preambles to various rules and in Section 2810.1 of
the Provider Reimbursement Manual, Part 1 (PRM-1). The adjustment also
has been the subject of a series of adjudications, rendered by the PRRB
and the CMS Administrator. For example, we refer readers to Greenwood
County Hospital Eureka, Kansas, v. Blue Cross Blue Shield Association/
Blue Cross Blue Shield of Kansas, 2006 WL 3050893 (PRRB, August 29,
2006); Unity Healthcare Muscatine, Iowa v. Blue Cross Blue Shield
Association/Wisconsin Physicians Service, 2014 WL 5450066 (CMS
Administrator September 4, 2014); Lakes Regional Healthcare Spirit
Lake, Iowa v. Blue Cross Blue Shield Association/Wisconsin Physicians
Service, 2014 WL 5450078 (CMS Administrator September 4, 2014); and
Fairbanks Memorial Hospital v. Wisconsin Physician Services/BlueCross
BlueShield Association, 2015 WL 5852432 (CMS Administrator, August 5,
2015). In those adjudications, the PRRB and the CMS Administrator have
recognized that: (1) The volume decrease adjustment is intended to
compensate qualifying SCHs for their fixed costs only, and that
variable costs are to be excluded from the adjustment; and (2) an SCH's
volume decrease adjustment should be reduced to reflect the
compensation of fixed costs that has already been made through MS-DRG
payments.
However, some hospitals have recently expressed concerns regarding
the exact calculations that the MACs use when determining the volume
decrease
[[Page 19934]]
adjustment. The issue also has been addressed in some recent decisions
of the PRRB. Under the current calculation methodology, the MACs
calculate the volume decrease adjustment by subtracting the hospital's
total MS-DRG revenue for inpatient operating costs, including outlier
payments and IME and DSH payments in the cost reporting period in which
the volume decrease occurred, from fixed costs in the cost reporting
period in which the volume decrease occurred, minus any adjustment for
excess staff. If the result of that calculation is greater than zero
and less than the cap, the hospital receives that amount in a lump-sum
payment. If the result of that calculation is zero or less than zero,
the hospital does not receive a volume decrease payment adjustment.
Under the IPPS, MS-DRG payments are not based on an individual
hospital's actual costs in a given cost reporting period. However, the
main issue raised by the PRRB and individual hospitals is that, under
the current calculation methodology, if the hospital's total MS-DRG
revenue for treating Medicare beneficiaries for which it incurs
inpatient operating costs (consisting of fixed, semi-fixed, and
variable costs) exceeds the hospital's fixed costs, the calculation by
the MACs results in no volume decrease adjustment for the hospital. In
some recent decisions, the PRRB has indicated that it believes it would
be more appropriate for the MACs to adjust the hospital's total MS-DRG
revenue from Medicare by looking at the ratio of a hospital's fixed
costs to its total costs (as determined by the MAC) and applying that
ratio as a proxy for the share of the hospital's MS-DRG payments that
it assumes are attributable (or allocable) to fixed costs, and then
comparing that estimate of the fixed portion of MS-DRG payments to the
hospital's fixed costs. In this way, the calculation would compare
estimated Medicare revenue for fixed costs to the hospital's fixed
costs when determining the volume decrease adjustment.
We continue to believe that our current approach in calculating
volume decrease adjustments is reasonable and consistent with the
statute. Nevertheless, we understand why hospitals might take the view
that CMS should make an effort, in some way, to ascertain whether a
portion of MS-DRG payments can be allocated or attributed to fixed
costs in order to fulfill the statutory mandate to ``fully compensate''
a qualifying SCH for its fixed costs.
Accordingly, after considering these views, we are proposing to
prospectively change how the MACs calculate the volume decrease
adjustments and require that the MACs compare estimated Medicare
revenue for fixed costs to the hospital's fixed costs to remove any
conceivable possibility that a hospital that qualifies for the volume
decrease adjustment could ever be less than fully compensated for fixed
costs as a result of the application of the adjustment. We are
proposing that, in order to estimate the fixed portion of the Medicare
revenue, the MACs would apply the ratio of the hospital's fixed costs
to total costs in the cost reporting period when it experienced the
volume decrease to the hospital's total Medicare revenue in that same
cost reporting period. We are proposing to revise the regulations at 42
CFR 412.92(e)(3) to reflect our proposed change in the MAC's
calculation of the volume decrease adjustment that would apply
prospectively to cost reporting periods beginning on or after October
1, 2017, and to reflect that the language requiring that the volume
decrease adjustment amount not exceed the difference between the
hospital's Medicare inpatient operating costs and the hospital's total
DRG revenue for inpatient operating costs would only apply to cost
reporting periods beginning before October 1, 2017, but not to
subsequent cost reporting periods. Under the proposed methodology, if a
hospital's total MS-DRG payment is less than its total Medicare
inpatient operating costs, the sum of any resulting volume decrease
adjustment payment and its MS-DRG payment would never exceed its total
Medicare inpatient operating costs due to the fact that the fixed cost
percentage is applied to the MS-DRG payment in calculating the volume
decrease adjustment amount. By taking the ratio derived from the subset
of fixed costs to total costs and applying that same ratio to the MS-
DRG payment, we ensure that the sum of a hospital's IPPS payment and
its volume decrease adjustment payment would never exceed its total
Medicare inpatient operating costs, thus negating the need for a cap
calculation. Thus, the proposed methodology renders the current volume
decrease adjustment cap calculation obsolete. Conversely, if a
hospital's total MS-DRG payment is greater than its total Medicare
inpatient operating costs, calculating a volume decrease adjustment
using the proposed methodology would result in a negative payment
amount, which would yield a volume decrease adjustment payment of zero.
Finally, if a hospital's total MS-DRG payment is equal to its total
Medicare inpatient operating costs, calculating a volume decrease
adjustment using the proposed methodology would also yield a volume
decrease adjustment payment of zero. Furthermore, we believe that
because a hospital could not foresee a decrease in its volume from one
year to the next and would therefore not plan for a volume decrease
adjustment, the volume decrease adjustment payment should therefore not
be limited to a cap that is based on the previous year's costs. For
these reasons, we are proposing to remove the cap calculation from the
volume decrease adjustment calculation methodology in future periods.
We are proposing that these proposed changes in the MAC's
calculation of the volume decrease adjustment would be prospective,
effective for cost reporting periods beginning on or after October 1,
2017. If these proposed changes are adopted, we also intend to update
Section 2810.1 of the PRM-1 to reflect the changes in the calculation
of the volume decrease adjustment by the MAC. For volume decrease
adjustments for earlier cost reporting periods, the current calculation
methodology will continue. In addition, we are not proposing to change
any part of the methodology, criteria, rules, or presumptions we
consider and apply in determining whether to classify a given cost as
fixed, semi-fixed, or variable for purposes of the volume decrease
adjustment.
The following example illustrates the calculation of the volume
decrease adjustment by the MAC under our proposed change.
Example: In its cost reporting period beginning October 1, 2017,
Hospital A has total Medicare inpatient operating costs equaling
$1,600,000 and total MS-DRG revenue (including outlier payments, IME
and DSH) of $1,400,000. The MAC determines that the hospital qualifies
for a volume decrease adjustment for this cost reporting period. The
MAC classifies $1,360,000 of Hospital A's costs as fixed and $240,000
as variable. Hospital A's fixed cost ratio is therefore .85 =
$1,360,000/$1,600,000. The MAC applies this ratio to the total MS-DRG
revenue of $1,400,000 to estimate the hospital's fixed MS-DRG revenue
to be $1,190,000. The volume decrease adjustment payment is then
calculated by comparing the fixed MS-DRG revenue of $1,190,000 to the
fixed costs of $1,360,000, resulting in a volume decrease adjustment
payment of $170,000 ($1,360,000 minus $1,190,000).
[[Page 19935]]
Under the current methodology used by the MACs, Hospital A would
receive no volume decrease adjustment payment because its total MS-DRG
revenue from Medicare of $1,400,000 exceeded the hospital's fixed costs
of $1,360,000. Furthermore, under the current methodology, but not
under our proposed methodology, it is possible that a hospital would
still receive no volume decrease adjustment payment even if its fixed
costs exceeded its total MS-DRG revenue if those fixed costs exceeded
the previous year's costs updated for inflation.
We also are proposing changes to an adjustment that might be made
to a hospital's staffing costs in calculating the volume decrease
adjustment. The statute and regulations and the PRM imply, and we have
expressly indicated in prior rulemaking, most recently in the FY 2006
rulemaking, our belief that not all staff costs can necessarily be
considered fixed costs (71 FR 48056 through 48060). Therefore, we
currently require a hospital, when applying for a volume decrease
adjustment, to demonstrate that it appropriately adjusted the number of
staff in inpatient areas of the hospital based on the decrease in the
number of inpatient days but not beyond minimum levels as required by
State or local laws. If a hospital does not appropriately adjust its
number of staff, the cost of maintaining those staff members is
deducted from the total volume decrease adjustment payment. In
reviewing the volume decrease adjustment calculation, we have also
weighed the administrative burden on the hospital of making this
demonstration to CMS, as compared to an assumption that it is likely
that a hospital would, in its normal course of business, adjust its
staffing levels as revenue declines. In the absence of evidence to
contrary, we believe that a hospital would adjust its staffing levels
as revenue declines rather than maintain those staffing levels for the
sole purpose of potentially having those staffing costs eventually
reflected in a Medicare volume decrease adjustment payment that the
hospital may or may not qualify for when it files its cost report.
Therefore, we are proposing to modify the volume decrease adjustment
process to no longer require that a hospital explicitly demonstrate
that it appropriately adjusted the number of staff in inpatient areas
of the hospital based on the decrease in the number of inpatient days
and to no longer require the MAC to adjust the volume decrease
adjustment payment amount for excess staffing. We are proposing that
these changes would be effective for cost reporting periods beginning
on or after October 1, 2017.
In summary, we are proposing to prospectively require that the MACs
compare Medicare revenue allocable to fixed costs from the cost
reporting period when the hospital experienced the volume decrease to
the hospital's fixed costs from that same cost reporting period when
calculating a volume decrease adjustment and that the cap will no
longer be applied to the volume decrease adjustment calculation
methodology. We are proposing to revise the regulations at Sec.
412.92(e)(3) to reflect our proposed changes. We also are proposing to
prospectively modify the volume decrease adjustment process to no
longer require that a hospital explicitly demonstrate that it
appropriately adjusted the number of staff in inpatient areas of the
hospital based on the decrease in the number of inpatient days and to
no longer require the MAC to adjust the volume decrease adjustment
payment amount for excess staffing. We are proposing that these changes
be effective for cost reporting periods beginning on or after October
1, 2017. As we noted earlier, we are proposing that if the MDH program
ends up being extended by law, similar to how it was extended by
section 205 of the MACRA (Pub. L. 114-10) and prior legislation, these
proposed changes to the volume decrease adjustment methodology and the
proposed amendment to Sec. 412.92(e)(3) for SCHs would also be made to
the parallel requirements for MDHs under Sec. 412.108(d)(3).
D. Rural Referral Centers (RRCs): Proposed Annual Updates to Case-Mix
Index and Discharge Criteria (Sec. 412.98)
Under the authority of section 1886(d)(5)(C)(i) of the Act, the
regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs also are not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area in which
the hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, that any
hospital classified as an RRC by the Secretary for FY 1991 shall be
classified as such an RRC for FY 1998 and each subsequent fiscal year.
In the August 29, 1997 IPPS final rule with comment period (62 FR
45999), we reinstated RRC status for all hospitals that lost that
status due to triennial review or MGCRB reclassification. However, we
did not reinstate the status of hospitals that lost RRC status because
they were now urban for all purposes because of the OMB designation of
their geographic area as urban. Subsequently, in the August 1, 2000
IPPS final rule (65 FR 47089), we indicated that we were revisiting
that decision. Specifically, we stated that we would permit hospitals
that previously qualified as an RRC and lost their status due to OMB
redesignation of the county in which they are located from rural to
urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in subpart D of 42 CFR
part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum case-mix index (CMI) and a minimum number of
discharges), and at least one of three optional criteria (relating to
specialty composition of medical staff, source of inpatients, or
referral volume). (We refer readers to Sec. 412.96(c)(1) through
(c)(5) and the September 30, 1988 Federal Register (53 FR 38513) for
additional discussion.) With respect to the two mandatory
prerequisites, a hospital may be classified as an RRC if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment
[[Page 19936]]
rates for purposes of determining RRC status. The methodology we used
to determine the national and regional CMI values is set forth in the
regulations at Sec. 412.96(c)(1)(ii). The proposed national median CMI
value for FY 2018 is based on the CMI values of all urban hospitals
nationwide, and the proposed regional median CMI values for FY 2018 are
based on the CMI values of all urban hospitals within each census
region, excluding those hospitals with approved teaching programs (that
is, those hospitals that train residents in an approved GME program as
provided in Sec. 413.75). These proposed values are based on
discharges occurring during FY 2016 (October 1, 2015 through September
30, 2016), and include bills posted to CMS' records through December
2016.
In this proposed rule, we are proposing that, in addition to
meeting other criteria, if rural hospitals with fewer than 275 beds are
to qualify for initial RRC status for cost reporting periods beginning
on or after October 1, 2017, they must have a CMI value for FY 2016
that is at least--
1.6635 (national--all urban); or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The proposed median CMI values by region are set forth in the
following table.
------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.4186
2. Middle Atlantic (PA, NJ, NY)......................... 1.5126
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.5393
4. East North Central (IL, IN, MI, OH, WI).............. 1.5921
5. East South Central (AL, KY, MS, TN).................. 1.5179
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.6346
7. West South Central (AR, LA, OK, TX).................. 1.6949
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.7614
9. Pacific (AK, CA, HI, OR, WA)......................... 1.6466
------------------------------------------------------------------------
We intend to update these proposed CMI values in the FY 2018 final
rule to reflect the updated FY 2016 MedPAR file, which will contain
data from additional bills received through March 2017.
A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are
available on the Provider Statistical and Reimbursement (PS&R) System.
In keeping with our policy on discharges, the CMI values are computed
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges criteria in each year's annual
notice of prospective payment rates for purposes of determining RRC
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the
national standard is set at 5,000 discharges. In this proposed rule,
for FY 2018, we are proposing to update the regional standards based on
discharges for urban hospitals' cost reporting periods that began
during FY 2015 (that is, October 1, 2014 through September 30, 2015),
which are the latest cost report data available at the time this
proposed rule was developed. Therefore, we are proposing that, in
addition to meeting other criteria, a hospital, if it is to qualify for
initial RRC status for cost reporting periods beginning on or after
October 1, 2017, must have, as the number of discharges for its cost
reporting period that began during FY 2015, at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located as reflected in the
following table.
------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 7,991
2. Middle Atlantic (PA, NJ, NY)......................... 10,268
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 10,503
4. East North Central (IL, IN, MI, OH, WI).............. 8,202
5. East South Central (AL, KY, MS, TN).................. 8,697
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,532
7. West South Central (AR, LA, OK, TX).................. 5,189
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 8,887
9. Pacific (AK, CA, HI, OR, WA)......................... 8,856
------------------------------------------------------------------------
We intend to update these numbers in the FY 2018 final rule based
on the latest available cost report data.
We note that the median number of discharges for hospitals in each
census region is greater than the national standard of 5,000
discharges. Therefore, under this proposed rule, 5,000 discharges is
the minimum criterion for all hospitals, except for osteopathic
hospitals for which the minimum criterion is 3,000 discharges.
E. Proposed Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Expiration of Temporary Changes to Low-Volume Hospital Payment
Policy
Under section 1886(d)(12) of the Act, as amended, most recently by
section 204 of the Medicare Access and CHIP Reauthorization Act of 2015
(MACRA), Public Law 114-10, the temporary changes in the low-volume
hospital payment policy originally provided by the Affordable Care Act
and extended through subsequent legislation are effective through FY
2017. Beginning with FY 2018, the preexisting low-volume hospital
payment adjustment and qualifying criteria, as implemented
[[Page 19937]]
in FY 2005 and discussed later in this section, will resume. We discuss
the proposed payment policies for FY 2018 in section V.E.3. of the
preamble of this proposed rule.
2. Background
Section 1886(d)(12) of the Act, as added by section 406(a) of
Public Law 108-173, provides for a payment adjustment to account for
the higher costs per discharge for low-volume hospitals under the IPPS,
effective beginning FY 2005. Sections 3125 and 10314 of the Affordable
Care Act amended section 1886(d)(12) of the Act by modifying the
definition of a low-volume hospital and the methodology for calculating
the payment adjustment for low-volume hospitals, effective only for
discharges occurring during FYs 2011 and 2012. Specifically, the
provisions of the Affordable Care Act amended the qualifying criteria
for low-volume hospitals to specify, for FYs 2011 and 2012, that a
hospital qualifies as a low-volume hospital if it is more than 15 road
miles from another subsection (d) hospital and has less than 1,600
discharges of individuals entitled to, or enrolled for, benefits under
Medicare Part A during the fiscal year. In addition, the statute, as
amended by the Affordable Care Act, provides that the low-volume
hospital payment adjustment (that is, the percentage increase) is
determined using a continuous linear sliding scale ranging from 25
percent for low-volume hospitals with 200 or fewer discharges of
individuals entitled to, or enrolled for, benefits under Medicare Part
A in the fiscal year to 0 percent for low-volume hospitals with greater
than 1,600 discharges of such individuals in the fiscal year. The
temporary changes to the low-volume hospital qualifying criteria and
the payment adjustment originally provided by the Affordable Care Act
were extended by subsequent legislation, most recently through FY 2017
by section 204 of the MACRA. (We refer readers to the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56941 through 59943) for a detailed summary of
the applicable legislation.) Under current law, beginning with FY 2018,
the preexisting low-volume hospital qualifying criteria and payment
adjustment, as implemented in FY 2005 and described in this section,
will resume. The regulations implementing the low-volume hospital
adjustment provided by section 1886(d)(12) of the Act are located at 42
CFR 412.101.
The additional payment adjustment to a low-volume hospital provided
for under section 1886(d)(12) of the Act is in addition to any payment
calculated under this section. Therefore, the additional payment
adjustment is based on the per discharge amount paid to the qualifying
hospital under section 1886 of the Act. In other words, the low-volume
add-on payment amount is based on total per discharge payments made
under section 1886 of the Act, including capital, DSH, IME, and
outliers. For hospitals paid based on the hospital-specific rate, the
low-volume add-on payment amount is based on either the Federal rate or
the hospital-specific rate, whichever results in a greater operating
IPPS payment.
Section 1886(d)(12)(C)(i) of the Act defines a low-volume hospital,
for fiscal years other than FYs 2011 through 2017, as a subsection (d)
hospital (as defined in paragraph (1)(B)) that the Secretary determines
is located more than 25 road miles from another subsection (d) hospital
and that has less than 800 discharges during the fiscal year. Section
1886(d)(12)(C)(ii) of the Act further stipulates that the term
``discharge'' means an inpatient acute care discharge of an individual,
regardless of whether the individual is entitled to benefits under
Medicare Part A. Therefore, for fiscal years other than FYs 2011
through 2017, the term ``discharge'' refers to total discharges,
regardless of payer (that is, not only Medicare discharges).
Furthermore, section 1886(d)(12)(B) of the Act requires, for discharges
occurring in FYs 2005 through 2010 and FY 2018 and subsequent years,
that the Secretary determine an applicable percentage increase for
these low-volume hospitals based on the ``empirical relationship''
between the standardized cost-per-case for such hospitals and the total
number of discharges of such hospitals and the amount of the additional
incremental costs (if any) that are associated with such number of
discharges. The statute thus mandates that the Secretary develop an
empirically justifiable adjustment based on the relationship between
costs and discharges for these low-volume hospitals. Section
1886(d)(12)(B)(iii) of the Act limits the applicable percentage
increase adjustment to no more than 25 percent.
Based on an analysis we conducted for the FY 2005 IPPS final rule
(69 FR 49099 through 49102), a 25-percent low-volume adjustment to all
qualifying hospitals with less than 200 discharges was found to be most
consistent with the statutory requirement to provide relief to low-
volume hospitals where there is empirical evidence that higher
incremental costs are associated with low numbers of total discharges.
In the FY 2006 IPPS final rule (70 FR 47432 through 47434), we stated
that multivariate analyses supported the existing low-volume adjustment
implemented in FY 2005.
