[Federal Register Volume 79, Number 163 (Friday, August 22, 2014)]
[Rules and Regulations]
[Pages 49853-50449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-18545]



[[Page 49853]]

Vol. 79

Friday,

No. 163

August 22, 2014

Part II





Department of Health and Human Services





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Center 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 Fiscal Year 2015 Rates; Quality Reporting 
Requirements for Specific Providers; Reasonable Compensation 
Equivalents for Physician Services in Excluded Hospitals and Certain 
Teaching Hospitals; Provider Administrative Appeals and Judicial 
Review; Enforcement Provisions for Organ Transplant Centers; and 
Electronic Health Record (EHR) Incentive Program; Final Rule

Federal Register / Vol. 79 , No. 163 / Friday, August 22, 2014 / 
Rules and Regulations

[[Page 49854]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 415, 422, 424, 485, and 488

[CMS-1607-F and CMS-1599-F3]
RINs 0938-AS11; 0938-AR12; and 0938-AR53


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Fiscal Year 2015 Rates; Quality Reporting 
Requirements for Specific Providers; Reasonable Compensation 
Equivalents for Physician Services in Excluded Hospitals and Certain 
Teaching Hospitals; Provider Administrative Appeals and Judicial 
Review; Enforcement Provisions for Organ Transplant Centers; and 
Electronic Health Record (EHR) Incentive Program

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

ACTION: Final rule.

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SUMMARY: We are revising the Medicare hospital inpatient prospective 
payment systems (IPPS) for operating and capital-related costs of acute 
care hospitals to implement changes arising from our continuing 
experience with these systems. Some of these changes implement certain 
statutory provisions contained in the Patient Protection and Affordable 
Care Act and the Health Care and Education Reconciliation Act of 2010 
(collectively known as the Affordable Care Act), the Protecting Access 
to Medicare Act of 2014, and other legislation. These changes are 
applicable to discharges occurring on or after October 1, 2014, unless 
otherwise specified in this final rule. We also are updating the rate-
of-increase limits for certain hospitals excluded from the IPPS that 
are paid on a reasonable cost basis subject to these limits. The 
updated rate-of-increase limits are effective for cost reporting 
periods beginning on or after October 1, 2014.
    We also are updating 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) and 
implementing certain statutory changes to the LTCH PPS under the 
Affordable Care Act and the Pathway for Sustainable Growth Rate (SGR) 
Reform Act of 2013 and the Protecting Access to Medicare Act of 2014. 
In addition, we discuss our proposals on the interruption of stay 
policy for LTCHs and on retiring the ``5 percent'' payment adjustment 
for co-located LTCHs. While many of the statutory mandates of the 
Pathway for SGR Reform Act apply to discharges occurring on or after 
October 1, 2014, others will not begin to apply until 2016 and beyond.
    In addition, we are making a number of changes relating to direct 
graduate medical education (GME) and indirect medical education (IME) 
payments. We are establishing new requirements or revising requirements 
for quality reporting by specific providers (acute care hospitals, PPS-
exempt cancer hospitals, and LTCHs) that are participating in Medicare.
    We are updating policies relating to the Hospital Value-Based 
Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, 
and the Hospital-Acquired Condition (HAC) Reduction Program. In 
addition, we are making technical corrections to the regulations 
governing provider administrative appeals and judicial review; updating 
the reasonable compensation equivalent (RCE) limits, and revising the 
methodology for determining such limits, for services furnished by 
physicians to certain teaching hospitals and hospitals excluded from 
the IPPS; making regulatory revisions to broaden the specified uses of 
Medicare Advantage (MA) risk adjustment data and to specify the 
conditions for release of such risk adjustment data to entities outside 
of CMS; and making changes to the enforcement procedures for organ 
transplant centers.
    We are aligning the reporting and submission timelines for clinical 
quality measures for the Medicare EHR Incentive Program for eligible 
hospitals and critical access hospitals (CAHs) with the reporting and 
submission timelines for the Hospital IQR Program. In addition, we 
provide guidance and clarification of certain policies for eligible 
hospitals and CAHs such as our policy for reporting zero denominators 
on clinical quality measures and our policy for case threshold 
exemptions.
    In this document, we are finalizing two interim final rules with 
comment period relating to criteria for disproportionate share hospital 
uncompensated care payments and extensions of temporary changes to the 
payment adjustment for low-volume hospitals and of the Medicare-
Dependent, Small Rural Hospital (MDH) Program.

DATES: Effective Date: These final rules are effective on October 1, 
2014.
    Applicability Dates: The amendments to 42 CFR 405.1811 and 405.1835 
are applicable to appeals based on untimely contractor determinations 
that are pending or were filed on or after August 21, 2008, subject to 
the rules of administrative finality and reopening at 42 CFR 405.1807 
and 405.1885. The provisions discussed in section IV.I.4.c. of the 
preamble of this final rule are applicable on or after July 1, 2015; 
and the provisions discussed in section IV.I.5.a. of the preamble of 
this final rule are applicable on or after January 1, 2015.

FOR FURTHER INFORMATION, CONTACT:
Ing-Jye Cheng, (410) 786-4548 and Donald Thompson, (410) 786-4487, 
Operating Prospective Payment, MS-DRGs, Hospital-Acquired Conditions 
(HAC), Wage Index, New Medical Service and Technology Add-On Payments, 
Hospital Geographic Reclassifications, Graduate Medical Education, 
Capital Prospective Payment, Excluded Hospitals, and Medicare 
Disproportionate Share Hospital (DSH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590, 
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG 
Relative Weights Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and 
Hospital Value-Based Purchasing--Program Administration, Validation, 
and Reconsideration Issues.
Pierre Yong, (410) 786-8896, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare 
Providers and Systems Issues; and Readmission Measures for Hospitals 
Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality 
Reporting--Hospital Consumer Assessment of Healthcare Providers and 
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing 
Efficiency Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality 
Reporting Issues.
Kellie Shannon, (410) 786-0416, Administrative Appeals by Providers and 
Judicial Review Issues.
Amelia Citerone, (410) 786-3901, and Robert Kuhl (410) 786-4597,

[[Page 49855]]

Reasonable Compensation Equivalent (RCE) Limits for Physician Services 
Provided in Providers.
Anne Calinger, (410) 786-3396, and Jennifer Harlow, (410) 786-4549, 
Medicare Advantage Risk Adjustment Data Issues.
Thomas Hamilton, (410) 786-6763, Organ Transplant Center Issues.
Jennifer Phillips, (410) 786-1023, 2-Midnight Rule Benchmark Issues.

SUPPLEMENTARY INFORMATION:

Electronic Access

    This Federal Register document is also 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 are available only through the Internet. The IPPS 
tables for this final rule are available only 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 2015 IPPS Final Rule Home Page'' 
or ``Acute Inpatient--Files for Download''. The LTCH PPS tables for 
this FY 2015 final rule are available only 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-1607-F. For complete details on the availability 
of the tables referenced in this final rule, we refer readers to 
section VI. of the Addendum to this final 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
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, Pub. L. 111-5
ASCA Administrative Simplification Compliance Act of 2002, Pub. L. 
107-105
ASITN American Society of Interventional and Therapeutic 
Neuroradiology
ATRA American Taxpayer Relief Act of 2012, Pub. L. 112-240
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 
106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Benefits Improvement and Protection Act of 2000, 
Pub. L. 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 Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile (C. difficile)
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, Pub. L. 99-
272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
COPD Chronis obstructive pulmonary disease
CPI Consumer price index
CQM Clinical quality measure
CRNA Certified registered nurse anesthetist
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External Bean Radiotherapy
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, Pub. L. 
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
HCRIS Hospital Cost Report Information System
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, 
Pub. L. 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
IBR Intern- and Resident-to-Bed Ratio
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
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]

[[Page 49856]]

IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
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, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 
110-173
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]
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
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991, Pub. 
L. 104-113
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Pub. L. 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAMA Protecting Access to Medicare Act of 2014, Pub. L. 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
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QRDA Quality Reporting Data Architecture
RCE Reasonable compensation equivalent
RFA Regulatory Flexibility Act, Pub. L. 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standardized mortality rate
RSRR 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
SCIP Surgical Care Improvement Project
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
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, Pub. L. 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, Pub. L. 
110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UMRA Unfunded Mandate Reform Act, Pub. L. 104-4
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 Discussed in This 
Final Rule
    1. Patient Protection and Affordable Care Act (Pub. L. 111-148) 
and the Health Care and Education Reconciliation Act of 2010 (Pub. 
L. 111-152)
    2. American Taxpayer Relief Act of 2012 (Pub. L. 112-240)
    3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 
(Pub. L. 113-67)
    4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
    D. Issuance of Notice of Proposed Rulemaking
    E. Public Comments Received in Response to the FY 2015 IPPS/LTCH 
PPS Proposed Rule
    F. Finalization of Interim Final Rule With Comment Period on 
Extension of Payment Adjustment for Low-Volume Hospitals and the MDH 
Program
    G. Finalization of Interim Final Rule With Comment Period 
Related to Changes to Certain Cost Reporting Procedures for 
Disproportionate Share Hospital Uncompensated Care Payments
II. 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. FY 2015 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 Pub. L. 110-90
    2. Adjustment to the Average Standardized Amounts Required by 
Pub. L. 110-90
    a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. 
L. 110-90
    b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 
Required by Section 7(b)(1)(B) Pub. L. 110-90
    3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
    4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by 
Section 7(b)(1)(A) of Pub. L. 110-90
    5. Recoupment or Repayment Adjustment Authorized by Section 
7(b)(1)(B) of Pub. L. 110-90

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    6. Recoupment or Repayment Adjustment Authorized by Section 631 
of the American Taxpayer Relief Act of 2012 (ATRA)
    7. Prospective Adjustment for the MS-DRG Documentation and 
Coding Effect Through FY 2010
    E. Refinement of the MS-DRG Relative Weight Calculation
    1. Background
    2. Discussion for FY 2015
    F. Adjustment to MS-DRGs for Preventable Hospital-Acquired 
Conditions (HACs), Including Infections for FY 2015
    1. Background
    2. HAC Selection
    3. Present on Admission (POA) Indicator Reporting
    4. HACs and POA Reporting in Preparation for Transition to ICD-
10-CM and ICD-10-PCS
    5. Current HACs and Previously Considered Candidate HACs
    6. RTI Program Evaluation
    7. Current and Previously Considered Candidate HACs--RTI Report 
on Evidence-Based Guidelines
    G. Changes to Specific MS-DRG Classifications
    1. Discussion of Changes to Coding System and Basis for MS-DRG 
Updates
    a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Edition (ICD-10)
    b. Basis for FY 2015 MS-DRG Updates
    2. MDC 1 (Diseases and Disorders of the Nervous System)
    a. Intracerebral Therapies: Gliadel[supreg] Wafer
    b. Endovascular Embolization or Occlusion of Head and Neck
    3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and 
Throat): Avery Breathing Pacemaker System
    4. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Exclusion of Left Atrial Appendage
    b. Transcatheter Mitral Valve Repair: MitraClip[supreg]
    c. Endovascular Cardiac Valve Replacement Procedures
    d. Abdominal Aorta Graft
    5. MDC 8 (Diseases and Disorders of the Musculoskeletal System 
and Connective Tissue)
    a. Shoulder Replacement Procedures
    b. Ankle Replacement Procedures
    c. Back and Neck Procedures
    6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders): Disorders of Porphyria Metabolism
    7. MDC 15 (Newborns and Other Neonates With Conditions 
Originating in the Perinatal Period)
    8. Medicare Code Editor (MCE) Changes
    9. Changes to Surgical Hierarchies
    10. Changes to the MS-DRG Diagnosis Codes for FY 2015
    a. Major Complications or Comorbidities (MCCs) and Complications 
or Comorbidities (CCs) Severity Levels for FY 2015
    b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
    11. Complications or Comorbidity (CC) Exclusions List
    a. Background of the CC List and the CC Exclusions List
    b. CC Exclusions List for FY 2015
    12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
    b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    c. Adding Diagnosis or Procedure Codes to MDCs
    13. Changes to the ICD-9-CM Coding System
    a. ICD-10 Coordination and Maintenance Committee
    b. Code Freeze
    14. Public Comments on Issues Not Addressed in the Proposed Rule
    a. Request for Review and MS-DRG Assignment for ICD-9-CM 
Diagnosis Code 784.7 Reported with Procedure Code 39.75
    b. Coding for Extracorporeal Membrane Oxygenation (ECMO) 
Procedures
    c. Adding Severity Levels to MS-DRGs 245 Through 251
    H. Recalibration of the FY 2015 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
    4. Bundled Payments for Care Improvement (BPCI) Initiative
    I. Add-On Payments for New Services and Technologies
    1. Background
    2. Public Input Before Publication of a Notice of Proposed 
Rulemaking on Add-On Payments
    3. FY 2015 Status of Technologies Approved for FY 2014 Add-On 
Payments
    a. Glucarpidase (Trade Brand Voraxaze[supreg])
    b. DIFICIDTM (Fidaxomicin) Tablets
    c. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA) 
Endovascular Graft
    d. KcentraTM
    e. Argus[supreg] II Retinal Prosthesis System
    f. Zilver[supreg] PTX[supreg] Drug Eluting Stent
    4. FY 2015 Applications for New Technology Add-On Payments
    a. Dalbavancin (Durata Therapeutics, Inc.)
    b. Heli-FXTM EndoAnchor System (Aptus Endosystems, 
Inc.)
    c. CardioMEMSTM HF (Heart Failure) System
    d. MitraClip[supreg] System
    f. Responsive Neurostimulator (RNS[supreg]) System
III. Changes to the Hospital Wage Index for Acute Care Hospitals
    A. Background
    B. Core-Based Statistical Areas for the Hospital Wage Index
    1. Background
    2. Implementation of New Labor Market Area Delineations
    a. Micropolitan Statistical Areas
    b. Urban Counties That Became Rural Under the New OMB 
Delineations
    c. Rural Counties That Became Urban Under the New OMB 
Delineations
    d. Urban Counties That Moved to a Different Urban CBSA Under the 
New OMB Delineations
    e. Transition Period
    C. Worksheet S-3 Wage Data for the FY 2015 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
    D. Verification of Worksheet S-3 Wage Data
    E. Method for Computing the FY 2015 Unadjusted Wage Index
    F. Occupational Mix Adjustment to the FY 2015 Wage Index
    1. Development of Data for the FY 2015 Occupational Mix 
Adjustment Based on the 2010 Occupational Mix Survey
    2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
    3. Calculation of the Occupational Mix Adjustment for FY 2015
    G. Analysis and Implementation of the Occupational Mix 
Adjustment and the FY 2015 Occupational Mix Adjusted Wage Index
    1. Analysis of the Occupational Mix Adjustment and the 
Occupational Mix Adjusted Wage Index
    2. Application of the Rural, Imputed, and Frontier Floors
    a. Rural Floor
    b. Imputed Floor and Alternative, Temporary Methodology for 
Computing the Rural Floor for FY 2015
    c. Frontier Floor
    3. FY 2015 Wage Index Tables
    H. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    1. General Policies and Effects of Reclassification and 
Redesignation
    2. FY 2015 MGCRB Reclassifications
    a. FY 2015 Reclassification Requirements and Approvals
    b. Effects of Implementation of New OMB Labor Market Area 
Delineations on Reclassified Hospitals
    c. Applications for Reclassifications for FY 2016
    3. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act
    a. New Lugar Areas for FY 2015
    b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act 
Seeking Reclassification by the MGCRB
    c. Rural Counties No Longer Meeting the Criteria to be 
Redesignated as Lugar
    4. Waiving Lugar Redesignation for the Out-Migration Adjustment
    5. Update of Application of Urban to Rural Reclassification 
Criteria
    I. FY 2015 Wage Index Adjustment Based on Commuting Patterns of 
Hospital Employees
    J. Process for Requests for Wage Index Data Corrections
    K. Notice of Change to Wage Index Development Timetable
    L. Labor-Related Share for the FY 2015 Wage Index
IV. Other Decisions and Changes to the IPPS for Operating Costs and 
Graduate Medical Education (GME) Costs
    A. Changes to MS-DRGs Subject to the Postacute Care Transfer 
Policy (Sec.  412.4)

[[Page 49858]]

    B. Changes in the Inpatient Hospital Updates for FY 2015 
(Sec. Sec.  412.64(d) and 412.211(c))
    1. FY 2015 Inpatient Hospital Update
    2. FY 2015 Puerto Rico Hospital Update
    C. Rural Referral Centers (RRCs): Annual Updates to Case-Mix 
Index (CMI) and Discharge Criteria (Sec.  412.96)
    1. Case-Mix Index (CMI)
    2. Discharges
    D. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
    1. Background
    2. Provisions of the Protecting Access to Medicare Act of 2014
    3. Low-Volume Hospital Definition and Payment Adjustment for FY 
2015
    E. Indirect Medical Education (IME) Payment Adjustment (Sec.  
412.105)
    1. IME Adjustment Factor for FY 2015
    2. IME Add-On Payments for Medicare Part C Discharges to Sole 
Community Hospitals (SCHs) That Are Paid According to Their 
Hospital-Specific Rates and Change in Methodology in Determining 
Payment to SCHs
    3. Other Policy Changes Affecting IME
    F. Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) (Sec.  412.106)
    1. Background
    2. Impact on Medicare DSH Payment Adjustment of Implementation 
of New OMB Labor Market Area Delineations
    3. Payment Adjustment Methodology for Medicare Disproportionate 
Share Hospitals (DSHs) under Section 3133 of the Affordable Care Act 
(Sec.  412.106)
    a. General Discussion
    b. Eligibility for Empirically Justified Medicare DSH Payments 
and Uncompensated Care Payments
    c. Empirically Justified Medicare DSH Payments
    d. Uncompensated Care Payments
    e. Limitations on Review
    G. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108) and Sole Community Hospitals Sec.  412.92)
    1. Background for the MDH Program
    2. PAMA of 2014 Provisions for FY 2015
    3. Expiration of the MDH Program
    4. Effects on MDHs of Adoption of New OMB Delineations
    5. Effects on SCHs of Adoption of New OMB Delineations
    H. Hospital Readmissions Reduction Program: Changes for FY 2015 
Through FY 2017 (Sec. Sec.  412.150 Through 412.154)
    1. Statutory Basis for the Hospital Readmissions Reduction 
Program
    2. Regulatory Background
    3. Overview of Policies for the FY 2015 Hospital Readmissions 
Reduction Program
    4. Refinement of the Readmissions Measures and Related 
Methodology for FY 2015 and Subsequent Years Payment Determinations
    a. Refinement of Planned Readmission Algorithm for Acute 
Myocardial Infarction (AMI), Heart Failure (HF), Pneumonia (PN), 
Chronic Obstructive Pulmonary Disease (COPD), and Total Hip 
Arthroplasty and Total Knee Arthroplasty (THA/TKA) 30-Day 
Readmission Measures
    b. Refinement of Total Hip Arthroplasty and Total Knee 
Arthroplasty (THA/TKA) 30-Day Readmission Measure Cohort
    c. Anticipated Effect of Refinements on Measures
    5. No Expansion of the Applicable Conditions for FY 2016
    6. Expansion of the Applicable Conditions for FY 2017 To Include 
Patients Readmitted Following Coronary Artery Bypass Graft (CABG) 
Surgery Measure
    a. Background
    b. Overview of the CABG Readmissions Measure: Hospital-Level, 
30-Day, All-Cause, Unplanned Readmission Following Coronary Artery 
Bypass Graft (CABG) Surgery
    c. Methodology for the CABG Measure: Hospital-Level, 30-Day, 
All-Cause, Unplanned Readmission Following Coronary Artery Bypass 
Graft (CABG) Surgery
    7. Maintenance of Technical Specifications for Quality Measures
    8. Waiver From the Hospital Readmissions Reduction Program for 
Hospitals Formerly Paid under Section 1814(b)(3) of the Act (Sec.  
412.152 and Sec.  412.154(d))
    9. Floor Adjustment Factor for FY 2015 (Sec.  412.154(c)(2))
    10. Applicable Period for FY 2015
    11. Inclusion of THA/TKA and COPD Readmissions Measures to 
Calculate Aggregate Payments for Excess Readmissions Beginning in FY 
2015
    12. Hospital Readmissions Reduction Program Extraordinary 
Circumstances Exceptions
    I. Hospital Value-Based Purchasing (VBP) Program
    1. Statutory Background
    2. Overview of Previous Hospital VBP Program Rulemaking
    3. FY 2015 Payment Details
    a. Payment Adjustments
    b. Base Operating DRG Payment Amount Definition for Medicare-
Dependent, Small Rural Hospitals (MDHs)
    4. Measures for the FY 2017 Hospital VBP Program
    a. Measures Previously Adopted
    b. Changes Affecting Topped-Out Measures
    c. New Measures for the FY 2017 Hospital VBP Program
    d. Adoption of the Current CLABSI Measure (NQF #0139) 
for the FY 2017 Hospital VBP Program
    e. Summary of Previously Adopted and New Measures for the FY 
2017 Hospital VBP Program
    5. Additional Measures for the FY 2019 Hospital VBP Program
    a. Hospital-level Risk-Standardized Complication Rate (RSCR) 
Following Elective Primary Total Hip Arthroplasty (THA) and Total 
Knee Arthroplasty (TKA)
    b. PSI-90 Measure
    6. Possible Measure Topics for Future Program Years
    a. Care Transition Measure (CTM-3) Items for HCAHPS Survey
    b. Possible Future Efficiency and Cost Reduction Domain Measure 
Topics
    7. Previously Adopted and Final Performance Periods and Baseline 
Periods for the FY 2017 Hospital VBP Program
    a. Background
    b. Previously Adopted Baseline and Performance Periods for the 
FY 2017 Hospital VBP Program
    c. Clinical Care--Process Domain Performance Period and Baseline 
Period for the FY 2017 Hospital VBP Program
    d. Patient and Caregiver-Centered Experience of Care/Care 
Coordination Domain Performance Period and Baseline Period for the 
FY 2017 Hospital VBP Program
    e. Performance Period and Baseline Period for NHSN Measures in 
the Safwety Domain for the FY 2017 Hospital VBP Program
    f. Efficiency and Cost Reduction Domain Performance Period and 
Baseline Period for the FY 2017 Hospital VBP Program
    g. Summary of Previously Adopted and Finalized Performance 
Periods and Baseline Periods for the FY 2017 Hospital VBP Program
    8. Previously Adopted and Finalized Performance Periods and 
Baseline Periods for Certain Measures for the FY 2019 Hospital VBP 
Program
    a. Previously Adopted and Finalized Performance Period and 
Baseline Period for the FY 2019 Hospital VBP Program for Clinical 
Care--Outcomes Domain Measures
    b. Performance Period and Baseline Period for the PSI-90 Safety 
Domain Measure for the FY 2019 Hospital VBP Program
    c. Summary of Previously Adopted and Finalized Performance 
Periods and Baseline Periods for Certain Measures for the FY 2019 
Hospital VBP Program
    9. Performance Period and Baseline Period for the Clinical 
Care--Outcomes Domain for the FY 2020 Hospital VBP Program
    10. Performance Standards for the Hospital VBP Program
    a. Background
    b. Performance Standards for the FY 2016 Hospital VBP Program
    c. Previously Adopted Performance Standards for the FY 2017, FY 
2018, and FY 2019 Hospital VBP Programs
    d. Additional Performance Standards for the FY 2017 Hospital VBP 
Program
    e. Performance Standards for the FY 2019 and FY 2020 Hospital 
VBP Programs
    f. Technical Updates Policy for Performance Standards
    g. Solicitation of Public Comments on ICD-10-CM/PCS Transition
    11. FY 2017 Hospital VBP Program Scoring Methodology
    a. General Hospital VBP Program Scoring Methodology
    b. Domain Weighting for the FY 2017 Hospital VBP Program for 
Hospitals That Receive a Score on All Domains
    c. Domain Weighting for the FY 2017 Hospital VBP Program for 
Hospitals Receiving Scores on Fewer Than Four Domains
    12. Minimum Numbers of Cases and Measures for the FY 2016 and FY 
2017 Hospital VBP Program's Quality Domains

[[Page 49859]]

    a. Previously Adopted Minimum Numbers of Cases and FY 2016 
Minimum Numbers of Cases
    b. Minimum Number of Measures--Safety Domain
    c. Minimum Number of Measures--Clinical Care Domain
    d. Minimum Number of Measures--Efficiency and Cost Reduction 
Domain
    e. Minimum Number of Measures--Patient and Caregiver Centered 
Experience of Care/Care Coordination (PEC/CC) Domain
    13. Applicability of the Hospital VBP Program to Maryland 
Hospitals
    14. Disaster/Extraordinary Circumstance Exception under the 
Hospital VBP Program
    J. Hospital-Acquired Condition (HAC) Reduction Program
    1. Background
    2. Statutory Basis for the HAC Reduction Program
    3. Implementation of the HAC Reduction Program for FY 2015
    a. Overview
    b. Payment Adjustment Under the HAC Reduction Program, Including 
Exemptions
    c. Measure Selection and Conditions, Including Risk Adjustment 
Scoring Methodology
    d. Criteria for Applicable Hospitals and Performance Scoring 
Policy
    e. Reporting Hospital-Specific Information, Including the Review 
and Correction of Information
    f. Limitation on Administrative and Judicial Review
    4. Maintenance of Technical Specifications for Quality Measures
    5. Extraordinary Circumstances Exceptions/Exemptions
    6. Implementation of the HAC Reduction Program for FY 2016
    a. Measure Selection and Conditions, including a Risk-Adjustment 
Scoring Methodology
    b. Measure Risk Adjustment
    c. Measure Calculation
    d. Applicable Time Period
    e. Criteria for Applicable Hospitals and Performance Scoring
    f. Rules To calculate the Total HAC Score for FY 2016
    7. Future Consideration for the Use of Electronically Specified 
Measures
    K. Payments for Indirect and Direct Graduate Medical Education 
(GME) Costs (Sec. Sec.  412.105 and 413.75 through 413.83)
    1. Background
    2. Changes in the Effective Date of the FTE Resident Cap, 3-Year 
Rolling Average, and Intern- and Resident-to-Bed (IRB) Ratio Cap for 
New Programs in Teaching Hospitals
    3. Changes to IME and Direct GME Policies as a Result of New OMB 
Labor Market Area Delineations
    a. New Program FTE Cap Adjustment for Rural Hospitals 
Redesignated as Urban
    b. Participation of Redesignated Hospitals in Rural Training 
Track
    4. Clarification of Policies on Counting Resident Time in 
Nonprovider Settings Under Section 5504 of the Affordable Care Act
    5. Changes to the Review and Award Process for Resident Slots 
Under Section 5506 of the Affordable Care Act
    a. Effective Date of Slots Awarded Under Section 5506 of the 
Affordable Care Act
    b. Removal of Seamless Requirement
    c. Revisions to Ranking Criteria One, Seven, and Eight for 
Applications Under Section 5506
    d. Clarification to Ranking Criterion Two Regarding Emergency 
Medicare GME Affiliation Agreements
    6. Regulatory Clarification Applicable To Direct GME Payments to 
Federally Qualified Health Centers (FQHCs) and Rural Health Clinics 
(RHCs) for Training Residents in Approved Programs
    L. Rural Community Hospital Demonstration Program
    1. Background
    2. FY 2015 Budget Neutrality Offset Amount
    M. Requirement for Transparency of Hospital Charges Under the 
Affordable Care Act
    1. Overview
    2. Transparency Requirement Under the Affordable Care Act
    N. Medicare Payment for Short Inpatient Hospital Stays
    O. Suggested Exceptions to the 2-Midnight Benchmark
    P. Finalization of Interim Final Rule With Comment Period on 
Extension of Payment Adjustment for Low-Volume Hospitals and the 
Medicare-Dependent, Small Rural Hospital (MDH) Program for FY 2014 
Discharges Through March 31, 2014
    1. Background
    2. Summary of the Provisions of the Interim Final Rule With 
Comment Period
    Q. Finalization of Interim Final Rule With Comment Period on 
Changes to Certain Cost Reporting Procedures Related to 
Disproportionate Share Hospital Uncompensated Care Payments
    V. Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    1. Exception Payments
    2. New Hospitals
    3. Hospitals Located in Puerto Rico
    C. Annual Update for FY 2015
VI. Changes for Hospitals Excluded From the IPPS
    A. Rate-of-Increase in Payments to Excluded Hospitals for FY 
2015
    B. Report on Adjustment (Exception) Payments
    C. Updates to the Reasonable Compensation Equivalent (RCE) 
Limits on Compensation for Physician Services Provided in Providers 
(Sec.  415.70)
    1. Background
    2. Overview of the Current RCE Limits
    a. Application of the RCE Limits
    b. Exceptions to the RCE Limits
    c. Methodology for Establishing the RCE Limits
    3. Changes to the RCE Limits
    D. Critical Access Hospitals (CAHs
    1. Background
    2. Proposed and Final Policy Changes Related to 
Reclassifications as Rural for CAHs
    3. Revision of the Requirements for Physician Certification of 
CAH Inpatient Services
VII. Changes to the Long-Term Care Hospital Prospective Payment 
System (LTCH PPS) for FY 2015
    A. Background of the LTCH PPS
    1. Legislative and Regulatory Authority
    2. Criteria for Classification as an LTCH
    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. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights for FY 2015
    1. Background
    2. Patient Classifications into MS-LTC-DRGs
    a. Background
    b. Changes to the MS-LTC-DRGs for FY 2015
    3. Development of the FY 2015 MS-LTC-DRG Relative Weights
    a. General Overview of the Development of the MS-LTC-DRG 
Relative Weights
    b. Development of the MS-LTC-DRG Relative Weights for FY 2015
    c. Data
    d. Hospital-Specific Relative Value (HSRV) Methodology
    e. Treatment of Severity Levels in Developing the MS-LTC-DRG 
Relative Weights
    f. Low-Volume MS-LTC-DRGs
    g. Steps for Determining the FY 2015 MS-LTC-DRG Relative Weights
    C. LTCH PPS Payment Rates for FY 2015
    1. Overview of Development of the LTCH Payment Rates
    2. FY 2015 LTCH PPS Annual Market Basket Update
    a. Overview
    b. Revision of Certain Market Basket Updates as Required by the 
Affordable Care Act
    c. Adjustment to the Annual Update to the LTCH PPS Standard 
Federal Rate Under the Long-Term Care Hospital Quality Reporting 
(LTCHQR) Program
    1. Background
    2. Reduction to the Annual Update to the LTCH PPS Standard 
Federal Rate under the LTCHQR Program
    d. Market Basket Under the LTCH PPS for FY 2015
    e. Annual Market Basket Update for LTCHs for FY 2015
    3. Adjustment for the Final Year of the Phase-In of the One-Time 
Prospective Adjustment to the Standard Federal Rate under Sec.  
412.523(d)(3)
    D. Revision of LTCH PPS Geographic Classifications
    1. Background
    2. Use of New OMB Labor Market Area Delineations (``New OMB 
Delineations'')
    a. Micropolitan Statistical Areas

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    b. Urban Counties That Became Rural Under the New OMB Labor 
Market Area Delineations
    c. Rural Counties That Became Urban Under the New OMB Labor 
Market Area Delineations
    d. Urban Counties That Moved to a Different Urban CBSA Under the 
New OMB Labor Market Area Delineations
    e. Transition Period
    E. Reinstatement and Extension of Certain Payment Rules for LTCH 
Services--The 25-Percent Threshold Payment Adjustment
    1. Background
    2. Implementation of Section 1206(b)(1) of Pub. L. 113-67
    F. Discussion of the ``Greater Than 3-Day Interruption of Stay'' 
Policy and the Transfer to Onsite Providers Policies Under the LTCH 
PPS
    G. Moratoria on the Establishment of LTCHs and LTCH Satellite 
Facilities and on the Increase in the Number of Beds in Existing 
LTCHs or LTCH Satellite Facilities
    H. Evaluation and Treatment of LTCHs Classified Under Section 
1886(d)(1)(B)(iv)(II) of the Act
    I. Description of Statutory Framework for Patient-Level 
Criteria-Based Payment Adjustment Under the LTCH PPS Under Pub. L. 
113-67
    1. Overview
    2. Additional LTCH PPS Issues
    J. Technical Change
VIII. Administrative Appeals by Providers and Judicial Review
    A. Proposed and Final Changes Regarding the Claims Required in 
Provider Cost Reports and for Provider Administrative Appeals
    B. Proposed and Final Changes to Conform Terminology From 
``Intermediary'' to ``Contractor''
    C. Technical Correction to Sec.  405.1835 of the Regulations and 
Corresponding Amendment to Sec.  405.1811 of the Regulations
    1. Background and Technical Correction to Sec. Sec.  405.1811 
and 405.1835 of the Regulations
    2. Waiver of Notice of Proposed Rulemaking
    3. Effective Date and Applicability Date; Finality and Reopening
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
    2. Removal and Suspension of Hospital IQR Program Measures
    a. Considerations in Removing Quality Measures From the Hospital 
IQR Program
    b. Removal of Hospital IQR Program Measures for the FY 2017 
Payment Determination and Subsequent Years
    3. Process for Retaining Previously Adopted Hospital IQR Program 
Measures for Subsequent Payment Determinations
    4. Additional Considerations in Expanding and Updating Quality 
Measures Under the Hospital IQR Program
    5. Previously Adopted Hospital IQR Program Measures for the FY 
2016 Payment Determination and Subsequent Years
    6. Refinements and Clarification to Existing Measures in the 
Hospital IQR Program
    a. Refinement of Planned Readmission Algorithm for 30-Day 
Readmission Measures
    b. Refinement of Total Hip Arthroplasty and Total Knee 
Arthroplasty (THA/TKA) 30-Day Complication and Readmission Measures
    c. Anticipated Effect of Refinements to Existing Measures
    d. Clarification Regarding Influenza Vaccination for Healthcare 
Personnel
    7. Additional Hospital IQR Program Measures for the FY 2017 
Payment Determination and Subsequent Years
    a. Hospital 30-day, All-Cause, Unplanned, Risk-Standardized 
Readmission Rate (RSRR) Following Coronary Artery Bypass Graft 
(CABG) Surgery
    b. Hospital 30-day, All-Cause, Risk-standardized Mortality Rate 
(RSMR) Following Coronary Artery Bypass Graft (CABG) Surgery
    c. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care 
Payment Measure for Pneumonia
    d. Hospital-Level, Risk-Standardized 30-Day Episode-of-Care 
Payment Measure for Heart Failure
    e. Severe Sepsis and Septic Shock: Management Bundle Measure 
(NQF #0500)
    f. Electronic Health Record-Based Voluntary Measures
    g. Readoption of Measures as Voluntarily Reported Electronic 
Clinical Quality Measures
    h. Electronic Clinical Quality Measures
    8. Possible New Quality Measures and Measure Topics for Future 
Years
    a. Mandatory Electronic Clinical Quality Measure Reporting for 
FY 2018 Payment Determination
    b. Possible Future Electronic Clinical Quality Measures
    9. Form, Manner, and Timing of Quality Data Submission
    a. Background
    b. Procedural Requirements for the FY 2017 Payment Determination 
and Subsequent Years
    c. Data Submission Requirements for Chart-Abstracted Measures
    d. Alignment of the Medicare EHR Incentive Program Reporting and 
Submission Timelines for Clinical Quality Measures With Hospital IQR 
Program Reporting and Submission Timelines
    e. Sampling and Case Thresholds for the FY 2017 Payment 
Determination and Subsequent Years
    f. HCAHPS Requirements for the FY 2017 Payment Determination and 
Subsequent Years
    g. Data Submission Requirements for Structural Measures for the 
FY 2017 Payment Determination and Subsequent Years
    h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
    10. Submission and Access of HAI Measures Data Through the CDC's 
NHSN Web Site
    11. Modifications to the Existing Processes for Validation of 
Chart-Abstracted Hospital IQR Program Data
    a. Eligibility Criteria for Hospitals Selected for Validation
    b. Number of Charts To Be Submitted per Hospital for Validation
    c. Combining Scores for HAI and Clinical Process of Care Topic 
Areas
    d. Processes To Submit Patient Medical Records for Chart-
Abstracted Measures
    e. Plans To Validate Electronic Clinical Quality Measure Data
    f. Data Submission Requirements for Quality Measures That May Be 
Voluntarily Electronically Reported for the FY 2017 Payment 
Determination
    12. Data Accuracy and Completeness Acknowledgement Requirements 
for the FY 2017 Payment Determination and Subsequent Years
    13. Public Display Requirements for the FY 2017 Payment 
Determination and Subsequent Years
    14. Reconsideration and Appeal Procedures for the FY 2017 
Payment Determination and Subsequent Years
    15. Hospital IQR Program Extraordinary Circumstances Extensions 
or Exemptions
    B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    1. Statutory Authority
    2. Covered Entities
    3. Previously Finalized PCHQR Program Quality Measures
    4. Update to the Clinical Process/Oncology Care Measures 
Beginning With the 2016 Program
    5. New Quality Measures Beginning With the FY 2017 Program
    a. Considerations in the Selection of Quality Measures
    b. New Quality Measure Beginning With the FY 2017 Program
    6. Possible New Quality Measure Topics for Future Years
    7. Maintenance of Technical Specifications for Quality Measures
    8. Public Display Requirements Beginning With the FY 2014 
Program
    9. Form, Manner, and Timing of Data Submission Beginning With 
the FY 2017 Program
    a. Background
    b. Reporting Requirements for the Proposed New Measure: External 
Beam Radiotherapy for Bone Metastases (NQF #1822) Beginning 
With the FY 2017 Program
    c. Reporting Options for the Clinical Process/Cancer Specific 
Treatment Measures Beginning With the FY 2015 Program and the SCIP 
and Clinical Process/Oncology Care Measures Beginning With the FY 
2016 Program
    d. New Sampling Methodology for the Clinical Process/Oncology 
Care Measures Beginning With the FY 2016 Program

[[Page 49861]]

    10. Exceptions From Program Requirements
    C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
    1. Background
    2. General Considerations Used for Selection of Quality Measures 
for the LTCHQR Program
    3. Policy for Retention of LTCHQR Program Measures Adopted for 
Previous Payment Determinations
    4. Policy for Adopting Changes to LTCHQR Program Measures
    5. Previously Adopted Quality Measures
    a. Previously Adopted Quality Measures for the FY 2015 and FY 
2016 Payment Determinations and Subsequent Years
    b. Previously Adopted Quality Measures for the FY 2017 and FY 
2018 Payment Determinations and Subsequent Years
    6. Revision to Data Collection Timelines and Submission 
Deadlines for Previously Adopted Quality Measures
    a. Revisions to Data Collection Timelines and Submission 
Deadlines for Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF 
#0680)
    b. Revisions to Data Collection Timelines and Submission 
Deadlines for the Application of Percent of Residents Experiencing 
One or More Falls With Major Injury (Long Stay) (NQF #0674)
    7. New LTCHQR Program Quality Measures for the FY 2018 Payment 
Determination and Subsequent Years
    a. New LTCHQR Program Functional Status Quality Measures for the 
FY 2018 Payment Determination and Subsequent Years
    b. Quality Measure: National Healthcare Safety Network (NHSN) 
Ventilator-Associated Event (VAE) Outcome Measure
    8. LTCHQR Program Quality Measures and Concepts Under 
Consideration for Future Years
    9. Form, Manner, and Timing of Quality Data Submission for the 
FY 2016 Payment Determinations and Subsequent Years
    a. Background
    b. Finalized Timeline for Data Submission Under the LTCHQR 
Program for the FY 2016 and FY 2017 Payment Determinations (Except 
NQF #0680 and NQF #0431)
    c. Revision to the Previously Adopted Data Collection Timelines 
and Submission Deadlines for Percent of Residents or Patients Who 
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine 
(Short-Stay) (NQF #680) for the FY 2016 Payment 
Determination and Subsequent Years
    d. Data Submission Mechanisms for the FY 2018 Payment 
Determination and Subsequent Years for New LTCHQR Program Quality 
Measures and for Revision to Previously Adopted Quality Measure
    e. Data Collection Timelines and Submission Deadlines Under the 
LTCHQR Program for the FY 2018 Payment Determination
    f. Data Collection Timelines and Submission Deadlines for the 
Application of Percent of Residents Experiencing One or More Falls 
With Major Injury (Long Stay) (NQF #0674) Measure for the FY 
2018 Payment Determination and Subsequent Years
    g. Data Collection Timelines and Submission Deadlines Under the 
LTCHQR Program for the FY 2019 Payment Determination
    10. LTCHQR Program Data Completion Threshold for the FY 2016 
Payment Adjustment and Subsequent Years
    a. Overview
    b. LTCHQR Program Data Completion Threshold for the Required 
LTCH CARE Data Set (LCDS) Data Items
    c. LTCHQR Program Data Completion Threshold for Measures 
Submitted Using the Centers for Disease Control and Prevention (CDC) 
National Healthcare Safety Network (NHSN)
    d. Application of the 2 Percentage Point Reduction for LTCHs 
That Fail To Meet the Data Completion Thresholds
    11. Data Validation Process for the FY 2016 Payment 
Determination and Subsequent Years
    a. Data Validation Process
    b. Application of the 2 Percentage Point Reduction for LTCHs 
That Fail To Meet the Data Accuracy Threshold
    12. Public Display of Quality Measure Data for the LTCHQR 
Program
    13. LTCHQR Program Submission Exception and Extension 
Requirements for the FY 2017 Payment Determination and Subsequent 
Years
    14. LTCHQR Program Reconsideration and Appeals Procedures for 
the FY 2016 Payment Determination and Subsequent Years
    a. Previously Finalized LTCHQR Program Reconsideration and 
Appeals Procedures for the FY 2014 and FY 2015 Payment 
Determinations
    b. LTCHQR Program Reconsideration and Appeals Procedures for the 
FY 2016 Payment Determination and Subsequent Years
    15. Electronic Health Records (EHR) and Health Information 
Exchange (HIE)
    D. Electronic Health Record (EHR) Incentive Program and 
Meaningful Use (MU)
    1. Background
    2. Alignment of the Medicare EHR Incentive Program Reporting and 
Submission Timelines for Clinical Quality Measures With Hospital IQR 
Program Reporting and Submission Timelines
    3. Quality Reporting Data Architecture Category III (QRDA-III) 
Option in 2015
    4. Electronically Specified Clinical Quality Measures (CQMs) 
Reporting for 2015
    5. Clarification Regarding Reporting Zero Denominators
X. Revision of Regulations Governing Use and Release of Medicare 
Advantage Risk Adjustment Data
    A. Background
    B. Regulatory Changes
    1. Expansion of Uses and Reasons for Disclosure of Risk 
Adjustment Data
    2. Conditions for CMS Release of Data
    3. Technical Change
XI. Changes to Enforcement Provisions for Organ Transplant Centers
    A. Background
    B. Basis for Changes
    1. Expansion of Mitigating Factors Based on CMS' Experience
    2. Coordination With Efforts of the Organ Procurement and 
Transplantation Network (OPTN) and Health Resources and Services 
Administration
    C. Provisions of the Proposed and Final Regulations
    1. Expansion of Mitigating Factors List, Content, and Timeframe
    2. Content and Timeframe for Mitigating Factors Requests
    3. System Improvement Agreements (SIAs)
    a. Purpose and Intent of an SIA
    b. Description and Contents of an SIA
    c. Effective Period for an SIA
XII. MedPAC Recommendations
XIII. Other Required Information
    A. Requests for Data from the Public
    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 FY 2015 Wage 
Index (Hospital Wage Index Occupational Mix Survey)
    4. Hospital Applications for Geographic Reclassifications by the 
MGCRB
    5. ICRs for Application for GME Resident Slots
    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 
(LTCHQR) Program
    10. ICR Regarding Electronic Health Record (EHR) Incentive 
Program and Meaningful Use (MU)
    11. ICR Regarding Revision of Regulations Governing Use and 
Release of Medicare Advantage (MA) Risk Adjustment Data (Sec.  
422.310(f))
Regulation Text
Addendum--Schedule of Standardized Amounts, Update Factors, and 
Rate-of-Increase Percentages Effective with Cost Reporting Periods 
Beginning on or After October 1, 2014 and Payment Rates for LTCHs 
Effective With Discharges Occurring on or After October 1, 2014
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2015
    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. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2015
    A. Determination of Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update

[[Page 49862]]

    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2015
    C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2015
V. Updates to the Payment Rates for the LTCH PPS for FY 2015
    A. LTCH PPS Standard Federal Rate for FY 2015
    1. Background
    2. Development of the FY 2015 LTCH PPS Standard Federal Rate
    B. Adjustment for Area Wage Levels under the LTCH PPS for FY 
2015
    1. Background
    2. Geographic Classifications Based on the New OMB Delineations
    3. LTCH PPS Labor-Related Share
    4. LTCH PPS Wage Index for FY 2015
    5. Budget Neutrality Adjustment for Changes to the Area Wage 
Level Adjustment
    C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located 
in Alaska and Hawaii
    D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
    1. Background
    2. Determining LTCH CCRs Under the LTCH PPS
    3. Establishment of the LTCH PPS Fixed-Loss Amount for FY 2015
    4. Application of the Outlier Policy to SSO Cases
    E. Update to the IPPS Comparable/Equivalent Amounts To Reflect 
the Statutory Changes to the IPPS DSH Payment Adjustment Methodology
    F. Computing the Adjusted LTCH PPS Federal Prospective Payments 
for FY 2015
VI. Tables Referenced in This Final Rule and Available 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 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 Policy Changes
    1. Effects of Policy on MS-DRGs for Preventable HACs, Including 
Infections
    2. Effects of Policy Relating to New Medical Service and 
Technology Add-On Payments
    3. Effects of Changes to List of MS-DRGs Subject to Postacute 
Care Transfer and DRG Special Pay Policy
    4. Effects of Payment Adjustment for Low-Volume Hospitals for FY 
2015
    5. Effects of Policy Changes Related to IME Medicare Part C Add-
On Payments to SCHs Paid According to Their Hospital-Specific Rates
    6. Effects of the Extension of the MDH Program for the First 
Half of FY 2015
    7. Effects of Changes Under the FY 2015 Hospital Value-Based 
Purchasing (VBP) Program
    8. Effects of the Changes to the HAC Reduction Program for FY 
2015
    9. Effects of Policy Changes Relating to Payments for Direct GME 
and IME
    10. Effects of Implementation of Rural Community Hospital 
Demonstration Program
    11. Effects of Changes Related to Reclassifications as Rural for 
CAHs
    12. Effects of Revision of the Requirements for Physician 
Certification of CAH Inpatient Services
    13. Effects of Changes Relating to Administrative Appeals by 
Providers and Judicial Review for Appropriate Claims in Provider 
Cost Reports
    I. Effects of Changes to Updates to the Reasonable Compensation 
Equivalent (RCE) Limits for Physician Services Provided to Providers
    J. Effects of Changes in the Capital IPPS
    1. General Considerations
    2. Results
    K. Effects of Payment Rate Changes and Policy Changes Under the 
LTCH PPS
    1. Introduction and General Considerations
    2. Impact on Rural Hospitals
    3. Anticipated Effects of LTCH PPS Payment Rate Changes and 
Policy Changes
    4. Effect on the Medicare Program
    5. Effect on Medicare Beneficiaries
    L. Effects of Requirements for Hospital Inpatient Quality 
Reporting (IQR) Program
    M. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program for FY 2015
    N. Effects of Requirements for the LTCH Quality Reporting 
(LTCHQR) Program for FY 2015 Through FY 2019
    O. Effects of Policy Changes Regarding Electronic Health Record 
(EHR) Incentive Program and Hospital IQR Program
    P. Effects of Revision of Regulations Governing Use and Release 
of Medicare Advantage Risk Adjustment Data
    Q. Effects of Changes to Enforcement Provisions for Organ 
Transplant Centers
II. Alternatives Considered
III. Overall Conclusion
    A. Acute Care Hospitals
    B. LTCHs
IV. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. 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 2015
    A. FY 2015 Inpatient Hospital Update
    B. Update for SCHs for FY 2015
    C. FY 2015 Puerto Rico Hospital Update
    D. Update for Hospitals Excluded From the IPPS for FY 2015
    E. Update for LTCHs for FY 2015
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 final rule makes 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. In addition, it makes 
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 makes policy changes to 
programs associated with Medicare IPPS hospitals, IPPS-excluded 
hospitals, and LTCHs.
    Under various statutory authorities, we are making changes to the 
Medicare IPPS, to the LTCH PPS, and to other related payment 
methodologies and programs for FY 2015 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; and short-term acute care hospitals located in the 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 Pub. L. 106-113 and section 
307(b)(1) of Public Law 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.