3. Proposed Payment Adjustment for FY 2018 and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, beginning with
FY 2018, the low-volume hospital definition and payment adjustment
methodology will revert back to the statutory requirements that were in
effect prior to the amendments made by the Affordable Care Act and
extended by subsequent legislation. Therefore, effective for FY 2018
and subsequent years, in order to qualify as a low-volume hospital, a
subsection (d) hospital must be more than 25 road miles from another
subsection (d) hospital and have less than 200 discharges (that is,
less than 200 discharges total, including both Medicare and non-
Medicare discharges) during the fiscal year. As discussed earlier, the
statute specifies that a low-volume hospital must have less than 800
discharges during the fiscal year. However, as required by section
1886(d)(12)(B)(i) of the Act and as discussed earlier, the Secretary
has developed an empirically justifiable payment adjustment based on
the relationship, for IPPS hospitals with less than 800 discharges,
between the additional incremental costs (if any) that are associated
with a particular number of discharges. Based on an analysis we
conducted for the FY 2005 IPPS final rule (69 FR 49099 through 49102),
a 25-percent low-volume adjustment to all qualifying hospitals with
less than 200 discharges was found to be most consistent with the
statutory requirement to provide relief for low-volume hospitals where
there is empirical evidence that higher incremental costs are
associated with low numbers of total discharges. (Under the policy we
established in that same final rule, hospitals with between 200 and 799
discharges do not receive a low-volume hospital adjustment.)
As described earlier, for FYs 2005 through 2010 and FY 2018 and
subsequent years, the discharge determination is made based on the
hospital's number of total discharges, that is, Medicare and non-
Medicare discharges. The hospital's most recently submitted cost report
is used to determine if the hospital meets the discharge criterion to
receive the low-volume payment adjustment in the current year (Sec.
412.101(b)(2)(i)). We use cost report data to determine if a hospital
meets the discharge criterion because this is the best available data
source that includes information on
[[Page 19938]]
both Medicare and non-Medicare discharges. We note that, for FYs 2011
through 2017, we used the most recently available MedPAR data to
determine the hospital's Medicare discharges because only Medicare
discharges were used to determine if a hospital met the discharge
criterion for those years.
For FY 2018 and for subsequent fiscal years, in addition to a
discharge criterion, the eligibility for the low-volume payment
adjustment is also dependent upon the hospital meeting the mileage
criterion specified at Sec. 412.101(b)(2)(i). Specifically, to meet
the mileage criterion to qualify for the low-volume payment adjustment
for FY 2018 and subsequent fiscal years, a hospital must be located
more than 25 road miles from the nearest subsection (d) hospital. We
define, at Sec. 412.101(a), the term ``road miles'' to mean ``miles''
as defined at Sec. 412.92(c)(1) (75 FR 50238 through 50275 and 50414).
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414) and subsequent rulemaking, most recently in the FY 2017
IPPS/LTCH PPS final rule (81 FR 56942 through 56943), we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment. In order to qualify for the low-volume hospital payment
adjustment, a hospital must provide to its MAC sufficient evidence to
document that it meets the discharge and distance requirements. The MAC
will determine, based on the most recent data available, if the
hospital qualifies as a low-volume hospital, so that the hospital will
know in advance whether or not it will receive a payment adjustment.
The MAC and CMS may review available data, in addition to the data the
hospital submits with its request for low-volume hospital status, in
order to determine whether or not the hospital meets the qualifying
criteria.
In order to receive a low-volume hospital payment adjustment under
Sec. 412.101, a hospital must notify and provide documentation to its
MAC that it meets the mileage criterion. The use of a Web-based mapping
tool as part of documenting that the hospital meets the mileage
criterion for low-volume hospitals is acceptable. The MAC will
determine if the information submitted by the hospital, such as the
name and street address of the nearest hospitals, location on a map,
and distance (in road miles, as defined in the regulations at Sec.
412.101(a)) from the hospital requesting low-volume hospital status, is
sufficient to document that it meets the mileage criterion. If not, the
MAC will follow up with the hospital to obtain additional necessary
information to determine whether or not the hospital meets the low-
volume mileage criterion. In addition, the MAC will refer to the
hospital's most recently submitted cost report to determine whether or
not the hospital meets the discharge criterion. A hospital should refer
to its most recently submitted cost report for total discharges
(Medicare and non-Medicare) in order to decide whether or not to apply
for low-volume hospital status for a particular fiscal year. A hospital
must continue to meet the qualifying criteria at Sec. 412.101(b)(2)(i)
as a low-volume hospital (that is, the discharge criterion and the
mileage criterion) in order to receive the payment adjustment in that
year; that is, low-volume hospital status is not based on a ``one-
time'' qualification (75 FR 50238 through 50275).
In order to be a low-volume hospital in FY 2018 and subsequent
fiscal years, in accordance with our previously established procedure,
a hospital must make a written request for low-volume hospital status
that is received by its MAC by September 1 immediately preceding the
start of the Federal fiscal year for which the hospital is applying for
low-volume hospital status in order for the 25-percent, low-volume,
add-on payment adjustment to be applied to payments for its discharges
for the fiscal year beginning on or after October 1 immediately
following the request (that is, the start of the Federal fiscal year).
For a hospital whose request for low-volume hospital status is received
after September 1, if the MAC determines the hospital meets the
criteria to qualify as a low-volume hospital, the MAC will apply the
25-percent, low-volume, add-on payment adjustment to determine payment
for the hospital's discharges for the fiscal year, effective
prospectively within 30 days of the date of the MAC's low-volume status
determination.
Specifically, for FY 2018, a hospital must make a written request
for low-volume hospital status that is received by its MAC no later
than September 1, 2017, in order for the 25-percent, low-volume, add-on
payment adjustment to be applied to payments for its discharges
beginning on or after October 1, 2017 (through September 30, 2018).
Under this procedure, a hospital that qualified for the low-volume
hospital payment adjustment for FY 2017 may continue to receive a low-
volume hospital payment adjustment for FY 2018 without reapplying if it
meets both the discharge criterion and the mileage criterion applicable
for FY 2018. As in previous years, we are proposing that such a
hospital must send written verification that is received by its MAC no
later than September 1, 2017, stating that it meets the mileage
criterion applicable for FY 2018. For FY 2018, we are further proposing
that this written verification must also state, based upon the most
recently submitted cost report, that the hospital meets the discharge
criterion applicable for FY 2018 (that is, less than 200 discharges
total, including both Medicare and non-Medicare discharges). If a
hospital's request for low-volume hospital status for FY 2018 is
received after September 1, 2017, and if the MAC determines the
hospital meets the criteria to qualify as a low-volume hospital, the
MAC will apply the 25-percent, low-volume, add-on payment adjustment to
determine the payment for the hospital's FY 2018 discharges, effective
prospectively within 30 days of the date of the MAC's low-volume
hospital status determination. We note that this process mirrors our
established application process but is updated to ensure that providers
currently receiving the low-volume hospital payment adjustment verify
that they meet both the mileage criterion and the discharge criterion
applicable for FY 2018 to continue receiving the adjustment for FY
2018. For additional information on our established application process
for the low-volume hospital payment adjustment, we refer readers to the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56942 through 56943).
In the FY 2016 IPPS interim final rule with comment period (80 FR
49594 through 49597 and 49767), we made conforming changes to the
regulations at 42 CFR 412.101 to reflect the extension of the changes
to the qualifying criteria and the payment adjustment methodology for
low-volume hospitals through FY 2017 in accordance with section 204 of
the MACRA. Under these revisions, beginning with FY 2018, consistent
with current law, the low-volume hospital qualifying criteria and
payment adjustment methodology will return to the criteria and
methodology that were in effect prior to the amendments made by the
Affordable Care Act (that is, the low-volume hospital payment policy in
effect for FYs 2005 through 2010). Therefore, no further revisions to
the policy or to the regulations at Sec. 412.101 are required to
conform them to the statutory requirement that the low-volume hospital
policy in effect prior to the Affordable Care Act will again be in
effect for FY 2018 and subsequent years.
For this reason, we are not proposing specific amendments to the
regulations at Sec. 412.101 to reflect the expiration of the temporary
changes to the low-volume hospital payment adjustment policy originally
provided for by the
[[Page 19939]]
Affordable Care Act. However, we are proposing that if these temporary
changes to the low-volume hospital payment policy were to be extended
by law, similar to extensions provided through FY 2013, by the American
Taxpayer Relief Act of 2012 (ATRA), Public Law 112-240; through March
31, 2014, by the Pathway for SGR Reform Act of 2013, Public Law 113-
167; through March 31, 2015, by the Protecting Access to Medicare Act
of 2014 (PAMA), Public Law 113-93; and most recently through FY 2017,
by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA),
Public Law 114-10, we would make conforming changes to the regulations
at Sec. 412.101(b) through (d), as appropriate, to reflect any such
extension.
These conforming changes would only be made if the temporary
changes to the low-volume hospital payment adjustment policy were to be
extended by statute beyond the current expiration date of September 30,
2017. If these temporary changes were to be extended by statute, for FY
2018, consistent with our historical policy and our implementation of
the prior extensions, qualifying low-volume hospitals and their payment
adjustment would be determined using the most recently available
Medicare discharge data available at the time of the final rule, which
we expect would be from the March 2017 update of the FY 2016 MedPAR
file. Consistent with past practice, if these temporary changes were to
be extended for FY 2018 before the development of the final rule, we
would list the subsection (d) hospitals with fewer than 1,600 Medicare
discharges based on the claims data from the March 2017 update of the
FY 2016 MedPAR file and their potential low-volume hospital payment
adjustment for FY 2018 in Table 14 listed in the Addendum of the final
rule. In such an event, hospitals would still submit requests or
verification to the MAC, as outlined earlier, but updated as needed to
reflect the applicable discharge and mileage criteria in accordance
with any such extension for FY 2018.
4. Proposed Parallel Low-Volume Hospital Payment Adjustment Regarding
Hospitals Operated by the Indian Health Services (IHS) or a Tribe
As previously stated, section 1886(d)(12)(C) of the Act and our
regulations at 42 CFR 412.101(b)(2) require that, in order to qualify
for the low-volume hospital payment adjustment, a hospital must be
located more than a specified number of miles from the nearest
subsection (d) hospital (referred to as the mileage criterion). Section
1886(d)(1)(B) of the Act defines a ``subsection (d) hospital'' as a
hospital located in one of the 50 States or District of Columbia, other
than the specified excluded types of hospitals. As stated in prior
rulemaking (for example, 79 FR 50153), CMS considers IHS and Tribal
hospitals to be subsection (d) hospitals. However, given the unique
nature of IHS and Tribal hospitals and the populations they serve, as
discussed below, we believe it would be appropriate to provide
additional flexibility in determining eligibility for the low-volume
hospital payment adjustment for IHS and non-IHS hospitals and Tribal
hospitals that are located less than the specified mileage from one
another. Specifically, we are proposing that, for an IHS or Tribal
hospital, only its proximity to other IHS or Tribal hospitals would be
used to determine if the mileage criterion is met. Similarly, for a
non-IHS hospital, only its proximity to other non-IHS hospitals would
be used to determine if the mileage criterion is met.
Except for emergencies and a few other limited special cases, those
individuals who are not members of a Federally recognized Tribe are not
eligible for treatment at IHS or Tribal hospitals. Therefore, such a
hospital is not a valid option for the general Medicare population,
including local residents who are not members of a Federally recognized
Tribe or not otherwise eligible for IHS services. Therefore, we believe
it would be appropriate to not consider IHS and Tribal hospitals when
evaluating whether a non-IHS hospital meets the mileage criterion.
Likewise, we believe it would be appropriate to not consider non-
IHS hospitals when evaluating whether an IHS or Tribal hospital meet
the mileage criterion. The principal mission of the IHS is the
provision of health care to American Indians and Alaska Natives
throughout the United States. In carrying out that mission, IHS
operates under two primary authorizing statutes. The first statute, the
Snyder Act, authorizes IHS to expend such moneys as Congress may
determine from time to time appropriate for the conservation of the
health of American Indians or Alaska Natives. We refer readers to 25
U.S.C. 13 (providing that the Bureau of Indian Affairs (BIA) will
expend funds as appropriated for, among other things, the conservation
of health of American Indians and Alaska Natives); and 42 U.S.C.
2001(a) (transferring the responsibility for American Indian and Alaska
Native health care from BIA to HHS). The second statute, the Indian
Health Care Improvement Act (IHCIA), established IHS as an agency
within the Public Health Service of HHS and provides authority for
numerous programs to address particular health initiatives for American
Indians and Alaska Natives, such as alcohol and substance abuse and
diabetes (25 U.S.C. 1601 et seq.).
IHS and Tribal hospitals are charged with addressing the health of
American Indians and Alaska Natives and are uniquely situated to
provide services to this population. For this reason, we believe it
would be appropriate to not consider the non-IHS hospitals when
evaluating whether an IHS or Tribal hospital meets the mileage
criterion.
Because IHS and Tribal hospitals are subsection (d) hospitals, we
are proposing to use our authority under section 1886(d)(5)(I)(i) of
the Act to provide an adjustment equal to the applicable low-volume
adjustment provided for under section 1886(d)(12) of the Act for an IHS
or Tribal hospital whose sole disqualifier for the low-volume hospital
adjustment is its proximity to a non-IHS hospital, and for a non-IHS
hospital whose sole disqualifier is its proximity to an IHS or Tribal
hospital. Such an adjustment would provide that, practically speaking,
an IHS or Tribal hospital would be able to receive a low-volume
hospital adjustment based on its distance to the nearest IHS or Tribal
hospital, and a non-IHS hospital would be able to qualify to receive a
low-volume hospital adjustment based on its distance to the nearest
non-IHS hospital. We believe it is appropriate to apply this authority
here, given the unique characteristics of IHS and Tribal hospitals, as
discussed above. To implement this proposed adjustment, we are
proposing to revise 42 CFR 412.101 by adding paragraph (e) to provide
that, for discharges occurring in FY 2018 and subsequent years, only
the distance between IHS or Tribal hospitals would be considered when
assessing whether an IHS or Tribal hospital meets the mileage criterion
under Sec. 412.101(b)(2). Similarly, only the distance between non-IHS
hospitals would be considered when assessing whether a non-IHS hospital
meets the mileage criterion under Sec. 412.101(b)(2).
F. Indirect Medical Education (IME) Payment Adjustment Factor for FY
2018 (Sec. 412.105)
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals
[[Page 19940]]
relative to nonteaching hospitals. The payment amount is determined by
use of a statutorily specified adjustment factor. The regulations
regarding the calculation of this additional payment, known as the IME
adjustment, are located at Sec. 412.105. We refer readers to the FY
2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full discussion of
the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges
occurring during FY 2008 and fiscal years thereafter, the IME formula
multiplier is 1.35. Accordingly, for discharges occurring during FY
2018, the formula multiplier is 1.35. We estimate that application of
this formula multiplier for the FY 2018 IME adjustment will result in
an increase in IPPS payment of 5.5 percent for every approximately 10
percent increase in the hospital's resident to bed ratio.
G. Proposed Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) for FY 2018 (Sec. 412.106)
1. General Discussion
Section 1886(d)(5)(F) of the Act provides for additional Medicare
payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's geographic
designation, the number of beds in the hospital, and the level of the
hospital's disproportionate patient percentage (DPP). A hospital's DPP
is the sum of two fractions: The ``Medicare fraction'' and the
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI
fraction'' or ``SSI ratio'') is computed by dividing the number of the
hospital's inpatient days that are furnished to patients who were
entitled to both Medicare Part A and Supplemental Security Income (SSI)
benefits by the hospital's total number of patient days furnished to
patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients who, for such days, were eligible for
Medicaid, but were not entitled to benefits under Medicare Part A, by
the hospital's total number of inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the
statutory references to ``days'' in section 1886(d)(5)(F) of the Act
have been interpreted to apply only to hospital acute care inpatient
days. Regulations located at Sec. 412.106 govern the Medicare DSH
payment adjustment and specify how the DPP is calculated as well as how
beds and patient days are counted in determining the Medicare DSH
payment adjustment. Under Sec. 412.106(a)(1)(i), the number of beds
for the Medicare DSH payment adjustment is determined in accordance
with bed counting rules for the IME adjustment under Sec. 412.105(b).
Section 3133 of the Patient Protection and Affordable Care Act, as
amended by section 10316 of the same Act and section 1104 of the Health
Care and Education Reconciliation Act (Pub. L. 111-152), added a
section 1886(r) to the Act that modifies the methodology for computing
the Medicare DSH payment adjustment. (For purposes of this proposed
rule, we refer to these provisions collectively as section 3133 of the
Affordable Care Act.) Beginning with discharges in FY 2014, hospitals
that qualify for Medicare DSH payments under section 1886(d)(5)(F) of
the Act receive 25 percent of the amount they previously would have
received under the statutory formula for Medicare DSH payments. This
provision applies equally to hospitals that qualify for DSH payments
under section 1886(d)(5)(F)(i)(I) of the Act and those hospitals that
qualify under the Pickle method under section 1886(d)(5)(F)(i)(II) of
the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals who are uninsured, is
available to make additional payments to each hospital that qualifies
for Medicare DSH payments and that has uncompensated care. The payments
to each hospital for a fiscal year are based on the hospital's amount
of uncompensated care for a given time period relative to the total
amount of uncompensated care for that same time period reported by all
hospitals that receive Medicare DSH payments for that fiscal year.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for FY 2014 and each subsequent
fiscal year, a subsection (d) hospital that would otherwise receive DSH
payments made under section 1886(d)(5)(F) of the Act receives two
separately calculated payments. Specifically, section 1886(r)(1) of the
Act provides that the Secretary shall pay to such subsection (d)
hospital (including a Pickle hospital) 25 percent of the amount the
hospital would have received under section 1886(d)(5)(F) of the Act for
DSH payments, which represents the empirically justified amount for
such payment, as determined by the MedPAC in its March 2007 Report to
Congress. We refer to this payment as the ``empirically justified
Medicare DSH payment.''
In addition to this empirically justified Medicare DSH payment,
section 1886(r)(2) of the Act provides that, for FY 2014 and each
subsequent fiscal year, the Secretary shall pay to such subsection (d)
hospital an additional amount equal to the product of three factors.
The first factor is the difference between the aggregate amount of
payments that would be made to subsection (d) hospitals under section
1886(d)(5)(F) of the Act if subsection (r) did not apply and the
aggregate amount of payments that are made to subsection (d) hospitals
under section 1886(r)(1) of the Act for each fiscal year. Therefore,
this factor amounts to 75 percent of the payments that would otherwise
be made under section 1886(d)(5)(F) of the Act.
The second factor is, for FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who were uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), and the percent
of individuals who were uninsured in the most recent period for which
data are available (as so calculated) minus 0.1 percentage point for FY
2014, and minus 0.2 percentage point for FYs 2015 through 2017. For FYs
2014 through 2017, the baseline for the estimate of the change in
uninsurance is fixed by the
[[Page 19941]]
most recent estimate of the Congressional Budget Office before the
final vote on the Health Care and Education Reconciliation Act of 2010,
which is contained in a March 20, 2010 letter from the Director of the
Congressional Budget Office to the Speaker of the House. (The March 20,
2010 letter is available for viewing on the following Web site: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)
For FY 2018 and subsequent fiscal years, the second factor is 1
minus the percent change in the percent of individuals who are
uninsured, as determined by comparing the percent of individuals who
were uninsured in 2013 (as estimated by the Secretary, based on data
from the Census Bureau or other sources the Secretary determines
appropriate, and certified by the Chief Actuary of CMS), and the
percent of individuals who were uninsured in the most recent period for
which data are available (as so estimated and certified), minus 0.2
percentage point for FYs 2018 and 2019.
The third factor is a percent that, for each subsection (d)
hospital, represents the quotient of the amount of uncompensated care
for such hospital for a period selected by the Secretary (as estimated
by the Secretary, based on appropriate data), including the use of
alternative data where the Secretary determines that alternative data
are available which are a better proxy for the costs of subsection (d)
hospitals for treating the uninsured, and the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act. Therefore, this third factor
represents a hospital's uncompensated care amount for a given time
period relative to the uncompensated care amount for that same time
period for all hospitals that receive Medicare DSH payments in the
applicable fiscal year, expressed as a percent.
For each hospital, the product of these three factors represents
its additional payment for uncompensated care for the applicable fiscal
year. We refer to the additional payment determined by these factors as
the ``uncompensated care payment.''