[[Page 49863]]

     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(d)(4)(D) of the Act, which addresses certain 
hospital-acquired conditions (HACs), including infections. Section 
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the 
Secretary was required to select, in consultation with the Centers for 
Disease Control and Prevention (CDC), at least two conditions that: (a) 
are high cost, high volume, or both; (b) are assigned to a higher 
paying MS-DRG when present as a secondary diagnosis (that is, 
conditions under the MS-DRG system that are complications or 
comorbidities (CCs) or major complications or comorbidities (MCCs); and 
(c) could reasonably have been prevented through the application of 
evidence-based guidelines. Section 1886(d)(4)(D) of the Act also 
specifies that the list of conditions may be revised, again in 
consultation with CDC, from time to time as long as the list contains 
at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires 
that hospitals, effective with discharges occurring on or after October 
1, 2007, submit information on Medicare claims specifying whether 
diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of 
the Act specifies that effective for discharges occurring on or after 
October 1, 2008, Medicare no longer assigns an inpatient hospital 
discharge to a higher paying MS-DRG if a selected condition is not POA.
     Section 1886(a)(4) of the Act, which specifies that 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. A payment for indirect 
medical education (IME) is made under section 1886(d)(5)(B) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase in payments to a 
subsection (d) hospital for 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 an adjustment to hospital 
payments for hospital-acquired conditions (HACs), or 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, which establishes the ``Hospital Readmissions Reduction 
Program'' effective for discharges from an ``applicable hospital'' 
beginning on or after October 1, 2012, under which payments to those 
hospitals under section 1886(d) of the Act will be reduced to account 
for certain 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 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 now requires that, for 
``fiscal year 2014 and each subsequent fiscal year,'' ``subsection (d) 
hospitals'' that would otherwise receive a ``disproportionate share 
hospital payment . . . made under subsection (d)(5)(F)'' will receive 
two separate payments: (1) 25 percent of the amount they previously 
would have received under subsection (d)(5)(F) 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 subsection (d)(5)(F); 
(2) 1 minus the percent change in the percent of individuals under the 
age of 65 who are uninsured (minus 0.1 percentage points for FY 2014, 
and minus 0.2 percentage points for FY 2015 through FY 2017); 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 SGR Reform Act of 2013, which provided 
for the establishment of patient criteria for payment under the LTCH 
PPS for implementation beginning in FY 2016.
     Section 1206(b)(1) of the Pathway for SGR Reform Act of 
2013, which further amended section 114(c) of the MMSEA, as amended by 
section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the 
Affordable Care Act, by retroactively reestablishing and extending the 
statutory moratorium on the full implementation of the 25-percent 
threshold payment adjustment policy under the LTCH PPS so that the 
policy will be in effect for 9 years (except for ``grandfathered'' 
hospital-within-hospitals (HwHs), which are permanently exempt from 
this policy); and section 1206(b)(2) (as amended by section 112(b) of 
Pub. L. 113-93), which together further amended section 114(d) of the 
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) 
and 10312(a) of the Affordable Care Act to establish a new moratoria 
(subject to certain defined exceptions) on the development of new LTCHs 
and LTCH satellite facilities and a new moratorium on increases in the 
number of beds in existing LTCHs and LTCH satellite facilities 
beginning January 1, 2015 and ending on September 30, 2017; and section 
1206(d), which instructs the Secretary to evaluate payments to LTCHs 
classified under section 1886(b)(1)(C)(iv)(II) of the Act and to adjust 
payment rates in FY 2015 or FY 2016 under the LTCH PPS, as appropriate, 
based upon the evaluation findings.
     Section 1886(m)(5)(D)(iv) of the Act, as added by section 
1206 (c) of the Pathway for SGR Reform Act of 2013, which provides for 
the establishment, no later than October 1, 2015, of a functional 
status quality measure under the LTCHQR Program for change in mobility 
among inpatients requiring ventilator support.
    In this final rule, we are making technical and conforming changes 
and nomenclature changes to the regulations regarding the claims 
required in provider cost reports and for provider administrative 
appeals to conform terminology from ``intermediary'' to ``contractor''
    We are aligning the reporting and submission timelines for clinical 
quality measures for the Medicare EHR Incentive Program for eligible 
hospitals and critical access hospitals (CAHs) with the reporting and 
submission timelines for the Hospital IQR Program. In addition, we 
provide guidance and clarification of certain policies for eligible 
hospitals and CAHs such as our

[[Page 49864]]

policy for reporting zero denominators on clinical quality measures and 
our policy for case threshold exemptions.
    In addition, this final rule contains several provisions that are 
not directly related to these Medicare payment systems, such as 
regulatory revisions to broaden the specified uses and reasons for 
disclosure of risk adjustment data and to specify the conditions for 
release of risk adjustment data to entities outside of CMS and changes 
to the enforcement procedures for organ transplant centers. The 
specific statutory authority for these other provisions is discussed in 
the relevant sections below.
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. This adjustment represents 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.
    While our actuaries estimated that a -9.3 percent 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 delay or phase in rate adjustments over 
more than one year, in order to moderate the effects on rates in any 
one year. Therefore, consistent with the policies that we have adopted 
in many similar cases, we made a -0.8 percent recoupment adjustment to 
the standardized amount in FY 2014. We are making an additional -0.8 
percent recoupment adjustment to the standardized amount in FY 2015.
b. Reduction of Hospital Payments for Excess Readmissions
    We are making changes in policies to 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. 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 FYs 2013 and 2014, these conditions 
are acute myocardial infarction, heart failure, and pneumonia. For FY 
2014, we established additional exclusions to the three existing 
readmission measures (that is, the excess readmission ratio) to account 
for additional planned readmissions. We also established additional 
readmissions measures, Chronic Obstructive Pulmonary Disease (COPD), 
and Total Hip Arthroplasty and Total Knee Arthroplasty (THA/TKA), to be 
used in the Hospital Readmissions Reduction Program for FY 2015 and 
future years. We are expanding the readmissions measures for FY 2017 
and future years by adding a measure of patients readmitted following 
coronary artery bypass graft (CABG) surgery. We also are refining the 
readmission measures and related methodology for FY 2015 and subsequent 
years payment determinations. In addition, we are providing that the 
readmissions payment adjustment factors for FY 2015 can be no more than 
a 3-percent reduction in accordance with the statute. We also are 
revising the calculation of aggregate payments for excess readmissions 
to include THA/TKA and COPD readmissions measures beginning in FY 2015.
c. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act 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. Both the performance standards and the performance period 
for a fiscal year are to be established by the Secretary.
    In this final rule, we are adopting quality measures for the FY 
2017, FY 2019, and FY 2020 Hospital VBP Program years and establishing 
performance periods and performance standards for measures we are 
adopting for those fiscal years. We are also adopting additional 
policies related to performance standards and revising the domain 
weighting previously adopted for the FY 2017 Hospital VBP Program.
d. Hospital-Acquired Condition (HAC) Reduction Program
    In this final rule, we are making a change in the scoring 
methodology with the addition of a previously finalized measure for the 
FY 2016 payment adjustment under the HAC Reduction Program. Section 
1886(p) of the Act, as added under section 3008(a) of the Affordable 
Care Act, establishes an adjustment to hospital payments for HACs, or a 
HAC Reduction program, under which payments to applicable hospitals are 
adjusted to provide an incentive to reduce HACs, effective for 
discharges beginning on October 1, 2014 and for subsequent program 
years. 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. The amount of payment shall be equal to 
99 percent of the amount of payment that would otherwise apply to such 
discharges under section 1886(d) or 1814(b)(3) of the Act, as 
applicable.
e. 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 will 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 what otherwise 
would have been paid as Medicare DSH payments, will be paid as 
additional payments after the amount is reduced for changes in the 
percentage of individuals that are uninsured. Each Medicare DSH 
hospital will receive its additional amount based on its share of the 
total amount of uncompensated care for all Medicare DSH hospitals for a 
given time period. In this final rule, we are updating the 
uncompensated care amount to be distributed for FY 2015, and we are 
making changes to the methodology for calculating the uncompensated 
care payment amounts such that we will combine uncompensated care data 
for hospitals that have merged in order to calculate the relative share 
of uncompensated care for the surviving hospital.
f. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, hospitals are 
required to report data on measures selected by the Secretary for the 
Hospital IQR Program in order to receive the full annual percentage 
increase. In past rules, we

[[Page 49865]]

have established measures for reporting and the process for submittal 
and validation of the data.
    We are finalizing a total of 63 measures (47 required and 16 
voluntary electronic clinical quality measures) in the Hospital IQR 
Program measure set for the FY 2017 payment determination and 
subsequent years. In this final rule, we are finalizing 11 new measures 
(1 chart-abstracted, 4 claims-based, and 6 voluntary electronic 
clinical quality measures). We proposed to remove 20 measures, but are 
only finalizing the removal of 19. The SCIP-INF-4 measure was proposed 
for removal, but will be retained as it was recently retooled for the 
2014 collection period. Ten of these 19 measures are topped-out, chart-
abstracted measures that are being retained as voluntary electronic 
clinical quality measures.
    While we are finalizing our proposal to align the reporting and 
submission timelines of the Medicare EHR Incentive Program with those 
of the Hospital IQR Program on the calendar year for CQMs that are 
reported electronically for 2015, we are not finalizing the proposal to 
require quarterly submission of CQM data. Hospitals can voluntarily 
submit one calendar year (CY) quarter of data for Q 1, Q 2, or Q3 of 
2015 by November 30, 2015, in order to partially fulfill requirements 
for both programs for CY 2015. In addition, we are finalizing a number 
of new policies related to the administration of the program, including 
access to specific NHSN data, updates to validation, and an electronic 
clinical quality measures validation pilot test.
g. Changes to the LTCH PPS
    Section 1206(b) of the Pathway for SGR Reform Act provides for the 
retroactive reinstatement and extension, for an additional 4 years, of 
the moratorium on the full implementation of the 25-percent threshold 
payment adjustment under the LTCH PPS established under section 114(c) 
of the MMSEA, as further amended by subsequent legislation. In keeping 
with this mandate, we are reinstating this payment adjustment 
retroactively for LTCH cost reporting periods beginning on or after 
July 1, 2013, or October 1, 2013.
    Section 1206(b)(2) of the Pathway for SGR Reform Act, as amended by 
section 112(b) of the Protecting Access to Medicare Act of 2014, 
provides for new statutory moratoria on the establishment of new LTCHs 
and LTCH satellite facilities (subject to certain defined exceptions) 
and a new statutory moratorium on bed increases in existing LTCHs 
effective for the period beginning April 1, 2014 and ending September 
30, 2017.
    In accordance with section 1206(d) of the Pathway for SGR Reform 
Act of 2013, we are applying a payment adjustment under the LTCH PPS to 
subclause (II) LTCHs beginning in FY 2015 that will result in payments 
to this type of LTCH resembling reasonable cost payments under the 
TEFRA payment system model.
    We also discuss our proposed changes to the LTCH interruption of 
stay policy, which is a payment adjustment that is applied when, during 
the course of an LTCH hospitalization, a patient is discharged to an 
inpatient acute care hospital, an IRF, or a SNF for treatment or 
services not available at the LTCH for a specified period followed by 
readmittance to the same LTCH. In addition, we are finalizing our 
proposal to remove the 5-percent payment threshold policy for patient 
transfers between LTCHs and onsite providers.
3. Summary of Costs and Benefits
     Adjustment for MS-DRG Documentation and Coding Changes. We 
are making a -0.8 percent recoupment adjustment to the standardized 
amount for FY 2015 to implement, in part, the requirement of section 
631 of the ATRA that the Secretary make an adjustment totaling $11 
billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This 
recoupment adjustment represents 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.
    While our actuaries estimated that a -9.3 percent recoupment 
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 delay or phase in rate 
adjustments over more than one year, in order to moderate the effects 
on rates in any one year. Therefore, consistent with the policies that 
we have adopted in many similar cases and the adjustment we made for FY 
2014, we are making a -0.8 percent recoupment adjustment to the 
standardized amount in FY 2015. We estimated that this level of 
adjustment, combined with leaving the -0.8 percent adjustment made for 
FY 2014 in place, will recover up to $2 billion in FY 2015. Taking into 
account the approximately $1 billion recovered in FY 2014, this will 
leave approximately $8 billion remaining to be recovered by FY 2017.
     Reduction to Hospital Payments for Excess Readmissions. 
The provisions of section 1886(q) of the Act which establishes the 
Hospital Readmissions Reduction Program are not budget neutral. For FY 
2015, a hospital's readmissions payment adjustment factor is the higher 
of a ratio of a hospital's aggregate payments for excess readmissions 
to its aggregate payments for all discharges, or 0.97 (that is, or a 3-
percent reduction). In this final rule, we estimate that the reduction 
to a hospital's base operating DRG payment amount to account for excess 
readmissions of selected applicable conditions under the Hospital 
Readmissions Reduction Program will result in a 0.2 percent decrease in 
payments to hospitals for FY 2015 relative to FY 2014.
     Value-Based Incentive Payments under the Hospital Value-
Based Purchasing (VBP) Program. We estimate that there will be no net 
financial impact to the Hospital VBP Program for FY 2015 in the 
aggregate because, by law, the amount available for value-based 
incentive payments under the program in a given fiscal year must be 
equal to the total amount of base operating DRG payment amount 
reductions for that year, as estimated by the Secretary. The estimated 
amount of base operating DRG payment amount reductions for FY 2015 and, 
therefore, the estimated amount available for value-based incentive 
payments for FY 2015 discharges is approximately $1.4 billion. We 
believe that the program's benefits will be seen in improved patient 
outcomes, safety, and in the patient's experience of care. However, we 
cannot estimate these benefits in actual dollar and patient terms.
     Payment Adjustment under the HAC Reduction Program for FY 
2015. Under section 1886(p) of the Act, (as added by section 3008 of 
the Affordable Care Act), the incentive to reduce hospital-acquired 
conditions with a payment adjustment to applicable hospitals under the 
HAC Reduction Program is made beginning FY 2015. We estimate that, 
under this provision, overall payments will decrease approximately 0.3 
percent or $369 million.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. Under section 1886(r) of the Act (as added by 
section 3313 of the Affordable Care Act), disproportionate share 
hospital payments to hospitals under section 1886(d)(5)(F) of the Act 
are reduced and an additional payment is made to eligible hospitals 
beginning in FY 2014. Hospitals that receive Medicare DSH

[[Page 49866]]

payments will receive 25 percent of the amount they previously would 
have received under the current statutory formula for Medicare DSH 
payments in section 1886(d)(5)(F) of the Act. The remainder, equal to 
75 percent of what otherwise would have been paid as Medicare DSH 
payments, will be 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 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 2015, we are providing that the 75 percent of what otherwise 
would have been paid for Medicare DSH is adjusted to approximately 
76.19 percent of the amount for changes in the percentage of 
individuals that are uninsured and additional statutory adjustments. In 
other words, our estimate of Medicare DSH payments prior to the 
application of section 3133 of the Affordable Care Act is adjusted to 
approximately 57.1 percent (the product of 75 percent and 76.19 
percent) and the resulting payment amount is used to create an 
additional payment to hospitals for their relative share of the total 
amount of uncompensated care. We project that Medicare DSH payments and 
additional payments for uncompensated care made for FY 2015 will reduce 
payments overall by 1.3 percent as compared to the Medicare DSH 
payments and uncompensated care payments distributed in FY 2014. 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 final payment amount is not tied to a hospital's discharges.
     Hospital Inpatient Quality Reporting (IQR) Program. In 
this final rule, we are finalizing 11 new measures (1 chart-abstracted, 
4 claims-based, and 6 voluntary electronic clinical quality measures). 
We proposed to remove 20 measures, but are only finalizing the removal 
of 19. The SCIP-INF-4 measure was proposed for removal, but will be 
retained as it was recently retooled for the 2014 collection period. 10 
of these 19 measures are topped-out, chart-abstracted measures that are 
being retained as voluntary electronic clinical quality measures. We 
estimate that the adoption and removal of these measures will decrease 
hospital costs by $39.8 million.
     Update to the LTCH PPS Standard Federal Rate and Other 
Payment Factors. Based on the best available data for the 423 LTCHs in 
our database, we estimate that the changes to the payment rates and 
factors we are presenting in the preamble and Addendum of this final 
rule, including the update to the standard Federal rate for FY 2015, 
the changes to the area wage adjustment for FY 2015, and the expected 
changes to short-stay outliers and high-cost outliers, will result in 
an increase in estimated payments from FY 2014 of approximately $62 
million (or 1.1 percent). In addition, we estimate that net effect of 
the projected impact of certain other LTCH PPS policy changes (that is, 
the reinstatement of the moratorium on the full implementation of the 
``25 percent threshold'' payment adjustment; the reinstatement of the 
moratorium on the development of new LTCHs and LTCH satellite 
facilities and additional LTCH beds; the revocation of onsite 
discharges and readmissions policy; and the payment adjustment for 
``subclause (II)'' LTCHs) is estimated to result in an increase in LTCH 
PPS payments of approximately $116 million.
    The impact analysis of the payment rates and factors presented in 
this final rule under the LTCH PPS, in conjunction with the estimated 
payment impacts of certain other LTCH PPS policy changes will result in 
a net increase of $178 million to LTCH providers. Additionally, we 
estimate that the costs to LTCHs associated with the completion of the 
data for the LTCHQR Program to be approximately $4.7 million more than 
FY 2014.

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 an approved teaching hospital, it receives a 
percentage add-on payment for each case paid under the IPPS, known as 
the indirect medical education (IME) adjustment. This percentage 
varies, depending on the ratio of residents to beds.
    Additional payments may be made for cases that involve new 
technologies or medical services that have been approved for special 
add-on payments. To qualify, a new technology or medical service must 
demonstrate that it is a substantial clinical improvement over 
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG 
payment.
    The costs incurred by the hospital for a case are evaluated to 
determine whether the hospital is eligible for an additional payment as 
an outlier case. This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
Any eligible outlier payment is added to the DRG-adjusted base payment 
rate, plus any DSH, IME, and new technology or medical service add-on 
adjustments.
    Although payments to most hospitals under the IPPS are made on the 
basis of the standardized amounts, some categories of hospitals are 
paid in whole or in part based on their hospital-specific rate, which 
is determined from their costs in a base year. For example, sole 
community hospitals (SCHs) receive the higher of a hospital-specific

[[Page 49867]]

rate based on their costs in a base year (the highest of FY 1982, FY 
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the 
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the 
Federal rate or the Federal rate plus 50 percent of the amount by which 
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987 
hospital-specific rate. As discussed below, for discharges occurring on 
or after October 1, 2007, but before April 1, 2015, an MDH will receive 
the higher of the Federal rate or the Federal rate plus 75 percent of 
the amount by which the Federal rate is exceeded by the highest of its 
FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We note that the 
statutory provision for payments to MDHs expires on March 31, 2015, 
under current law.) SCHs are the sole source of care in their areas, 
and MDHs are a major source of care for Medicare beneficiaries in their 
areas. Specifically, section 1886(d)(5)(D)(iii) of the Act defines an 
SCH as a hospital that is located more than 35 road miles from another 
hospital or that, by reason of factors such as isolated location, 
weather conditions, travel conditions, or absence of other like 
hospitals (as determined by the Secretary), is the sole source of 
hospital inpatient services reasonably available to Medicare 
beneficiaries. In addition, certain rural hospitals previously 
designated by the Secretary as essential access community hospitals are 
considered SCHs. Section 1886(d)(5)(G)(iv) of the Act defines an MDH as 
a hospital that is located in a rural area, has not more than 100 beds, 
is not an SCH, and has a high percentage of Medicare discharges (not 
less than 60 percent of its inpatient days or discharges in its cost 
reporting year beginning in FY 1987 or in two of its three most 
recently settled Medicare cost reporting years). Both of these 
categories of hospitals are afforded this special payment protection in 
order to maintain access to services for beneficiaries.
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services ``in accordance 
with a prospective payment system established by the Secretary.'' The 
basic methodology for determining capital prospective payments is set 
forth in our regulations at 42 CFR 412.308 and 412.312. Under the 
capital IPPS, payments are adjusted by the same DRG for the case as 
they are under the operating IPPS. Capital IPPS payments are also 
adjusted for IME and DSH, similar to the adjustments made under the 
operating IPPS. In addition, hospitals may receive outlier payments for 
those cases that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; long-term 
care hospitals (LTCHs); psychiatric hospitals and units; children's 
hospitals; certain cancer hospitals; and short-term acute care 
hospitals located in Guam, the U.S. Virgin Islands, 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 rehabilitation hospitals and units (referred to as inpatient 
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and 
units (referred to as inpatient psychiatric facilities (IPFs)). (We 
note that the annual updates to the LTCH PPS are now included as part 
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS 
are issued as separate documents.) Children's hospitals, certain cancer 
hospitals, short-term acute care hospitals located in Guam, the U.S. 
Virgin Islands, 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, as 
updated annually by the percentage increase in the IPPS operating 
market basket.
    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 section 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. The existing regulations governing payment under 
the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning with 
FY 2009, annual updates to the LTCH PPS are published 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)(1)(A) 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 Discussed in This Final 
Rule

    The Patient Protection and Affordable Care Act (Pub. L. 111-148), 
enacted on March 23, 2010, and the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 
2010, made a number of changes that affect the IPPS and the LTCH PPS. 
(Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as 
the ``Affordable Care Act.'') A number of the provisions of the 
Affordable Care Act affect the updates to the IPPS and the LTCH PPS and 
providers and

[[Page 49868]]

suppliers. The provisions of the Affordable Care Act that were 
applicable to the IPPS and the LTCH PPS for FYs 2010, 2011, and 2012 
were implemented in the June 2, 2010 Federal Register notice (75 FR 
31118), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50042) and the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51476).
    The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), 
enacted on January 2, 2013, also made a number of changes that affect 
the IPPS. We announced changes related to certain IPPS provisions for 
FY 2013 in accordance with sections 605 and 606 of Public Law 112-240 
in a document that appeared in the Federal Register on March 7, 2013 
(78 FR 14689).
    The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on 
December 26, 2013, also made a number of changes that affect the IPPS 
and the LTCH PPS. We implemented changes related to the low-volume 
hospital payment adjustment and MDH provisions for FY 2014 in 
accordance with sections 1105 and 1106 of Public Law 113-67 in an 
interim final rule with comment period that appeared in the Federal 
Register on March 18, 2014 (79 FR 15022).
    The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), 
enacted on April 1, 2014, also made a number of changes that affect the 
IPPS and LTCH PPS.
1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and 
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
    In this final rule, we are making policy changes to implement (or, 
as applicable, continue to implement in FY 2015) the following 
provisions (or portions of the following provisions) of the Affordable 
Care Act that are applicable to the IPPS, the LTCH PPS, and PPS-exempt 
cancer hospitals for FY 2015:
     Section 3001(a) of Public Law 111-148, which requires the 
establishment of a hospital inpatient value-based purchasing program 
under which value-based incentive payments are made in a fiscal year to 
hospitals that meet performance standards for the performance period 
for that fiscal year.
     Section 3004 of Public Law 111-148, which provides for the 
submission of quality data by LTCHs in order for them to receive the 
full annual update to the payment rates beginning with the FY 2014 rate 
year.
     Section 3005 of Public Law 111-148, which provides for the 
establishment of a quality reporting program for PPS-exempt cancer 
hospitals beginning with FY 2014, and for subsequent program years.
     Section 3008 of Public Law 111-148, which establishes the 
Hospital-Acquired Condition (HAC) Reduction Program and requires the 
Secretary to make an adjustment to hospital payments for applicable 
hospitals, effective for discharges beginning on October 1, 2014, and 
for subsequent program years.
     Section 3025 of Public Law 111-148, which establishes a 
hospital readmissions reduction program and requires the Secretary to 
reduce payments to applicable hospitals with excess readmissions 
effective for discharges beginning on or after October 1, 2012.
     Section 3133 of Public Law 111-148, as amended by section 
10316 of Public Law 111-148 and section 1104 of Public Law 111-152, 
which modifies the methodologies for determining Medicare DSH payments 
and creates a new additional payment for uncompensated care effective 
for discharges beginning on or after October 1, 2013.
     Section 3401 of Public Law 111-148, which provides for the 
incorporation of productivity adjustments into the market basket 
updates for IPPS hospitals and LTCHs.
     Section 10324 of Public Law 111-148, which provides for a 
wage adjustment for hospitals located in frontier States.
     Sections 3401 and 10319 of Public Law 111-148 and section 
1105 of Public Law 111-152, which revise certain market basket update 
percentages for IPPS and LTCH PPS payment rates for FY 2015.
     Section 5506 of Public Law 111-148, which added a 
provision to the Act that instructs the Secretary to establish a 
process by regulation under which, in the event a teaching hospital 
closes, the Secretary will permanently increase the FTE resident caps 
for hospitals that meet certain criteria up to the number of the closed 
hospital's FTE resident caps.
2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
    In this final rule, we are making policy changes to implement 
section 631 of the American Taxpayer Relief Act of 2012, which amended 
section 7(b)(1)(B) of Public Law 110-90 and requires a recoupment 
adjustment to the standardized amounts under section 1886(d) of the Act 
based upon the Secretary's estimates for discharges occurring in FY 
2014 through FY 2017 to fully offset $11 billion (which represents the 
amount of the increase in aggregate payments from FYs 2008 through 2013 
for which an adjustment was not previously applied).
3. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
    In this final rule, we are making policy changes to implement, or 
discuss the need for future policy changes, to carry out provisions 
under section 1206 of the Pathway for SGR Reform Act of 2013. These 
include:
     Section 1206(a), which provides the establishment of 
patient criteria for ``site neutral'' payment rates under the LTCH PPS, 
portions of which will begin to be implemented in FY 2016.
     Section 1206(b)(1), which further amended section 114(c) 
of the MMSEA, as amended by section 4302(a) of the ARRA and sections 
3106(c) and 10312(a) of the Affordable Care Act by retroactively 
reestablishing, and extending, the statutory moratorium on the full 
implementation of the 25-percent threshold payment adjustment policy 
under the LTCH PPS so that the policy will be in effect for 9 years 
(except for grandfathered hospitals-within-hospitals (HwHs), which are 
permanently exempt from this policy).
     Section 1206(b)(2), which amended section 114(d) of the 
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) 
and 10312(a) of the Affordable Care Act to establish new moratoria 
(subject to certain defined exceptions) on the development of new LTCHs 
and LTCH satellite facilities and a new moratorium on increases in the 
number of beds in existing LTCHs and LTCH satellite facilities.
     Section 1206(d), which instructs the Secretary to evaluate 
payments to LTCHs classified under section 1886(d)(1)(B)(iv)(II) of the 
Act and to adjust payment rates in FY 2015 or 2016 under the LTCH PPS, 
as appropriate, based upon the evaluation findings.
4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
    In this final rule, we are making policy changes to implement, or 
making conforming changes to regulations in accordance with, the 
following provisions (or portions of the following provisions) of the 
Protecting Access to Medicare Act of 2014 that are applicable to the 
IPPS and the LTCH PPS for FY 2015:
     Section 105, which extends the temporary changes to the 
Medicare inpatient hospital payment adjustment for low-volume 
subsection (d) hospitals through March 31, 2015.

[[Page 49869]]

     Section 106, which extends the MDH program through March 
31, 2015.
     Section 112, which makes certain changes to Medicare LTCH 
provisions, including modifications to the statutory moratoria on the 
establishment of new LTCHs and LTCH satellite facilities.
     Section 212, which prohibits the Secretary from requiring 
implementation of ICD-10 code sets before October 1, 2015.

D. Issuance of Notice of Proposed Rulemaking

    Earlier this year, we published a proposed rule that set forth 
proposed changes to the Medicare IPPS for operating costs and for 
capital-related costs of acute care hospitals for FY 2015. The proposed 
rule appeared in the Federal Register on May 15, 2014 (79 FR 27978). In 
the proposed rule, we also set forth proposed changes relating to 
payments for IME and GME costs and payments to certain hospitals that 
continue to be excluded from the IPPS and paid on a reasonable cost 
basis. In addition, in the proposed rule, we set forth proposed changes 
to the payment rates, factors, and other payment rate policies under 
the LTCH PPS for FY 2015.
    Below is a summary of the major changes that we proposed to make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of the proposed rule, we included--
     Proposed changes to MS-DRG classifications based on our 
yearly review, including a discussion of the conversion of MS-DRGs to 
ICD-10 and the status of the implementation of the ICD-10-CM and ICD-
10-PCS systems.
     Proposed application of the documentation and coding 
adjustment for FY 2015 resulting from implementation of the MS-DRG 
system.
     Proposed recalibrations of the MS-DRG relative weights.
     Proposed changes to hospital-acquired conditions (HACs) 
and a listing and discussion of HACs, including infections, that would 
be subject to the statutorily required adjustment in MS-DRG payments 
for FY 2015.
     A discussion of the FY 2015 status of new technologies 
approved for add-on payments for FY 2014 and a presentation of our 
evaluation and analysis of the FY 2015 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 the proposed rule, we proposed 
revisions to the wage index for acute care hospitals and the annual 
update of the wage data. Specific issues addressed included the 
following:
     Proposed changes in CBSAs as a result of new OMB labor 
market area delineations and proposed policies related to the proposed 
changes in CBSAs.
     The proposed FY 2015 wage index update using wage data 
from cost reporting periods beginning in FY 2011.
     Analysis and implementation of the proposed FY 2015 
occupational mix adjustment to the wage index for acute care hospitals, 
including the proposed application of the rural floor, the proposed 
imputed rural floor, and the proposed frontier State floor.
     Proposed revisions to the wage index for acute care 
hospitals based on hospital redesignations and reclassifications.
     The proposed adjustment to the wage index for acute care 
hospitals for FY 2015 based on commuting patterns of hospital employees 
who reside in a county and work in a different area with a higher wage 
index.
     The timetable for reviewing and verifying the wage data 
used to compute the proposed FY 2015 hospital wage index and proposed 
revisions to that timetable.
     Determination of the labor-related share for the proposed 
FY 2015 wage index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs 
and GME Costs
    In section IV. of the preamble of the proposed rule, we discussed 
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 in postacute care transfer policies as a 
result of proposed new MS-DRGs.
     Proposed changes to the inpatient hospital updates for FY 
2015, including incorporation of the adjustment for hospitals that are 
not meaningful EHR users under section 1886(b)(3)(B)(ix) of the Act.
     The proposed updated national and regional case-mix values 
and discharges for purposes of determining RRC status.
     Proposed payment adjustment for low-volume hospitals for 
FY 2015.
     The statutorily required IME adjustment factor for FY 2015 
and proposed IME add-on payments for Medicare Part C discharges to SCHs 
that are paid according to their hospital-specific rates.
     Effect of expiration of the MDH program on April 1, 2015.
     Proposed changes to the methodologies for determining 
Medicare DSH payments and the additional payments for uncompensated 
care.
     Proposed changes to the measures and payment adjustments 
under the Hospital Readmissions Reduction Program.
     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 2015.
     Proposed IME and direct GME policy changes regarding the 
effective date of the FTE resident cap, 3-year rolling average, and IRB 
ratio cap in new programs in teaching hospitals; effect of new OMB 
labor market area delineations on certain teaching hospitals training 
residents in rural areas; clarification of effective date of provisions 
on counting resident time in nonprovider settings; proposed changes to 
the process for reviewing applications for and awarding slots made 
available under section 5506 of the Affordable Care Act by teaching 
hospitals that close; and clarification regarding direct GME payment to 
FQHCs and RHCs that train residents in approved programs.
     Discussion of the Rural Community Hospital Demonstration 
Program and a proposal for making a budget neutrality adjustment for 
the demonstration program.
     Discussion of the requirements for transparency of 
hospital charges under the Affordable Care Act.
     Discussion of and solicitation of comments on an 
alternative payment methodology under the Medicare program for short 
inpatient hospital stays.
     Discussion of the process for submitting suggested 
exceptions to the 2-midnight benchmark.
4. Proposed FY 2015 Policy Governing the IPPS for Capital-Related Costs
    In section V. of the preamble to the proposed rule, we discussed 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2015 and other related proposed 
policy changes.

[[Page 49870]]

5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VI. of the preamble of the proposed rule, we discussed--
     Proposed changes to payments to certain excluded hospitals 
for FY 2015.
     Proposed updates to the RCE limits and proposed changes to 
the methodology for determining such limits for services furnished by 
physicians to IPPS-excluded hospitals and certain teaching hospitals.
     Proposed CAH related changes regarding reclassifications 
as rural.
     Proposed changes to the physician certification 
requirements for services furnished in CAHs.
6. Proposed Changes to the LTCH PPS
    In section VII. of the preamble of the proposed rule, we set 
forth--
     Proposed changes to the payment rates, factors, and other 
payment rate policies under the LTCH PPS for FY 2015.
     Proposed revisions to the LTCH PPS geographic 
classifications based on the new OMB delineations.
     Proposals to implement section 1206(b)(1) of the Pathway 
for SGR Reform Act, which provides for the retroactive reinstatement 
and extension, for an additional 4 years, of the statutory moratorium 
on the full implementation of the 25-percent threshold payment 
adjustment established under section 114(c) of the MMSEA, as further 
amended by subsequent legislation.
     Proposals to implement section 1206(b)(2) of the Pathway 
for SGR Reform Act, as amended by section 112(b) of the Protecting 
Access to Medicare Act of 2014, which provides for moratoria (subject 
to certain defined exceptions) on the establishment of new LTCHs and 
LTCH satellite facilities and a moratorium on bed increases in LTCHs 
effective for the period beginning April 1, 2014, and ending September 
30, 2017.
     Proposed changes to the LTCH interruption of stay policy 
by revising the fixed-day thresholds under the ``greater than 3-day 
interruption of stay policy'' to apply a uniform 30-day threshold as an 
``acceptable standard'' for determining a linkage between an index 
discharge and a readmission.
     Proposal to remove the discharge and readmission 
requirement, ``Special Payment Provisions for Patients Who are 
Transferred to Onsite Providers and Readmitted to an LTCH'' (the ``5 
percent payment threshold'') beginning in FY 2015.
     Proposal to apply a payment adjustment under the LTCH PPS 
to subclause (II) LTCHs beginning in FY 2015 that would result in 
payments to this type of LTCH resembling reasonable cost payment under 
the TEFRA payment system model, consistent with the provisions of 
section 1206(d) of the Pathway for SGR Reform Act of 2013.
7. Proposed Changes to Regulations Governing Administrative Appeals by 
Providers and Judicial Review of Provider Claims
    In section VIII. of the preamble of the proposed rule, we set forth 
proposals to revise the regulations governing administrative appeals 
and judicial review of provider claims in Medicare cost reports.
8. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section IX. of the preamble of the proposed rule, we addressed--
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program as a condition for receiving the full 
applicable percentage increase.
     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 (LTCHQR) Program.
9. Proposed Uses and Release of Medicare Advantage Risk Adjustment Data
    In section X. of the preamble of the proposed rule, we set forth 
proposed regulatory revisions to broaden the specified uses of Medicare 
Advantage (MA) risk adjustment data and to specify the conditions for 
release of such risk adjustment data to entities outside of CMS.
10. Proposed Changes to Enforcement Provisions for Organ Transplant 
Centers
    In section XI. of the preamble of the proposed rule, we proposed to 
revise the regulations governing organ transplant centers that request 
approval, based on mitigating factors for initial approval and re-
approval, for participation in Medicare when the centers have not met 
one or more of the conditions of participation.
11. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In the Addendum to the proposed rule, we set forth proposed changes 
to the amounts and factors for determining the proposed FY 2015 
prospective payment rates for operating costs and capital-related costs 
for acute care hospitals. We also proposed to establish the threshold 
amounts for outlier cases. In addition, we addressed the proposed 
update factors for determining the rate-of-increase limits for cost 
reporting periods beginning in FY 2015 for certain hospitals excluded 
from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
    In the Addendum to the proposed rule, we set forth proposed changes 
to the amounts and factors for determining the proposed FY 2015 LTCH 
PPS standard Federal rate. We proposed to establish the adjustments for 
wage levels (including proposed changes to the LTCH PPS labor market 
area delineations based on the new OMB delineations), the labor-related 
share, the cost-of-living adjustment, and high-cost outliers, including 
the fixed-loss amount, and the LTCH cost-to-charge ratios (CCRs) under 
the LTCH PPS.
13. Impact Analysis
    In Appendix A of the proposed rule, we set forth an analysis of the 
impact that the proposed changes would have on affected acute care 
hospitals, LTCHs, and PCHs.
14. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of the proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provided our recommendations of 
the appropriate percentage changes for FY 2015 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 standard Federal rate for hospital inpatient services 
furnished by LTCHs.
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 2014 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and

[[Page 49871]]

capital-related costs for hospitals under the IPPS. We addressed these 
recommendations in Appendix B of the proposed rule. For further 
information relating specifically to the MedPAC March 2014 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.

E. Public Comments Received in Response to the FY 2015 IPPS/LTCH PPS 
Proposed Rule

    We received approximately 653 timely pieces of correspondence 
containing multiple comments on the FY 2015 IPPS/LTCH PPS proposed 
rule. We note that some of these public comments were outside of the 
scope of the proposed rule. These out-of-scope public comments are not 
addressed in the policy responses in this final rule. Summaries of the 
public comments that are within the scope of the proposed rule and our 
responses to those public comments are set forth in the various 
sections of this final rule under the appropriate headings.

F. Finalization of Interim Final Rule With Comment Period on Extension 
of Payment Adjustment for Low-Volume Hospitals and the Medicare-
Dependent, Small Rural Hospital (MDH) Program for FY 2014 Discharges 
Through March 31, 2014

    In an interim final rule with comment period (CMS-1599-IFC2) that 
appeared in the Federal Register on March 18, 2014, we implemented the 
extension of the temporary changes to the payment adjustment for low-
volume hospitals and the MDH program under the IPPS for FY 2014 
(through March 31, 2014) in accordance with sections 1105 and 1106, 
respectively, of the Pathway for SGR Reform Act of 2013 (79 FR 15022 
through 15030). We received four timely pieces of correspondence on 
this interim final rule with comment period. In section IV.P. of the 
preamble of this final rule, we summarize the provisions of the interim 
final rule, summarize and respond to the public comments received, and 
finalize the provisions of the interim final rule with comment period.

G. Finalization of Interim Final Rule With Comment Period on Changes to 
Certain Cost Reporting Procedures Related to Disproportionate Share 
Hospital Uncompensated Care Payments

    In an interim final rule with comment period (CMS-1599-IFC) that 
appeared in the Federal Register on October 13, 2013 (78 FR 61191), we 
revised certain operational considerations for hospitals with Medicare 
cost reporting periods that span more than one Federal fiscal year and 
also made chnges to the data that will be used in the uncompensated 
care payment calculation in order to ensure that data from Indian 
Health Service (IHS) hospitals are included in Factor 1 and Factor 3 of 
that calculation (78 FR 61191 through 61197). We received 12 timely 
pieces of correspondence in response to this interim final rule with 
comment period. In section IV.Q. of the preamble of this final rule, we 
summarize the provisions of the interim final rule with comment period, 
summarize and respond to the public comments received, and finalize the 
provisions of the interim final rule with comment period.

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

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as 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.
    Congress recognized that it would be necessary to recalculate the 
DRG relative weights periodically to account for changes in resource 
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires 
that the Secretary adjust the DRG classifications and relative weights 
at least annually. These adjustments are made to reflect changes in 
treatment patterns, technology, and any other factors that may change 
the relative use of hospital resources.

B. MS-DRG Reclassifications

    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), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 
through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), and 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50512).

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. FY 2015 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 Pub. L. 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. (In FY 2014, there are 
751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking 
into account patient severity of illness in Medicare payment rates for 
acute care hospitals, MS-DRGs encourage hospitals to improve their 
documentation and coding of patient diagnoses.
    In the FY 2008 IPPS final rule with comment period (72 FR 47175 
through 47186), we indicated that the adoption of the MS-DRGs had the 
potential to lead to increases in aggregate payments without a 
corresponding increase in actual patient severity of illness due to the 
incentives for additional documentation and coding. In that final rule 
with comment period, we exercised our authority under section 
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget 
neutrality by adjusting the national standardized amount, to eliminate 
the estimated effect of changes in coding or classification that do not 
reflect real changes in case-mix. Our actuaries estimated that 
maintaining budget neutrality required an adjustment of -4.8 percent to 
the national standardized amount. We provided for phasing in this -4.8 
percent adjustment over 3 years. Specifically, we established 
prospective documentation and coding adjustments of -1.2 percent for FY 
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
    On September 29, 2007, Congress enacted the TMA [Transitional 
Medical

[[Page 49872]]

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 percent for FY 2008 and -0.9 percent 
for FY 2009, and we finalized the FY 2008 adjustment through 
rulemaking, effective October 1, 2007 (72 FR 66886).
    For FY 2009, section 7(a) of Public Law 110-90 required a 
documentation and coding adjustment of -0.9 percent, and we finalized 
that adjustment through rulemaking effective October 1, 2008 (73 FR 
48447). The documentation and coding adjustments established in the FY 
2008 IPPS final rule with comment period, which reflected the 
amendments made by section 7(a) of Public Law 110-90, are cumulative. 
As a result, the -0.9 percent documentation and coding adjustment for 
FY 2009 was in addition to the -0.6 percent adjustment for FY 2008, 
yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Pub. L. 
110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Pub. L. 
110-90
    Section 7(b)(1)(A) of Public Law 110-90 requires that, if the 
Secretary determines that implementation of the MS-DRG system resulted 
in changes in documentation and coding that did not reflect real 
changes in case-mix for discharges occurring during FY 2008 or FY 2009 
that are different than the prospective documentation and coding 
adjustments applied under section 7(a) of Public Law 110-90, the 
Secretary shall make an appropriate adjustment under section 
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act 
authorizes adjustments to the average standardized amounts for 
subsequent fiscal years in order to eliminate the effect of such coding 
or classification changes. These adjustments are intended to ensure 
that future annual aggregate IPPS payments are the same as the payments 
that otherwise would have been made had the prospective adjustments for 
documentation and coding applied in FY 2008 and FY 2009 reflected the 
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 
Required by Section 7(b)(1)(B) Pub. L. 110-90
    If, based on a retroactive evaluation of claims data, the Secretary 
determines that implementation of the MS-DRG system resulted in changes 
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are 
different from the prospective documentation and coding adjustments 
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of 
Public Law 110-90 requires the Secretary to make an additional 
adjustment to the standardized amounts under section 1886(d) of the 
Act. This adjustment must offset the estimated increase or decrease in 
aggregate payments for FYs 2008 and 2009 (including interest) resulting 
from the difference between the estimated actual documentation and 
coding effect and the documentation and coding adjustment applied under 
section 7(a) of Public Law 110-90. This adjustment is in addition to 
making an appropriate adjustment to the standardized amounts under 
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) 
of Public Law 110-90. That is, these adjustments are intended to recoup 
(or repay, in the case of underpayments) spending in excess of (or less 
than) spending that would have occurred had the prospective adjustments 
for changes in documentation and coding applied in FY 2008 and FY 2009 
matched the changes that occurred in those years. Public Law 110-90 
requires that the Secretary only make these recoupment or repayment 
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
    In order to implement the requirements of section 7 of Public Law 
110-90, we performed a retrospective evaluation of the FY 2008 data for 
claims paid through December 2008 using the methodology first described 
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and 
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43768 through 43772). We performed the same analysis for FY 2009 claims 
data using the same methodology as we did for FY 2008 claims (75 FR 
50057 through 50068). The results of the analysis for the FY 2011 IPPS/
LTCH PPS proposed and final rules, and subsequent evaluations in FY 
2012, supported that the 5.4 percent estimate accurately reflected the 
FY 2009 increases in documentation and coding under the MS-DRG system. 
We were persuaded by both MedPAC's analysis (as discussed in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own 
review of the methodologies recommended by various commenters that the 
methodology we employed to determine the required documentation and 
coding adjustments was sound.
    As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files 
are available to the public to allow independent analysis of the FY 
2008 and FY 2009 documentation and coding effects. Interested 
individuals may still order these files through the CMS Web site at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-
Hospital (National). This CMS Web page describes the file and provides 
directions and further detailed instructions for how to order.
    Persons placing an order must send the following: A Letter of 
Request, the LDS Data Use Agreement and Research Protocol (refer to the 
Web site for further instructions), the LDS Form, and a check (refer to 
the Web site for the required payment amount) to:
    Mailing address if using the U.S. Postal Service: Centers for 
Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. 
Box 7520, Baltimore, MD 21207-0520.
    Mailing address if using express mail: Centers for Medicare & 
Medicaid Services, OFM/Division of Accounting--RDDC, 7500 Security 
Boulevard, C3-07-11, Baltimore, MD 21244-1850.
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by 
Section 7(b)(1)(A) of Pub. L. 110-90
    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 
through 43777), we opted to delay the implementation of any 
documentation and coding adjustment until a full analysis of case-mix 
changes based on FY 2009 claims data could be completed. We refer 
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed 
description of our proposal, responses to comments, and finalized 
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total 
prospective documentation and coding effect of 5.4 percent. After 
accounting for the -0.6 percent and the -0.9 percent documentation and 
coding adjustments in FYs 2008 and 2009, we found a remaining 
documentation and coding

[[Page 49873]]

effect of 3.9 percent. As we have discussed, an additional cumulative 
adjustment of -3.9 percent would be necessary to meet the requirements 
of section 7(b)(1)(A) of Public Law 110-90 to make an adjustment to the 
average standardized amounts in order to eliminate the full effect of 
the documentation and coding changes that do not reflect real changes 
in case-mix on future payments. Unlike section 7(b)(1)(B) of Public Law 
110-90, section 7(b)(1)(A) does not specify when we must apply the 
prospective adjustment, but merely requires us to make an 
``appropriate'' adjustment. Therefore, as we stated in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50061), we believed the law provided 
some discretion as to the manner in which we applied the prospective 
adjustment of -3.9 percent. As we discussed extensively in the FY 2011 
IPPS/LTCH PPS final rule, it has been our practice to moderate payment 
adjustments when necessary to mitigate the effects of significant 
downward adjustments on hospitals, to avoid what could be widespread, 
disruptive effects of such adjustments on hospitals. Therefore, we 
stated that we believed it was appropriate to not implement the -3.9 
percent prospective adjustment in FY 2011 because we finalized a -2.9 
percent recoupment adjustment for that fiscal year. Accordingly, we did 
not propose a prospective adjustment under section 7(b)(1)(A) of Public 
Law 110-90 for FY 2011 (75 FR 23868 through 23870). We noted that, as a 
result, payments in FY 2011 (and in each future fiscal year until we 
implemented the requisite adjustment) would be higher than they would 
have been if we had implemented an adjustment under section 7(b)(1)(A) 
of Public Law 110-90.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we 
indicated that, because further delay of this prospective adjustment 
would result in a continued accrual of unrecoverable overpayments, it 
was imperative that we implement a prospective adjustment for FY 2012, 
while recognizing CMS' continued desire to mitigate the effects of any 
significant downward adjustments to hospitals. Therefore, we 
implemented a -2.0 percent prospective adjustment to the standardized 
amount instead of the full -3.9 percent.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 
53276), we completed the prospective portion of the adjustment required 
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9 
percent adjustment to the standardized amount for FY 2013. We stated 
that this adjustment would remove the remaining effect of the 
documentation and coding changes that do not reflect real changes in 
case-mix that occurred in FY 2008 and FY 2009. We believed that it was 
imperative to implement the full remaining adjustment, as any further 
delay would result in an overstated standardized amount in FY 2013 and 
any future fiscal years until a full adjustment was made.
    We noted again that delaying full implementation of the prospective 
portion 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. These overpayments could not be recovered by CMS 
as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to 
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) 
of Pub. L. 110-90
    Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to 
make an adjustment to the standardized amounts under section 1886(d) of 
the Act to offset the estimated increase or decrease in aggregate 
payments for FY 2008 and FY 2009 (including interest) resulting from 
the difference between the estimated actual documentation and coding 
effect and the documentation and coding adjustments applied under 
section 7(a) of Public Law 110-90. This determination must be based on 
a retrospective evaluation of claims data. Our actuaries estimated that 
there was a 5.8 percentage point difference resulting in an increase in 
aggregate payments of approximately $6.9 billion. Therefore, as 
discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 
50067), we determined that an aggregate adjustment of -5.8 percent in 
FYs 2011 and 2012 would be necessary in order to meet the requirements 
of section 7(b)(1)(B) of Public Law 110-90 to adjust the standardized 
amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to 
offset the estimated amount of the increase in aggregate payments 
(including interest) in FYs 2008 and 2009.
    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, in the FY 2011 IPPS/LTCH PPS final rule, 
we made an adjustment to the standardized amount of -2.9 percent, 
representing approximately half of the aggregate adjustment required 
under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. An 
adjustment of this magnitude allowed us to moderate the effects on 
hospitals in one year while simultaneously making it possible to 
implement the entire adjustment within the timeframe required under 
section 7(b)(1)(B) of Public Law 110-90 (that is, no later than FY 
2012). For FY 2012, in accordance with the timeframes set forth by 
section 7(b)(1)(B) of Public Law 110-90, and consistent with the 
discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the 
recoupment adjustment by implementing the remaining -2.9 percent 
adjustment, in addition to removing the effect of the -2.9 percent 
adjustment to the standardized amount finalized for FY 2011 (76 FR 
51489 and 51498). Because these adjustments, in effect, balanced out, 
there was no year-to-year change in the standardized amount due to this 
recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53276), we made a final +2.9 percent adjustment to the 
standardized amount, completing the recoupment portion of section 
7(b)(1)(B) of Public Law 110-90. We note that with this positive 
adjustment, according to our estimates, all overpayments made in FY 
2008 and FY 2009 have been fully recaptured with appropriate interest, 
and the standardized amount has been returned to the appropriate 
baseline.
6. 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 represents 
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 is a one-time recoupment of a prior overpayment, not a permanent 
reduction to payment rates. Therefore, any adjustment made to reduce 
payment rates in one year would eventually be offset by a positive 
adjustment, once the necessary amount of overpayment is recovered.
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515

[[Page 49874]]

through 50517), our actuaries estimate that a -9.3 percent 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 percent 
recoupment adjustment to the standardized amount in FY 2014. We stated 
that if adjustments of approximately -0.8 percent are implemented in 
FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we 
estimate that the entire $11 billion will be accounted for by the end 
of the statutory 4-year timeline. As estimates of any future 
adjustments are subject to slight variations in total savings, we did 
not provide for specific adjustments for FYs 2015, 2016, or 2017 at 
that time. We stated that we believed that this level of adjustment for 
FY 2014 was a reasonable and fair approach that satisfies the 
requirements of the statute while mitigating extreme annual 
fluctuations in payment rates. In addition, we again noted that this -
0.8 percent recoupment adjustment, and future adjustments under this 
authority, will be eventually offset by an equivalent positive 
adjustment once the full $11 billion recoupment requirement has been 
realized.
    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 proposed rule (79 FR 27997 through 27998), we 
proposed an additional -0.8 percent recoupment adjustment to the 
standardized amount for FY 2015. We estimated that this level of 
adjustment, combined with leaving the -0.8 percent adjustment made for 
FY 2014 in place, would recover up to $2 billion in FY 2015. Taking 
into account the approximately $1 billion recovered in FY 2014, this 
would leave approximately $8 billion remaining to be recovered by FY 
2017.
    Comment: Several commenters restated their previous position, as 
set forth in comments submitted in response to the FY 2014 IPPS/LTCH 
PPS proposed rule and summarized in the FY 2014 IPPS/LTCH PPS final 
rule, that CMS overstated the impact of documentation and coding 
effects for prior years. Commenters cited potential deficiencies in the 
CMS methodology and disagreed that the congressionally mandated 
adjustment is warranted. However, the majority of these commenters 
conceded that CMS is required by section 631 of the ATRA to recover $11 
billion by FY 2017, and supported CMS' policy to phase in the 
adjustments over a 4-year period.
    Response: We appreciate the commenters' support. We refer readers 
to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for 
our response to the commenters' position that CMS overstated the impact 
of documentation and coding effects.
    After consideration of the public comments we received, we are 
finalizing the proposal to make an additional -0.8 percent adjustment 
to the standardized amount for FY 2015. Considering the -0.8 percent 
adjustment made in FY 2014, we expect the combined impact of these 
adjustments will be to recover $2 billion dollars in overpayments in FY 
2015. Combined with the estimated $1 billion adjustment made in FY 
2014, we estimate that $3 billion of the $11 billion in overpayments 
required to be recovered by section 631 of the ATRA will be accounted 
for.
    We continue to believe that if adjustments of approximately -0.8 
percent are implemented in FYs 2014, 2015, 2016, and 2017, using 
standard inflation factors, the entire $11 billion will be accounted 
for by the end of the statutory 4-year timeline. As we explained in the 
FY 2014 IPPS/LTCH PPS final rule, estimates of any future adjustments 
are subject to slight variations in total savings. Therefore, we have 
not yet addressed specific adjustments for FY 2016 and FY 2017. We 
continue to believe that the -0.8 percent adjustment for FY 2015 is a 
reasonable and fair approach that will help satisfy the requirements of 
the statute while mitigating extreme annual fluctuations in payment 
rates. In addition, we again note that this -0.8 percent recoupment 
adjustment, and future adjustments under this authority, will be 
eventually offset by an equivalent positive adjustment once the full 
$11 billion recoupment requirement has been realized.
7. Prospective Adjustment for the MS-DRG Documentation and Coding 
Effect Through FY 2010
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 
50517), we discussed the possibility of applying an additional 
prospective adjustment to account for the cumulative MS-DRG 
documentation and coding effect through FY 2010. In that final rule, we 
stated that if we were to apply such an adjustment, we believed the 
most appropriate additional adjustment was -0.55 percent. However, we 
decided not to apply such an adjustment in FY 2014, in light of the 
need to make the retrospective adjustments required by the ATRA. We 
continue to believe that if we were to apply an additional prospective 
adjustment for the cumulative MS-DRG documentation and coding effect 
through FY 2010, the most appropriate additional adjustment is -0.55 
percent. However, we did not propose such an adjustment for FY 2015, in 
light of the ongoing recoupment required by the ATRA. We will consider 
whether such an additional adjustment is appropriate in future years' 
rulemaking.
    Comment: Commenters reiterated their concern, as set forth in 
comments submitted in response to the FY 2014 IPPS/LTCH PPS proposed 
rule and summarized in the FY 2014 IPPS/LTCH PPS final rule, that CMS 
overstated the adjustment factor for documentation and coding, 
including the revised -0.55 percent factor to adjust for documentation 
and coding that occurred in FY 2010. Commenters believed that 
adjustments related to FY 2010 documentation and coding are not 
required under section 631 of the ATRA. Commenters urged CMS to not 
consider additional adjustments, other than those required by section 
631 of the ATRA.
    Response: We appreciate the commenters' concerns. We refer readers 
to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 through 50517) for 
our response to the commenters' position that CMS overstated the impact 
of documentation and coding effects. We did not propose to make any 
additional prospective adjustment to address the cumulative 
documentation and coding effect through FY 2010 for FY 2015. We will 
consider these comments in future years' rulemaking.