Section 1886(r) of the Act applies to FY 2014 and each subsequent
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647) and the FY 2014 IPPS interim final rule with comment
period (78 FR 61191 through 61197), we set forth our policies for
implementing the required changes to the Medicare DSH payment
methodology made by section 3133 of the Affordable Care Act for FY
2014. In those rules, we noted that, because section 1886(r) of the Act
modifies the payment required under section 1886(d)(5)(F) of the Act,
it affects only the DSH payment under the operating IPPS. It does not
revise or replace the capital IPPS DSH payment provided under the
regulations at 42 CFR part 412, subpart M, which were established
through the exercise of the Secretary's discretion in implementing the
capital IPPS under section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
no administrative or judicial review under section 1869, section 1878,
or otherwise of any estimate of the Secretary for purposes of
determining the factors described in section 1886(r)(2) of the Act or
of any period selected by the Secretary for the purpose of determining
those factors. Therefore, there is no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or the periods selected
in order to develop such estimates.
2. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
As indicated earlier, the payment methodology under section 3133 of
the Affordable Care Act applies to ``subsection (d) hospitals'' that
would otherwise receive a DSH payment made under section 1886(d)(5)(F)
of the Act. Therefore, hospitals must receive empirically justified
Medicare DSH payments in a fiscal year in order to receive an
additional Medicare uncompensated care payment for that year.
Specifically, section 1886(r)(2) of the Act states that, in addition to
the payment made to a subsection (d) hospital under section 1886(r)(1)
of the Act, the Secretary shall pay to such subsection (d) hospitals an
additional amount. Because section 1886(r)(1) of the Act refers to
empirically justified Medicare DSH payments, the additional payment
under section 1886(r)(2) of the Act is limited to hospitals that
receive empirically justified Medicare DSH payments in accordance with
section 1886(r)(1) of the Act for the applicable fiscal year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2014 IPPS interim final rule with comment period (78 FR 61193), we
provided that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in a fiscal year will not receive
uncompensated care payments for that year. We also specified that we
would make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status for the applicable fiscal year (using the most recent data that
are available). We indicated that our final determination on the
hospital's eligibility for uncompensated care payments will be based on
the hospital's actual DSH status at cost report settlement for that
payment year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2015 IPPS/LTCH PPS final rule (79 FR 50006), we specified our policies
for several specific classes of hospitals within the scope of section
1886(r) of the Act. We refer readers to those two final rules for a
detailed discussion of our policies. In summary, we specified the
following:
Subsection (d) Puerto Rico hospitals that are eligible for
DSH payments also are eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under the new
payment methodology (78 FR 50623 and 79 FR 50006).
Maryland hospitals are not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1886(r) of the Act because they are
not paid under the IPPS. As discussed in the FY 2015 IPPS/LTCH PPS
final rule (79 FR 50007), effective January 1, 2014, the State of
Maryland elected to no longer have Medicare pay Maryland hospitals in
accordance with section 1814(b)(3) of the Act and entered into an
agreement with CMS that Maryland hospitals will be paid under the
Maryland All-Payer Model. However, under the Maryland All-Payer Model,
Maryland hospitals still are not paid under the IPPS. Therefore, they
remain ineligible to receive empirically justified Medicare DSH
payments or uncompensated care payments under section 1886(r) of the
Act.
SCHs that are paid under their hospital-specific rate are
not eligible for Medicare DSH payments. SCHs that are paid under the
IPPS Federal rate receive interim payments based on what we estimate
and project their DSH status to be prior to the beginning of the
Federal fiscal year (based on the best available data at that time)
subject to settlement through the cost report, and if they receive
interim empirically justified Medicare DSH payments in a fiscal year,
they also will receive interim uncompensated care payments for that
fiscal year on a per discharge basis, subject as well to settlement
through the cost report. Final eligibility determinations will be made
at the end
[[Page 19942]]
of the cost reporting period at settlement, and both interim
empirically justified Medicare DSH payments and uncompensated care
payments will be adjusted accordingly (78 FR 50624 and 79 FR 50007).
MDHs are paid based on the IPPS Federal rate or, if
higher, the IPPS Federal rate plus 75 percent of the amount by which
the Federal rate is exceeded by the updated hospital-specific rate from
certain specified base years (76 FR 51684). The IPPS Federal rate used
in the MDH payment methodology is the same IPPS Federal rate that is
used in the SCH payment methodology. Section 205 of the Medicare Access
and CHIP Reauthorization Act of 2015 (MACRA), Public Law 114-10,
enacted April 16, 2015, extended the MDH program for discharges on or
after April 1, 2015, through September 30, 2017. Because MDHs are paid
based on the IPPS Federal rate, for FY 2017, MDHs continue to be
eligible to receive empirically justified Medicare DSH payments and
uncompensated care payments if their DPP is at least 15 percent. We
apply the same process to determine MDHs' eligibility for empirically
justified Medicare DSH and uncompensated care payments, as we do for
all other IPPS hospitals, through September 30, 2017. We note that
there has not been legislation at the time of development of this
proposed rule that would extend the MDH program beyond September 30,
2017. However, if the MDH program were to be extended beyond its
current expiration date, similar to how it was extended under MACRA,
MDHs would continue to be paid based on the IPPS Federal rate or, if
higher, the IPPS Federal rate plus 75 percent of the amount by which
the Federal rate is exceeded by the updated hospital-specific rate from
certain specified base years. Accordingly, if the MDH program were to
be extended beyond its current expiration date of September 30, 2017,
we would continue to make a determination concerning eligibility for
interim uncompensated care payments based on each hospital's estimated
DSH status for the applicable fiscal year (using the most recent data
that are available). Our final determination on the hospital's
eligibility for uncompensated care payments would be based on the
hospital's actual DSH status at cost report settlement for that payment
year. In addition, as we do for all IPPS hospitals, we would calculate
a numerator for Factor 3 for all MDHs, regardless of whether they are
projected to be eligible for Medicare DSH payments during the fiscal
year, but the denominator for Factor 3 would be based on the
uncompensated care data from the hospitals that we have projected to be
eligible for Medicare DSH payments during the fiscal year.
These policies for MDHs would only apply in FY 2018 if the MDH
program is extended by statute, beyond its current expiration date of
September 30, 2017.
IPPS hospitals that have elected to participate in the
Bundled Payments for Care Improvement initiative and IPPS hospitals
that are participating in the mandatory Comprehensive Care for Joint
Replacement Model, the Episde Payment Models, or the Cardiac
Rehabilitation Incentive Payment Model continue to be paid under the
IPPS (77 FR 53342) and, therefore, are eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments (78 FR
50625 and 79 FR 50008).
Hospitals Participating in the Rural Community Hospital
Demonstration Program are not eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under section
1886(r) of the Act because they are not paid under the IPPS (78 FR
50625 and 79 FR 50008). The Rural Community Hospital Demonstration
Program was originally authorized for a 5-year period by section 410A
of the Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) (Pub. L. 108-173), and extended for another 5-year period
by sections 3123 and 10313 of the Affordable Care Act (Pub. L. 114-
255). The period of performance for this 5-year extension period ended
December 31, 2016. Section 15003 of the 21st Century Cures Act (Pub. L.
114-255), enacted December 13, 2016, again amended section 410A of
Public Law 108-173 to require a 10-year extension period (in place of
the 5-year extension required by the Affordable Care Act), to begin on
the date immediately following the last day of the initial 5-year
period. Section 15003 also requires that, no later than 120 days after
enactment of Public Law 114-255, the Secretary issue a solicitation to
select additional hospitals to participate in the demonstration program
for the second 5 years of the 10-year extension period so long as the
maximum number of 30 hospitals stipulated by the Affordable Care Act is
not exceeded. (We refer readers to section V.L. of the preamble of this
proposed rule for a full discussion of the provisions of section 15003
of Public Law 114-255 and our proposals for implementation.) As of the
time of development of this proposed rule, the entire set of hospitals
that will participate in the second 5 years of the extension period is
unknown. However, we intend to apply a similar payment methodology
during the remainder of the extension period. As a result, we expect
that hospitals participating in the demonstration will not receive
empirically justified DSH payments, and that they will be excluded from
receiving interim and final uncompensated care payments for FY 2018 and
subsequent fiscal years for the duration of the second 5 years of the
extension period.
3. Empirically Justified Medicare DSH Payments
As we have discussed earlier, section 1886(r)(1) of the Act
requires the Secretary to pay 25 percent of the amount of the Medicare
DSH payment that would otherwise be made under section 1886(d)(5)(F) of
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the
Act merely requires the program to pay a designated percentage of these
payments, without revising the criteria governing eligibility for DSH
payments or the underlying payment methodology, we stated in the FY
2014 IPPS/LTCH PPS final rule that we did not believe that it was
necessary to develop any new operational mechanisms for making such
payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50626), we implemented this provision by advising MACs to simply adjust
the interim claim payments to the requisite 25 percent of what would
have otherwise been paid. We also made corresponding changes to the
hospital cost report so that these empirically justified Medicare DSH
payments can be settled at the appropriate level at the time of cost
report settlement. We provided more detailed operational instructions
and cost report instructions following issuance of the FY 2014 IPPS/
LTCH PPS final rule that are available on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
4. Uncompensated Care Payments
As we discussed earlier, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
uncompensated care payment is the product of three factors. These three
factors represent our estimate of 75 percent of the amount of Medicare
DSH payments that would otherwise have been paid, an adjustment to this
amount for the percent change in the national rate of uninsurance
compared to the rate of
[[Page 19943]]
uninsurance in 2013, and each eligible hospital's estimated
uncompensated care amount relative to the estimated uncompensated care
amount for all eligible hospitals. Below we discuss the data sources
and methodologies for computing each of these factors, our final
policies for FYs 2014 through 2017, and our proposed policies for FY
2018.
a. Proposed Calculation of Factor 1 for FY 2018
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that this factor is equal to the difference between (1)
the aggregate amount of payments that would be made to subsection (d)
hospitals under section 1886(d)(5)(F) of the Act if section 1886(r) of
the Act did not apply for such fiscal year (as estimated by the
Secretary); and (2) the aggregate amount of payments that are made to
subsection (d) hospitals under section 1886(r)(1) of the Act for such
fiscal year (as so estimated). Therefore, section 1886(r)(2)(A)(i) of
the Act represents the estimated Medicare DSH payments that would have
been made under section 1886(d)(5)(F) of the Act if section 1886(r) of
the Act did not apply for such fiscal year. Under a prospective payment
system, we would not know the precise aggregate Medicare DSH payment
amount that would be paid for a Federal fiscal year until cost report
settlement for all IPPS hospitals is completed, which occurs several
years after the end of the Federal fiscal year. Therefore, section
1886(r)(2)(A)(i) of the Act provides authority to estimate this amount,
by specifying that, for each fiscal year to which the provision
applies, such amount is to be estimated by the Secretary. Similarly,
section 1886(r)(2)(A)(ii) of the Act represents the estimated
empirically justified Medicare DSH payments to be made in a fiscal
year, as prescribed under section 1886(r)(1) of the Act. Again, section
1886(r)(2)(A)(ii) of the Act provides authority to estimate this
amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for the
fiscal year, in the absence of the new payment provision; and (2) the
amount of empirically justified Medicare DSH payments that are made for
the fiscal year, which takes into account the requirement to pay 25
percent of what would have otherwise been paid under section
1886(d)(5)(F) of the Act. In other words, this factor represents our
estimate of 75 percent (100 percent minus 25 percent) of our estimate
of Medicare DSH payments that would otherwise be made, in the absence
of section 1886(r) of the Act, for the fiscal year.
As we did for FY 2017, in this FY 2018 IPPS/LTCH PPS proposed rule,
in order to determine Factor 1 in the uncompensated care payment
formula for FY 2018, we are proposing to continue the policy
established in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50628
through 50630) and in the FY 2014 IPPS interim final rule with comment
period (78 FR 61194) of determining Factor 1 by developing estimates of
both the aggregate amount of Medicare DSH payments that would be made
in the absence of section 1886(r)(1) of the Act and the aggregate
amount of empirically justified Medicare DSH payments to hospitals
under 1886(r)(1) of the Act. These estimates will not be revised or
updated after we know the final Medicare DSH payments for FY 2018.
Therefore, in order to determine the two elements of proposed
Factor 1 for FY 2018 (Medicare DSH payments prior to the application of
section 1886(r)(1) of the Act, and empirically justified Medicare DSH
payments after application of section 1886(r)(1) of the Act), for this
proposed rule, we used the most recently available projections of
Medicare DSH payments for the fiscal year, as calculated by CMS' Office
of the Actuary using the most recently filed Medicare hospital cost
report with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File.
For purposes of calculating proposed Factor 1 and modeling the
impact of this FY 2018 IPPS/LTCH PPS proposed rule, we used the Office
of the Actuary's January 2017 Medicare DSH estimates, which are based
on data from the December 2016 update of the Medicare Hospital Cost
Report Information System (HCRIS) and the FY 2017 IPPS/LTCH PPS final
rule IPPS Impact file, published in conjunction with the publication of
the FY 2017 IPPS/LTCH PPS final rule. Because SCHs that are projected
to be paid under their hospital-specific rate are excluded from the
application of section 1886(r) of the Act, these hospitals also were
excluded from the January 2017 Medicare DSH estimates. Furthermore,
because section 1886(r) of the Act specifies that the uncompensated
care payment is in addition to the empirically justified Medicare DSH
payment (25 percent of DSH payments that would be made without regard
to section 1886(r) of the Act), Maryland hospitals participating in the
Maryland All-Payer Model that do not receive DSH payments were also
excluded from the Office of the Actuary's January 2017 Medicare DSH
estimates. Hospitals that had been participating in the Rural Community
Hospital Demonstration Program through December 31, 2016 were included
in these estimates. (As discussed earlier, the Affordable Care Act
authorized a 5-year extension period for the demonstration, which ended
December 31, 2016.) The demonstration was extended for an additional 5
years by section 15003 of Public Law 114-255. Although the hospitals
that will participate in the second 5 years of the extension period had
not been determined at the time of development of this proposed rule,
we intend to apply a similar payment methodology during the second 5
years of the extension period as for the earlier periods of the
demonstration. Therefore, hospitals participating in the demonstration
would not be eligible to receive DSH payments. If the hospitals
participating in the second 5 years of the extension period are known
prior to the development of the Medicare DSH estimates for the FY 2018
final rule, these hospitals would be excluded from the Office of the
Actuary's final Medicare DSH estimates for FY 2018.
For this proposed rule, using the data sources discussed above, the
Office of the Actuary used the most recently submitted Medicare cost
report data to identify Medicare DSH payments and the most recent
Medicare DSH payment adjustments and applied inflation updates and
assumptions for future changes in utilization and case-mix to estimate
Medicare DSH payments for the upcoming fiscal year. The January 2017
Office of the Actuary estimate for Medicare DSH payments for FY 2018,
without regard to the application of section 1886(r)(1) of the Act, is
approximately $16.003 billion. This estimate excludes Maryland
hospitals participating in the Maryland All-Payer Model and SCHs paid
under their hospital-specific payment rate. Therefore, based on the
January 2017 estimate, the estimate for empirically justified Medicare
DSH payments for FY 2018, with the application of section 1886(r)(1) of
the Act, is approximately $4.001 billion (or 25 percent of the total
amount of estimated Medicare DSH payments for FY 2018). Under Sec.
412.106(g)(1)(i) of the regulations, Factor 1 is the difference between
these two estimates of the Office of the Actuary. Therefore, in this
proposed rule, we are proposing that Factor 1 for
[[Page 19944]]
FY 2018 is $12,001,915,095.04, which is equal to 75 percent of the
total amount of estimated Medicare DSH payments for FY 2018
($16,002,553,460.05 minus $4,000,638,365.01).
The Office of the Actuary's estimates for FY 2018 for this proposed
rule began with a baseline of $12.405 billion in Medicare DSH
expenditures for FY 2014. The following table shows the factors applied
to update this baseline through the current estimate for FY 2018:
Factors Applied for FY 2015 Through FY 2018 To Estimate Medicare DSH Expenditures Using 2014 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated DSH
FY Update Discharge Case-mix Other Total payment (in
billions) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
2015.................................................... 1.014 1.0068 1.005 1.0493 1.076581 $13.355
2016.................................................... 1.009 0.9757 1.027 1.0689 1.080724 14.433
2017.................................................... 1.0015 1.0058 1.005 1.0535 1.066506 15.393
2018.................................................... 1.022088 1.0188 1.005 0.9934 1.039603 16.003
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounded.
In this table, the discharge column shows the increase in the
number of Medicare fee-for-service (FFS) inpatient hospital discharges.
The figures for FY 2015 are based on Medicare claims data that have
been adjusted by a completion factor. The discharge figure for FY 2016
is based on preliminary data for 2016. The discharge figures for FYs
2017 and 2018 are assumptions based on recent trends recovering back to
the long-term trend and assumptions related to how many beneficiaries
will be enrolled in Medicare Advantage (MA) plans. The case-mix column
shows the increase in case-mix for IPPS hospitals. The case-mix figures
for FY 2015 are based on actual data adjusted by a completion factor.
The FY 2016 increase is based on preliminary data adjusted by a
completion factor. The FYs 2017 and 2018 increases are based on the
recommendation of the 2010-2011 Medicare Technical Review Panel. The
``Other'' column shows the increase in other factors that contribute to
the Medicare DSH estimates. These factors include the difference
between the total inpatient hospital discharges and the IPPS
discharges, and various adjustments to the payment rates that have been
included over the years but are not reflected in the other columns
(such as the change in rates for the 2-midnight stay policy). In
addition, the ``Other'' column includes a factor for the Medicaid
expansion due to the Affordable Care Act. In the past, commenters have
contended that the ``Other'' column understates the effect of the
Medicaid expansion. The factor for Medicaid expansion was developed
using public information and statements for each State regarding its
intent to implement the expansion. Based on this information, it is
assumed that 50 percent of all individual who were potentially newly
eligible Medicaid enrollees in 2016 resided in States that had elected
to expand Medicaid eligibility and, for 2017 and thereafter, that 55
percent of such individuals would reside in expansion States. In the
future, these assumptions may change based on actual participation by
States. For a discussion of general issues regarding Medicaid
projections, we refer readers to the 2016 Actuarial Report on the
Financial Outlook for Medicaid (https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/MedicaidReport2016.pdf). We note that, in developing their estimates of
the effect of Medicaid expansion on Medicare DSH expenditures, our
actuaries have assumed that the new Medicaid enrollees are healthier
than the average Medicaid recipient and, therefore, use fewer hospital
services.
The table below shows the factors that are included in the
``Update'' column of the above table:
----------------------------------------------------------------------------------------------------------------
Affordable
Market basket Care Act Multifactor Documentation Total update
FY percentage payment productivity and coding percentage
reductions adjustment
----------------------------------------------------------------------------------------------------------------
2015............................ 2.9 -0.2 -0.5 -0.8 1.4
2016............................ 2.4 -0.2 -0.5 -0.8 0.9
2017............................ 2.7 -0.75 -0.3 -1.5 0.15
2018............................ 2.9 -0.75 -0.4 0.4588 2.2088
----------------------------------------------------------------------------------------------------------------
Note: All numbers are based on FY 2018 President's Budget projections.
We are inviting public comments on our proposed calculation of
Factor 1 for FY 2018.
b. Proposed Calculation of Factor 2 for FY 2018
(1) Background
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Specifically, section
1886(r)(2)(B)(i) of the Act provides that, for each of FYs 2014, 2015,
2016, and 2017, a factor equal to 1 minus the percent change in the
percent of individuals under the age of 65 who are uninsured, as
determined by comparing the percent of such individuals (1) who were
uninsured in 2013, the last year before coverage expansion under the
Affordable Care Act (as calculated by the Secretary based on the most
recent estimates available from the Director of the Congressional
Budget Office before a vote in either House on the Health Care and
Education Reconciliation Act of 2010 that, if determined in the
affirmative, would clear such Act for enrollment); and (2) who are
uninsured in the most recent period for which data are available (as so
calculated), minus 0.1 percentage point for FY 2014 and minus 0.2
percentage point for each of FYs 2015, 2016, and 2017.
Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the
percent of
[[Page 19945]]
individuals under 65 without insurance in 2013 must be the percent of
such individuals who were uninsured in 2013, the last year before
coverage expansion under the Affordable Care Act (as calculated by the
Secretary based on the most recent estimates available from the
Director of the Congressional Budget Office before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 that,
if determined in the affirmative, would clear such Act for enrollment).