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.
    As we implemented cost-based relative weights, some public

[[Page 49875]]

commenters raised concerns about potential bias in the weights due to 
``charge compression,'' which is the practice of applying a higher 
percentage charge markup over costs to lower cost items and services, 
and a lower percentage charge markup over costs to higher cost items 
and services. As a result, the cost-based weights would undervalue 
high-cost items and overvalue low-cost items if a single cost-to-charge 
ratio (CCR) is applied to items of widely varying costs in the same 
cost center. To address this concern, in August 2006, we awarded a 
contract to the Research Triangle Institute, International (RTI) to 
study the effects of charge compression in calculating the relative 
weights and to consider methods to reduce the variation in the CCRs 
across services within cost centers. For a detailed summary of RTI's 
findings, recommendations, and public comments that we received on the 
report, we refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 
48452 through 48453). In addition, we refer readers to RTI's July 2008 
final report titled ``Refining Cost to Charge Ratios for Calculating 
APC and MS-DRG Relative Payment Weights'' (http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
    In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in 
response to the RTI's recommendations concerning cost report 
refinements, we discussed our decision to pursue changes to the cost 
report to split the cost center for Medical Supplies Charged to 
Patients into one line for ``Medical Supplies Charged to Patients'' and 
another line for ``Implantable Devices Charged to Patients.'' We 
acknowledged, as RTI had found, that charge compression occurs in 
several cost centers that exist on the Medicare cost report. However, 
as we stated in the FY 2009 IPPS final rule, we focused on the CCR for 
Medical Supplies and Equipment because RTI found that the largest 
impact on the MS-DRG relative weights could result from correcting 
charge compression for devices and implants. In determining the items 
that should be reported in these respective cost centers, we adopted 
the commenters' recommendations that hospitals should use revenue codes 
established by the AHA's National Uniform Billing Committee to 
determine the items that should be reported in the ``Medical Supplies 
Charged to Patients'' and the ``Implantable Devices Charged to 
Patients'' cost centers. Accordingly, a new subscripted line for 
``Implantable Devices Charged to Patients'' was created in July 2009. 
This new subscripted cost center has been available for use for cost 
reporting periods beginning on or after May 1, 2009.
    As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 
through 68527), in addition to the findings regarding implantable 
devices, RTI also found that the costs and charges of computed 
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
also concluded that both the IPPS and the OPPS relative weights would 
better estimate the costs of those services if CMS were to add standard 
cost centers for CT scans, MRIs, and cardiac catheterization in order 
for hospitals to report separately the costs and charges for those 
services and in order for CMS to calculate unique CCRs to estimate the 
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50075 through 50080), we finalized our proposal to create 
standard cost centers for CT scans, MRIs, and cardiac catheterization, 
and to require that hospitals report the costs and charges for these 
services under new cost centers on the revised Medicare cost report 
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50075 through 50080) for a detailed discussion of the 
reasons for the creation of standard cost centers for CT scans, MRIs, 
and cardiac catheterization.) The new standard cost centers for CT 
scans, MRIs, and cardiac catheterization are effective for cost 
reporting periods beginning on or after May 1, 2010, on the revised 
cost report Form CMS-2552-10.
    In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due 
to what is typically a 3-year lag between the reporting of cost report 
data and the availability for use in ratesetting, we anticipated that 
we might be able to use data from the new ``Implantable Devices Charged 
to Patients'' cost center to develop a CCR for ``Implantable Devices 
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle. 
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 
FR 43782), due to delays in the issuance of the revised cost report 
Form CMS 2552-10, we determined that a new CCR for ``Implantable 
Devices Charged to Patients'' might not be available before FY 2013. 
Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS 
final rule to add new cost centers for CT scans, MRIs, and cardiac 
catheterization, we explained that data from any new cost centers that 
may be created will not be available until at least 3 years after they 
are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH 
PPS rulemaking, we checked the availability of data in the 
``Implantable Devices Charged to Patients'' cost center on the FY 2009 
cost reports, but we did not believe that there was a sufficient amount 
of data from which to generate a meaningful analysis in this particular 
situation. Therefore, we did not propose to use data from the 
``Implantable Devices Charged to Patients'' cost center to create a 
distinct CCR for ``Implantable Devices Charged to Patients'' for use in 
calculating the MS-DRG relative weights for FY 2012. We indicated that 
we would reassess the availability of data for the ``Implantable 
Devices Charged to Patients'' cost center for the FY 2013 IPPS/LTCH PPS 
rulemaking cycle and, if appropriate, we would propose to create a 
distinct CCR at that time.
    During the development of the FY 2013 IPPS/LTCH PPS proposed and 
final rules, hospitals were still in the process of transitioning from 
the previous cost report Form CMS-2552-96 to the new cost report Form 
CMS-2552-10. Therefore, we were able to access only those cost reports 
in the FY 2010 HCRIS with fiscal year begin dates on or after October 
1, 2009, and before May 1, 2010; that is, those cost reports on Form 
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not 
available because cost reports filed on the Form CMS-2552-10 were not 
accessible in the HCRIS. Further complicating matters was that, due to 
additional unforeseen technical difficulties, the corresponding 
information regarding charges for implantable devices on hospital 
claims was not yet available to us in the MedPAR file. Without the 
breakout in the MedPAR file of charges associated with implantable 
devices to correspond to the costs of implantable devices on the cost 
report, we believed that we had no choice but to continue computing the 
relative weights with the current CCR that combines the costs and 
charges for supplies and implantable devices. We stated in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do 
have the necessary data for supplies and implantable devices on the 
claims in the MedPAR file to create distinct CCRs for the respective 
cost centers for supplies and implantable devices, we hoped that we 
would also have data for an analysis of

[[Page 49876]]

creating distinct CCRs for CT scans, MRIs, and cardiac catheterization, 
which could then be finalized through rulemaking. In the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53281), we stated that, prior to proposing 
to create these CCRs, we would first thoroughly analyze and determine 
the impacts of the data, and that distinct CCRs for these new cost 
centers would be used in the calculation of the relative weights only 
if they were first finalized through rulemaking.
    At the time of the development of the FY 2014 IPPS/LTCH PPS 
proposed rule (78 FR 27506 through 27507), we had a substantial number 
of hospitals completing all, or some, of these new cost centers on the 
FY 2011 Medicare cost reports, compared to prior years. We stated that 
we believed that the analytic findings described using the FY 2011 cost 
report data and FY 2012 claims data supported our original decision to 
break out and create new cost centers for implantable devices, MRIs, CT 
scans, and cardiac catheterization, and we saw no reason to further 
delay proposing to implement the CCRs of each of these cost centers. 
Therefore, beginning in FY 2014, we proposed to calculate the MS-DRG 
relative weights using 19 CCRs, creating distinct CCRs from cost report 
data for implantable devices, MRIs, CT scans, and cardiac 
catheterization (78 FR 27509).
    We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27507 through 27509) and final rule (78 FR 50518 through 50523) in 
which we presented data analyses using distinct CCRs for implantable 
devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/
LTCH PPS final rule also set forth our responses to public comments we 
received on our proposal to implement these CCRs. As explained in more 
detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our 
proposal to use 19 CCRs to calculate MS-DRG relative weights beginning 
in FY 2014--the then existing 15 cost centers and the 4 new CCRs for 
implantable devices, MRIs, CT scans, and cardiac catheterization. 
Therefore, beginning in FY 2014, we calculated the IPPS MS-DRG relative 
weights using 19 CCRs, creating distinct CCRs for implantable devices, 
MRIs, CT scans, and cardiac catheterization.
2. Discussion of Policy for FY 2015
    As we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
27999), to calculate the MS-DRG relative weights for FY 2015, we used 
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 19 CCRs and 
the MS-DRG relative weights for FY 2015 is included in section II.H. of 
the preamble of this final rule.
    Comment: One commenter supported CMS' plans to continue to use data 
from the implantable devices cost center to create a distinct CCR for 
implantable devices in the calculation of the FY 2015 relative weights. 
The commenter also urged CMS to promote transparency by making detailed 
data from the implantable device cost center available to the public so 
that hospitals could evaluate these costs in the context of overall 
hospital charges.
    Response: We did not propose any changes to the methodology or data 
sources for the FY 2015 CCRs and relative weights. Regarding the 
commenter's request to make data from the implantable devices cost 
center available to the public, we note that hospital cost report data, 
via HCRIS, are available to the public. For more information, we refer 
to readers to the CMS Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/CostReports/index.html?redirect=/costReports.

F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions 
(HACs), Including Infections for FY 2015

1. Background
    Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is 
part of an array of Medicare tools that we are using to promote 
increased quality and efficiency of care. Under the IPPS, hospitals are 
encouraged to treat patients efficiently because they receive the same 
DRG payment for stays that vary in length and in the services provided, 
which gives hospitals an incentive to avoid unnecessary costs in the 
delivery of care. In some cases, conditions acquired in the hospital do 
not generate higher payments than the hospital would otherwise receive 
for cases without these conditions. To this extent, the IPPS encourages 
hospitals to avoid complications.
    However, the treatment of these conditions can generate higher 
Medicare payments in two ways. First, if a hospital incurs 
exceptionally high costs treating a patient, the hospital stay may 
generate an outlier payment. Because the outlier payment methodology 
requires that hospitals experience large losses on outlier cases before 
outlier payments are made, hospitals have an incentive to prevent 
outliers. Second, under the MS-DRG system that took effect in FY 2008 
and that has been refined through rulemaking in subsequent years, 
certain conditions can generate higher payments even if the outlier 
payment requirements are not met. Under the MS-DRG system, there are 
currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups 
based on the presence or absence of a complication or comorbidity (CC) 
or a major complication or comorbidity (MCC). The presence of a CC or 
an MCC generally results in a higher payment.
    Section 1886(d)(4)(D) of the Act specifies that, by October 1, 
2007, the Secretary was required to select, in consultation with the 
Centers for Disease Control and Prevention (CDC), at least two 
conditions that: (a) Are high cost, high volume, or both; (b) are 
assigned to a higher paying MS-DRG when present as a secondary 
diagnosis (that is, conditions under the MS-DRG system that are CCs or 
MCCs); and (c) could reasonably have been prevented through the 
application of evidence-based guidelines. Section 1886(d)(4)(D) of the 
Act also specifies that the list of conditions may be revised, again in 
consultation with the CDC, from time to time as long as the list 
contains at least two conditions.
    Effective for discharges occurring on or after October 1, 2008, 
under the authority of section 1886(d)(4)(D) of the Act, Medicare no 
longer assigns an inpatient hospital discharge to a higher paying MS-
DRG if a selected condition is not present on admission (POA). Thus, if 
a selected condition that was not POA manifests during the hospital 
stay, it is considered a HAC and the case is paid as though the 
secondary diagnosis was not present. However, even if a HAC manifests 
during the hospital stay, if any nonselected CC or MCC appears on the 
claim, the claim will be paid at the higher MS-DRG rate. In addition, 
Medicare continues to assign a discharge to a higher paying MS-DRG if a 
selected condition is POA. When a HAC is not POA, payment can be 
affected in a manner shown in the diagram below

[[Page 49877]]

[GRAPHIC] [TIFF OMITTED] TR22AU14.000

2. HAC Selection
    Beginning in FY 2007, we have set forth proposals, and solicited 
and responded to public comments, to implement section 1886(d)(4)(D) of 
the Act through the IPPS annual rulemaking process. For specific 
policies addressed in each rulemaking cycle, including a detailed 
discussion of the collaborative interdepartmental process and public 
input regarding selected and potential candidate HACs, we refer readers 
to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100) 
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed 
rule (72 FR 24716 through 24726) and final rule with comment period (72 
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) 
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS 
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and 
final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 
through 53303); and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27509 through 27512) and final rule (78 FR 50523 through 50527). A 
complete list of the 11 current categories of HACs is included on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
    Collection of POA indicator data is necessary to identify which 
conditions were acquired during hospitalization for the HAC payment 
provision as well as for broader public health uses of Medicare data. 
In previous rulemaking, we provided both CMS and CDC Web site resources 
that are available to hospitals for assistance in this reporting 
effort. For detailed information regarding these sites and materials, 
including the application and use of POA indicators, we refer the 
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 
51507).
    Currently, as we have discussed in the prior rulemaking cited under 
section II.I.2. of the preamble of this final rule, the POA indicator 
reporting requirement only applies to IPPS hospitals because they are 
subject to this HAC provision. Non-IPPS hospitals, including CAHs, 
LTCHs, IRFs, IPFs, cancer hospitals, children's hospitals, RNHCIs, and 
the Department of Veterans Affairs/Department of Defense hospitals, are 
exempt from POA reporting.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50524 through 
50525), we noted that hospitals in Maryland operating under a statutory 
waiver were not paid under the IPPS, but rather were paid under the 
provisions of section 1814(b)(3) of the Act, and therefore prior to FY 
2014 these hospitals were exempt from reporting POA indicators. 
However, we believed it was appropriate to require them to use POA 
indicator reporting on their claims so that we could include their data 
and have as complete a dataset as possible when we analyze trends and 
make further payment policy determinations, such as those authorized 
under section 1886(p) of the Act. Therefore, in the FY 2014 IPPS/LTCH 
PPS final rule, we finalized our policy that hospitals in Maryland that 
formerly operated under section 1814(b)(3) of the Act were no longer 
exempted from the POA indicator reporting requirement beginning with 
claims submitted on or after October 1, 2013, including all claims for 
discharges on or after October 1, 2013. We noted that, while this 
requirement was not effective until October 1, 2013, hospitals in 
Maryland could submit data with POA indicators before that date with 
the expectation that these data would be accepted by Medicare's claims 
processing systems. (We refer readers to the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50707 through 50712) for a discussion of our FY 2014 
final policies to implement section 1886(p) of the Act that are 
applicable to Maryland hospitals.)
    Subsequent to our FY 2014 rulemaking, the State of Maryland entered 
into an agreement with CMS, effective January 1, 2014, to participate 
in CMS' new Maryland All-Payer Model, a 5-year hospital payment model. 
This model is being implemented under section 1115A of the Act, as 
added by section 3021 of the Affordable Care Act, which authorizes the 
testing of innovative payment and service delivery models, including 
models that allow States to ``test and evaluate systems of all-payer 
payment reform for the medical care of residents of the State, 
including dual eligible individuals.'' Section 1115A of the Act

[[Page 49878]]

authorizes the Secretary to waive such requirements of titles XI and 
XVIII of the Act as may be necessary solely for purposes of carrying 
out section 1115A of the Act with respect to testing models.
    Under the agreement with CMS, Maryland will limit per capita total 
hospital cost growth for all payers, including Medicare. In order to 
implement the new model, effective January 1, 2014, Maryland elected to 
no longer have Medicare make payments to Maryland hospitals in 
accordance with section 1814(b)(3) of the Act. Maryland also 
represented that it is no longer in continuous operation of a 
demonstration project reimbursement system since July 1, 1977, as 
specified under section 1814(b)(3) of the Act. Because Maryland 
hospitals are no longer paid under section 1814(b)(3) of the Act, they 
are no longer subject to those provisions of the Act and related 
implementing regulations that are specific to section 1814(b)(3) 
hospitals. Although CMS has waived certain provisions of the Act for 
Maryland hospitals, as set forth in the agreement between CMS and 
Maryland and subject to Maryland's compliance with the terms of the 
agreement, CMS has not waived the POA indicator reporting requirement. 
In other words, the changes to the status of Maryland hospitals under 
section 1814(b)(3) of the Act as described above do not in any way 
change the POA indicator reporting requirement for Maryland hospitals.
    There are currently four POA indicator reporting options, ``Y'', 
``W'', ``N'', and ``U'', as defined by the ICD-9-CM Official Guidelines 
for Coding and Reporting. We note that prior to January 1, 2011, we 
also used a POA indicator reporting option ``1''. However, beginning on 
or after January 1, 2011, hospitals were required to begin reporting 
POA indicators using the 5010 electronic transmittal standards format. 
The 5010 format removes the need to report a POA indicator of ``1'' for 
codes that are exempt from POA reporting. We issued CMS instructions on 
this reporting change as a One-Time Notification, Pub. No. 100-20, 
Transmittal No. 756, Change Request 7024, effective on August 13, 2010, 
which can be located at the following link on the CMS Web site: http://www.cms.gov/manuals/downloads/Pub100_20.pdf.) The current POA 
indicators and their descriptors are shown in the chart below:

------------------------------------------------------------------------
                 Indicator                           Descriptor
------------------------------------------------------------------------
Y.........................................  Indicates that the condition
                                             was present on admission.
W.........................................  Affirms that the hospital
                                             has determined that, based
                                             on data and clinical
                                             judgment, it is not
                                             possible to document when
                                             the onset of the condition
                                             occurred.
N.........................................  Indicates that the condition
                                             was not present on
                                             admission.
U.........................................  Indicates that the
                                             documentation is
                                             insufficient to determine
                                             if the condition was
                                             present at the time of
                                             admission.
------------------------------------------------------------------------

    Under the HAC payment policy, we treat HACs coded with ``Y'' and 
``W'' indicators as POA and allow the condition on its own to cause an 
increased payment at the CC and MCC level. We treat HACs coded with 
``N'' and ``U'' indicators as Not Present on Admission (NPOA) and do 
not allow the condition on its own to cause an increased payment at the 
CC and MCC level. We refer readers to the following rules for a 
detailed discussion of POA indicator reporting: the FY 2009 IPPS 
proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); 
the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final 
rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed 
rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 
50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 
25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 
FR 53284 through 53285); and the FY 2014 IPPS/LTCH PPS proposed rule 
(78 FR 27510 through 27511) and final rule (78 FR 50524 through 50525).
    In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53324), the 5010 format allows the reporting and, 
effective January 1, 2011, the processing of up to 25 diagnoses and 25 
procedure codes. As such, it is necessary to report a valid POA 
indicator for each diagnosis code, including the principal diagnosis 
and all secondary diagnoses up to 25.
4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM 
and ICD-10-PCS
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in 
preparation for the transition to the ICD-10-CM and ICD-10-PCS code 
sets, we indicated that further information regarding the use of the 
POA indicator with the ICD-10-CM/ICD-10-PCS classifications as they 
pertain to the HAC policy would be discussed in future rulemaking.
    At the March 5, 2012 and the September 19, 2012 meetings of the 
ICD-9-CM Coordination and Maintenance Committee, an announcement was 
made with regard to the availability of the ICD-9-CM HAC list 
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were 
informed that the list of the ICD-9-CM selected HACs has been 
translated into codes using the ICD-10-CM and ICD-10-PCS classification 
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the selected HACs available on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under the 
link titled ``ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of 
Contents--Full Titles--HTML Version in Appendix I--Hospital-Acquired 
Conditions (HACs).'' This CMS Web site regarding the ICD-10-MS-DRG 
Conversion Project is also available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encouraged the public to submit comments on these 
translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC 
Translation Feedback Mailbox that was set up for this purpose under the 
Related Links section titled ``CMS HAC Feedback.''
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated 
that the final HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-
PCS would be subject to formal rulemaking. We encouraged readers to 
review the educational materials and draft code sets available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/ICD10/. In 
addition, we stated that the draft ICD-10-CM/ICD-10-PCS Coding 
Guidelines could be viewed on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10cm.htm.
    The HACs code translation list from ICM-9-CM to ICD-10-CM/ICD-10-
PCS is available to the public on the CMS Web site at: http://
www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-

[[Page 49879]]

DRG-Conversion-Project.html. We note that Appendix I of the ICD-10-CM/
PCS MS-DRG V31R Definitions Manual Table of Contents--Full Titles files 
(available in both text and HTML formats) are posted on the Web site 
and contain the DRA HACs translated to ICD-10.
    We note that section 212 of the Protecting Access to Medicare Act 
of 2014 (Pub. L. 113-93), enacted on April 1, 2014, provides that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. This 
effectively delayed the transition from ICD-9-CM to ICD-10. The 
Secretary expects to release a final rule in the near future that will 
include a new compliance date for use of ICD-10.
5. Current HACs and Previously Considered Candidate HACs
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28002), we did 
not propose to add or remove categories of the HACs. However, we 
indicated that we continue to encourage public dialogue about 
refinements to the HAC list by written stakeholder comments about both 
previously selected and potential candidate HACs. We refer readers to 
section II.F.6. of the FY 2008 IPPS final rule with comment period (72 
FR 47202 through 47218) and to section II.F.7. of the FY 2009 IPPS 
final rule (73 FR 48774 through 48491) for detailed discussion 
supporting our determination regarding each of these conditions. We 
also refer readers to section II.F.5. of the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 27892 through 27898), the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53285 through 53292) for the HAC policy for FY 2013, 
and the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 through 27512) 
and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50523 through 50527) 
for the HAC policy for FY 2014.
    Comment: Some commenters stated they were pleased the CMS did not 
propose to expand the list of categories or conditions subject to the 
Deficit Reduction Act of 2005 provisions that would reduce payment for 
HACs not present on admission. However, one commenter suggested that 
CMS remove ``falls and trauma'' from the categories of conditions to 
which the HAC policy applies. Another believed that iatrogenic 
pneumothorax with thoracentesis and accidental puncture/bleeding with 
paracentesis are two conditions that meet the HAC criteria for 
inclusion and urged CMS to expand the HAC program in FY 2015 to include 
them.
    Response: We value and appreciate these public comments, and we 
will take the comments and suggestions into consideration in future 
rulemaking.
    Comment: One commenter recognized the importance of targeting HACs, 
but stated that the DRA HAC program does not recognize that certain 
conditions are not 100 percent preventable, despite adherence to 
evidence-based practices. The commenter noted that facilities that 
treat patients with greater comorbidities and complex conditions are at 
a greater risk for penalties. Specifically, the commenter reiterates 
concerns about the inclusion of Surgical Site Infections (SSI) 
Following Cardiac Implantable Electronic Device (CIED) as a HAC 
category. The commenter stated that there are many variables that may 
contribute to the risk of CIED-related infections and that the 
implanting physician may not be able to control all circumstances (for 
example, pre-operative white blood cell count, fever within 24 hours, 
and timing of perioperative antibiotic administration).
    Response: In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51510 
through 51511), we addressed commenters' concerns regarding the 
preventability of DRA HACs and noted that the statute does not require 
that a condition be ``always preventable'' in order to qualify as an 
HAC. We stated that the statute indicated that the condition be 
``reasonably preventable,'' which necessarily implies something less 
than 100 percent.
    Comment: One commenter recommended that CMS address the question 
that its hospital customers have posed regarding the effect of the DRA 
HAC policy when a patient is discharged from a hospital and then 
returns to a hospital to have a foreign object removed. Specifically, 
the commenter stated that hospitals need to be better informed about 
how Medicare payment changes if the hospital removing the foreign 
object is the same hospital at which the foreign object was left or is 
a different hospital, and if the foreign object is removed during an 
outpatient procedure or during an inpatient procedure.
    Response: Questions related to payment for HACs are dependent upon 
how the conditions are coded and reported with ICD-9-CM and the 
corresponding POA indicator. The American Hospital Association (AHA) 
Central OfficeTM is the national clearinghouse for medical 
coding advice. Coding inquiries can be directed to the following AHA 
Web site: http://www.CodingClinicAdvisor.com. Instructions for how to 
assign the correct POA indicator can be found in the ICD-9-CM Official 
Guidelines for Coding and Reporting located at the CDC Web site: http://www.cdc.gov/nchs/icd/icd9cm_addenda_guidelines.htm. Also, 
illustrations of how to assign POA indicators are included in the 
Present on Admission (POA) Indicator Reporting by Acute Inpatient 
Prospective Payment System (IPPS) Hospitals Fact Sheet located on the 
CMS Hospital-Acquired Conditions Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/EducationalResources.html in the ``Downloads'' section. Table 1: CMS 
POA Indicator Reporting Options, Description, and Payment contains an 
explanation of when payment for a condition is made or not made, based 
on the POA indicator assigned, as shown below.

------------------------------------------------------------------------
       POA indicator              Description         Medicare payment
------------------------------------------------------------------------
Y..........................  Diagnosis was present  Payment made for
                              at time of inpatient   condition by
                              admission.             Medicare, when an
                                                     HAC is present.
N..........................  Diagnosis was not      No payment made for
                              present at time of     condition by
                              inpatient admission.   Medicare, when an
                                                     HAC is present.
U..........................  Documentation          No payment made for
                              insufficient to        condition by
                              determine if           Medicare, when an
                              condition was          HAC is present.
                              present at the time
                              of inpatient
                              admission.
W..........................  Clinically             Payment made for
                              undetermined.          condition by
                              Provider unable to     Medicare, when an
                              clinically determine   HAC is present.
                              whether the
                              condition was
                              present at the time
                              of inpatient
                              admission.
------------------------------------------------------------------------


[[Page 49880]]

6. RTI Program Evaluation
    On September 30, 2009, a contract was awarded to RTI to evaluate 
the impact of the Hospital-Acquired Condition-Present on Admission 
(HAC-POA) provisions on the changes in the incidence of selected 
conditions, effects on Medicare payments, impacts on coding accuracy, 
unintended consequences, and infection and event rates. This was an 
intra-agency project with funding and technical support from CMS, OPHS, 
AHRQ, and CDC. The evaluation also examined the implementation of the 
program and evaluated additional conditions for future selection. The 
contract with RTI ended on November 30, 2012. Summary reports of RTI's 
analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-
POA program evaluation were included in the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53292 through 53302). Summary and detailed data also were made 
publicly available on the CMS Web site at: http://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web site at: http://www.rti.org/reports/cms/.
    In addition to the evaluation of HAC and POA MedPAR claims data, 
RTI also conducted analyses on readmissions due to HACs, the 
incremental costs of HACs to the health care system, a study of 
spillover effects and unintended consequences, as well as an updated 
analysis of the evidence-based guidelines for selected and previously 
considered HACs. Reports on these analyses have been made publicly 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html.
7. Current and Previously Considered Candidate HACs--RTI Report on 
Evidence-Based Guidelines
    The RTI program evaluation includes a report that provides 
references for all evidence-based guidelines available for each of the 
selected and previously considered candidate HACs that provide 
recommendations for the prevention of the corresponding conditions. 
Guidelines were primarily identified using the AHRQ National Guidelines 
Clearing House (NGCH) and the CDC, along with relevant professional 
societies. Guidelines published in the United States were used, if 
available. In the absence of U.S. guidelines for a specific condition, 
international guidelines were included.
    Evidence-based guidelines that included specific recommendations 
for the prevention of the condition were identified for each of the 
selected conditions. In addition, evidence-based guidelines also were 
found for the previously considered candidate conditions. RTI prepared 
a final report to summarize its findings regarding evidence-based 
guidelines. This report can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/Evidence-Based-Guidelines.pdf.
    Subsequent to this final report, RTI was awarded an FY 2014 
Evidence-Based Guidelines Monitoring contract. Under the contract, RTI 
was to provide a summary report of all evidence-based guidelines 
available for each of the selected and previously considered candidate 
HACs that provide recommendations for the prevention of the 
corresponding conditions. This report is usually delivered to CMS 
annually in a May/June timeframe. We received the updated 2014 report 
and have made it available to the public on the CMS Hospital-Acquired 
Conditions Web page in the ``Downloads'' section at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html?redirect=/HospitalAcqCond/.

G. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    Providers use the code sets under the ICD-9-CM coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system. A later coding edition, 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. The ICD-10 coding system was initially adopted 
for transactions conducted on or after October 1, 2013, as described in 
the Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
Administrative Simplification: Modifications to Medical Data Code Set 
Standards to Adopt ICD-10-CM and ICD-10-PCS Final Rule published in the 
Federal Register on January 16, 2009 (74 FR 3328 through 3362) 
(hereinafter referred to as the ``ICD-10-CM and ICD-10-PCS final 
rule''). However, the Secretary of Health and Human Services issued a 
final rule that delayed the compliance date for ICD-10 from October 1, 
2013, to October 1, 2014. That final rule, entitled ``Administrative 
Simplification: Adoption of a Standard for a Unique Health Plan 
Identifier; Addition to the National Provider Identifier Requirements; 
and a Change to the Compliance Date for ICD-10-CM and ICD-10-PCS 
Medical Data Code Sets,'' CMS-0040-F, was published in the Federal 
Register on September 5, 2012 (77 FR 54664) and is available for 
viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare 
Act of 2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that 
the Secretary may not adopt ICD-10 prior to October 1, 2015. Section 
212 of Public Law 113-93, titled ``Delay in Transition from ICD-9 to 
ICD-10 Code Sets,'' provides that ``[t]he Secretary of Health and Human 
Services may not, prior to October 1, 2015, adopt ICD-10 code sets as 
the standard for code sets under section 1173(c) of Act. On May 1, 
2014, the Secretary announced plans to release an interim final rule in 
the near future that will include a new compliance date to require the 
use of ICD-10 beginning October 1, 2015. The rule will also require 
HIPAA covered entities to continue to use ICD-9-CM through September 
30, 2015.
    The anticipated move to ICD-10 necessitated the development of an 
ICD-10-CM/ICD-10-PCS version of the MS-DRGs. CMS began a project to 
convert the ICD-9-CM-based MS-DRGs to ICD-10 MS-DRGs. In response to 
the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on 
the creation of the ICD-10 version of the MS-DRGs, which will be 
implemented at the same time as ICD-10 (75 FR 50127 and 50128). While 
we did not propose an ICD-10 version of the MS-DRGs in the FY 2011 
IPPS/LTCH PPS proposed rule, we noted that we have been actively 
involved in converting current MS-DRGs from ICD-9-CM codes to ICD-10 
codes and sharing this information through the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee. We undertook this early 
conversion project to assist other payers and providers in 
understanding how to implement their own conversion projects. We posted 
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We

[[Page 49881]]

also posted a paper that describes how CMS went about completing this 
project and suggestions for other payers and providers to follow. 
Information on the ICD-10 MS-DRG conversion project can be found on the 
ICD-10 MS-DRG Conversion Project Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have 
continued to keep the public updated on our maintenance efforts for 
ICD-10-CM and ICD-10-PCS coding systems, as well as the General 
Equivalence Mappings that assist in conversion through the ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee. 
Information on these committee meetings can be found on the CMS Web 
site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
    During FY 2011, we developed and posted Version 28.0 of the ICD-10 
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized 
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the 
ICD-10 version of the hospital-acquired conditions (HACs), which was 
not posted with Version 26.0. We also discussed this update at the 
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM 
Coordination and Maintenance Committee. The minutes of these two 
meetings are posted on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
    We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made 
updates as a result of these comments. We called the updated version 
the ICD-10 MS-DRGs Version 28-R1. We posted a Definitions Manual of 
ICD-10 MS-DRGs Version 28-R1 on our ICD-10 MS-DRG Conversion Project 
Web site. To make the review of Version 28-R1 updates easier for the 
public, we also made available pilot software on a CD ROM that could be 
ordered through the National Technical Information Service (NTIS). A 
link to the NTIS ordering page was provided on the CMS ICD-10 MS-DRGs 
Web page. We stated that we believed that, by providing the ICD-10 MS-
DRGs Version 28-R1 Pilot Software (distributed on CD ROM), the public 
would be able to more easily review and provide feedback on updates to 
the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs Version 28-
R1 at the September 14, 2011 ICD-9-CM Coordination and Maintenance 
Committee meeting. We encouraged the public to continue to review and 
provide comments on the ICD-10 MS-DRGs so that CMS could continue to 
update the system.
    In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on 
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012 
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We 
also prepared a document that describes changes made from Version 28.0 
to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0 
was discussed at the ICD-9-CM Coordination and Maintenance Committee 
meeting on March 5, 2012. Information was provided on the types of 
updates made. Once again the public was encouraged to review and 
comment on the most recent update to the ICD-10 MS-DRGs.
    CMS prepared the ICD-10 MS-DRGs Version 30.0 based on the FY 2013 
MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS 
final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs 
Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site. We also 
prepared a document that describes changes made from Version 29.0 to 
Version 30.0 to facilitate a review. We produced mainframe and computer 
software for Version 30.0, which was made available to the public in 
February 2013. Information on ordering the mainframe and computer 
software through NTIS was posted on the ICD-10 MS-DRG Conversion 
Project Web site. The ICD-10 MS-DRGs Version 30.0 computer software 
facilitated additional review of the ICD-10 MS-DRGs conversion.
    We provided information on a study conducted on the impact of 
converting MS-DRGs to ICD-10. Information on this study is summarized 
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare 
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10 
MS-DRGs Conversion Project Web site and was distributed and discussed 
at the September 15, 2010 ICD-9-CM Coordination and Maintenance 
Committee meeting. The paper described CMS' approach to the conversion 
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was 
undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010) which was 
converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the 
impact on aggregate payment to hospitals and the distribution of 
payments across hospitals. The impact of the conversion from ICD-9-CM 
to ICD-10 on Medicare MS-DRG hospital payments was estimated using FY 
2009 Medicare claims data. The study found a hospital payment increase 
of 0.05 percent using the ICD-10 MS-DRGs Version 27.0.
    CMS provided an overview of this hospital payment impact study at 
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee 
meeting. This presentation followed presentations on the creation of 
ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be 
found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html. At this March 2012 meeting, CMS 
announced that it would produce an update on this impact study based on 
an updated version of the ICD-10 MS-DRGs. This update of the impact 
study was presented at the March 5, 2013 ICD-9-CM Coordination and 
Maintenance Committee meeting. The study found that moving from an ICD-
9-CM-based system to an ICD-10 MS-DRG replicated system would lead to 
DRG reassignments on only 1 percent of the 10 million MedPAR sample 
records used in the study. Ninety-nine percent of the records did not 
shift to another MS-DRG when using an ICD-10 MS-DRG system. For the 1 
percent of the records that shifted, 45 percent of the shifts were to a 
higher weighted MS-DRG, while 55 percent of the shifts were to lower 
weighted MS-DRGs. The net impact across all MS-DRGs was a reduction by 
4/10000 or minus 4 pennies per $100. The updated paper is posted on the 
CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section. 
Information on the March 5, 2013 ICD-9-CM Coordination and Maintenance 
Committee meeting can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-
10 MS-DRG Version 30.0 software provided additional information to the 
public who were evaluating the conversion of the MS-DRGs to ICD-10 MS-
DRGs.
    CMS prepared the ICD-10 MS-DRGs Version 31.0 based on the FY 2014 
MS-DRGs (Version 31.0) that we finalized in the FY 2014 IPPS/LTCH PPS 
final rule. In November 2013, we posted a Definitions Manual of the 
ICD-10 MS-DRGs Version 31.0 on the ICD-10 MS-DRG Conversion Project Web 
site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described 
changes made from Version 30.0 to Version 31.0 to facilitate a review. 
We

[[Page 49882]]

produced mainframe and computer software for Version 31.0, which was 
made available to the public in December 2013. Information on ordering 
the mainframe and computer software through NTIS was posted on the CMS 
Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 31.0 computer software facilitated additional review 
of the ICD-10 MS-DRGs conversion. We encouraged the public to submit to 
CMS any comments on areas where they believed the ICD-10 MS-DRGs did 
not accurately reflect grouping logic found in the ICD-9-CM MS-DRGs 
Version 31.0.
    We reviewed comments received and developed an update of ICD-10 MS-
DRGs Version 31.0, which we called ICD-10 MS-DRGs Version 31.0-R. We 
have posted a Definitions Manual of the ICD-10 MS-DRGs Version 31.0-R 
on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made 
from Version 31.0 to Version 31.0-R to facilitate a review. We will 
continue to share ICD-10-MS-DRG conversion activities with the public 
through this Web site.
b. Basis for FY 2015 MS-DRG Updates
    CMS encourages 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 2016, comments and 
suggestions should be submitted by December 7, 2014. The comments that 
were submitted in a timely manner for FY 2015 are discussed below in 
this section.
    Following are the changes we proposed to the MS-DRGs for FY 2015. 
In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28004), we invited 
public comment on each of the MS-DRG classification proposed changes 
described below, as well as our proposals to maintain certain existing 
MS-DRG classifications, which also are discussed below. In some cases, 
we proposed changes to the MS-DRG classifications based on our analysis 
of claims data. In other cases, we proposed to maintain the existing 
MS-DRG classification based on our analysis of claims data. For the FY 
2015 proposed rule, our MS-DRG analysis was based on claims data from 
the December 2013 update of the FY 2013 MedPAR file, which contains 
hospital bills received through September 30, 2013, for discharges 
occurring through September 30, 2013. In our discussion of the proposed 
MS-DRG reclassification changes that follows, we refer to our analysis 
of claims data from the ``December 2013 update of the FY 2013 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 considered 
whether the resource consumption and clinical characteristics of the 
patients with a given set of conditions are significantly different 
than the remaining patients in the MS-DRG. We evaluated patient care 
costs using average costs and lengths of stay and relied on the 
judgment of our clinical advisors to decide whether patients are 
clinically distinct or similar to other patients in the MS-DRG. In 
evaluating resource costs, we considered both the absolute and 
percentage differences in average costs between the cases we selected 
for review and the remainder of cases in the MS-DRG. We also considered 
variation in costs within these groups; that is, whether observed 
average differences were consistent across patients or attributable to 
cases that were extreme in terms of costs or length of stay, or both. 
Further, we considered the number of patients who will have a given set 
of characteristics and generally preferred not to create a new MS-DRG 
unless it would include a substantial number of cases.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Intracerebral Therapies: Gliadel[supreg] Wafer
    During the comment period for the FY 2014 IPPS/LTCH PPS proposed 
rule, we received a public comment that we considered to be outside the 
scope of that proposed rule. We stated in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50550) that we would consider this issue in future 
rulemaking as part of our annual review process. The commenter 
requested that a new MS-DRG be created for intracerebral therapies, 
including implantation of chemotherapeutic agents. Specifically, the 
commenter referred to the Gliadel[supreg] Wafer for the treatment of 
High-Grade Malignant Gliomas (HGGs) defined as aggressive tumors 
originating in the brain.
    The Gliadel[supreg] Wafer has been discussed in prior rulemaking, 
including the FY 2004 IPPS proposed rule (68 FR 27187) and final rule 
(68 FR 45354 through 45355 and 68 FR 45391 through 45392); the FY 2005 
IPPS proposed rule (69 FR 28221 through 28222) and final rule (69 FR 
48957 through 48971); and the FY 2008 IPPS/LTCH PPS final rule (72 FR 
47252 through 47253). We refer readers to these prior discussions for 
further background information regarding the Gliadel[supreg] Wafer.
    Effective October 1, 2002, ICD-9-CM procedure code 00.10 
(Implantation of chemotherapeutic agent) was created to identify and 
describe insertion of the Gliadel[supreg] Wafer. This procedure code is 
assigned to MS-DRG 023 (Craniotomy with Major Device Implant/Acute 
Complex Central Nervous System (CNS) PDX with MCC or Chemo Implant) in 
MDC 1. According to the commenter, this current MS-DRG assignment does 
not compensate providers adequately for the expenses incurred to 
perform the surgery and implantation of the wafer device. The commenter 
noted that MS-DRG 023 has a national average payment rate of 
approximately $28,016. However, the commenter stated, ``the acquisition 
cost for 1 box of the Gliadel[supreg] Wafer alone (typical utilization 
per procedure is 8 wafers or 1 box) is $29,035.''
    We conducted an analysis using claims data from the December 2013 
update of the FY 2013 MedPAR file. Our findings are shown in the table 
below.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases         of  stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases...........................................           5,383           10.98         $36,982
MS-DRG 023--Cases with procedure code 00.10.....................             158             7.0          34,027
----------------------------------------------------------------------------------------------------------------


[[Page 49883]]

    As shown in the table above, there were a total of 5,383 cases in 
MS-DRG 023 with an average length of stay of 10.98 days and average 
costs of $36,982. The number of cases reporting procedure code 00.10 in 
MS-DRG 023 totaled 158, with an average length of stay of 7.0 days and 
average costs of $34,027.
    The data clearly demonstrate that the volume of cases reporting 
procedure code 00.10 within MS-DRG 023 have a shorter average length of 
stay and are lower in average costs in comparison to all the cases in 
the MS-DRG. As we stated in the proposed rule, given the low volume of 
cases, shorter average length of stay, and lower average costs, the 
data do not support the creation of a new MS-DRG for cases utilizing 
the Gliadel[supreg] Wafer. In addition, our clinical advisors 
determined that cases reporting procedure code 00.10 are appropriately 
assigned within MS-DRG 023.
    As discussed in the FY 2005 IPPS final rule (69 FR 48959), 
Gliadel[supreg] Wafer cases were assigned to a new DRG that was 
clinically coherent and reflected the resources used to treat those 
cases, which appropriately addressed the concerns of commenters who 
raised questions regarding DRG assignment for those cases at that time. 
Subsequently, with the adoption of the MS-DRGs, in the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47252 through 47253), we assigned all cases 
utilizing the Gliadel[supreg] Wafer technology to MS-DRG 023, the 
higher severity level, and revised the title of this MS-DRG in 
recognition of the complexity and costs associated with the 
implantation. Our clinical advisors continue to support this assignment 
for these same reasons. Therefore, in the FY 2015 IPPS/LTCH PPS 
proposed rule, we did not propose to create a new MS-DRG for FY 2015 
for cases where ICD-9-CM procedure code 00.10 is reported. We invited 
public comments on our proposal to maintain the current MS-DRG 
structure.
    Comment: Several commenters supported CMS' proposal to maintain 
cases reporting procedure code 00.10 in MS-DRG 23, stating it was 
reasonable given the data and information provided.
    Response: We appreciate the commenters' support.
    Comment: Some commenters believed that MS-DRG 23 does not provide 
adequate payment to hospitals that perform craniotomies with insertion 
of the Gliadel[supreg] Wafer. These commenters suggested the MedPAR 
data are flawed for a number of reasons. The commenters indicated that, 
upon conducting their own analysis of FY 2012 MedPAR data, there 
appears to be confusion among providers on how to accurately report 
procedure code 00.10. The commenters reported that, during their 
analysis, they encountered claims where procedure code 00.10 was 
reported for diagnoses of several other types of cancers (small and 
large bowel, pancreatic, and liver) that were completely unrelated to 
the brain. One commenter suggested that several providers who have 
reported procedure code 00.10 did not ever purchase the Gliadel[supreg] 
Wafer product. This commenter noted that it is unclear if the product 
should be classified as an implant or a drug within the revenue codes 
and that this uncertainty results in additional confusion. The same 
commenter urged CMS to consider more input from the professional 
community and Medicare beneficiaries, as well as data sources other 
than the MedPAR file when evaluating MS-DRG assignments for low volume 
procedures so as not to restrict access to care for patients in need of 
this intracerebral therapy.
    Response: We acknowledge the commenters' concerns. With regard to 
confusion on how to accurately report procedure code 00.10 and concern 
that the code is being reported for other types of cancers besides 
brain cancer, we point out that the AHA's Coding Clinic for ICD-9-CM 
has provided coding instruction and examples for how to appropriately 
assign and report this code. Specifically, Coding Clinic Fourth 
Quarter, 2002, explains how the chemotherapy wafer is utilized in brain 
cancer and that chemotherapy wafers also have been used to treat the 
liver and bladder as well as other sites. We also note that the terms 
associated with procedure code 00.10 within ICD-9-CM are not restricted 
solely for use of the Gliadel[supreg] Wafer product. The ICD-9-CM 
coding classification system is not device specific.
    With respect to the comment that providers are confused as to 
assigning an implant or drug revenue code to the Gliadel[supreg] Wafer 
product, we note that where explicit instructions are not provided, 
providers should report their charges under the revenue code that will 
result in the charges being assigned to the same cost center to which 
the cost of those services are assigned in the cost report. We 
appreciate the commenter's suggestion to obtain additional input from 
the professional community.
    Comment: One commenter recommended that a new MS-DRG be created 
specifically for the Gliadel[supreg] Wafer product. The commenter 
stated that it is unacceptable for CMS to state there are too few cases 
to do so.
    Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule, 
our analysis of the claims data and our clinical advisors did not 
support creation of a new MS-DRG. Furthermore, the MS-DRGs are a 
classification system intended to group together those diagnoses and 
procedures with similar clinical characteristics and utilization of 
resources. Basing a new MS-DRG on such a small number of cases could 
lead to distortions 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. Moreover, our clinical advisors have examined this issue and 
continue to advise us that the procedure code 00.10 cases are 
appropriately classified within MS-DRG 23 because they are clinically 
similar based on both the craniotomy and the insertion of the device, 
among other reasons. Our advisors reaffirmed their assessment that the 
groupings were not overly broad or heterogeneous, reiterating that the 
clinical flexibility of both physicians and hospitals is maximized when 
larger cohorts of clinically similar patients are grouped and the costs 
averaged. They note that many factors are considered when comparing 
groups of patients, including such factors as length of stay, cost of 
specific devices, type of device, type of procedure, and anatomical 
location, among others, and stated that the commenter did not identify 
any factors that would necessitate an atypical small, separate grouping 
when these cases are categorized. Our clinical advisors do not support 
creating a new MS DRG for such a small number of cases but would not 
support creating a separate DRG even if the volume of cases was large.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current structure for MS-DRG 23 
for FY 2015.
b. Endovascular Embolization or Occlusion of Head and Neck
    We received a request to change the MS-DRG assignment for the 
following three ICD-9-CM procedure codes representing endovascular 
embolization or occlusion procedures of the head and neck:
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils); and
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils).

[[Page 49884]]

    These three procedure codes are currently assigned to the following 
eight MS-DRGs under MDC 1. Cases assigned to MS-DRGs 020, 021, and 022 
require a principal diagnosis of hemorrhage. Cases assigned to MS-DRGs 
023 and 024 require the insertion of a major implant or an acute 
complex central nervous system (CNS) principal diagnosis. Cases 
assigned to MS-DRGs 025, 026, and 027 do not have a principal diagnosis 
of hemorrhage, an acute complex CNS principal diagnosis, or a major 
device implant.

 MS-DRG 020 (Intracranial Vascular Procedures with Principal 
Diagnosis of Hemorrhage with MCC)
 MS-DRG 021 (Intracranial Vascular Procedures with Principal 
Diagnosis of Hemorrhage with CC)
 MS-DRG 022 (Intracranial Vascular Procedures with Principal 
Diagnosis of Hemorrhage without CC/MCC)
 MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex 
CNS Principal Diagnosis with MCC or Chemo Implant)
 MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex 
CNS Principal Diagnosis without MCC)
 MS-DRG 025 (Craniotomy & Endovascular Intracranial Procedures 
with MCC)
 MS-DRG 026 (Craniotomy & Endovascular Intracranial Procedures 
with CC)
 MS-DRG 027 (Craniotomy & Endovascular Intracranial Procedures 
without CC/MCC)

    The requestor recommended that cases with procedure codes 39.72, 
39.75, and 39.76 be moved from MS-DRGs 025, 026, and 027 to MS-DRGs 023 
and 024, even when there is no reported acute complex CNS principal 
diagnosis or a major device implant. The requestor stated that 
unruptured aneurysms can be treated by a minimally invasive technique 
utilizing endovascular coiling. The requester noted that a 
microcatheter is inserted into a groin artery and navigated through the 
vascular system to the location of the aneurysm. The coils are inserted 
through the microcatheter into the aneurysm in order to occlude (fill) 
the aneurysm from inside the blood vessel. Once the coils are 
implanted, the blood flow pattern within the aneurysm is altered. The 
requestor stated that these cases do not have a principal diagnosis of 
hemorrhage because the treatment is for an unruptured aneurysm which 
has not hemorrhaged. Furthermore, the requestor stated that only a few 
of these cases without hemorrhage have a complex CNS principal 
diagnosis. Therefore, the requester believed that most of the cases 
should be assigned to MS-DRGs 025, 026, and 027.
    The requestor stated that the average costs of coil cases captured 
by procedure codes 39.72, 39.75, and 39.76 are significantly higher 
than other cases within MS-DRGs 025, 026, and 027 where most of the 
coil cases are assigned. As stated earlier, the requester recommended 
that cases with procedure codes 39.72, 39.75, and 39.76 be moved to MS-
DRGs 023 and 024, even when there is not an acute complex CNS principal 
diagnosis or a major device implant reported.
    We examined claims data from the December 2013 update of the FY 
2013 MedPAR file for cases of endovascular embolization or occlusion of 
head and neck. The table below shows our findings. For MS-DRGs 025, 
026, and 027, the cases identified by procedure code 39.72, 39.75, or 
39.76 (endovascular embolization or occlusion of head and neck) have 
higher average costs and shorter lengths of stay in comparison to all 
the cases within each of those respective MS-DRGs. The average costs of 
cases in MS-DRG 024 are $4,049 higher than the average costs of the 
1,731 endovascular embolization or occlusion of head and neck 
procedures cases in MS-DRG 027 ($26,250 versus $22,201). The findings 
also show that the 524 cases with procedure code 39.72, 39.75, or 39.76 
with average costs of $41,030 in MS-DRG 025 are closer to the average 
costs of $36,982 for cases in MS-DRG 023. Lastly, we found that the 721 
endovascular embolization or occlusion of head and neck procedure cases 
in MS-DRG 026 have average costs of $27,998 compared to average costs 
of $26,250 for cases in MS-DRG 024.

----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of      length  of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 23--All cases............................................           5,383           10.98         $36,982
MS-DRG 24--All cases............................................           1,745            6.30          26,250
MS-DRG 25--All cases............................................          15,937            9.68          29,722
MS-DRG 25--Cases with procedure code 39.72, 39.75, or 39.76.....             524            7.97          41,030
MS-DRG 26--All cases............................................           8,520            6.16          21,194
MS-DRG 26--Cases with procedure code 39.72, 39.75, or 39.76.....             721            3.14          27,998
MS-DRG 27--All cases............................................          10,326            3.30          16,389
MS-DRG 27--Cases with procedure code 39.72, 39.75, or 39.76.....           1,731            1.66          22,201
----------------------------------------------------------------------------------------------------------------

    Our clinical advisors reviewed the results of our examination and 
determined that the endovascular embolization or occlusion of head and 
neck procedures are appropriately classified within MS-DRGs 025, 026, 
and 027 because they do not have an acute complex CNS principal 
diagnosis or a major device implant which would add to their clinical 
complexity. Cases in MS-DRG 024 have average costs that are $4,049 
higher than cases in MS-DRG 027 with procedure code 39.72, 39.75, or 
39.76. We acknowledge that the 1,245 cases with procedure code 39.72, 
39.75, or 39.76 in MS-DRGs 025 and 026 have average costs that are 
closer to those in MS-DRGs 023 and 024. However, these cases are 1,245 
of the total 2,976 cases that would be involved if we moved all MS-DRGs 
025, 026, and 027 cases with procedure code 39.72, 39.75, or 39.76 to 
MS-DRGs 023 and 024, even if they did not have an acute complex CNS 
principal diagnosis or a major device implant. Based on these findings 
and the recommendations from our clinical advisors, we determined that 
proposing to move endovascular embolization or occlusion of head and 
neck procedures from MS-DRGs 025, 026, and 027 to MS-DRGs 023 and 024 
was not warranted. Therefore, in the FY 2015 IPPS/LTCH PPS proposed 
rule, we proposed to maintain the current MS-DRG assignments for 
endovascular embolization or occlusion of head and neck procedures. We 
invited public comments on our proposal.
    Comment: A number of commenters supported CMS' proposal to maintain 
the current MS-DRG assignment for codes 39.72, 39.75, or 39.76 in MS-
DRGs 025, 026, and 027. The commenters stated this was reasonable, 
given the data and information provided.

[[Page 49885]]

    A number of commenters objected to the proposal to maintain the 
current MS-DRG assignments for endovascular embolizations captured in 
codes 39.72, 39.75 and 39.76. The commenters recommended that CMS move 
the three codes to MS-DRGs 023 and 024. The commenters stated that the 
coils used in the endovascular embolizations are expensive and the 
endovascular procedures require substantial additional resources. The 
commenters stated that their hospitals are significantly underpaid for 
these cases. The commenters recommended that endovascular embolization 
codes 39.72, 39.75 and 39.76 be classified a ``Major Device Implants'' 
and therefore assigned to MS-DRGs 023 and 024.
    Several commenters recommended that CMS create new severity 
subgroups within MS-DRG 024 to indicate cases with CC and cases without 
CC/MCC. The commenters recommended a three-level severity split as 
follows:

 MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex 
CNS Principal Diagnosis with MCC or Chemo Implant);
 MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex 
CNS Principal Diagnosis with CC); and
 MS-DRG XXX (Craniotomy with Major Device Implant/Acute Complex 
CNS Principal Diagnosis without CC/MCC)

    The commenters recommended that endovascular embolizations captured 
in codes 39.72, 39.75 and 39.76 be added to these three recommended MS-
DRGs as part of the Major Device Implant group.
    One of the commenters recommended the creation of a new set of MS-
DRGs to capture intracranial endovascular embolization procedures if 
CMS decided not to modify the current MS-DRGs by moving codes 39.72, 
39.75, and 39.76 to MS-DRGs 023 and 024. The commenter suggested the 
following titles for the recommended new MS-DRGs:

 Recommended new MS-DRG 043 (Intracranial Endovascular 
Embolization Procedures with MCC)
 Recommended new MS-DRG 044 (Intracranial Endovascular 
Embolization Procedures with CC)
 Recommended new MS-DRG 045 (Intracranial Endovascular 
Embolization Procedures with Device Implant without CC/MCC).