The Health Care and Education Reconciliation Act (Pub. L. 111-152) was
enacted on March 30, 2010. It was passed in the House of
Representatives on March 21, 2010, and by the Senate on March 25, 2010.
Because the House of Representatives was the first House to vote on the
Health Care and Education Reconciliation Act of 2010 on March 21, 2010,
we have determined that the most recent estimate available from the
Director of the Congressional Budget Office ``before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 . .
.'' (emphasis added) appeared in a March 20, 2010 letter from the
director of the CBO to the Speaker of the House. Therefore, we believe
that only the estimates in this March 20, 2010 letter meet the
statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To
view the March 20, 2010 letter, we refer readers to the Web site at:
https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf.)
In its March 20, 2010 letter to the Speaker of the House of
Representatives, the CBO provided two estimates of the ``post-policy
uninsured population.'' The first estimate is of the ``Insured Share of
the Nonelderly Population Including All Residents'' (82 percent) and
the second estimate is of the ``Insured Share of the Nonelderly
Population Excluding Unauthorized Immigrants'' (83 percent). In the FY
2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate
that includes all residents, including unauthorized immigrants. We
stated that we believe this estimate is most consistent with the
statute, which requires us to measure ``the percent of individuals
under the age of 65 who are uninsured'' and provides no exclusions
except for individuals over the age of 65. In addition, we stated that
we believe that this estimate more fully reflects the levels of
uninsurance in the United States that influence uncompensated care for
hospitals than the estimate that reflects only legal residents. The
March 20, 2010 CBO letter reports these figures as the estimated
percentage of individuals with insurance. However, because section
1886(r)(2)(B)(i) of the Act requires that we compare the percent of
individuals who are uninsured in the most recent period for which data
are available with the percent of individuals who were uninsured in
2013, in the FY 2014 IPPS/LTCH PPS final rule, we used the CBO
insurance rate figure and subtracted that amount from 100 percent (that
is, the total population without regard to insurance status) to
estimate the 2013 baseline percent of individuals without insurance.
Therefore, for FYs 2014 through 2017, our estimate of the uninsurance
percentage for 2013 was 18 percent.
Section 1886(r)(2)(B)(i) of the Act requires that we compare the
baseline uninsurance rate to the percent of such individuals who are
uninsured in the most recent period for which data are available (as so
calculated). In the FY 2014, FY 2015, FY 2016, and FY 2017 IPPS/LTCH
PPS final rules (78 FR 50634, 79 FR 50014, 80 FR 49522, and 81 FR
56952, respectively), we used the same data source, CBO estimates, to
calculate this percent of individuals without insurance. In response to
public comments, we also agreed that we should normalize the CBO
estimates, which are based on the calendar year, for the Federal fiscal
years for which each calculation of Factor 2 is made (78 FR 50633).
Therefore, for the FY 2017 IPPS/LTCH PPS final rule (81 FR 56952), we
used the most recently available estimate of the uninsurance rate,
which was based on the CBO's March 2016 estimates of the effects of the
Affordable Care Act on health insurance coverage (which are available
at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51385-HealthInsuranceBaseline.pdf). The CBO's March 2016
estimate of individuals under the age of 65 with insurance in CY 2016
was 90 percent. Therefore, the CBO's most recent estimate of the rate
of uninsurance in CY 2016 was 10 percent (that is, 100 percent minus 90
percent). The CBO's March 2016 estimate of individuals under the age of
65 with insurance in CY 2017 was also 90 percent. Therefore, the CBO's
most recent estimate of the rate of uninsurance in CY 2017 available
for the FY 2017 final rule was also 10 percent (that is, 100 percent
minus 90 percent).
The calculation of the final Factor 2 for FY 2017, employing a
weighted average of the CBO projections for CY 2016 and CY 2017, was as
follows:
CY 2016 rate of insurance coverage (March 2016 CBO
estimate): 90 percent.
CY 2017 rate of insurance coverage (March 2016 CBO
estimate): 90 percent.
FY 2016 rate of insurance coverage: (90 percent * .25) +
(90 percent * .75) = 90 percent.
Percent of individuals without insurance for 2013 (March
2010 CBO estimate): 18 percent.
Percent of individuals without insurance for FY 2017
(weighted average): 10 percent.
1-((0.10-0.18)/0.18) = 1-0.4444 = 0.5555 (55.56
percent)
0.5556 (55.56 percent)-.002 (0.2 percentage points for FY 2017 under
section 1886(r)(2)(B)(i) of the Act) = 0.5536 or 55.36 percent
0.5536 = Factor 2
Therefore, the final Factor 2 for FY 2017 was 55.36 percent.
The FY 2017 final uncompensated care amount was: $10,797,476,782.62
x 0.5536 = $5,977,483,146.86.
------------------------------------------------------------------------
------------------------------------------------------------------------
FY 2017 uncompensated care total available........... $5,977,483,146.86
------------------------------------------------------------------------
(2) Proposed Methodology for Calculation of Factor 2 for FY 2018
Section 1886(r)(2)(B)(ii) of the Act permits the use of a data
source other than the CBO estimates to determine the percent change in
the rate of uninsurance beginning in FY 2018. In addition, for FY 2018
and subsequent years, the statute does not require that the estimate of
the percent of individuals who are uninsured be limited to individuals
who are under 65. Specifically, the statute states that, for FY 2018
and subsequent fiscal years, the second factor is 1 minus the percent
change in the percent of individuals who are uninsured, as determined
by comparing the percent of individuals who were uninsured in 2013 (as
estimated by the Secretary, based on data from the Census Bureau or
other sources the Secretary determines appropriate, and certified by
the Chief Actuary of CMS) and the percent of individuals who were
uninsured in the most recent period for which data are available (as so
estimated and certified), minus 0.2 percentage point for FYs 2018 and
2019. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56952), we
indicated that we planned to address changes to the methodology for
determining Factor 2 and the viability of potential alternative data
sources in the FY 2018 IPPS/LTCH PPS proposed rule.
In our analysis of a potential data source for the rate of
uninsurance for purposes of computing Factor 2 in FY 2018, we
considered the following: (a)
[[Page 19946]]
The extent to which the source accounted for the full U.S. population;
(b) the extent to which the source comprehensively accounted for both
public and private health insurance coverage in deriving its estimates
of the number of uninsured; (c) the extent to which the source utilized
data from the Census Bureau; (d) the timeliness of the estimates; (e)
the continuity of the estimates over time; (f) the accuracy of the
estimates; and (g) the availability of projections (including the
availability of projections using an established estimation methodology
that would allow for calculation of the rate of uninsurance for the
applicable Federal fiscal year). These considerations are consistent
with the statutory requirement that this estimate be based on data from
the Census Bureau or other sources the Secretary determines appropriate
and help to ensure the data source will provide reasonable estimates
for the rate of uninsurance that are available in conjunction with the
IPPS rulemaking cycle.
We have determined that the source that, on balance, best meets all
of these considerations is the uninsured estimates produced by CMS'
Office of the Actuary (OACT) as part of the development of the National
Health Expenditure Accounts (NHEA). The NHEA represents the
government's official estimates of economic activity (spending) within
the health sector. The information contained in the NHEA has been used
to study numerous topics related to the health care sector, including,
but not limited to, changes in the amount and cost of health services
purchased and the payers or programs that provide or purchase these
services; the economic causal factors at work in the health sector; the
impact of policy changes, including major health reform; and
comparisons to other countries' health spending. Of relevance to the
determination of Factor 2 is that the comprehensive and integrated
structure of the NHEA creates an ideal tool for evaluating changes to
the health care system, such as the mix of the insured and uninsured
because this mix is integral to the well-established NHEA methodology.
Below we describe some aspects of the methodology used to develop the
NHEA that we believe are particularly relevant in estimating the
percent change in the rate of uninsurance for FY 2018. A full
description of the methodology used to develop the NHEA is available on
the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/DSM-15.pdf.
The NHEA estimates of U.S. population reflect the Census Bureau's
definition of the resident-based population, which includes all people
who usually reside in the 50 States or the District of Columbia, but
excludes residents living in Puerto Rico and areas under U.S.
sovereignty, members of the U.S. Armed Forces overseas, and U.S.
citizens whose usual place of residence is outside of the United
States, plus a small (typically less than 0.2 percent of population)
adjustment to reflect Census undercounts. In past years, the estimates
for Factor 2 were made using the CBO's uninsured population estimates
for the under 65 population. For FY 2018 and subsequent years, the
statute does not restrict the estimate to the measurement of the
percent of individuals under the age of 65 who are uninsured.
Accordingly, we believe it is appropriate to use an estimate that
reflects the rate of uninsurance in the United States across all age
groups. In addition, we continue to believe that a resident-based
population estimate more fully reflects the levels of uninsurance in
the United States that influence uncompensated care for hospitals than
an estimate that reflects only legal residents. The NHEA estimates of
uninsurance are for the total U.S. population (all ages) and not by
specific age cohort, such as the population under the age of 65.
The NHEA includes comprehensive enrollment estimates for total
private health insurance (PHI) (including direct and employer-sponsored
plans), Medicare, Medicaid, the Children's Health Insurance Program
(CHIP), and other public programs, and estimates of the number of
individuals who are uninsured. Estimates of total PHI enrollment are
available for 1960 through 2015, estimates of Medicaid, Medicare, and
CHIP enrollment are available for the length of the respective
programs, and all other estimates (including the more detailed
estimates of direct-purchased and employer-sponsored insurance) are
available for 1987 through 2015. The NHEA data are publicly available
on the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html.
In order to compute Factor 2, the first metric that is needed is
the proportion of the total U.S. population that was uninsured in 2013.
In developing the estimates for the NHEA, OACT's methodology included
using the number of uninsured individuals for 1987 through 2009 based
on the enhanced Current Population Survey (CPS) from the State Health
Access Data Assistance Center (SHADAC). The CPS, sponsored jointly by
the U.S. Census Bureau and the U.S. Bureau of Labor Statistics (BLS),
is the primary source of labor force statistics for the population of
the United States. (We refer readers to the Web site at: http://www.census.gov/programs-surveys/cps.html.) The enhanced CPS, available
from SHADAC (available at http://datacenter.shadac.org) accounts for
changes in the CPS methodology over time. OACT further adjusts the
enhanced CPS for an estimated undercount of Medicaid enrollees (a
population that is often not fully captured in surveys that include
Medicaid enrollees due to a perceived stigma associated with being
enrolled in the Medicaid program or confusion about the source of their
health insurance).
To estimate the number of uninsured individuals for 2010 through
2014, OACT extrapolates from the 2009 CPS data using data from the
National Health Interview Survey (NHIS). The NHIS is one of the major
data collection programs of the National Center for Health Statistics
(NCHS), which is part of the Centers for Disease Control and Prevention
(CDC). The U.S. Census Bureau is the data collection agent for the
NHIS. The NHIS results have been instrumental over the years in
providing data to track health status, health care access, and progress
toward achieving national health objectives. For further information
regarding the NHIS, we refer readers to the CDC Web site at: https://www.cdc.gov/nchs/nhis/index.htm. For 2015, the estimate of the rate of
uninsurance in the NHEA matches with the estimate from the NHIS.
The next metrics needed to compute Factor 2 are projections of the
rate of uninsurance in both calendar years 2017 and 2018. On an annual
basis, the OACT projects enrollment and spending trends for the coming
10-year period. Those projections (currently for years 2016 through
2025) use the latest NHEA historical data, which presently run through
2015. The NHEA projection methodology accounts for expected changes in
enrollment across all of the categories of insurance coverage
previously listed. The sources for projected growth rates in enrollment
for Medicare, Medicaid, and CHIP include the latest Medicare Trustees
Report, the Medicaid Actuarial Report, or other updated estimates as
produced by the OACT. Projected rates of growth in enrollment for
private health insurance and the uninsured are based largely on
[[Page 19947]]
OACT's econometric models, which rely on the set of macroeconomic
assumptions underlying the latest Medicare Trustees Report. Greater
detail can be found in OACT's report titled ``Projections of National
Health Expenditure: Methodology and Model Specification,'' which is
available on the CMS Web site at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
The use of data from the NHEA to estimate the rate of uninsurance
is consistent with the statute and meets the criteria we have
identified for determining the appropriate data source. Section
1886(r)(2)(B)(ii) of the Act instructs the Secretary to estimate the
rate of uninsurance for purposes of Factor 2 based on data from the
Census Bureau or other sources the Secretary determines appropriate.
The NHEA utilizes data from the Census Bureau; the estimates are
available in time for the IPPS rulemaking cycle; the estimates are
produced by OACT on an annual basis and are expected to continue to be
produced for the foreseeable future; and projections are available for
calendar year time periods that span the upcoming fiscal year.
Timeliness and continuity are important considerations because of our
need to be able to update this estimate annually. Accuracy is also a
very important consideration and, all things being equal, we would
choose the most accurate data source that sufficiently meets our other
criteria.
Using these data sources and the methodologies described above,
OACT estimates that the uninsured rate for the historical, baseline
year of 2013 was 14 percent and for CYs 2017 and 2018 is 8.3 percent
and 8.1 percent respectively. As required by section 1886(r)(2)(B)(ii)
of the Act, the Chief Actuary of CMS has certified these estimates.
As with the CBO estimates on which we based Factor 2 in prior
fiscal years, the NHEA estimates are for a calendar year. In the
rulemaking for FY 2014, many commenters noted that the uncompensated
care payments are made on fiscal year and not a calendar year basis and
requested that CMS normalize the CBO estimate to reflect a fiscal year
basis. Specifically, commenters requested that CMS calculate a weighted
average of the CBO estimate for October through December 2013 and the
CBO estimate for January through September 2014 when determining Factor
2 for FY 2014. We agreed with the commenters that normalizing the
estimate to cover FY 2014 rather than CY 2014 would more accurately
reflect the rate of uninsurance that hospitals would experience during
the FY 2014 payment year. Accordingly, we estimated the rate of
uninsurance for FY 2014 by calculating a weighted average of the CBO
estimates for CY 2013 and CY 2014 (78 FR 50633). We have continued this
weighted average approach in each fiscal year since FY 2014.
We continue to believe that, in order to estimate the rate of
uninsurance during a fiscal year more accurately, Factor 2 should
reflect the estimated rate of uninsurance that hospitals will
experience during the fiscal year, rather than the rate of uninsurance
during only one of the calendar years that the fiscal year spans.
However, we have concerns about the future potential for the uninsured
rate to vary nonuniformly in the 2 calendar years that the fiscal year
spans (for example, due to changes in the economy or changes in
legislation). Nevertheless, for FY 2018, because OACT's current
estimates of the percent of individuals without insurance in CY 2017
and CY 2018 are relatively close, we do not believe this is a
significant policy issue and are proposing to continue with the
weighted average approach used in past fiscal years in order to
estimate the rate of uninsurance for FY 2018.
The calculation of the proposed Factor 2 for FY 2018 using a
weighted average of OACT's projections for CY 2017 and CY 2018 is as
follows:
Percent of individuals without insurance for CY 2013: 14
percent.
Percent of individuals without insurance for CY 2017: 8.3
percent.
Percent of individuals without insurance for CY 2018: 8.1
percent.
Percent of individuals without insurance for FY 2018 (0.25
times 0.083) + (0.75 times 0.081): 8.15 percent
1-[verbar]((0.0815-0.14)/0.14)[verbar] = 1-0.4179 = 0.5821 (58.21
percent)
0.5821 (58.21 percent)-.002 (0.2 percentage points for FY 2018 under
section 1886(r)(2)(B)(ii) of the Act) = 0.5801 or 58.01 percent
0.5801 = Factor 2
Therefore, the proposed Factor 2 for FY 2018 is 58.01 percent.
The proposed FY 2018 uncompensated care amount is:
$12,001,915,095.04 x 0.5801 = $6,962,310,946.63.
------------------------------------------------------------------------
------------------------------------------------------------------------
Proposed FY 2018 uncompensated care total available.. $6,962,310,946.63
------------------------------------------------------------------------
We are inviting public comments on our proposed methodology for
calculation of Factor 2 for FY 2018.
c. Calculation of Proposed Factor 3 for FY 2018
(1) Background
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal
to the percent, for each subsection (d) hospital, that represents the
quotient of (1) the amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data are available that are a better proxy for
the costs of subsection (d) hospitals for treating the uninsured, the
use of such alternative data)); and (2) the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act for such period (as so
estimated, based on such data).
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and each subsection (d) Puerto Rico hospital
with the potential to receive Medicare DSH payments relative to the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the fiscal year for which the
uncompensated care payment is to be made. Factor 3 is applied to the
product of Factor 1 and Factor 2 to determine the amount of the
uncompensated care payment that each eligible hospital will receive for
FY 2014 and subsequent fiscal years. In order to implement the
statutory requirements for this factor of the uncompensated care
payment formula, it was necessary to determine: (1) The definition of
uncompensated care or, in other words, the specific items that are to
be included in the numerator (that is, the estimated uncompensated care
amount for an individual hospital) and the denominator (that is, the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the applicable fiscal year); (2) the
data source(s) for the estimated uncompensated care amount; and (3) the
timing and manner of computing the quotient for each hospital estimated
to receive Medicare DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period based on
appropriate data. In addition, we note that the statute permits the
Secretary to use alternative data in the
[[Page 19948]]
case where the Secretary determines that such alternative data are
available that are a better proxy for the costs of subsection (d)
hospitals for treating individuals who are uninsured.
In the course of considering how to determine Factor 3 during the
rulemaking process for FY 2014, we considered defining the amount of
uncompensated care for a hospital as the uncompensated care costs of
each hospital and determined that Worksheet S-10 of the Medicare cost
report potentially provides the most complete data regarding
uncompensated care costs for Medicare hospitals. However, because of
concerns regarding variations in the data reported on Worksheet S-10
and the completeness of these data, we did not propose to use data from
Worksheet S-10 to determine Factor 3 for FY 2014, the first year this
provision was in effect, or for FY 2015, 2016, or 2017. When we first
discussed using Worksheet S-10 to allocate hospitals' shares of
uncompensated care costs in the FY 2014 IPPS/LTCH PPS final rule (78 FR
50638), we explained why we believed that it was premature to use
uncompensated care costs reported on Worksheet S-10 for FY 2014.
Specifically, at that time, the most recent available cost reports
would have been from FYs 2010 and 2011, which were submitted on or
after May 1, 2010, when the new Worksheet S-10 went into effect. We
believed that concerns about the standardization and completeness of
the Worksheet S-10 data could be more acute for data collected in the
first year of the Worksheet's use (78 FR 50635). In addition, we
believed that it would be most appropriate to use data elements that
have been historically publicly available, subject to audit, and used
for payment purposes (or that the public understands will be used for
payment purposes) to determine the amount of uncompensated care for
purposes of Factor 3 (78 FR 50635). At the time we issued the FY 2014
IPPS/LTCH PPS final rule, we did not believe that the available data
regarding uncompensated care from Worksheet S-10 met these criteria
and, therefore, we believed they were not reliable enough to use for
determining FY 2014 uncompensated care payments. Accordingly, for FY
2014, we concluded that utilization of insured low-income patients
would be a better proxy for the costs of hospitals in treating the
uninsured. For FYs 2015, 2016, and 2017, the cost reports used for
calculating uncompensated care payments (that is, FYs 2011, 2012, and
2013) were also submitted prior to the time that hospitals were on
notice that Worksheet S-10 could be the data source for calculating
uncompensated care payments. Therefore, we believed it was also
appropriate to use proxy data to calculate Factor 3 for these years.
We stated in the preamble of the FY 2017 IPPS/LTCH PPS proposed
rule that we believed that, for FY 2018, many of the above concerns
would no longer be relevant. That is, hospitals were on notice as of FY
2014 that Worksheet S-10 could eventually become the data source for
CMS to calculate uncompensated care payments. Furthermore, hospitals'
cost reports from FY 2014 had been publicly available for some time,
and CMS had analyses of Worksheet S-10 conducted both internally and by
stakeholders demonstrating that Worksheet S-10 accuracy had improved
over time. Specifically, as discussed in the FY 2017 IPPS/LTCH PPS
proposed rule (81 FR 25090), MedPAC has provided analyses that found
that current Worksheet S-10 data are a better proxy for predicting
audited uncompensated care costs than Medicaid/Medicare SSI days, and
that the data on Worksheet S-10 would improve over time as the data are
actually used to make payments. CMS has also undertaken an extensive
analysis of the Worksheet S-10 data, benchmarking it against the data
on uncompensated care costs reported to the Internal Revenue Service
(IRS) on Form 990 by not-for-profit hospitals. (This analysis,
performed by Dobson DaVanzo & Associates, LLC, under contract to CMS,
was included in a report entitled ``Improvements to Medicare
Disproportionate Share Hospital (DSH) Payments Report: Benchmarking S-
10 Data Using IRS Form 990 Data and Worksheet S-10 Trend Analyses,''
which is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html
under the Downloads section.) The analysis determined a strong and
converging correlation between the amounts for Factor 3 derived using
the IRS Form 990 and Worksheet S-10 data suggesting that Worksheet S-10
uncompensated care data are becoming more stable over time. Given these
results and in light of the fact that hospitals have been on notice
since the FY 2014 rulemaking that CMS intended eventually to use
Worksheet S-10 as the data source for calculating uncompensated care
payments, we believed it would be appropriate to propose to begin
incorporating Worksheet S-10 data for purposes of calculating Factor 3
starting in FY 2018. In section IV.F.4.d. of the preamble of the FY
2017 IPPS/LTCH PPS proposed rule (81 FR 25090 through 25094), we
proposed a methodology and timeline for incorporating Worksheet S-10
data in the calculation of Factor 3 beginning in FY 2018 and invited
public comments on that proposal.
While some commenters, including MedPAC, were supportive of the
proposal, many other commenters expressed concerns about a perceived
lack of clarity in the Worksheet S-10 instructions and their belief in
the necessity of a strict audit mechanism to capture aberrant
uncompensated care costs reported on Worksheet S-10. Many commenters
also cited the report from Dobson DaVanzo, which concluded that
hospitals are doing a better job of reporting their uncompensated care
data on Worksheet S-10 than they did a few years ago. However, these
commenters disagreed with CMS about the significance of this
observation. One commenter stated that even if it is true in the
aggregate that hospitals are reporting data more accurately on
Worksheet S-10, the zero-sum nature of the calculation of uncompensated
care payments is such that the remaining inaccuracy and lack of
uniformity in the data reported can have a very large impact on
hospitals. The commenter asserted that if hospitals, for whatever
reason, over-report their uncompensated care, they benefit financially
from doing so, while those that do not aggressively report suffer
financial harm. The commenter concluded that, for this reason, the
possibility that some hospitals are generally ``doing better'' with
reporting data is not good enough. All hospitals must do better, and
until they do, the commenter believed that data from Worksheet S-10 are
not accurate enough for public policymaking purposes. Other commenters
asserted that the Dobson/DaVanzo study did not illustrate or even
evaluate whether data from Worksheet S-10 are a reasonable proxy for
the costs hospitals incur in providing care to the uninsured. These
commenters pointed to their own analyses, which indicated that the most
notable aberrations in Worksheet S-10 data reporting occur among public
hospitals, which do not file a Form 990 and are therefore missing from
the Dobson/DaVanzo analysis.
On balance, after considering all of the comments, we elected not
to finalize our proposal to begin to incorporate Worksheet S-10 into
the calculation of Factor 3 for FY 2018 in the FY 2017 IPPS/LTCH PPS
final rule. We stated that we were postponing the decision regarding
when to begin incorporating
[[Page 19949]]
data from Worksheet S-10 and proceeding with certain additional quality
control and data improvement measures to the Worksheet S-10
instructions as commenters had requested. We indicated that we would
consider further whether the current Worksheet S-10 data or a proxy
should be used to calculate Factor 3 for FY 2018 and subsequent fiscal
years. We also expressed our intention to explore whether there is an
appropriate proxy for uncompensated care that could be used to
calculate Factor 3 until we determine that data from the revised
Worksheet S-10 can be used for this purpose. We stated that we would
undertake notice-and-comment rulemaking to address the issue of the
appropriate data to use to determine Factor 3 for FY 2018 and
subsequent years.
(2) Proposed Data Sources for FY 2018
Since the publication of the FY 2017 final rule and as part of our
ongoing quality control and data improvement measures for Worksheet S-
10, we have updated the benchmarking analysis described in the report
``Improvements to Medicare Disproportionate Share Hospital (DSH)
Payments Report: Benchmarking S-10 Data Using IRS Form 990 Data and
Worksheet S-10 Trend Analyses'' posted with the FY 2017 IPPS/LTCH PPS
proposed rule. As discussed in the FY 2017 IPPS/LTCH PPS proposed rule,
the purpose of this analysis was to determine if Worksheet S-10
uncompensated care data are becoming more stable over time (81 FR
25090). In the report issued in conjunction with the FY 2017
rulemaking, we conducted an analysis of 2010, 2011, and 2012 Worksheet
S-10 data and IRS Form 990 data from the same years. Using IRS Form 990
data for tax years 2010, 2011, and 2012 (the latest available years at
that time) as a benchmark, we compared key variables derived from
Worksheet S-10 and IRS Form 990 data, such as charity care and bad
debt. The analysis was completed using data from hospitals that had
completed both Worksheet S-10 and IRS Form 990 across all study years,
yielding a sample of 788 not-for-profit hospitals (representing 668
unique Taxpayer Identification Numbers). Because Factor 3 is used to
determine the Medicare uncompensated care payment amount for each
hospital, we calculated the amounts for Factor 3 for the matched
hospitals using charity care and bad debt, and compared the Factor 3
distributions calculated using data from IRS Form 990 and Worksheet S-
10. Key findings indicated that the amounts for Factor 3 derived using
the IRS Form 990 and Worksheet S-10 data were highly correlated. In
addition, the correlation coefficient between the amounts for Factor 3
calculated from the IRS Form 990 and Worksheet S-10 had increased over
time, from 0.71 in 2010 to 0.77 in 2011 and 0.80 in 2012, demonstrating
an increasing convergence between the data sources.
In the updated analysis performed for this year's rulemaking, we
again compared Worksheet S-10 and IRS Form 990 data and assessed the
correlation in Factor 3s derived from each of the data sources. We
conducted an analysis of 2011, 2012, and 2013 Worksheet S-10 data and
IRS Form 990 data from the same years. (The previous analysis used data
from 2010 to 2012.) Using IRS Form 990 data for tax years 2011, 2012,
and 2013 (again, the latest available years) as a benchmark, we
utilized the same methodology as was used in the previous analysis,
which yielded a sample of 1,061 not-for-profit hospitals (representing
918 unique Taxpayer Identification Numbers) and found that the amounts
for Factor 3 derived using the IRS Form 990 and Worksheet S-10 data
continue to be highly correlated and that, within the larger sample in
the updated analysis, this correlation continues to increase over time,
from 0.80 in 2011 to 0.85 in 2013. (The highest correlation found in
the earlier analysis performed for the FY 2017 rulemaking was 0.80.)
The fact that this most recent analysis, which was performed after
the issuance of the FY 2017 IPPS/LTCH PPS final rule, continues to
demonstrate a high correlation between the amounts for Factor 3 derived
using the IRS 990 data and the Worksheet S-10 data and that this
correlation continues to increase over time leads us to believe that we
have reached a tipping point with respect to the use of the Worksheet
S-10 data. Specifically, we can no longer conclude that alternative
data are available for FY 2014 that are a better proxy for the costs of
subsection (d) hospitals for treating individuals who are uninsured
than the data on uncompensated care costs reported on the Worksheet S-
10. However, we continue to believe that it is appropriate to use low-
income insured days as a proxy for uncompensated care costs for years
prior to FY 2014. Hospitals did not have notice that the Worksheet S-10
data from these years might be used for purposes of computing
uncompensated care payments and, as a result, may not have fully
appreciated the importance of reporting their uncompensated care costs
as completely and accurately as possible.
We found further evidence for this tipping point when we examined
changes to the FY 2014 Worksheet S-10 data submitted by hospitals since
the publication of the FY 2017 IPPS/LTCH PPS final rule. In the FY 2017
IPPS/LTCH PPS final rule, as part of our ongoing quality control and
data improvement measures for the Worksheet S-10, we referred readers
to Change Request 9648, Transmittal 1681, titled ``The Supplemental
Security Income (SSI)/Medicare Beneficiary Data for Fiscal Year 2014
for Inpatient Prospective Payment System (IPPS) Hospitals, Inpatient
Rehabilitation Facilities (IRFs), and Long Term Care Hospitals
(LTCH),'' issued on July 15, 2016 (available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R1681OTN.pdf).
In this transmittal, as part of the process for ensuring complete
submission of Worksheet S-10 by all eligible DSH hospitals, we
instructed MACs to accept amended Worksheets S-10 for FY 2014 cost
reports submitted by hospitals (or initial submissions of Worksheet S-
10 if none had been submitted previously) and to upload them to the
Health Care Provider Cost Report Information System (HCRIS) in a timely
manner. The transmittal stated that, for revisions to be considered,
hospitals were required to submit their amended FY 2014 cost report
containing the revised Worksheet S-10 (or a completed Worksheet S-10 if
no data were included on the previously submitted cost report) to the
MAC no later than September 30, 2016.
We have examined hospitals' FY 2014 cost reports to see if the
Worksheet S-10 data on those cost reports have changed as a result of
the opportunity for hospitals to submit revised Worksheet S-10 data for
FY 2014. Specifically, we compared hospitals' FY 2014 Worksheet S-10
data as they existed in the first quarter of CY 2016 with data from the
fourth quarter of CY 2016. We found that the FY 2014 Worksheet S-10
data had changed over that time period for approximately one quarter of
hospitals that receive uncompensated care payments. The fact that the
Worksheet S-10 data changed for such a significant number of hospitals
following a review of the cost report data they originally submitted
and that the revised Worksheet S-10 information is available to be used
in determining uncompensated care costs contributes to our belief that
we can no longer conclude that alternative data are available that are
a better proxy than the Worksheet S-10 data for the costs of
[[Page 19950]]
subsection (d) hospitals for treating individuals who are uninsured.
Commenters have also provided equity arguments with respect to the
relationship between uncompensated care payments and the expansion of
Medicaid in certain States under the authority provided by the
Affordable Care Act. The commenters have made a twofold argument.
First, they have argued that hospitals in States that did not expand
Medicaid treat a higher number of uninsured patients compared to
hospitals in States that did expand Medicaid and, as a result, provide
more uncompensated care. However, since the implementation of the new
DSH payment methodology under section 3133 of the Affordable Care Act
in FY 2014, these hospitals have experienced reductions in the payments
for uncompensated care due to the national decline in the uninsured
rate driven in large part by Medicaid expansions in other States.
Second, they have argued that hospitals in non-expansion States will be
penalized a second time when Medicaid utilization is used as part of
the basis for determining Factor 3 because their Medicaid utilization
has not grown as much relative to hospitals in expansion States. We
note that, while CMS has not yet used data affected by Medicaid
expansion when determining Factor 3, commenters are concerned that they
will be penalized in future calculations when these data are used.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50639), we
recognized that, in using Medicaid days as part of the proxy for
uncompensated care, it would be possible for hospitals in States that
choose to expand Medicaid to receive higher uncompensated care payments
because they may have more Medicaid patient days than hospitals in a
State that does not choose to expand Medicaid. Because the earliest
Medicaid expansions under the Affordable Care Act began in 2014, the
2011, 2012, and 2013 Medicaid days data used to determine Factor 3 for
FY 2017 are the most recent available data on Medicaid utilization that
do not reflect the effects of these Medicaid expansions. Accordingly,
if we were to use only low-income insured days to estimate
uncompensated care in FY 2018, we would need to hold the time period of
these data constant and use data on Medicaid days from 2011, 2012, and
2013 in order to avoid the risk of any redistributive effects arising
from the decision to expand Medicaid in certain States. As a result, we
would be using older data that may provide a less accurate proxy for
the level of uncompensated care being furnished by hospitals in FY
2018, contributing to our growing concerns regarding the continued use
of low-income insured days as a proxy for uncompensated care costs in
FY 2018.
We also note that when weighing the new information that has become
available to us regarding the Worksheet S-10 and the low-income days
proxy since the FY 2018 rulemaking, we are not considering these
developments in isolation, but rather in the context of the information
that we previously considered as part our discussions of the Worksheet
S-10 data in prior rulemaking. Part of this background is provided by
the 2007 MedPAC analysis of data from the Government Accountability
Office (GAO) and the American Hospital Association (AHA), which
suggests that Medicaid days and low income Medicare days are not a good
proxy for uncompensated care costs (80 FR 49525). Additional analyses
performed by MedPAC showed that the correlation between audited
uncompensated care data from 2009 and the data from the FY 2011
Worksheet S-10 was over 0.80, as compared to a correlation of
approximately 0.50 between the audited uncompensated care data and 2011
Medicare SSI and Medicaid days. Based on this analysis, MedPAC
concluded that use of Worksheet S-10 data was already better than using
Medicare SSI and Medicaid days as a proxy for uncompensated care costs,
and that the data on Worksheet S-10 would improve over time as the data
are actually used to make payments (81 FR 25090). Furthermore, MedPAC
in the past has raised concerns about the low-income days proxy we have
used historically because it is an inpatient measure and much of the
uncompensated care provided by certain hospitals, including rural
hospitals, occurs in the emergency room or other outpatient areas. In
its comments on the FY 2017 proposed rule, MedPAC again recommended we
start using the Worksheet S-10 data with a phase-in (81 FR 56962).
In summary, when weighing the new information that has become
available to us since the FY 2017 rulemaking in conjunction with the
information regarding Worksheet S-10 data and the low-income days proxy
that we have analyzed as part of our consideration of this issue in
prior rulemaking, we can no longer conclude that alternative data to
the Worksheet S-10 are available for FY 2014 that are a better proxy
for the costs of subsection (d) hospitals for treating individuals who
are uninsured. We discuss below our proposed methodology for how we
would begin to incorporate Worksheet S-10 data for FY 2014 into the
calculation of Factor 3 of the uncompensated care payment methodology.
(3) Proposed Time Period for Calculating Factor 3 for FY 2018,
Including Methodology for Incorporating Worksheet S-10 Data
Section 1886(r)(2)(C) of the Act not only governs the selection of
the data to be used in calculating Factor 3, but also allows the
Secretary the discretion to determine the time periods from which we
will derive the data to estimate the numerator and the denominator of
the Factor 3 quotient. Specifically, section 1886(r)(2)(C)(i) of the
Act defines the numerator of the quotient as the amount of
uncompensated care for such hospital for a period selected by the
Secretary. Section 1886(r)(2)(C)(ii) of the Act defines the denominator
as the aggregate amount of uncompensated care for all subsection (d)
hospitals that receive a payment under section 1886(r) of the Act for
such period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638), we
adopted a process of making interim payments with final cost report
settlement for both the empirically justified Medicare DSH payments and
the uncompensated care payments required by section 3133 of the
Affordable Care Act. Consistent with that process, we also determined
the time period from which to calculate the numerator and denominator
of the Factor 3 quotient in a way that would be consistent with making
interim and final payments. Specifically, we must have Factor 3 values
available for hospitals that we estimate will qualify for Medicare DSH
payments and for those hospitals that we do not estimate will qualify
for Medicare DSH payments but that may ultimately qualify for Medicare
DSH payments at the time of cost report settlement.
In the FY 2017 IPPS/LTCH PPS final rule, in order to mitigate undue
fluctuations in the amount of uncompensated care payments to hospitals
from year to year and smooth over anomalies between cost reporting
periods, we finalized a policy of calculating a hospital's share of
uncompensated care based an average of data derived from three cost
reporting periods instead of one cost reporting period. As explained in
the preamble to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56957
through 56959), instead of determining Factor 3 using Medicaid days
from a single cost reporting period and the most recent available data
on Medicare SSI utilization, as we did in FY 2014, FY 2015, and FY
2016, we used Medicaid days from three cost reporting periods (FYs
2011, 2012, and 2013) and SSI days from the three most
[[Page 19951]]
recent available years of SSI utilization data (FYs 2012, 2013, and
2014) to compute Factor 3 for FY 2017. We continued to extract Medicaid
days data from the most recent update of HCRIS, which for FY 2017 was
the March 2016 update. Furthermore, instead of determining a single
Factor 3 as we have done since the first year of the uncompensated care
payment in FY 2014, we calculated an individual Factor 3 for each of
the three cost reporting periods, which we then averaged by the number
of cost reporting years with data to compute the final Factor 3 for a
hospital. Under this policy, if a hospital had merged, we would combine
data from both hospitals for the cost reporting periods in which the
merger was not reflected in the surviving hospital's cost report data
to compute Factor 3 for the surviving hospital. Moreover, to further
reduce undue fluctuations in a hospital's uncompensated care payments,
if a hospital filed multiple cost reports beginning in the same fiscal
year, we combined data from the multiple cost reports so that a
hospital could have a Factor 3 calculated using more than one cost
report within a cost reporting period. We codified these changes for FY
2017 by amending the regulations at Sec. 412.106(g)(1)(iii)(C).
For FY 2018, we are proposing to continue to use the methodology
finalized in FY 2017 and to compute Factor 3 using an average of data
from three cost reporting periods instead of one cost reporting period.
Consistent with the methodology used to calculate Factor 3 for FY 2017,
we are proposing to advance the time period of the data used in the
calculation of Factor 3 forward by one year and using data from FY
2012, FY 2013, and FY 2014 cost reports. For the reasons we described
earlier, we believe it would not be appropriate to use Worksheet S-10
data for periods prior to FY 2014. Rather, for cost reporting periods
prior to FY 2014, we believe it would be appropriate to continue to use
low-income insured days. Accordingly, with a time period that includes
three cost reporting years consisting of FY 2014, FY 2013, and FY 2012,
we are proposing to use Worksheet S-10 data for the FY 2014 cost
reporting period and the low-income insured day proxy data for the two
earlier cost reporting periods. In order to perform this calculation,
we will draw three sets of data (2 years of Medicaid utilization data
and 1 year of Worksheet S-10 data) from the most recent available HCRIS
extract, which for FY 2018 is the December 2016 update of HCRIS for the
proposed rule and the March 2017 update of HCRIS for the final rule.
Accordingly, for FY 2018, in addition to the Worksheet S-10 data for FY
2014, we are proposing to use Medicaid days from FY 2012 and FY 2013
cost reports and FY 2014 and FY 2015 SSI ratios. We also would continue
to use FY 2012 cost report data submitted to CMS by IHS and Tribal
hospitals to determine Medicaid days for those hospitals. (We note that
cost report data from IHS and Tribal hospitals are included in HCRIS
beginning in FY 2013 and are no longer submitted separately.) We also
are proposing to continue the policies that were finalized in the FY
2015 IPPS/LTCH PPS final rule (79 FR 50020) to address several specific
issues concerning the process and data to be employed in determining
Factor 3 in the case of hospital mergers as well as the policies
finalized in the FY 2017 IPPS/LTCH PPS final rule concerning multiple
cost reports beginning in the same fiscal year (81 FR 56957).
We believe this approach, if we were to propose to continue it for
FY 2019 and FY 2020, would have the effect of transitioning the
incorporation of data from Worksheet S-10 into the calculation of
Factor 3. Starting with one year of Worksheet S-10 data in FY 2018, an
additional year of Worksheet S-10 data would be incorporated into the
calculation of Factor 3 in FY 2019, and the use of low-income insured
days would be phased out by FY 2020.
In addition, we acknowledge the concerns regarding IHS/Tribal
hospitals and subsection (d) Puerto Rico hospitals that some commenters
expressed in response to the FY 2017 proposal to begin using Worksheet
S-10 data to determine Factor 3 in FY 2018. According to some of these
commenters, the use of data from Worksheet S-10 to calculate
uncompensated care may jeopardize all of the IHS/Tribal hospitals'
uncompensated care payments due to their the unique funding structure.
With respect to Puerto Rico, other commenters asserted that the use of
Worksheet S-10 data may not be appropriate given the historical
treatment of subsection (d) Puerto Rico hospitals under the statutory
provisions governing payments under Medicaid and Medicare Part A and
its impact on the reporting of uncompensated care payments by these
hospitals. After consideration of the concerns, we believe that the
uncompensated care data reported by Puerto Rico and IHS/Tribal
hospitals needs to be further examined and should not be used for FY
2018. For the reasons described earlier related to the impact of the
Medicaid expansion beginning in FY 2014, we also do not believe it
would be appropriate to calculate a Factor 3 for these hospitals using
FY 2014 low-income insured days. Because we do not believe it is
appropriate to use the FY 2014 uncompensated care data for these
hospitals and we also do not believe it is appropriate to use the FY
2014 low-income insured days, we believe that the best proxy for the
costs of Puerto Rico and IHS/Tribal hospitals for treating the
uninsured is the low income-insured days data for FY 2012 and FY 2013.