    The commenter acknowledged that there were a limited number of 
other intracranial endovascular procedures that could also be 
considered for inclusion in the new base MS-DRG with this new option. 
The commenter supported including any additional intracranial 
endovascular embolization procedures that CMS deemed to be clinically 
appropriate.
    Response: We appreciate the commenters' support of our proposal to 
maintain the current MS-DRG assignment. We examined the commenters' 
recommendation of subdividing MS-DRG 024 by adding an additional 
severity level (with CC and without CC/MCC). The findings from the 
examination of the claims data in the December 2013 update of the FY 
2013 MedPAR file on endovascular embolization or occlusion of head and 
neck procedures are shown in the first table below. We applied the 
following criteria established in FY 2008 (72 FR 47169) to determine if 
the creation of a new CC or MCC subgroup within a base MS-DRG was 
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 different 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.

                       Endovascular Embolization or Occlusion of Head and Neck Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of      length  of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 23--All cases............................................           5,383           10.98         $36,982
MS-DRG 24--All cases............................................           1,745            6.30          26,250
----------------------------------------------------------------------------------------------------------------

    The following table shows the number of cases that would be within 
each of the new requested three MS-DRGs, including the two proposed 
severity levels.

----------------------------------------------------------------------------------------------------------------
                                                                    Number  of    Average length
                             MS-DRG                                    cases          of stay     Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 23 (Craniotomy with Major Device Implant/Acute Complex              5,383           10.98         $36,982
 CNS Principal Diagnosis with MCC or Chemo Implant).............
Proposed MS-DRG 24 (Craniotomy with Major Device Implant/Acute             1,211            7.65          27,360
 Complex CNS Principal Diagnosis with CC or Chemo Implant)......
Proposed MS-DRG XX (Craniotomy with Major Device Implant/Acute               534            3.25          23,733
 Complex CNS Principal Diagnosis without CC/MCC or Chemo
 Implant).......................................................
----------------------------------------------------------------------------------------------------------------

    We determined that the requested new severity subdivision of with 
CC and without CC/MCC would meet only four of the five criteria. The 
requested new with CC and without CC/MCC severity levels do not meet 
the criterion that there is at least a 20 percent difference in average 
costs between subgroups.
    Because the requested new severity level does not meet all five 
criteria, we are not modifying MS-DRG 024 to create severity levels for 
cases with CC and cases without CC/MCC.
    We also evaluated the request to add endovascular embolizations 
captured by codes 39.72, 39.75 and 39.76 to the group labeled ``Major 
Device Implants'' within MS-DRGs 023 and 024. Major Device Implants 
within MS-DRGs 023 and 024 include the following three sets

[[Page 49886]]

of intracranial neurostimulator procedures. Each of the three is 
composed of the implantation of an intracranial neurostimulator pulse 
generator which is implanted in the patient, as well as the insertion 
of a neurostimulator lead which is inserted through a burr hole in the 
skull into the patient's brain.

 01.20 (Cranial implantation or replacement of neurostimulator 
pulse generator) and 02.93 (Implantation or replacement of intracranial 
neurostimulator lead(s))
 02.93 (Implantation or replacement of intracranial 
neurostimulator lead(s)) and 86.95 (Insertion or replacement of 
multiple array neurostimulator pulse generator, not specified as 
rechargeable)
 02.93 (Implantation or replacement of intracranial 
neurostimulator lead(s)) and 86.98 (Insertion or replacement of 
multiple array (two or more) rechargeable neurostimulator pulse 
generator)

    Our clinical advisors reviewed this issue and advised us not to 
classify endovascular embolization procedures in the same manner as 
patients who receive intracranial neurostimulators. They advised 
against classifying endovascular embolizations as Major Device Implants 
for several reasons. First, the endovascular embolization device itself 
is a simple mechanical device, such as a wire, not a complex electronic 
device. The work involved in configuring the neurostimulator device to 
the patient, both before and after insertion, is significantly 
different from that of the endovascular embolizations. Second, 
endovascular embolizations are not devices implanted through an open 
procedure as are intracranial neurostimulator pulse generators and 
neurostimulator leads. Our clinical advisors stated that open 
procedures, including open procedures to implant the generator but 
especially including open skull procedures, from a clinical standpoint 
are significantly different than endovascular procedures, both in terms 
of the work, the facilities, the risks, and recovery rates (length of 
stay). Our clinical advisors specifically stated that the insertion of 
coils through an endovascular approach is not similar to the insertion 
of a complex electronic device. Endovascular embolizations do not match 
the clinical complexity and severity of the intracranial 
neurostimulators which have greater lengths of stay. Our clinical 
advisors stated that care of patients who receive endovascular 
embolizations is not at the same severity level as for those patients 
who have a major device implant such as an intracranial neurostimulator 
or those patients with an acute complex central nervous system 
principal diagnosis. Therefore, our clinical advisors recommended not 
moving endovascular embolizations to MS-DRGs 023 or 024. They 
recommended maintaining their current assignments in MS-DRGs 025, 026, 
and 027.
    We evaluated the request to create a new set of MS-DRGs to capture 
intracranial endovascular embolization procedures. The requestor 
recommended including codes 39.72, 39.75, and 39.76 and any other 
procedures which CMS deemed appropriate. Our clinical advisors stated 
that codes 39.72, 39.75, and 39.76 were appropriately assigned to MS-
DRGs 025, 026, and 027 because they are clinically similar to other 
cases in MS-DRGs 025, 026, and 027. In addition, as stated earlier, 
these cases do not match the clinical complexity and severity of the 
intracranial neurostimulators within MS-DRGs 023 and 024. For these 
reasons, our clinical advisors did not support creating a new set of 
MS-DRG for these codes and any additional intracranial endovascular 
embolization procedures.
    After consideration of public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG assignments for 
codes 39.72, 39.75 and 39.76 in MS-DRGs 025, 026, and 027.
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat): 
Avery Breathing Pacemaker System
    We received a request to create a new MS-DRG for the Avery 
Breathing Pacemaker System. This system is also called a diaphragmatic 
pacemaker and is captured by ICD-9-CM procedure code 34.85 
(Implantation of diaphragmatic pacemaker). The requestor stated that 
the diaphragmatic pacemaker is indicated for adult and pediatric 
patients with chronic respiratory insufficiency that would otherwise be 
dependent on ventilator support. The procedure consists of surgically 
implanted receivers and electrodes mated to an external transmitter by 
antennas worn over the implanted receivers. The external transmitter 
and antennas send radiofrequency energy to the implanted receivers 
under the skin. The receivers then convert the radio waves into 
stimulating pulses sent down the electrodes to the phrenic nerves, 
causing the diaphragm to contract. The requestor stated that this 
normal pattern is superior to mechanical ventilators that force air 
into the chest. The requestor also stated that the system is expensive; 
the device cost is approximately $57,000. According to the requestor, 
given the cost of the device, hospitals are reluctant to use it. The 
requestor did not make a specific MS-DRG reassignment request.
    When used for a respiratory failure patient, procedure code 34.85 
is assigned to MS-DRGs 163, 164, and 165 (Major Chest Procedures with 
MCC, with CC, and without CC/MCC, respectively).
    We examined claims data from the December 2013 update of the FY 
2013 MedPAR file for diaphragmatic pacemaker cases. The following table 
shows our findings.

----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases...........................................          11,766           13.13         $34,308
MS-DRG 163--Cases with procedure code 34.85.....................              13            2.23         $29,406
MS-DRG 164--All cases...........................................          16,087            6.58         $18,352
MS-DRG 164--Cases with procedure code 34.85.....................              34            1.71         $23,406
MS-DRG 165--All cases...........................................           9,207            3.91         $13,081
MS-DRG 165--Cases with procedure code 34.85.....................               1            1.00         $22,977
----------------------------------------------------------------------------------------------------------------

    There were only 48 cases of diaphragmatic pacemakers within MS-DRGs 
163, 164, and 165. The average costs of these diaphragmatic pacemaker 
cases ranged from $22,977 for the single case in MS-DRG 165 to $29,406 
for the cases in MS-DRG 163, compared to the average costs for all 
cases in MS-DRGs 163, 164, and 165, which range from $13,081 to 
$34,308. The average cost for diaphragmatic pacemaker cases in MS-DRG 
163 was lower than that for all cases in MS-DRG 163, $29,406 compared 
to $34,308 for all cases. The average cost for diaphragmatic

[[Page 49887]]

pacemaker cases was higher for MS-DRG 164, $23,406 compared to $18,352 
for all cases. While the average cost for the single diaphragmatic 
pacemaker case was significantly higher for MS-DRG 165, $22,977 
compared to $13,081, we were unable to determine if additional factors 
might have impacted the higher cost for this single case.
    We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, given 
the small number of diaphragmatic pacemaker cases that we found, we did 
not believe that there was justification for creating a new MS-DRG. 
Basing a new MS-DRG on such a small number of cases could lead to 
distortions 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 noted that, as discussed in section II.G.4.c. of the 
preamble of the proposed rule, one of the criteria we apply in 
evaluating whether to create new severity subgroups within an MS-DRG is 
whether there are at least 500 cases in the CC or MCC subgroup. While 
this criterion is used to evaluate whether to create a severity 
subgroup within an MS-DRG, applying it here suggests that creating a 
new MS-DRG for only 48 cases would not be appropriate. Although the 
average costs of these diaphragmatic pacemaker cases are higher than 
the average costs of all cases in MS-DRG 164, the average costs are 
lower than all cases in MS-DRG 163. We believe the current MS-DRG 
assignment is appropriate and that the data do not support creating an 
MS-DRG because there are so few cases.
    Our clinical advisors reviewed this issue and determined that the 
diaphragmatic pacemaker cases are appropriately classified within MS-
DRGs 163, 164, and 165 because they are clinically similar to other 
cases of patients with major chest procedures within MS-DRGs 163, 164, 
and 165. Our clinical advisors did not support creating a new MS-DRG 
for such a small number of cases.
    Based on the results of the examination of the claims data, the 
recommendations from our clinical advisors, and the small number of 
diaphragmatic pacemaker cases, in the FY 2015 IPPS/LTCH PPS proposed 
rule, we did not propose to create a new MS-DRG for diaphragmatic 
pacemaker cases for FY 2015. We proposed to maintain the current MS-DRG 
assignments for diaphragmatic pacemaker cases. We invited public 
comments on our proposal.
    Comment: A number of commenters supported CMS' proposal to maintain 
the current MS-DRG assignment for diaphragmatic pacemakers. The 
commenters stated that the proposal was reasonable given the data and 
information presented.
    Another commenter expressed appreciation for the analysis performed 
on this issue, but disagreed with the conclusion to leave diaphragmatic 
pacemakers in MS-DRGs 163, 164, and 165. The commenter stated that, 
although the number of cases identified (48) is small, they are unique 
in both their costs and their length of stay. The commenter stated that 
these cases do not represent the full universe of Medicare 
beneficiaries who would be good candidates for the diaphragmatic 
pacemaker. The commenter expressed surprise at the average cost data 
presented in the table in the proposed rule. The commenter stated that 
it sells this system directly to hospitals and does not know what 
insurance plan covers the procedure. However, in investigating systems 
hospitals reported with code 34.85, the commenter stated that it 
discovered that this code covers systems provided by other 
manufacturers and that the cost of devices by other manufacturers is 
lower than the Avery system and is closer to the costs in CMS' claims 
data. The commenter stated that the Avery system is fully implantable, 
whereas other systems are not. The commenter asserted that one other 
system has percutaneous lead wires that leave the patients; therefore, 
the other system is not totally implantable. The commenter made 
inquiries of hospitals and found that a majority of those hospitals 
contacted were using a lower priced system. The commenter stated that 
by grouping multiple manufacturers' devices into the same MS-DRG, with 
the same payment rate, CMS was limiting physician and patient choice of 
a device. The commenter recommended that MS-DRG payments be made based 
on the equipment provided and allow hospitals to recoup the costs of 
each system used.
    The commenter stated that inadequate payment discourages hospitals 
from offering the service to patients. The commenter also stated that 
these cases are anomalies in the current MS-DRGs to which they are 
assigned and should be classified into a single, unique MS-DRG that 
would be clinically and financially coherent. The commenter believed 
that such a correction could increase the number of eligible Medicare 
beneficiaries who would benefit from use of the device, allowing them 
to stop using mechanical ventilation, which would greatly improve their 
overall health and quality of life.
    The commenter also stated that the average costs for 35 of the 
cases with procedure code 34.85 exceed the average costs of the other 
cases in the MS-DRG to which they are assigned. The commenter stated 
that it found the average length of stay for all 48 cases to be 
substantially less than the average length of stay for all of the other 
cases. Therefore, the commenter stated that the costs for the hospital 
are related primarily to the device and not to the direct hospital care 
provided to the patients. The commenter stated that the small number of 
diaphragmatic pacemaker cases compared to the large volume of other 
cases in each MS-DRG means that the unique cost factors of most of the 
pacemaker cases will never be reflected in the payment for these MS-
DRGs. The commenter stated that hospitals have no incentive to make the 
service available to patients who could use the system. The commenter 
stated that the number of individuals who can use the pacemaker is 
small because of the comparatively small volume of individuals who 
suffer from the conditions that make the pacemaker necessary, but there 
are more than 48 Medicare beneficiaries who could benefit from the 
device.
    The commenter further questioned the rationale for not basing a new 
MS-DRG on such a small number of cases. The commenter questioned the 
reference to the use of 500 cases, which is one of the criteria for a 
severity level, when the requestor did not want a severity level, but 
instead was requesting a new MS-DRG for these Avery Diaphragmatic 
Pacemaker cases.
    In conclusion, the commenter urged CMS to create a new MS-DRG for 
procedure code 34.85.
    Response: We appreciate the commenters' support for our proposal 
not to change the MS-DRG for diaphragmatic pacemakers. As noted by one 
commenter, the ICD-9-CM procedure codes capture the procedure 
performed, in this case the implantation of a diaphragmatic pacemaker. 
The codes are not manufacturer specific. This is the case for all types 
of implanted devices such as cardiac pacemakers, defibrillators, and 
orthopedic devices. The procedure codes are grouped into clinically 
appropriate MS-DRGs. MS-DRGs were not created to capture a device by a 
single manufacturer. It is assumed that hospitals and their physician 
staff will select the appropriate devices. CMS makes Medicare payments 
to hospitals for groups of similar patients within

[[Page 49888]]

each MS-DRG. The average costs provided in the tables above were based 
on Medicare patients reported to have received a diaphragmatic 
pacemaker. Hospitals have been receiving payments by diagnosis-related 
groups for several decades and are aware that average payments will 
exceed the costs of some cases and be less than the costs of other 
cases. They are aware that the selection of a particular manufacturer, 
or a particular device made by one manufacturer, should be consistent 
with the needs of the patient. Our data do not identify which 
manufacturer's devices the hospitals and physicians chose to utilize.
    As stated earlier, given the small number of diaphragmatic 
pacemaker cases, we do not believe there is justification for creating 
a new MS-DRG. Basing a new MS-DRG on such a small number of cases could 
lead to distortions 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.
    Our clinical advisors reviewed this issue and the public comments 
received and continue to advise that that the diaphragmatic pacemaker 
cases are appropriately classified within MS-DRGs 163, 164, and 165 
because they are clinically similar to other cases of patients with 
major chest procedures within MS-DRGs 163, 164, and 165. They stated 
that the clinical flexibility of both physicians and hospitals is 
maximized when larger cohorts of clinically similar patients are 
grouped and the costs averaged. Our clinical advisors note that many 
factors are considered when comparing groups of patients, including 
such factors as length of stay, cost of specific devices, type of 
device, type of procedure, and anatomical location, among others. They 
stated that the commenter did not identify any factors that they had 
failed to consider when categorizing these cases. Our clinical advisors 
do not support creating a new MS DRG for such a small number of cases.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG assignments for 
diaphragmatic pacemaker cases within MS-DRGs 163, 164, and 165.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Exclusion of Left Atrial Appendage
    We received a request to move the exclusion of the left atrial 
appendage procedure, which is a non-O.R. procedure and captured by ICD-
9-CM procedure code 37.36 (Excision, destruction or exclusion of left 
atrial appendage (LAA)), from MS-DRGs 250 (Percutaneous Cardiovascular 
without Coronary Artery Stent with MCC) and 251 (Percutaneous 
Cardiovascular without Coronary Artery Stent without MCC) to MS-DRGs 
237 (Major Cardiovascular Procedures with MCC) and 238 (Major 
Cardiovascular Procedures without MCC). The requestor stated that the 
exclusion of the left atrial appendage procedure code 37.36 is not 
clinically coherent with the other procedures in MS-DRGs 250 and 251 
and that this current assignment to MS-DRGs 250 and 251 does not 
compensate providers adequately for the expenses incurred to perform 
this procedure and placement of the device.
    The exclusion of the left atrial appendage procedure involves a 
percutaneous placement of a snare/suture around the left atrial 
appendage to close it off. The exclusion of the left atrial appendage 
procedure takes place in the cardiac catheterization laboratory under 
general anesthesia and is a catheter based closed-chest procedure 
instead of an open heart surgical technique to treat the same clinical 
condition, with the same intended results. The procedure can be 
performed by either an interventional cardiologist or an 
electrophysiologist.
    We analyzed claims data from the December 2013 update of the FY 
2013 MedPAR file for cases assigned to MS-DRGs 250 and 251 and MS-DRGs 
237 and 238. Our findings are shown in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 250--All cases...........................................           9,174            6.90         $21,319
MS-DRG 250--Cases with procedure code 37.36.....................              61            7.21          29,637
MS-DRG 251--All cases...........................................          26,331            3.01          14,614
MS-DRG 251--Cases with procedure code 37.36.....................             341            3.01          18,298
MS-DRG 237--All cases...........................................          17,813            9.66          35,642
MS-DRG 238--All cases...........................................          33,644            3.73          24,511
----------------------------------------------------------------------------------------------------------------

    The data in the table above show that, while the average costs of 
the atrial appendage exclusion procedures are higher ($29,637) than 
those for all cases ($21,319) within MS-DRG 250 and are higher 
($18,298) than for all cases ($14,614) within MS-DRG 251, they are 
lower than those in MS-DRGs 237 ($35,642) and 238 ($24,511). Our 
clinical advisors reviewed this issue and recommended not moving these 
stand-alone percutaneous cases to MS-DRGs 237 and 238 because they do 
not consider them to be major cardiovascular procedures. Our clinical 
advisors stated that cases reporting ICD-9-CM procedure code 37.36 are 
appropriately assigned within MS-DRG 250 and 251 because they are 
percutaneous cardiovascular procedures and are clinically similar to 
other procedures within the MS-DRG. Therefore, in the FY 2015 IPPS/LTCH 
PPS proposed rule, we did not propose to reassign exclusion of atrial 
appendage procedure cases from MS-DRGs 250 and 251 to MS-DRGs 237 and 
238 for FY 2015. We invited public comments on our proposal to maintain 
the current MS-DRG structure for the exclusion of the left atrial 
appendage.
    Comment: Several commenters supported CMS' proposal to maintain the 
current MS-DRGs 250 and 251 assignment for exclusion of the left atrial 
appendage. Several commenters disagreed with the proposal and 
recommended that CMS assign exclusion of the left atrial appendage to 
MS-DRG 237 and 238 because the procedure can be performed as a 
standalone percutaneous procedure or in combination with an open chest 
procedure such as cardiac bypass surgery. The commenters stated that 
when the procedure is performed in conjunction with an open chest 
procedure, the procedure is performed in a surgical suite. Therefore, 
the commenters recommended that exclusion of the left atrial appendage 
be assigned to MS-DRGs 237 and 238 when it is a standalone procedure.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current MS-DRG assignment for the exclusion of atrial

[[Page 49889]]

appendage procedures. We are not accepting the commenters' 
recommendation to move the cases to MS-DRGs 237 and 238. Our clinical 
advisors reviewed these public comments and continue to maintain that 
cases reporting ICD-9-CM procedure code 37.36 are appropriately 
assigned within MS-DRG 250 and 251 because they are percutaneous 
cardiovascular procedures and are clinically similar to other 
procedures within the MS-DRGs. They also stated that when performed 
with an open chest procedure, these procedures would map to a 
clinically appropriate open chest MS-DRG under the current MS-DRG 
logic. Our clinical advisors confirmed that although these are not 
insignificant procedures, the procedures are not considered to be major 
cardiovascular procedures on the same scale and with similar 
characteristics as cases grouped together in MS-DRGs 237 and 238.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG assignment for 
exclusion of atrial appendage in MS-DRGs 250 and 251 for FY 2015.
b. Transcatheter Mitral Valve Repair: MitraClip[supreg]
    The MitraClip[supreg] System (hereafter referred to as 
MitraClip[supreg]) for transcatheter mitral valve repair has been 
discussed in extensive detail in previous rulemaking, including the FY 
2012 IPPS/LTCH PPS proposed rule (76 FR 25822) and final rule (76 FR 
51528 through 51529) and the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 
27902 through 27903) and final rule (77 FR 53308 through 53310), in 
response to requests for MS-DRG reclassification, as well as, in the FY 
2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552) under the 
new technology add-on payment policy. In the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50575), the application for a new technology add-on 
payment for MitraClip[supreg] was unable to be considered further due 
to lack of FDA approval by the July 1, 2013 deadline.
    Subsequently, on October 24, 2013, MitraClip[supreg] received FDA 
approval. As a result, the manufacturer has submitted new requests for 
both an MS-DRG reclassification and new technology add-on payment for 
FY 2015. We refer readers to section II.I. of the preamble of the 
proposed rule and this final rule for a discussion regarding the 
application for MitraClip[supreg] under the new technology add-on 
payment policy. Below we discuss the MS-DRG reclassification request.
    The manufacturer's request for MS-DRG reclassification involves two 
components. The first component consists of reassigning cases reporting 
a transcatheter mitral valve repair using the MitraClip[supreg] from 
MS-DRGs 250 and 251 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC and without MCC, respectively) to 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 second component of the manufacturer's request was for CMS to 
examine the creation of a new base MS-DRG for transcatheter valve 
therapies.
    Effective October 1, 2010, ICD-9-CM procedure code 35.97 
(Percutaneous mitral valve repair with implant) was created to identify 
and describe the MitraClip[supreg] technology.
    To address the first component of the manufacturer's request, we 
conducted an analysis of claims data from the December 2013 update of 
the FY 2013 MedPAR file for cases reporting procedure code 35.97 in MS-
DRGs 250 and 251. The table below shows our findings.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 250--All cases...........................................           9,174            6.90         $21,319
MS-DRG 250--Cases with procedure code 35.97.....................              67            8.48          39,103
MS-DRG 251--All cases...........................................          26,331            3.01          14,614
MS-DRG 251--Cases with procedure code 35.97.....................             127            3.94          25,635
----------------------------------------------------------------------------------------------------------------

    As displayed in the table above, the data demonstrate that, for MS-
DRG 250, there were a total of 9,174 cases with an average length of 
stay of 6.90 days and average costs of $21,319. The number of cases 
reporting the ICD-9-CM procedure code 35.97 in MS-DRG 250 totaled 67 
with an average length of stay of 8.48 days and average costs of 
$39,103. For MS-DRG 251, there were a total of 26,331 cases with an 
average length of stay of 3.01 days and average costs of $14,614. There 
were 127 cases found in MS-DRG 251 reporting the procedure code 35.97 
with an average length of stay of 3.94 days and average costs of 
$25,635. We recognize that the cases reporting procedure code 35.97 
have a longer length of stay and higher average costs in comparison to 
all the cases within MS-DRGs 250 and 251. However, as stated in prior 
rulemaking (77 FR 53309), it is a fundamental principle of an averaged 
payment system that half of the procedures in a group will have above 
average costs. It is expected that there will be higher cost and lower 
cost subsets, especially when a subset has low numbers.
    We also evaluated the claims data from the December 2013 update of 
the FY 2013 MedPAR file for MS-DRGs 216 through 221. Our findings are 
shown in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All cases...........................................          10,131           15.41         $65,478
MS-DRG 217--All cases...........................................           5,374            9.51          44,695
MS-DRG 218--All cases...........................................             882            6.88          39,470
MS-DRG 219--All cases...........................................          17,856           11.63          54,590
MS-DRG 220--All cases...........................................          21,059            7.13          38,137

[[Page 49890]]

 
MS-DRG 221--All cases...........................................           4,586            5.32          34,310
----------------------------------------------------------------------------------------------------------------