Accordingly, we are proposing for these hospitals that when we compute
the individual Factor 3s for each of the three cost reporting periods
that are used to determine Factor 3, rather than computing a Factor 3
using Worksheet S-10 data from the hospital's FY 2014 cost report, we
would substitute the Factor 3 calculated using the hospital's FY 2013
low-income insured days. That is, in order to determine the Factor 3
for FY 2018, we would calculate an average of three individual Factor
3s using the Factor 3 calculated using FY 2013 cost report data twice
and the Factor 3 calculated using FY 2012 cost report data once. We
believe it is appropriate to double-weight the Factor 3 calculated
using FY 2013 data as it reflects the most recent available information
regarding the hospital's low-income insured days before any expansion
of Medicaid. We note that as we are not making any proposals with
respect to the calculation of Factor 3 for FY 2019 at this time, we
will reexamine the use of the Worksheet S-10 data for Puerto Rico and
IHS/Tribal hospitals as part of the FY 2019 rulemaking. In addition, we
are proposing to continue to use a proxy for SSI days consisting of 14
percent of a hospital's Medicaid days for Puerto Rico hospitals, as
finalized in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56953 through
56956).
Therefore, for FY 2018, we are proposing to compute Factor 3 for
each hospital by--
Step 1: Calculating Factor 3 using the low-income insured
days proxy based on FY 2012 cost report data and the FY 2014 SSI ratio;
Step 2: Calculating Factor 3 using the insured low-income
days proxy based on FY 2013 cost report data and the FY 2015 SSI ratio;
Step 3: Calculating Factor 3 based on the FY 2014
Worksheet S-10 data (or using the Factor 3 calculated in Step 2 for
Puerto Rico and IHS/Tribal hospitals); and
Step 4: Averaging the Factor 3 values from Steps 1, 2, and
3; that is, adding the Factor 3 values from FY 2012, FY 2013, and FY
2014 for each
[[Page 19952]]
hospital, and dividing that amount by the number of cost reporting
periods with data to compute an average Factor 3.
We are inviting public comments on our proposed methodology for
calculating Factor 3 for FY 2018.
We note that if this proposed methodology is adopted for FY 2018,
we would expect to propose to use a similar methodology for calculating
Factor 3 for subsequent years, meaning that for FY 2019 we would expect
to incorporate data from the FY 2015 Worksheet S-10 into the
methodology and drop the FY 2012 low-income insured day proxy data.
However, we are not making any proposals with respect to the
calculation of Factor 3 for FY 2019 at this time.
For new hospitals that do not have data for any of the three cost
reporting periods used in the proposed Factor 3 calculation, we will
continue to apply the new hospital policy finalized in the FY 2014
IPPS/LTCH PPS final rule (78 FR 50643). That is, the hospital will not
receive either interim empirically justified Medicare DSH payments or
interim uncompensated care payments. However, if the hospital is later
determined to be eligible to receive empirically justified Medicare DSH
payments based on its FY 2018 cost report, the hospital will also
receive an uncompensated care payment calculated using a Factor 3,
where the numerator is the uncompensated care costs reported on
Worksheet S-10 of the hospital's FY 2018 cost report, and the
denominator is the sum of uncompensated care costs reported on
Worksheet S-10 of all DSH eligible hospitals' FY 2014 cost reports as
prospectively determined during rulemaking. We note that, given the
selected time period of the data used to calculate Factor 3, any
hospitals with a CCN established after October 1, 2014 would be
considered new and subject to this policy.
As we have done for every proposed and final rule beginning in FY
2014, in conjunction with both the FY 2018 IPPS/LTCH PPS proposed rule
and final rule, we will publish on the CMS Web site a table listing
Factor 3 for all hospitals that we estimate would receive empirically
justified Medicare DSH payments in FY 2018 (that is, those hospitals
that would receive interim uncompensated care payments during the
fiscal year), and for the remaining subsection (d) hospitals and
subsection (d) Puerto Rico hospitals that have the potential of
receiving a Medicare DSH payment in the event that they receive an
empirically justified Medicare DSH payment for the fiscal year as
determined at cost report settlement. We note that, as of this proposed
rule, the FY 2015 SSI ratios are not yet available. Accordingly, for
modeling purposes, we computed Factor 3 using the most recent available
data regarding SSI days from the FY 2013 and FY 2014 SSI ratios.
However, we expect that the FY 2015 SSI ratios will be available to
calculate Factor 3 for the FY 2018 IPPS/LTCH PPS final rule.
We also will publish a supplemental data file containing a list of
the mergers that we are aware of and the computed uncompensated care
payment for each merged hospital. Hospitals have 60 days from the date
of public display of this FY 2018 IPPS/LTCH PPS proposed rule to review
the table and supplemental data file published on the CMS Web site in
conjunction with the proposed rule and to notify CMS in writing of any
inaccuracies. Comments can be submitted to the CMS inbox at
[email protected]. We will address these comments as
appropriate in the table and the supplemental data file that we publish
on the CMS Web site in conjunction with the publication of the FY 2018
IPPS/LTCH PPS final rule. After the publication of the FY 2018 IPPS/
LTCH PPS final rule, hospitals will have until August 31, 2017, to
review and submit comments on the accuracy of the table and
supplemental data file published in conjunction with the final rule.
Comments may be submitted to the CMS inbox at
[email protected] through August 31, 2017, and any changes to
Factor 3 will be posted on the CMS Web site prior to October 1, 2017.
(4) Methodological Considerations for Calculating Factor 3
Annualizing short cost reports. As we explained
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56957 through 56959), we
believe that for hospitals that file multiple cost reports beginning in
the same year, combining the data from these cost reports has the
benefit of supplementing the data of hospitals that filed cost reports
that are less than 12 months, such that the basis of their
uncompensated care payments and those of hospitals that filed full-year
12-month cost reports would be more equitable. In response to our
original proposal in the FY 2017 IPPS/LTCH PPS proposed rule to combine
data from multiple cost reports, many hospitals stated that while they
were appreciative of CMS' efforts to provide a more equitable playing
field for hospitals that filed short cost reports, they believed that
expanding the time period of the data used to calculate Factor 3 as
well as combining data across multiple cost reports would not remedy
the fact that some hospitals are still disadvantaged by having less
than 36 months of data in their Factor 3 calculation (81 FR 56959).
Other commenters opposed the use of multiple cost reporting periods if
it would result in a hospital having more than 12 months of data in the
Factor 3 calculation for a year, and recommended that CMS prorate the
data to a 12-month period. Similarly, other commenters recommended that
CMS annualize cost report data for any cost reporting period that is
less than 12 months. In the FY 2017 IPPS/LTCH PPS final rule, we
acknowledged that, although we had not made any proposal in the FY 2017
IPPS/LTCH PPS proposed rule to annualize the cost reports used to
calculate Factor 3, the situations presented by commenters, including
both long and short cost reporting periods, pose unique challenges in
the context of estimating Factor 3. We stated that we intended to
consider the issue further and might address the issue in future
rulemaking.
For this FY 2018 IPPS/LTCH PPS proposed rule, taking into
consideration the feedback from hospitals that have been disadvantaged
in the Factor 3 calculation due to cost reports that do not span a full
year, we are proposing to annualize Medicaid data if a hospital's cost
report does not equal 12 months of data. We are not proposing to
annualize SSI days because we do not obtain these data from hospital
cost reports in HCRIS. Rather, we obtain these data from the latest
available SSI ratios posted on the Medicare DSH homepage (https://
www.cms.gov/medicare/medicare-fee-for-service-payment/
acuteinpatientpps/dsh.html), which are aggregated at the hospital level
and do not have the information needed to determine if the data should
be annualized.
Under this proposal, if the time between the start date of a
hospital's cost reporting year and the end date of its cost reporting
year is less than 12 months, we would annualize the Medicaid days so
that the hospital has 12 months of data included in its Factor 3
calculation. Conversely, if the time between the aforementioned start
date and the end date is greater than 12 months, we would annualize the
Medicaid days to achieve 12 months of Medicaid days data. If a hospital
files more than one cost report beginning in the same fiscal year, we
would first combine the data across the multiple cost reports before
determining the difference between the start date and the end date to
see if annualization is needed.
[[Page 19953]]
To annualize the Medicaid days for a long or short cost reporting
year, we would divide the length of a full year (365 or 366 calendar
days, as applicable) by the length of the cost reporting year (the
number of calendar days in the cost reporting year) and then multiply
the quotient by the number of Medicaid days in the cost reporting year.
For instance, a cost reporting year that is 285 calendar days long
with 1,200 Medicaid days would be annualized as follows: (365/285) *
1,200 = 1,537 days.
A cost reporting year that is 385 calendar days long with 1,200
Medicaid days would be annualized using the same formula: (365/385) *
1,200 = 1,137 days.
Likewise, because long and short cost reporting periods pose the
same challenges in the context of estimating Factor 3 using hospital
uncompensated care costs, we are proposing to annualize the
uncompensated care cost data reported on Worksheet S-10 for cost
reports that do not equal 12 months of data, by dividing the length of
a full year (365 or 366 calendar days, as applicable) by the length of
the cost reporting year (number of calendar days in the cost reporting
year) and then multiplying the quotient by the total reported
uncompensated care costs for the cost reporting year.
For instance, a cost reporting year that is 285 calendar days long
reporting $10,500,000 in uncompensated care costs would be annualized
as follows:
(365/285) * $10,500,000 = $13,447,368.
A cost reporting year that is 385 calendar days long reporting
$10,500,000 in uncompensated care costs would be annualized using the
same formula:
(365/385) * $10,500,000 = $9,954,545.
If a hospital files more than one cost report beginning in the same
fiscal year, we would first combine the data across the multiple cost
reports before determining the length of the cost reporting year to see
if annualization is needed.
We are inviting public comment on our proposal to annualize the
cost reports used to calculate Factor 3 for FY 2018. In addition, as
noted earlier, our proposal to continue calculating a hospital's share
of uncompensated care payments using a time period that includes three
cost reporting years is also designed to mitigate undue fluctuations in
the amount of uncompensated care payments to hospitals from year to
year and smooth over anomalies between cost reporting periods. Given
that our proposal to annualize the costs reports used to calculate the
Factor 3 for FY 2018 would also mitigate fluctuations in the amount of
uncompensated care payments from year to year, we also are seeking
public comment on the degree to which the use of three cost reporting
years would still be necessary if we were to adopt our proposal to
annualize the cost reports used to calculate Factor 3, or if instead
the use of a single cost reporting year or two cost reporting years
would be appropriate. In order to facilitate public comments, we intend
to post on our Web site a data file containing information similar to
the information provided in section I.H.5., ``Effects of the Proposed
Changes to Medicare DSH and Uncompensated Care Payments for FY 2018''
of Appendix A of this proposed rule. However, instead of reflecting our
proposed approach of calculating Factor 3 using a time period that
includes three cost reporting years, it would reflect an alternative
approach of calculating Factor 3 using only the most recent year (FY
2014) of our proposed 3-year average. In all other respects, the
calculation of Factor 3 would remain the same.
Scaling Factor. Under the methodology adopted in
the FY 2017 IPPS/LTCH PPS final rule and that we are proposing to apply
in FY 2018, if the hospital does not have data for one or more of the
three cost reporting periods, we will compute Factor 3 for the periods
available and average those. In other words, we will divide the sum of
the individual Factor 3s by the number of cost reporting periods with
data so as not to disadvantage hospitals that are missing data for one
or more cost reporting periods. Following the publication of the FY
2017 IPPS/LTCH PPS final rule, several hospitals noted that this aspect
of the methodology resulted in the Factor 3 values of DSH eligible
hospitals in Table 18 and the Medicare DSH Supplemental Data File
adding up to slightly greater than one, which resulted in total
uncompensated care payments somewhat exceeding the estimate published
in the FY 2017 final rule. Specifically, for hospitals that have fewer
than 3 cost reporting years with data, dividing the individual Factor
3s by the number of cost reporting years with data (that is, 2 cost
reporting years or 1 cost reporting year) results in a higher average
Factor 3 than if the individual Factor 3s were divided by the number of
cost reporting years, regardless of whether or not there is data (that
is, 3 cost reporting years). For example, a hospital with no data for
FY 2011 and a Factor 3 of 0.000051762 for FY 2012 and 0.000049852 for
FY 2013 would have an average Factor 3 of 0.000050807 if averaged by 2
but an average Factor 3 of only 0.000033871 if averaged by 3. After
reviewing the data in Table 18 and the Medicare DSH Supplemental Data
File, which were published in conjunction with the FY 2017 IPPS/LTCH
PPS final rule, we concluded that the hospitals' observations are
correct and that an adjustment is needed so that total uncompensated
care payments do not exceed the estimate published in section
V.G.4.b.(2) of the preamble of this proposed rule.
Accordingly, to address the effects of averaging Factor 3s
calculated for three separate fiscal years, we are proposing to apply a
scaling factor to the Factor 3 values of all DSH eligible hospitals so
that total uncompensated care payments are consistent with the
estimated amount available to make uncompensated care payments for FY
2018. Under this proposal, we would first compute the Factor 3 and
uncompensated care payments for all hospitals that we anticipate
qualifying for Medicare DSH payments in FY 2018. We would then divide 1
(the expected sum of all eligible hospitals' Factor 3) by the actual
sum of all eligible hospitals' Factor 3 values and multiply the
quotient by each hospital's total uncompensated care payment to obtain
scaled uncompensated care payment amounts whose sum is consistent with
the estimate of the total amount available to make uncompensated care
payments in section V.G.4.b.(2) of the preamble of this proposed rule.
The hospital-specific uncompensated care amount would then be divided
by a 3-year claims average to obtain the amount of the interim
uncompensated care payment the hospital will receive for each claim. As
an illustration of the calculation of the scaling factor, applying this
proposal to the FY 2017 uncompensated care payments would have resulted
in a scaling factor of 0.9992 (1/1.0008). We note that the FY 2017
uncompensated care payments as calculated for the FY 2017 IPPS final
rule exceeded the estimated amount by approximately $5 million due to
the lack of a scaling factor.
We are inviting public comments on our proposal to apply a scaling
factor to all hospitals' Factor 3 values for FY 2018.
(5) Methodological Considerations for Incorporating Worksheet S-10 Data
Definition of uncompensated care. In the FY 2014
IPPS/LTCH PPS rulemaking, we considered three potential definitions of
uncompensated care: Charity care; charity care + bad debt; and charity
care + bad debt +
[[Page 19954]]
Medicaid shortfalls. As we explained in the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50634), we considered proposing to define the amount of
uncompensated care for a hospital as the uncompensated care costs of
that hospital and considered potential data sources for those costs. We
examined the literature on uncompensated care and the concepts of
uncompensated care used in various public and private programs, and
considered input from stakeholders and public comments in various
forums, including the national provider call that we held in January
2013. Our review of the information from these sources indicated that
there is some variation in how different States, provider
organizations, and Federal programs define ``uncompensated care.''
However, a common theme of almost all these definitions is that they
include both ``charity care'' and ``bad debt'' as components of
``uncompensated care.'' Therefore, a definition that incorporates the
most commonly used factors within uncompensated care as reported by
stakeholders would include charity care costs and bad debt costs.
Worksheet S-10 employs the definition of charity care plus non-Medicare
bad debt. Specifically:
Cost of Charity Care (Line 23)
+ Cost of non-Medicare bad debt expanse (Line 29)
Cost of non-Medicare uncompensated care (Line 30)
Where:
Cost of charity care = Cost of initial obligation of
patients approved for charity care (line 21) minus partial payment
by patients approved for charity care (line 22).
Cost of non-Medicare bad debt expense = Cost to charge
ratio (line 1) times non-Medicare and nonreimbursable bad debt
expense (line 28).
In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25092), we
proposed to adopt a definition of uncompensated care costs that
included charity care and non-Medicare bad debt. We explained that we
believe there are compelling arguments for excluding Medicaid
shortfalls from the definition of uncompensated care, including the
fact that several government agencies and key stakeholders do not
consider Medicaid shortfalls in their definition of uncompensated care
and that excluding Medicaid shortfalls from the uncompensated care
definition allows Medicare uncompensated care payments to target
hospitals that have a disproportionate share of uncompensated care for
patients with no insurance coverage. Although we did not finalize the
proposed definition of uncompensated care costs as part of the FY 2017
rulemaking, we continue to believe a definition that incorporates the
most commonly used factors within uncompensated care as reported by
stakeholders would include charity care costs and non-Medicare bad debt
costs, which correlates to Line 30 of Worksheet S-10. Therefore, we are
again proposing that, for purposes of calculating Factor 3 and
uncompensated care costs beginning in FY 2018, ``uncompensated care''
would be defined as the amount on line 30 of Worksheet S-10, which is
the cost of charity care (Line 23) and the cost of non-Medicare bad
debt (Line 29). We are inviting public comments on this proposal.
Trims to apply to CCRs on Line 1 of Worksheet S-
10. As we noted in the FY 2017 IPPS/LTCH proposed and final rules (81
FR 25093; 81 FR 56971), commenters have suggested that uncompensated
care costs reported on Worksheet S-10 should be audited due to
extremely high values consistently reported by some hospitals. In
response to these comments, we have reviewed the Worksheet S-10 data
and identified approximately 10 to 20 hospitals that have anomalous
uncompensated care costs. We note that many of these hospitals are
public hospitals, which can have charging practices that are distinct
from other hospital types. We believe that, just as we apply trims to
hospitals' CCRs to eliminate anomalies when calculating outlier
payments for extraordinarily high cost cases (Sec. 412.84(h)(3)(ii)),
it is appropriate to apply statistical trims to the CCRs on Worksheet
S-10, Line 1 that are considered anomalies. Specifically, Sec.
412.84(h)(3)(ii) states that the Medicare contractor may use a
statewide CCR for hospitals whose operating or capital CCR is in excess
of 3 standard deviations above the corresponding national geometric
mean (that is, the CCR ``ceiling''). This mean is recalculated annually
by CMS and published in the proposed and final IPPS rules each year. To
control for data anomalies, in the FY 2017 rulemaking, we considered
approaches that would trim hospitals' CCRs to ensure reasonable CCRs
are used to convert charges to costs for purposes of determining
uncompensated care costs.
After considering the comments received in response to the FY 2017
IPPS/LTCH PPS proposed rule, which were discussed in the FY 2017 IPPS/
LTCH final rule (81 FR 56971 through 56973), for FY 2018, we are
proposing the following alternative methodology for trimming CCRs:
Step 1: Remove Maryland hospitals. In addition, we will remove all-
inclusive rate providers, as they have charge structures that differ
from other IPPS hospitals, and providers that did not report a CCR on
Worksheet S-10, Line 1, and assign them the statewide average CCR in
step 5 below.
Step 2: For hospitals with multiple cost reports included in the
2014 HCRIS data, (a) combine the amounts from Worksheet C, Part I, Line
202, Column 3 from each cost report to calculate total costs, (b)
combine the amounts from Worksheet C, Part I, Line 202, Column 8 from
each cost report to calculate total charges, and (c) divide the total
costs by the total charges to arrive at a recalculated CCR.
Step 3: Calculate a CCR ``ceiling'' using the CCRs reported on
Worksheet S-10, Line 1, from all IPPS hospitals that were not removed
in Step 1 (including non-DSH eligible hospitals), or the recalculated
CCR described in Step 2. The ceiling is calculated as 3 standard
deviations above the national geometric mean CCR. This approach is
consistent with our calculation of the CCR ceiling used for high-cost
outliers. Remove all hospitals that exceed the ceiling so that these
aberrant CCRs do not skew the calculation of the statewide average CCR.
Based on the information currently available to us, this trim would
remove 9 hospitals that have CCRs above the calculated ceiling of
0.937.
Step 4: Using the CCRs for the remaining hospitals in Step 3,
determine the urban and rural statewide average CCRs using Line 1 of
Worksheet S-10 for hospitals within each State (including non-DSH
eligible hospitals), weighted by the sum of total inpatient discharges
and outpatient visits from Worksheet S-3, Part I, Line 14, Column 14.
Step 5: Assign the appropriate statewide average CCR (urban or
rural) calculated in Step 4 to all hospitals with a CCR greater than 3
standard deviations above the corresponding national geometric mean
(that is, the CCR ``ceiling''), as well as to all-inclusive rate
providers, and providers that did not report a CCR on Worksheet S-10,
Line 1. The statewide average CCR would therefore be applied to 140
hospitals, of which 14 did not report a CCR on Worksheet S-10, Line 1,
9 had a CCR that exceeded the calculated ceiling of 0.937, and 117 are
all-inclusive rate providers.
After applying the applicable trims to a hospital's CCR as
appropriate, we are proposing to calculate a hospital's uncompensated
care costs as being
[[Page 19955]]
equal to Line 30, which is the sum of Line 23 and Line 29, as follows:
Hospital Uncompensated Care Costs = Line 30 (Line 23 + Line 29),
which is equal to--
[(Line 1 CCR (as adjusted, if applicable) x charity care line 20)-
(Payments received for charity care Line 22)]
+
[(Line 1 CCR (as adjusted, if applicable) x Non-Medicare and non-
reimbursable Bad Debt Line 28)].
We are inviting public comments on our proposed trim methodology
for FY 2018.
Cost report revisions and Worksheet S-10 audits.
While not directly relevant to our proposal to use FY 2014 Worksheet S-
10 data beginning in FY 2018, we note that as part of our ongoing
quality control and data improvement measures to continue to improve
the Worksheet S-10 data over time, we have made revisions to the cost
report instructions and developed an audit process.
With respect to the cost reporting instructions, on November 18,
2016, we issued Transmittal 10 which updated the instructions for Form
2552-10. Specifically, we updated the instructions in Section 4012 of
Chapter 40 of the Provider Reimbursement Manual, Part II. The
instructions clarify the reporting of charges for charity care.
Transmittal 10 can be downloaded from the CMS Web site at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2016-Transmittals-Items/R10P240.html.
With respect to the audit process, in the FY 2017 IPPS/LTCH PPS
final rule (81 FR 56964), we stated that we intended to provide
standardized instructions to the MACs to guide them in determining when
and how often a hospital's Worksheet S-10 should be reviewed. We
indicated that we would not make the MACs' review protocol public as
all CMS desk review and audit protocols are confidential and are for
CMS and MAC use only. The instructions for the MACs are still under
development and will be provided to the MACs as soon as possible. We
refer readers to the FY 2017 IPPS/LTCH PPS final rule for a complete
discussion concerning the issues that we are considering in developing
the instructions that will be provided to the MACs. We expect that cost
reports beginning in FY 2017 will be the first cost reports for which
the Worksheet S-10 data will be subject to a desk review. We do not
anticipate making any further modifications to the Worksheet S-10
instructions at this time so that hospitals can begin to review and
conform to the current instructions in Transmittal 10. Predictability
is an important part of the process for reporting data on Worksheet S-
10. As a result, we believe it is reasonable to wait until the
Worksheet S-10 data have been submitted, the audits have been
performed, and the data are available for review before we consider
making any further revisions to the Worksheet S-10 instructions.
H. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background for the MDH Program
Section 1886(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684).) As discussed in section V.B.1.
of the preamble of this proposed rule, the MDH program provisions at
section 1886(d)(5)(G) of the Act will expire at the end of FY 2017.
Beginning with discharges occurring on or after October 1, 2017, all
hospitals that previously qualified for MDH status will be paid based
on the Federal rate.
Since the extension of the MDH program through FY 2012 provided by
section 3124 of the Affordable Care Act, the MDH program had been
extended by subsequent legislation as follows: Section 606 of the ATRA
(Pub. L. 112-240) extended the MDH program through FY 2013 (that is,
for discharges occurring before October 1, 2013). Section 1106 of the
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) extended the MDH
program through the first half of FY 2014 (that is, for discharges
occurring before April 1, 2014). Section 106 of the PAMA (Pub. L. 113-
93) extended the MDH program through the first half of FY 2015 (that
is, for discharges occurring before April 1, 2015). Section 205 of the
MACRA (Pub. L. 114-10) extended the MDH program through FY 2017 (that
is, for discharges occurring before October 1, 2017). For additional
information on the extensions of the MDH program after FY 2012, we
refer readers to the following Federal Register documents: The FY 2013
IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and 53413 through
53414); the FY 2013 IPPS notice (78 FR 14689); the FY 2014 IPPS/LTCH
PPS final rule (78 FR 50647 through 50649); the FY 2014 interim final
rule with comment period (79 FR 15025 through 15027); the FY 2014
notice (79 FR 34446 through 34449); the FY 2015 IPPS/LTCH PPS final
rule (79 FR 50022 through 50024); the August 2015 interim final rule
with comment period (80 FR 49596); and the FY 2017 IPPS/LTCH PPS final
rule (81 FR 57054 through 57057).
b. Expiration of the MDH Program
Because section 205 of the MACRA extended the MDH program through
FY 2017 only, beginning October 1, 2017, the MDH program will no longer
be in effect. Because the MDH program is not authorized by statute
beyond September 30, 2017, beginning October 1, 2017, all hospitals
that previously qualified for MDH status under section 1886(d)(5)(G) of
the Act will no longer have MDH status and will be paid based on the
IPPS Federal rate.
When the MDH program was set to expire at the end of FY 2012, in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we
revised our sole community hospital (SCH) policies to allow MDHs to
apply for SCH status in advance of the expiration of the MDH program
and be paid as such under certain conditions. We codified these changes
in the regulations at Sec. 412.92(b)(2)(i) and (b)(2)(v).
Specifically, the existing regulations at Sec. 412.92(b)(2)(i) and
(b)(2)(v) allow for an effective date of an approval of SCH status that
is the day following the expiration date of the MDH program. We note
that these same conditions apply to MDHs that intend to apply for SCH
status with the expiration of the MDH program on September 30, 2017.
Therefore, in order for an MDH to receive SCH status effective October
1, 2017, the MDH must apply for SCH status at least 30 days before the
expiration of the MDH program; that is, the MDH must apply for SCH
status by September 1, 2017. The MDH also must request that, if
approved as an SCH, the SCH status be effective with the expiration of
the MDH program; that is, the MDH must request that the SCH status, if
approved, be effective October 1, 2017, immediately after its MDH
status expires with the expiration of the MDH program on September 30,
2017. We emphasize that an MDH that applies for SCH status in
anticipation of the expiration of the MDH program would not qualify for
the October 1, 2017 effective date for SCH status if it does not apply
by the September 1, 2017 deadline. If the MDH does not apply by the
September 1, 2017 deadline, the hospital would instead be subject to
the usual effective date for SCH classification; that is, 30 days after
the date of CMS' written notification of approval as specified at Sec.
412.92(b)(2)(i).
We note that the regulations governing the MDH program are found
[[Page 19956]]
at Sec. 412.108 and the MDH program is also cited in the general
payment rules in the regulations at Sec. 412.90. As stated earlier,
under current law, the MDH program will expire at the end of FY 2017,
which is already reflected in Sec. 412.108. As such, we are not
proposing specific amendments to the regulations at Sec. 412.108 to
reflect the expiration of the MDH program. However, it has come to our
attention that, with the various extensions of the MDH program as noted
earlier, we neglected to make conforming changes to the regulation text
at Sec. 412.90. Therefore, we are proposing to revise the general
payment rules under Sec. 412.90 to reflect the expiration of the MDH
program. However, we are proposing that if the MDH program were to be
extended by law, similar to how it was extended through FY 2013, by the
ATRA (Pub. L. 112-240); through March 31, 2014, by the Pathway for SGR
Reform Act of 2013 (Pub. L. 113-167); through March 31, 2015, by the
PAMA (Pub. L. 113-93); and most recently through FY 2017, by the MACRA
(Pub. L. 114-10), we would make conforming changes to the regulations
governing the MDH program at Sec. 412.108(a)(1) and (c)(2)(iii) and
the general payment rules at Sec. 412.90(j) to reflect such an
extension of the MDH program. These conforming changes would only be
made if the MDH program were to be extended by statute beyond September
30, 2017.
I. Hospital Readmissions Reduction Program: Proposed Updates and
Changes (Sec. Sec. 412.150 Through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added section 1886(q) to the Act,
which establishes the ``Hospital Readmissions Reduction Program''
effective for discharges from ``applicable hospitals'' beginning on or
after October 1, 2012. Under the Hospital Readmissions Reduction
Program, payments to applicable hospitals may be reduced to account for
certain excess readmissions. We refer readers to section IV.E.1. of the
FY 2016 IPPS/LTCH PPS final rule (80 FR 49530 through 49531) for a
detailed discussion and additional information on of the statutory
history of the Hospital Readmissions Reduction Program.
On December 13, 2016, the 21st Century Cures Act (Pub. L. 114-255)
was enacted. Section 15002 of that law added subparagraphs (D) and (E)
to section 1886(q)(3) of the Act, which directs the Secretary to assign
hospitals to peer groups, develop a methodology that allows for
separate comparisons for hospitals within these groups, and allows for
changes in the risk adjustment methodology. The 21st Century Cures Act
also directs the Medicare Payment Advisory Commission (MedPAC) to
conduct a review of overall hospital readmissions and whether such
readmissions are related to any changes in outpatient and emergency
services furnished. A report on the study is required to be submitted
in the MedPAC's report to Congress no later than June 2018.
Specifically, section 1886(q)(3)(D) of the Act directs the
Secretary to develop a transitional methodology that accounts for the
percentage of full-benefit dual eligible patients treated by a hospital
to determine a hospital's payment adjustment factor. Section
1886(q)(3)(D)(i) of the Act sets forth the requirement that the
Secretary assign hospitals to groups and apply a methodology ``that
allows for separate comparison of hospitals within each such group.''
This applies to discharges that occur during and after FY 2019 and
before the application of section 1886(q)(3)(E)(i) of the Act, which
allows the Secretary to take into account the recommendations in the
reports required by the IMPACT Act (Pub. L. 113-185) related to risk
adjustment and social risk factors. The first of two reports required
in the IMPACT Act was released in December of 2016 (available at:
https://aspe.hhs.gov/system/files/pdf/253971/ASPESESRTCfull.pdf), and
the second report is required to be completed by October 2019.
The hospital groups in section 1886(q)(3)(D)(ii) of the Act are
described as being ``based on their overall proportion, of the
inpatients who are entitled to, or enrolled for, benefits under
Medicare Part A and who are full-benefit dual eligible individuals (as
defined in section 1935(c)(6) [of the Act]).'' The Secretary is further
required to consult with MedPAC when defining groups and may consider
analysis done by MedPAC in preparation for its June 2013 report
submitted to Congress. Section 1886(q)(3)(D)(iii) of the Act prevents
the imposition of additional reporting requirements in order to carry
out subparagraph (D). Section 1886(q)(3)(D)(iv) of the Act requires
that the estimated total amount of reductions in payments using the
methodology should equal the estimated total amount of reductions in
payments if subparagraph (D) did not apply.
Section 1886(q)(3)(E) of the Act outlines the considerations the
Secretary may take into account with respect to the risk adjustment
methodology. Section 1886(q)(3)(E)(i) of the Act allows the Secretary
to take into account studies conducted and recommendations made by the
Secretary under section 2(d)(1) of the IMPACT Act in the application of
risk adjustment methodologies. This does not preclude the consideration
of the use of groupings of hospitals. The Secretary is also allowed
under section 1886(q)(3)(E)(ii) of the Act to consider the use of ``V''
or other ICD-related codes for removal of a readmission with respect to
discharges occurring after FY 2018. Section 1886(q)(3)(E)(iii) of the
Act outlines the considerations the Secretary may make in the removal
of certain readmissions. For discharges occurring after FY 2018, the
Secretary may consider the removal as a readmission of an admission
that is classified within one or more of the following: Transplants;
end-stage renal disease; burns, trauma; psychosis; or substance abuse.
2. Regulatory Background
We refer readers to the following past final rules for detailed
discussions of the regulatory background and descriptions of the
current policies for the Hospital Readmissions Reduction Program: The
FY 2012 IPPS/LTCH PPS final rule (76 FR 51660 through 51676); the FY
2013 IPPS/LTCH PPS final rule (77 FR 53374 through 53401); the FY 2014
IPPS/LTCH PPS final rule (78 FR 50649 through 50676); the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50024 through 50048); the FY 2016 IPPS/LTCH
PPS final rule (80 FR 49530 through 49543); and the FY 2017 IPPS/LTCH
PPS final rule (81 FR 56973 through 56979). These policies describe the
general framework for the implementation of the Hospital Readmissions
Reduction Program, including: (1) The selection of and measures for the
applicable conditions; (2) the calculation of the excess readmission
ratio, which is used, in part, to calculate the readmissions adjustment
factor; (3) the current calculation of the hospital readmission payment
adjustment factor, specifically addressing the base operating DRG
payment amount, aggregate payments for excess readmissions, and
aggregate payments for all discharges; (4) the opportunity for
hospitals to review and submit corrections using a process similar to
what is currently used for posting results on Hospital Compare; (5) the
adoption of an extraordinary circumstances exception policy to address
hospitals that experience a disaster or other extraordinary
circumstance; (6) the clarification that the public reporting of excess
[[Page 19957]]
readmission ratios will be posted on an annual basis to the Hospital
Compare Web site as soon as is feasible following the preview period;
and (7) the specification that the definition of ``applicable
hospital'' does not include hospitals and hospital units excluded from
the IPPS, such as LTCHs, cancer hospitals, children's hospitals, IRFs,
IPFs, CAHs, and hospitals in Puerto Rico.
We also have codified certain requirements of the Hospital
Readmissions Reduction Program at 42 CFR 412.152 through 412.154.
3. Maintenance of Technical Specifications for Quality Measures
We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR
50039) for a discussion of the maintenance of technical specifications
for quality measures for the Hospital Readmissions Reduction Program.
Technical specifications of the readmission measures are provided on
our Web site in the Measure Methodology Reports at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. Additional resources
about the Hospital Readmissions Reduction Program and measure technical
specifications are on the QualityNet Web site on the Resources page at:
http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772412995.
4. Proposed Policies for the Hospital Readmissions Reduction Program
In this proposed rule, we are proposing the following policies for
the Hospital Readmissions Reduction Program: (1) The applicable time
period for FY 2018; (2) the calculation of aggregate payments for
excess readmissions for FY 2018; (3) changes to the payment adjustment
factor in accordance with section 15002 of the 21st Century Cures Act
for FY 2019; and (4) updates to the Extraordinary Circumstance
Exception policy beginning in FY 2018 as related to extraordinary
circumstances that occur on or after October 1, 2017. These proposals
are described in more detail below.
5. Proposed Applicable Period for FY 2018
Under section 1886(q)(5)(D) of the Act, the Secretary has the
authority to specify the applicable period with respect to a fiscal
year under the Hospital Readmissions Reduction Program. In the FY 2012
IPPS/LTCH PPS final rule (76 FR 51671), we finalized our policy to use
3 years of claims data to calculate the readmission measures. In the FY
2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition
of ``applicable period'' in the regulations at 42 CFR 412.152 as the 3-
year period from which data is collected in order to calculate excess
readmissions ratios and adjustments for the fiscal year, which includes
aggregate payments for excess readmissions and aggregate payments for
all discharges used in the calculation of the payment adjustment.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56974 through
56975), for FY 2017, consistent with the definition specified at Sec.
412.152, we established an ``applicable period'' for the Hospital
Readmissions Reduction Program to be the 3-year period from July 1,
2012 through June 30, 2015. In other words, the excess readmissions
ratios and the payment adjustment (including aggregate payments for
excess readmissions and aggregate payments for all discharges) for FY
2017 are calculated using data from the 3-year time period of July 1,
2012 through June 30, 2015.
In this proposed rule, for FY 2018, consistent with the definition
specified at Sec. 412.152, we are proposing that the ``applicable
period'' for the Hospital Readmissions Reduction Program would be the
3-year period from July 1, 2013 through June 30, 2016. In other words,
we are proposing that the excess readmissions ratios and the payment
adjustment (including aggregate payments for excess readmissions and
aggregate payments for all discharges) for FY 2018 would be calculated
using data from the 3-year time period of July 1, 2013 through June 30,
2016.
We are inviting public comment on this proposal.
6. Proposed Calculation of Aggregate Payments for Excess Readmissions
for FY 2018
Section 1886(q)(3)(B) of the Act specifies the ratio used to
calculate the adjustment factor under the Hospital Readmissions
Reduction Program. It states that the ratio is equal to 1 minus the
ratio of--(i) the aggregate payments for excess readmissions and (ii)
the aggregate payments for all discharges. For a detailed discussion on
the methodology for the calculation of aggregate payments for excess
readmissions, we refer readers to the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53387 through 53397). We also have codified the definition of
``aggregate payments for excess readmissions'' and ``aggregate payments
for all discharges,'' as well as a current methodology for calculating
the numerator of the ratio (aggregate payments for excess readmissions)
and the denominator of the ratio (aggregate payments for all
discharges) at 42 CFR 412.152 through 412.154.
The Hospital Readmissions Reduction Program currently includes the
following six applicable conditions: Acute myocardial infarction (AMI);
heart failure (HF); pneumonia (PN); total hip arthroplasty/total knee
arthroplasty (THA/TKA); chronic obstructive pulmonary disease (COPD);
and Coronary Artery Bypass Graft (CABG) Surgery.
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56975 through
56977), we adopted the methodology to include CABG in the calculation
of the readmissions payment adjustment for FY 2017. Specifically, we
discussed how the addition of CABG applicable conditions would be
included in the calculation of the aggregate payments for excess
readmissions (the numerator of the readmissions payment adjustment). We
note that this policy did not alter our established methodology for
calculating aggregate payments for all discharges (that is, the
denominator of the ratio).
When calculating the numerator (aggregate payments for excess
readmissions), we determine the base operating DRG payments for the
applicable period. To determine the base operating DRG payment amount
for an individual hospital for such applicable period for such
condition, we use Medicare inpatient claims from the MedPAR file with
discharge dates that are within the same applicable period to calculate
the excess readmissions ratio. We use MedPAR claims data as our data
source for determining aggregate payments for excess readmissions and
aggregate payments for all discharges, as this data source is
consistent with the claims data source used in IPPS rulemaking to
determine IPPS rates.
For FY 2018, we are proposing to use MedPAR claims with discharge
dates that are on or after July 1, 2013, and no later than June 30,
2016, consistent with our historical use of a 3-year applicable period.
Under our established methodology, we use the update of the MedPAR file
for each Federal fiscal year, which is updated 6 months after the end
of each Federal fiscal year within the applicable period, as our data
source (that is, the March updates of the respective Federal fiscal
year MedPAR files) for the final rules.
In this proposed rule, for FY 2018, we are proposing to determine
aggregate payments for excess readmissions and
[[Page 19958]]
aggregate payments for all discharges using data from MedPAR claims
with discharge dates that are on or after July 1, 2013, and no later
than June 30, 2016. However, we note that, for the purpose of modeling
the proposed FY 2018 readmissions payment adjustment factors for this
proposed rule, we used excess readmissions ratios for applicable
hospitals from the FY 2017 Hospital Readmissions Reduction Program
applicable period. For the FY 2018 IPPS/LTCH PPS final rule, applicable
hospitals will have had the opportunity to review and correct data from
the proposed FY 2018 applicable period of July 1, 2013 to June 30,
2016, before they are made public under our policy regarding the
preview and reporting of hospital-specific information, which we
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401).
In this proposed rule, for FY 2018, we are proposing to use MedPAR
data from July 1, 2013 through June 30, 2016. Specifically, for this
proposed rule, we are using the following MedPAR files:
March 2014 update of the FY 2013 MedPAR file to identify
claims within FY 2013 with discharges dates that are on or after July
1, 2013;
March 2015 update of the FY 2014 MedPAR file to identify
claims within FY 2014;
March 2016 update of the FY 2015 MedPAR file to identify
claims within FY 2015;
December 2016 update of the FY 2016 MedPAR file to
identify claims within FY 2016 with discharge dates no later than June
30, 2016.
For the final rule, we are proposing to use the same MedPAR files
as listed above for claims within FY 2013, FY 2014 and FY 2015, and for
claims within FY 2016, we are proposing to use the March 2017 update of
the FY 2016 MedPAR file.
For a discussion of how we identified the applicable conditions to
calculate the aggregate payments for excess readmissions for FY 2017,
we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56975
through 56977).
Under our current methodology, in identifying the applicable
conditions to calculate the aggregate payments for excess readmissions,
we apply the same exclusions to the claims in the MedPAR file as are
applied in the measure methodology for each of the applicable
conditions. In this proposed rule, for FY 2018, we are proposing to
continue to apply the same exclusions to the claims in the MedPAR file
as we applied for FY 2017 for the AMI, HF, PN, THA/TKA, CABG and COPD
applicable conditions. We refer readers to the FY 2016 IPPS/LTCH PPS
and FY 2017 IPPS/LTCH PPS final rules (80 FR 49539; 81 FR 56976) for a
list of these exclusions. Updates to these exclusions will be posted on
the QualityNet Web site at: http://www.QualityNet.org > Hospital-
Inpatient > Claims-Based Measures > Readmission Measures > Measure
Methodology.
Furthermore, under our current methodology we only identify
Medicare fee-for-service (FFS) claims that meet the criteria described
above for each applicable condition to calculate the aggregate payments
for excess readmissions (that is, claims paid for under Medicare Part
C, Medicare Advantage, are not included in this calculation). This
policy is consistent with the methodology to calculate excess
readmissions ratios based solely on admissions and readmissions for
Medicare FFS patients. Therefore, consistent with our established
methodology, for FY 2018, we are proposing to continue to exclude
admissions for patients enrolled in Medicare Advantage as identified in
the Medicare Enrollment Database.
Under our existing policy, we identify eligible hospitalizations
and readmissions of Medicare patients discharged from an applicable
hospital having a principal diagnosis for the measured condition in an
applicable period (76 FR 51669). As described above, the proposed 3-
year applicable period for FY 2018 of July 1, 2013 through June 30,
2016 includes discharges occurring in four Federal FYs (FY 2013, FY
2014, FY 2015, and FY 2016). Diagnoses and procedure codes for
discharges occurring prior to October 1, 2015 were reported under the
ICD-9-CM code set. Effective with discharges occurring on or after
October 1, 2015 (FY 2016), diagnoses and procedure codes are reported
under the ICD-10-CM and ICD-10-PCS code sets. Thus, for the proposed FY
2018 applicable period, the discharge diagnoses for each applicable
condition would be based on a list of specific ICD-9-CM or ICD-10-CM
and ICD-10-PCS code sets, as applicable, for that condition.
In this proposed rule, to identify the discharges for each
applicable condition for FY 2018 to calculate the aggregate payments
for excess readmissions for an individual hospital, we are proposing to
identify each applicable condition, using, for FY 2013, FY 2014 and FY
2015, the appropriate ICD-9-CM codes, and for FY 2016, the appropriate
ICD-10-CM and ICD-10-PCS code sets. This proposal is consistent with
our established policy for identifying the discharges for each
applicable condition to calculate the aggregate payments for excess
readmissions (76 FR 51673 through 51676). The ICD-9-CM codes for the
AMI, HF, PN, THA/TKA, COPD, and CABG applicable conditions can be found
on the QualityNet Web site at: http://www.QualityNet.org > Hospital-
Inpatient > Claims-Based Measures > Readmission Measures > Measure
Methodology. For a complete list of the ICD-9-CM codes we are proposing
to use to identify the applicable conditions, we refer readers to the
following tables of the measure methodology reports on the QualityNet
Web site:
2016 Measure Updates: AMI, HF, Pneumonia, COPD, Stroke
Readmission (AMI-Version 8.0, HF-Version 8.0, Pneumonia-Version 8.0,
COPD-Version 4.0, and Stroke-Version 4.0: 2016 Condition-Specific
Readmission Measures Updates and Specifications Report)--
++ Table D.1.1--ICD-9-CM Codes for AMI Cohort (page 79).
++ Table D.2.1--ICD-9-CM Codes for COPD Cohort (page 83).
++ Table D.3.1--ICD-9-CM Codes for Inclusion in HF Cohort (page
89).
++ Table D.4.1--ICD-9-CM Codes for Pneumonia Cohort (page 94).
2016 Measure Updates: THA/TKA and CABG Readmission (THA
and/or TKA-Version 4.0, CABG-Version 2.0: 2016 Procedure-Specific
Readmission Measures Updates and Specifications Report)--
++ Table D.1.1--ICD-9-CM Codes Used to Identify Eligible CABG
Procedures (page 49).
++ Table D.2.1--ICD-9-CM Codes Used to Identify Eligible THA/TKA
Procedures (page 58).
A detailed list of the condition-specific and procedure-specific
reports detailing the ICD-10-CM and ICD-10-PCS code sets we are
proposing to use to identify the applicable conditions for the period
from October 1, 2015 to June 30, 2016 is not yet publicly available.
However, we anticipate the 2017 AMI, HF, Pneumonia, COPD, Stroke, THA/
TKA, and CABG Readmission Measures Updates and Specifications Report,
will be available by mid-April and can be accessed at: http://www.QualityNet.org > Hospital-Inpatient > Claims-Based Measures >
Readmission Measures > Measure Methodology. We are currently making a
list of the ICD-10-CM and ICD-10-PCS code sets used to identify the
applicable conditions for this proposed rule, titled ICD-10-CM Codes
for Inclusion in the Hospital Readmissions Reduction Program Applicable
Conditions for FY 2018 Proposed Rule, available on the Hospital
Readmissions Reduction Program page on the CMS Web site at: https://
[[Page 19959]]
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/Readmissions-Reduction-Program.html.
In summary, for FY 2018, we are proposing to calculate aggregate
payments for excess readmissions, using MedPAR claims from July 1, 2013
through June 30, 2016, to identify applicable conditions based on the
same ICD-9-CM codes or ICD-10-CM and ICD-10-PCS code sets, as
applicable, used to identify the conditions for the readmissions
measures, and to apply the proposed exclusions for the types of
admissions (as previously discussed). We are not proposing any changes
to our existing methodology for calculating ``aggregate payments for
excess readmissions'' for each hospital (the numerator of the ratio).
Specifically, to calculate aggregate payments for excess readmissions
for each hospital, we are proposing to calculate the base operating DRG
payment amounts for all claims in the 3-year applicable period for each
applicable condition (AMI, HF, PN, COPD, THA/TKA, and CABG) based on
the claims we have identified as described above. Once we have
calculated the base operating DRG amounts for all the claims for the
six applicable conditions, we are proposing to sum the base operating
DRG payments amounts by each condition, resulting in six summed
amounts, one amount for each of the six applicable conditions. We are
proposing to then multiply the amount for each condition by the
respective excess readmissions ratio minus 1 when that excess
readmissions ratio is greater than 1, which indicates that a hospital
has performed, with respect to readmissions for that applicable
condition, worse than the average hospital with similar patients. Each
product in this computation represents the payments for excess
readmissions for that condition. We are proposing to then sum the
resulting products which represent a hospital's proposed ``aggregate
payments for excess readmissions'' (the numerator of the ratio).
Because this calculation is performed separately for each of the six
conditions, a hospital's excess readmissions ratio must be less than or
equal to 1 on each measure to avoid CMS' determination that there were
payments made by CMS for excess readmissions (resulting in a payment
reduction under the Hospital Readmissions Reduction Program). In other
words, in order to avoid a payment reduction a hospital's excess
readmissions ratio must be less than or equal to 1 on each measure. We
note that we are not proposing any changes to our existing methodology
to calculate ``aggregate payments for all discharges'' (the denominator
of the ratio).
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater
of: (i) The ratio described in subparagraph (B) for the hospital for
the applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C). Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. Specifically, it states that
the ratio is equal to 1 minus the ratio of--(i) the aggregate payments
for excess readmissions and (ii) the aggregate payments for all
discharges. The calculation of this ratio is codified at Sec.
412.154(c)(1) of the regulations and the floor adjustment factor is
codified at Sec. 412.154(c)(2) of the regulations. Section
1886(q)(3)(C) of the Act specifies the floor adjustment factor at 0.97
for FY 2015 and subsequent fiscal years.
Consistent with section 1886(q)(3) of the Act, codified at Sec.
412.154(c)(2), for FY 2018, the adjustment factor is either the greater
of the ratio or the floor adjustment factor of 0.97. Under our
established policy, the ratio is rounded to the fourth decimal place.
In other words, for FY 2018, a hospital subject to the Hospital
Readmissions Reduction Program would have an adjustment factor that is
between 1.0 (no reduction) and 0.9700 (greatest possible reduction).
We are inviting public comment on these proposals.
7. Background and Current Payment Adjustment Methodology
a. Background
As described above, section 1886(q)(3)(D) of the Act requires the
Secretary to group hospitals and apply a methodology that allows for
separate comparisons of hospitals within groups in determining a
hospital's adjustment factor for payments applied to discharges
beginning in FY 2019.
b. Current Payment Adjustment Methodology
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401), we finalized policies that relate to the portions of section
1886(q) of the Act that at that time addressed the calculation of the
hospital readmissions payment adjustment factor. Section 1886(q)(3)(A)
of the Act defines the ``adjustment factor'' for an applicable hospital
for a fiscal year as equal to the greater of: (i) The ratio described
in subparagraph (B) for the hospital for the applicable period (as
defined in paragraph (5)(D)) for such fiscal year; or (ii) the floor
adjustment factor specified in subparagraph (C). Section 1886(q)(3)(B)
of the Act, in turn, describes the ratio used to calculate the
adjustment factor. Specifically, it states that the ratio is equal to 1
minus the ratio of--(i) the aggregate payments for excess readmissions
and (ii) the aggregate payments for all discharges.
Consistent with section 1886(q)(3)(C) of the Act, codified at Sec.
412.154(c)(2), for FY 2015 and subsequent years, the adjustment factor
is either the greater of the ratio or the floor adjustment factor of
0.9700. In other words, a hospital subject to the Hospital Readmissions
Reduction Program will have an adjustment factor that is between 1.0000
(no reduction) and 0.9700 (greatest possible reduction). Under our
established policy, the ratio is rounded to the fourth decimal place.
8. Provisions for the Proposed Payment Adjustment Methodology for FY
2019: Proposed Methodology for Calculating the Proportion of Dual
Eligible Patients
a. Background
As described above, section 1886(q)(3)(D) of the Act requires the
Secretary to group hospitals and apply a methodology that allows for
separate comparisons of hospitals within groups in determining a
hospital's adjustment factor for payments of discharges beginning in FY
2019. Furthermore, section 1886(q)(3)(D)(ii) of the Act directs the
Secretary to define groups of hospitals, based on their overall
proportion, of the inpatients who are entitled to, or enrolled for,
benefits under part A, and who are full-benefit dual eligible
individuals (as defined in section 1935(c)(6) of the Act).\38\ Under
these statutory requirements, hospitals are grouped based on the
proportion or ratio of full-benefit dual eligible patients (numerator)
to the hospital's Medicare inpatient stays (denominator). The Act
specifies that in defining groups, the Secretary shall consult the
MedPAC and may consider the analysis done by MedPAC in preparing the
portion of its
[[Page 19960]]
report submitted to Congress in June 2013 relating to readmissions.
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\38\ Section 1935(c)(6)(A) of the Act defines ``full-benefit
dual eligible individual'' as, for a State for a month, an
individual who--(i) has coverage for the month for covered part D
drugs under a prescription drug plan under part D of title XVIII, or
under an MA-PD plan under part C of such title; and (ii) is
determined eligible by the State for medical assistance for full
benefits under this title for such month under section
1902(a)(10)(A) or 1902(a)(10)(C) [of the Act], by reason of section
1902(f) [of the Act], or under any other category of eligibility for
medical assistance for full benefits under this title, as determined
by the Secretary.
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b. Proposed Data Sources Used To Determine Dual Eligibility
In this proposed rule, we are proposing to identify full-benefit
dual status (numerator) using dual eligibility status data where the
original data source is the State Medicare Modernization Act (MMA) file
of dual eligibility which States submit to CMS monthly. The State MMA
file is considered the most current and most accurate source of data
for identifying dual eligible beneficiaries since it is also used for
operational purposes related to the administration of Part D benefits.
Under our proposal, an individual would be counted as a full-benefit
dual patient if the beneficiary was identified as full-benefit dual
status in the State MMA files for the month he/she was discharged from
the hospital.
We are inviting public comment on this proposal.
For this proposed rule, we considered two alternative definitions
of total number of Medicare patients (denominator) that could be used
to calculate each hospital's proportion of dual eligible patients. We
are proposing to define the proportion of full-benefit dual eligible
beneficiaries as the proportion of dual eligible patients among all
Medicare FFS and Medicare Advantage stays. This is our preferred
approach because using the proportion of dual eligible patients
calculated among all Medicare FFS and managed care patients more
accurately represents the proportion of dual eligible patients served
by the hospital, particularly for hospitals in States with high managed
care penetration rates. For example, Hospital A located in Arizona has
a high managed care penetration rate. When stratified based on the
proportion of dual eligibles, calculated among Medicare FFS and managed
care patients, Hospital A was assigned to the top quintile of
proportion of dual eligibles and its payment adjustment calculated
based on its ERR relative to the threshold for the top quintile. When
stratified based on the proportion of dual eligible among only Medicare
FFS patients, Hospital A was assigned to the second quintile and its
payment adjustment calculated relative to the threshold of the second
quintile. Its classification when managed care patients are included
more accurately identifies the social risk of the patients Hospital A
serves, compared to its classification if only the FFS population is
included.
However, because the Hospital Readmissions Reduction Program
payment adjustment is only applied to Medicare FFS payments, and is
based on excess readmissions among Medicare FFS patients only, we are
including an alternative to define the proportion of full-benefit dual
eligible beneficiaries as only Medicare FFS stays. Under both
approaches, we are proposing to use the MedPAR files, the same data
source used to calculate the payment adjustment factors, to identify
total hospital stays as this is the best available claims data that is
readily publicly available. However, in developing our proposal, we
also considered using other data sources such as the CMS integrated
data repository (IDR), which may incorporate managed care claims more
consistently to calculate total hospital stays, but it is currently not
readily available to the public. We are inviting stakeholder input on
the most appropriate data source to identify total hospital stays and
whether such stays should include all Medicare FFS and Medicare
Advantage stays or only Medicare FFS stays.
We are inviting public comment on our preferred proposals and
alternative considerations.
c. Proposed Data Period Used To Define Dual Eligibility
Consistent with the requirement of the statute, we are proposing to
group or stratify hospitals based on the proportion of full-benefit
dual eligible patients determined under the proposals discussed above
and are proposing to define the proportion of full-benefit dual
eligible beneficiaries as the number of dual eligible patients
discharged during the 3-year applicable period under the Hospital
Readmissions Reduction Program. For this proposed rule, we considered
two alternatives for the data period used to define dual eligibility, a
3-year period corresponding to the performance period, and a 1-year
period, which would be calculated over the most recent year for which
complete data is available.
While both data periods would include the most recently available
data to define dual eligibility, our proposal to use a 3-year period
accounts for the influence of social risk factors on the excess
readmissions ratio (ERR) because the proportion of dual eligible
patients is measured over the full period when they influenced the
likelihood of excess readmissions. However, the most recent 1-year
period would capture the most recent population served by the hospital
and may enable a more accurate stratification to calibrate the impact
of payment adjustments to the proportion of dual eligible patients that
the hospital currently serves.
We are inviting public comment on our preferred proposal and
alternative considerations.
9. Provisions for the Proposed Payment Adjustment Methodology for FY
2019: Proposed Methodology for Assigning Hospitals to Peer Groups
For this proposed rule, we considered three alternative
methodologies for assigning hospitals to peer groups. For the reasons
discussed below, our preferred approach is to stratify hospitals into
quintiles (five peer groups). However, we are also seeking public
comment on stratifying hospitals into two and 10 peer groups.
To understand the impact on payment adjustments of stratifying
hospitals into different number of peer groups, we conducted an
analysis that estimated payment adjustments when stratifying hospitals
into two, five (quintiles), or 10 (deciles) peer groups. Two and 10
peer groups were considered to align with previous research conducted
by MedPAC and ASPE that assessed impacts from stratifying hospitals
into two or 10 groups. MedPAC's analysis stratified hospitals into 10
peer groups when setting the target rate used to compare hospital
performance. ASPE's analysis stratified hospitals into two and 10 peer
groups to calculate payment adjustments. Our analysis showed that using
five peer groups allows for more precisely defined peer groups than is
possible with a grouping of two, while ensuring that the number of
hospitals is sufficient to represent a peer group, even for measures,
like CABG, in which only a minority of hospitals are subject to a
payment adjustment.
We note, as the number of groupings increase, hospitals became more
similar within their peer groups with respect to proportion of dual
eligible patients in their patient population. Hence, payment
adjustments are more closely related to the proportion of dual
eligibles, and to the possible influence on the likelihood of
readmission resulting from small variations in patient populations. We
also observed that increasing the number of peer groups also increases
the likelihood that hospitals with similar exposure to dual eligible
patients will be compared to different thresholds in the payment
adjustment formula. Deciles cover a narrow range of dual eligible
patient proportions in each peer group, so small differences in
proportion are likely to result in differences in peer group assignment
and corresponding comparison thresholds used in the payment adjustment
formula. This
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problem is compounded by the small number of hospitals in deciles. When
the number of hospitals is small, peer group thresholds or
distributions and the resulting payment adjustments are less
predictable.
Stratifying hospitals into two peer groups is a simpler method and
reduces the likelihood that similar hospitals are assigned different
payment adjustments. However, this approach yields peer groups with a
more heterogeneous mix of hospitals assigned to each group and weakens
the relationship between the payment adjustment and the hospital's
patient population. When the impact on payments of different peer group
definitions was tested using the various methods of incorporating
stratification into the payment formula, we found a substantial
reduction in penalties (measured as the share of payment adjustments as
a percentage of total payments) to safety-net hospitals, defined as
hospitals in the highest quintile for disproportionate share (DSH)
payments, from stratification into quintiles compared to stratification
into two groups. Furthermore, our analysis found a similar impact on
the share of total payments borne as payment adjustments by safety-net
hospitals from stratifying hospitals into quintiles and deciles,
suggesting that the benefit to safety-net hospitals from increasing the
number of strata would be small. For example, using the preferred
modified payment formula, proposed below, across the current set of six
conditions, we found that for safety-net hospitals, payment adjustment
as a proportion of total payments decreased from a baseline of 0.64
percent to 0.59 percent with two groups, 0.55 percent with quintiles
and 0.54 percent with deciles.
Based on the analysis described above, we are proposing to stratify
hospitals into quintiles (five peer groups) because it creates peer
groups that accurately reflect the relationship between the proportion
of dual eligibles in the hospital's population without the disadvantage
of establishing a larger number of peer groups.
We are inviting public comment on our preferred proposal and
alternative considerations.
10. Provisions for the Proposed Payment Adjustment Methodology for FY
2019: Proposed Payment Adjustment Formula Calculation Methodology
a. Background
As described above, section 1886(q)(3)(D)(iv) of the Act requires
the Secretary to design the methodology to implement this subparagraph
so that the estimated total amount of Medicare savings under this
subsection (stratified methodology) equals the estimated total amount
of Medicare savings that would otherwise occur under this subsection
(current methodology) if this subparagraph did not apply (that is,
maintain budget neutrality).
We analyzed several modifications of the payment adjustment formula
to assess payment reductions based on a hospital's performance compared
to performance of other hospitals in its peer group. The current
readmissions payment adjustment can be written as
[GRAPHIC] [TIFF OMITTED] TP28AP17.000
where dx is AMI, HF, pneumonia, COPD, THA/TKA or CABG. In our analyses,
we modified the payment adjustment formula by replacing the current
threshold ERR of 1.0000 with a peer group specific threshold.
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\39\ ``Payment'' refers to the base operating DRG payment.
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In adopting a methodology for achieving budget neutrality, our
priority is to adopt a simplified and well-known metric that allows us
to be more transparent in our methodology and reduces the penalty on
safety-net hospitals, while not disproportionality increasing the
penalty to non-safety-net hospitals. In developing policy options to
implement the budget neutrality requirement, we analyzed the following
alternatives to evaluate the financial impacts:
Using the median ERR for the hospital's peer group in
place of 1.0000 in the payment adjustment formula and applying a
uniform modifier to maintain budget neutrality;
Using the mean ERR for the hospital's peer group in place
of 1.0000 in the payment adjustment formula and applying a uniform
modifier to maintain budget neutrality;
Using the ``budget neutralizing'' ERR for each peer group
in place of 1.0000 in the payment adjustment formula. The budget
neutralizing ERR is defined as the ERR corresponding to the percentile
(for example, 52nd) of the peer group distributions that would maintain
budget neutrality for each peer group; and