    The data in our findings did not warrant reassignment of cases 
reporting use of the MitraClip[supreg]. We stated in the proposed rule 
that if we were to propose reassignment of cases reporting procedure 
code 35.97 to MS-DRGs 216 through 221, they would be significantly 
overpaid, as the average costs range from $34,310 to $65,478 for those 
MS-DRGs. In addition, our clinical advisors did not support reassigning 
these cases. They noted that the current MS-DRG assignment is 
appropriate for the reasons stated in the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53309). To reiterate, our clinical advisors noted that the 
current MS-DRG assignment is reasonable because the operating room 
resource utilizations of percutaneous procedures, such as those found 
in MS-DRGs 250 and 251, tend to group together, and are generally less 
costly than open procedures, such as those found in MS-DRGs 216 through 
221. Percutaneous procedures by organ system represent groups that are 
reasonably clinically coherent. More significantly, our clinical 
advisors stated that postoperative resource utilization is 
significantly higher for open procedures with much greater morbidity 
and consequent recovery needs. Because the equipment, technique, staff, 
patient populations, and physician specialty all tend to group by type 
of procedure (percutaneous or open), separately grouping percutaneous 
procedures and open procedures is more clinically consistent. 
Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not 
propose to modify the current MS-DRG assignment for cases reporting 
procedure code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 216 through 
221 for FY 2015. We invited public comments on our proposal to not make 
any modifications to the current MS-DRG logic for these cases.
    Comment: Several commenters supported the proposal to maintain 
cases reporting procedure code 35.97 in MS-DRGs 250 and 251, stating it 
was reasonable given the data and information provided.
    Response: We acknowledge and appreciate the commenters' support.
    Comment: Some commenters suggested that cases utilizing the 
MitraClip[supreg] should be compensated similarly to mitral valve 
procedures that are performed with an open approach due to the time, 
staff and resources involved. Commenters reported that this novel 
technology has improved the quality of life for patients suffering from 
congestive heart failure. However, the commenters indicated that due to 
inadequate payment, their respective facilities are not able to offer 
the MitraClip[supreg] to the entire population that is eligible for it. 
The commenters also indicated that patients do not have access to this 
life-saving technology not only due to the lack of adequate payment to 
providers but also due to the cost of the device. Another commenter 
reported that ``the price of the device should be reduced to a level 
that is feasible for both sponsor and hospital.'' Commenters also 
suggested that congestive heart failure readmissions would be reduced 
if patients could be treated with the MitraClip[supreg].
    Response: As explained in the FY 2015 IPPS/LTCH PPS proposed rule, 
our clinical advisors believe that the current MS-DRG assignment for 
the MitraClip[supreg] is reasonable because the operating room resource 
utilizations of percutaneous procedures, such as those found in MS-DRGs 
250 and 251, tend to group together, and are generally less costly than 
open procedures. In addition, the data do not support reassignment. We 
stated in the proposed rule that if we were to propose reassignment of 
cases reporting procedure code 35.97 to MS-DRGs 216 through 221, they 
would be significantly overpaid, as the average costs range from 
$34,310 to $65,478 for those MS-DRGs and the average costs for cases 
reporting procedure code 35.97 are $30,286 for MS-DRGs 250 and 251.
    Comment: One commenter suggested an alternative option regarding 
MS-DRG reassignment for the MitraClip[supreg] and requested that CMS 
reassign cases reporting procedure code 35.97 from MS-DRGs 250 and 251 
to MS-DRGs 237 and 238 (Major Cardiovascular Procedures with MCC and 
without MCC, respectively) with concurrent approval of the new 
technology add-on payment application. The commenter stated that this 
would allow the MitraClip[supreg] to be recognized in MS-DRGs involving 
a major cardiovascular procedure with an implantable device.
    Response: We did not propose to reassign cases reporting procedure 
code 35.97 from MS-DRGs 250 and 251 to MS-DRGs 237 and 238. Therefore, 
we consider this comment to be outside of the scope of the FY 2015 
IPPS/LTCH PPS proposed rule. We note that, as referenced in section 
II.G.1.b. of the preamble of this final rule, we encourage 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 2016, comments and suggestions should be submitted by 
December 7, 2014.
    We note that the MitraClip[supreg] technology is discussed in 
section II.I. of the preamble of this final rule under the new 
technology add-on payment policy.
    After consideration of the public comments we received, we are 
finalizing our proposal to not modify the current MS-DRG assignment for 
cases reporting procedure code 35.97 from MS-DRGs 250 and 251 to MS-
DRGs 216 through 221 for FY 2015.
    As indicated above, the second component of the manufacturer's 
request involved the creation of a new base MS-DRG for transcatheter 
valve therapies. We also received a similar request from another 
manufacturer recommending that CMS create a new MS-DRG for procedures 
referred to as endovascular cardiac valve replacement procedures. We 
reviewed each of these requests using the same data analysis, as set 
forth below. The discussion for endovascular cardiac valve replacement 
procedures is included in section II.G.4.c. of the preamble of this 
final rule and includes findings from the analysis and our proposals 
and final policies for each of these similar, but distinct requests.
c. Endovascular Cardiac Valve Replacement Procedures
    As noted in the previous section related to the MitraClip[supreg] 
technology, we received two requests to create a new base MS-DRG for 
what was referred to as ``transcatheter valve therapies'' by one 
manufacturer and ``endovascular cardiac valve replacement'' procedures 
by another manufacturer. Below we summarize the details of each request 
and review results of the data analysis that was performed.
Transcatheter Valve Therapies
    The request related to transcatheter valve therapies consisted of 
creating a new MS-DRG that would include the MitraClip[supreg] 
technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve 
repair with implant)), along

[[Page 49891]]

with the following list of ICD-9-CM procedure codes that identify the 
various types of valve replacements performed by an endovascular or 
transcatheter technique:
     35.05 (Endovascular replacement of aortic valve);
     35.06 (Transapical replacement of aortic valve);
     35.07 (Endovascular replacement of pulmonary valve);
     35.08 (Transapical replacement of pulmonary valve); and
     35.09 (Endovascular replacement of unspecified valve).
    We performed analysis of claims data from the December 2013 update 
of the FY 2013 MedPAR file for both the percutaneous mitral valve 
repair and the transcatheter/endovascular cardiac valve replacement 
codes in their respective MS-DRGs. The percutaneous mitral valve repair 
with implant (MitraClip[supreg]) procedure code is currently assigned 
to MS-DRGs 250 and 251, while the transcatheter/endovascular cardiac 
valve replacement procedure codes are currently assigned to MS-DRGs 
216, 217, 218, 219, 220, and 221. As illustrated in the table below, 
the data demonstrate that, for MS-DRGs 250 and 251, there were a total 
of 194 cases reporting procedure code 35.97, with an average length of 
stay of 5.5 days and average costs of $30,286.

----------------------------------------------------------------------------------------------------------------
                                                                                 Average length
                            MS-DRG                             Number of cases      of stay       Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 250 through 251--Cases with procedure code 35.97......             194              5.5          $30,286
----------------------------------------------------------------------------------------------------------------

    Upon analysis of cases in MS-DRGs 216 through 221 reporting the 
cardiac valve replacement procedure codes, we found a total of 7,287 
cases with an average length of stay of 8.1 days and average costs of 
$53,802, as shown in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 216 through 221--Cases with procedure codes 35.05,                 7,287             8.1         $53,802
 35.06, 35.07, 35.08 and 35.09..................................
MS-DRGs 216 through 221--Cases without procedure codes 35.05,             52,601            10.1          47,177
 35.06, 35.07, 35.08 and 35.09..................................
----------------------------------------------------------------------------------------------------------------

    The data clearly demonstrate that the volume of cases for the 
transcatheter/endovascular cardiac valve replacement procedures is much 
higher in comparison to the volume of cases for the percutaneous mitral 
valve repair (MitraClip[supreg]) procedure (7,287 compared to 194). In 
addition, the average costs of the transcatheter/endovascular cardiac 
valve replacement procedures are significantly higher than the average 
costs of the percutaneous mitral valve repair with implant ($53,802 
compared to $30,286).
    Our clinical advisors did not support grouping a percutaneous valve 
repair procedure with transcatheter/endovascular valve replacement 
procedures. They do not believe that these procedures are clinically 
coherent or similar in terms of resource consumption because the 
MitraClip[supreg] technology identified by procedure code 35.97 is 
utilized for a percutaneous mitral valve repair, while the other 
technologies, identified by procedure codes 35.05 through 35.09, are 
utilized for transcatheter/endovascular cardiac valve replacements. 
Consequently, the data analysis and our clinical advisors did not 
support the creation of a new MS-DRG. Therefore, for FY 2015, we did 
not propose to create a new MS-DRG to group cases reporting the 
percutaneous mitral valve repair (MitraClip[supreg]) procedure with 
transcatheter/endovascular cardiac valve replacement procedures. We 
invited public comments on our proposal.
    Comment: One commenter recommended reassignment of procedure code 
35.97 to a more appropriate MS-DRG. However, the commenter did not 
offer a specific recommendation as to which MS-DRG would be more 
appropriate.
    Response: We appreciate the commenter's recommendation. However, as 
the commenter did not provide a specific MS-DRG to which procedure code 
35.97 should be reassigned, we were unable to evaluate the 
recommendation. As we noted earlier, and as referenced in section 
II.G.1.b. of the preamble of this final rule, we encourage 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 2016, comments and suggestions should be submitted by 
December 7, 2014.
    Comment: One commenter urged CMS to reassign procedure code 35.97 
from its current assignment in MS-DRGs 250 and 251 to a more 
appropriate MS-DRG that would better recognize case complexity as a 
major cardiovascular procedure with a permanent implant. This commenter 
specifically recommended the inclusion of transcatheter mitral valve 
repair (TMVR) within the newly proposed MS-DRGs 266 and 267, and to 
subsequently retitle these MS-DRGs, ``Endovascular Transcatheter Valve 
Therapy with Implant.''
    Response: As stated in the FY 2015 IPPS/LTCH PPS proposed rule, our 
analysis did not support including cases reporting procedure code 35.97 
for percutaneous mitral valve repair procedures together with 
transcatheter/endovascular cardiac valve replacement procedures in a 
new MS-DRG. The average costs of the transcatheter/endovascular cardiac 
valve replacement procedures are significantly higher than the average 
costs of the percutaneous mitral valve repair procedures with implant 
($53,802 compared to $30,286).
    In addition, our clinical advisors did not support grouping a 
percutaneous valve repair procedure with transcatheter/endovascular 
valve replacement procedures. They do not believe that these procedures 
are clinically coherent or similar in terms of resource consumption 
because the MitraClip[supreg] technology identified by procedure code 
35.97 is utilized for a percutaneous mitral valve repair, while the 
other technologies, identified by procedure codes 35.05 through 35.09, 
are utilized for transcatheter/endovascular cardiac valve replacements.

[[Page 49892]]

    Comment: One commenter disagreed with the CMS analysis that 
transcatheter mitral valve repair (TMVR) is significantly different 
than transcatheter aortic valve replacement (TAVR). The commenter 
asserted that ``unlike alternative open repair and replacement 
procedures, a heart valve prosthesis is being manipulated/modified from 
a Transcatheter approach; whether the prosthesis serves to `replace' or 
`repair' an existing valve is irrelevant in regards to resource 
consumption.'' The commenter urged CMS to consider all transcatheter 
valve procedures equally with respect to DRG assignment.
    Response: We disagree with the commenter that TMVR and TAVR are not 
significantly different. As explained in the FY 2015 IPPS/LTCH PPS 
proposed rule, our analysis of the claims data and the recommendation 
from our clinical advisors do not support treating TMVR and all 
transcatheter valve procedures equally with respect to MS-DRG 
assignment. As noted previously, the average costs of the 
transcatheter/endovascular cardiac valve replacement procedures are 
significantly higher than the average costs of the percutaneous mitral 
valve repair procedures with implant ($53,802 compared to $30,286).
    After consideration of the public comments we received, we are 
finalizing our proposal to not create a new MS-DRG to group cases 
reporting the percutaneous mitral valve repair (MitraClip[supreg]) 
procedure with transcatheter/endovascular cardiac valve replacement 
procedures.
Endovascular Cardiac Valve Replacement
    The similar but separate request relating to endovascular cardiac 
valve replacement procedures consisted of creating a new MS-DRG that 
would only include the various types of cardiac valve replacements 
performed by an endovascular or transcatheter technique. In other 
words, this request specifically did not include the MitraClip[supreg] 
technology (ICD-9-CM procedure code 35.97 (Percutaneous mitral valve 
repair with implant)) and only included the list of ICD-9-CM procedure 
codes that identify the various types of valve replacements performed 
by an endovascular or transcatheter technique (ICD-9-CM procedure codes 
35.05 through 35.09) as described earlier in this section.
    The human heart contains four major valves--the aortic, mitral, 
pulmonary, and tricuspid valves. These valves function to keep blood 
flowing through the heart. When conditions such as stenosis or 
insufficiency/regurgitation occur in one or more of these valves, 
valvular heart disease may result. Cardiac valve replacement surgery is 
performed in an effort to correct these diseased or damaged heart 
valves. The endovascular or transcatheter technique presents a viable 
option for high-risk patients who are not candidates for the 
traditional open surgical approach.
    We reviewed the claims data from the December 2013 update of the FY 
2013 MedPAR file for cases in MS-DRGs 216 through 221. Our findings are 
shown in the chart below. The data analysis shows that cardiac valve 
replacements performed by an endovascular or transcatheter technique 
represent a total of 7,287 of the cases in MS-DRGs 216 through 221, 
with an average length of stay of 8.1 days and higher average costs 
($53,802 compared to $47,177) in comparison to all of the cases in MS-
DRGs 216 through 221.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 216 through 221--Cases with procedure codes 35.05,                 7,287             8.1         $53,802
 35.06, 35.07, 35.08 and 35.09..................................
MS-DRGs 216 through 221--Cases without procedure codes 35.05,             52,601            10.1          47,177
 35.06, 35.07, 35.08 and 35.09..................................
----------------------------------------------------------------------------------------------------------------

    As the data appear to indicate support for the creation of a new 
base MS-DRG, based on our evaluation of resource consumption, patient 
characteristics, volume, and costs between the cardiac valve 
replacements performed by an endovascular or transcatheter technique 
and the open surgical technique, we then applied our established 
criteria to determine if these cases would meet the requirements to 
create subgroups. We use five criteria established in the FY 2008 IPPS 
final rule (72 FR 47169) to review requests involving the creation of a 
new CC or an MCC subgroup within a base MS-DRG. As outlined in the FY 
2012 IPPS proposed rule (76 FR 25819), the original criteria were based 
on average charges but were later converted to average costs. In order 
to warrant creation of a CC or an MCC subgroup within a base MS-DRG, 
this subgroup must meet all of the following five criteria:
     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 the MCC subgroup.
     At least 500 cases are in the CC or the 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 applying the five criteria, we found that the data support the 
creation of a new MS-DRG subdivided into two severity levels. We also 
consulted with our clinical advisors. Our clinical advisors stated that 
patients receiving endovascular cardiac valve replacements are 
significantly different from those patients who undergo an open chest 
cardiac valve replacement. They noted that patients receiving 
endovascular cardiac valve replacements are not eligible for open chest 
cardiac valve procedures because of a variety of health constraints. 
This highlights the fact that peri-operative complications and post-
operative morbidity have significantly different profiles for open 
chest procedures compared with endovascular interventions. This is also 
substantiated by the different average lengths of stay demonstrated by 
the two cohorts. Our clinical advisors further noted that separately 
grouping these endovascular valve replacement procedures provides 
greater clinical cohesion for this subset of high-risk patients.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to create 
the following MS-DRGs for endovascular cardiac valve replacements:
     Proposed new MS-DRG 266 (Endovascular Cardiac Valve 
Replacement with MCC); and
     Proposed new MS-DRG 267 (Endovascular Cardiac Valve 
Replacement without MCC).

[[Page 49893]]



----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
 Proposed new MS-DRGs for endovascular cardiac valve replacement       cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 266 with MCC................................           3,516            10.6         $61,891
Proposed New MS-DRG 267 without MCC.............................           3,771             5.7          46,259
----------------------------------------------------------------------------------------------------------------

    We invited public comments on our proposal to create these new MS-
DRGs for FY 2015.
    Comment: Several commenters supported the proposal to create new 
MS-DRGs for endovascular cardiac valve replacement procedures. One 
commenter noted that ``the endovascular or transcatheter approach 
presents a viable option for high-risk patients who are not candidates 
for the traditional open chest surgical approach. The proposed MS-DRGs 
better align the more extensive cardiac valve procedures based on 
clinical coherence and similar resource costs.'' Another commenter 
stated that, by establishing these new MS-DRGs, ``CMS will continue to 
be able to collect the necessary information that will help assure 
appropriate payment in the future as these technologies evolve.'' Other 
commenters supported creation of the new MS-DRGs, noting it was 
reasonable given the data and information provided. Another commenter 
applauded CMS for proposing the two new MS-DRGs, noting that ``this 
decision will allow patients, particularly women, to have increased 
access to innovative therapies that will ease their suffering from the 
debilitating effects of severe aortic stenosis.''
    Response: We appreciate the commenters' support.
    Comment: One commenter commended CMS for proposing new MS-DRGs to 
identify endovascular/transcatheter valve procedures. However, the 
commenter suggested that CMS reconsider the title of the proposed MS-
DRGs. The commenter noted that the accepted nomenclature is 
``transcatheter'' and not ``endovascular''.
    Response: We acknowledge that many individuals prefer the use of 
the term ``transcatheter'', such as occurs in the frequently used 
acronym TAVR (transcatheter aortic valve replacement). However, we note 
that this nomenclature is by no means universal. ``Endovascular'' is 
also used to describe these procedures. The current ICD-9-CM procedure 
code for TAVR, for example, is 35.05 (Endovascular replacement of 
aortic valve). Recognizing that universal agreement on medical 
nomenclature is still an unachievable goal at the present time, we have 
elected to retain the term ``endovascular'' to maintain consistency 
with the current ICD-9-CM terminology.
    After consideration of the public comments we received, we are 
finalizing our proposal to create new MS-DRG 266 (Endovascular Cardiac 
Valve Replacement with MCC) and MS-DRG 267 (Endovascular Cardiac Valve 
Replacement without MCC).
d. Abdominal Aorta Graft
    We received a request that we change the MS-DRG assignment for 
procedure code 39.71 (Endovascular implantation of other graft in 
abdominal aorta), which is assigned to MS-DRGs 237 and 238 (Major 
Cardiovascular Procedures with MCC and without MCC, respectively). The 
requestor asked that we reassign procedure code 39.71 to MS-DRGs 228, 
229, and 230 (Other Cardiothoracic Procedures with MCC, with CC, and 
without CC/MCC, respectively). The requestor stated that the average 
cost of endovascular abdominal aorta graft implantation cases is 
significantly higher than other cases in MS-DRGs 237 and 238. The 
requestor stated that the average cost of endovascular abdominal aorta 
graft implantation cases is closer to those in MS-DRGs 228, 229, and 
230.
    The requestor stated that the goal of endovascular repair for 
abdominal aneurysm is to isolate the diseased, aneurismal portion of 
the aorta and common iliac arteries from continued exposure to systemic 
blood pressure. The procedure involves the delivery and deployment of 
endovascular prostheses, also referred to as a graft, as required to 
isolate the aneurysm above and below the extent of the disease. The 
requestor stated that this significantly reduces patient morbidity and 
death caused by leakage and/or sudden rupture of an untreated aneurysm.
    We examined claims data from the December 2013 update of the FY 
2013 MedPAR file for cases of endovascular abdominal aorta graft 
implantations. The following table shows our findings.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 237--All cases...........................................          17,813            9.66         $35,642
MS-DRG 237--Cases with procedure code 39.71.....................           2,093            8.30          44,898
MS-DRG 238--All cases...........................................          33,644            3.73          24,511
MS-DRG 238--Cases with procedure code 39.71.....................          15,483            2.30          28,484
MS-DRG 228--All cases...........................................           1,543           13.48          52,315
MS-DRG 229--All cases...........................................           2,003            7.47          32,070
MS-DRG 230--All cases...........................................             493            4.95          29,281
----------------------------------------------------------------------------------------------------------------

    As this table shows, endovascular abdominal aorta graft 
implantation cases have higher average costs and shorter lengths of 
stay than all cases within MS-DRGs 237 and 238. The average cost for 
endovascular abdominal aorta graft implantation cases in MS-DRG 237 is 
$9,256 greater than that for all cases in MS-DRG 237 ($44,898 compared 
to $35,642). The average cost for endovascular abdominal aorta graft 
implantation cases in MS-DRG 238 is $3,973 higher than that for all 
cases in MS-DRG 238 ($28,484 compared to $24,511). Cases in MS-DRG 228 
have average costs that are $7,417 higher than the endovascular 
abdominal aorta graft implantation cases in MS-DRG 237 ($52,315 
compared to $44,898). MS-DRG 228 and MS-DRG 237 both contain cases with 
MCCs. Cases in MS-DRG 229, which contain a CC, have average costs that 
are $3,586 higher than average costs of the endovascular abdominal 
aorta graft implantation cases in MS-DRG 238, which do not contain an 
MCC ($32,070 compared to $28,484). Cases in MS-DRG 230, which have 
neither an MCC nor a CC, have average costs that are $797 higher than 
the endovascular abdominal aorta graft implantation cases in MS-DRG 238 
($29,281 compared to $28,484). While the average costs were

[[Page 49894]]

higher for endovascular abdominal aorta graft implantation cases 
compared to all cases within MS-DRGs 237 and 238, each MS-DRG has some 
cases that are higher and some cases that are lower than the average 
costs for the entire MS-DRG. MS-DRGs were developed to capture cases 
that are clinically consistent with similar overall average resource 
requirements. This results in some cases within an MS-DRG having costs 
that are higher than the overall average and other cases having costs 
that are lower than the overall average. This may be due to specific 
types of cases included within the MS-DRGs or to the fact that some 
cases will simply require additional resources on a specific admission. 
However, taken as a whole, the hospital will be paid an appropriate 
amount for the group of cases that are assigned to the MS-DRG. We 
believe the endovascular abdominal aorta graft implantation cases are 
appropriately grouped with other procedures within MS-DRGs 237 and 238.
    Our clinical advisors reviewed this issue and determined that the 
endovascular abdominal aorta graft implantation cases are appropriately 
classified within MS-DRGs 237 and 238 because they are clinically 
similar to the other procedures in MS-DRGs 237 and 238, which include 
other procedures on the aorta. While the endovascular abdominal aorta 
graft implantation cases have higher average costs than the average for 
all cases within MS-DRGs 237 and 238, our clinical advisors do not 
believe this justifies moving the cases to MS-DRGs 228, 229 and 230, 
which involve a different set of cardiothoracic surgeries.
    As we stated in the FY 2015 IPPS/LTCH PPS proposed rule, based on 
the results of examination of the claims data and the recommendations 
of our clinical advisors, we did not believe that proposing to 
reclassify endovascular abdominal aorta graft implantation cases from 
MS-DRGs 237 and 238 was warranted. We proposed to maintain the current 
MS-DRG assignments for endovascular abdominal aorta graft implantation 
cases. We invited public comments on our proposal.
    Comment: A number of commenters supported CMS' proposal to maintain 
the current MS-DRG assignments for endovascular abdominal aorta graft 
implantation cases. The commenters stated that the proposal was 
reasonable given the data and information provided. One commenter 
disagreed with the proposal and stated that endovascular abdominal 
aorta graft implantation cases should be reassigned to MS-DRGs 228, 
229, and 230. The commenter stated that neither MS-DRGs 237 and 238 nor 
MS-DRGs 228, 229, and 230 have absolute clinical coherence and that 
there are a mix of procedures in both set of MS-DRGs. The commenter 
also expressed concern that CMS was prioritizing clinical coherence 
over total resource cost in deciding not to approve this request to 
assign procedure code 39.71 to MS-DRGs 228, 229, and 230. The commenter 
stated that if CMS is concerned about the perception regarding clinical 
coherence of the MS-DRG assignment for procedures represented by code 
39.71, CMS should change the titles for these five MS-DRGs to 
accommodate the evolution of these procedures while also allowing for 
new indications of various types of grafts in the aorta and its 
branches. The commenter did not suggest specific new MS-DRG titles for 
MS-DRGs 228, 229, 230, 237, and 238.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current assignments for endovascular abdominal aorta graft 
implantation cases in MS-DRGs 237 and 238. We are not accepting the 
commenter's suggestion that we modify the titles of MS-DRGs 228, 229, 
230, 237, and 238 in order to justify the reassignment of abdominal 
aorta graft procedures to MS-DRGs 228, 229, and 230. Our clinical 
advisors reviewed this issue and disagree with the commenters' 
statement that CMS puts too high a priority on the clinical coherence 
of the MS-DRGs. MS-DRGs were developed based on clinical similarities 
of groups of medical and surgical patients. We also consider average 
costs of these patients in evaluating the need to make modifications to 
the MS-DRGs. However, for the reasons described previously, we do not 
believe that the higher average costs for the endovascular abdominal 
aorta graft implantation cases as compared to the average for all cases 
within MS-DRGs 237 and 238 warrant reassigning these cases to MS-DRGs 
228, 229, and 230. We will continue to evaluate the need to make 
updates to the MS-DRGs to better capture procedures of the aorta and 
its branches. We welcome any specific recommendations for refinements 
to better capture changes in medical treatment. Any requests for MS-DRG 
updates must be received by December 7, 2014, in order to be considered 
for the FY 2016 proposed rule.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current assignments for 
endovascular abdominal aorta graft implantation cases in MS-DRGs 237 
and 238.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Shoulder Replacement Procedures
    We received a request to change the MS-DRG assignment for shoulder 
replacement procedures. This request involved the following two 
procedure codes:
     81.88 (Reverse total shoulder replacement); and
     81.97 (Revision of joint replacement of upper extremity).
    With respect to procedure code 81.88, the requestor asked that 
reverse total shoulder replacements be reassigned from MS-DRGs 483 and 
484 (Major Joint/Limb Reattachment Procedure of Upper Extremities with 
CC/MCC and without CC/MCC, respectively) to MS-DRG 483 only. The 
reassignment of procedure code 81.88 from MS-DRGs 483 and 484 was 
discussed previously in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50534 through 50536). The result of reassigning reverse shoulder 
replacements from MS-DRGs 483 and 484 to MS-DRG 483 only would be that 
this procedure would be assigned to MS-DRG 483 whether or not the case 
had a CC or an MCC. The requestor stated that reverse shoulder 
replacement procedures are more clinically cohesive with higher 
severity MS-DRGs due to the complexity and resource consumption of 
these procedures. We refer readers to the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50534 through 50536) for a discussion of the reverse total 
shoulder replacement.
    The requestor also recommended that we reassign what it described 
as another shoulder procedure involving procedure code 81.97, which is 
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), to MS-DRG 483. We point out that MS-DRG 483 
contains upper joint replacements, including shoulder replacements. MS-
DRG 483 does not contain any joint revision procedures. Similar to the 
request for reassignment of procedure code 81.88, this would mean that 
procedure code 81.97 would be assigned to MS-DRG 483 whether or not the 
case had a CC or an MCC. If CMS did not support this recommendation for 
moving procedure code 81.97 to MS-DRG 483, the requestor recommended an 
alternative reassignment to MS-DRG 515 (Other Musculoskeletal System 
and Connective Tissue O.R. procedures with MCC) even if the case had no 
MCC.
    We point out that, while the requestor refers to procedure code 
81.97 as a

[[Page 49895]]

shoulder procedure, the code description actually includes revisions of 
joint replacements of a variety of upper extremity joints, including 
those in the elbow, hand, shoulder, and wrist.
    As stated earlier, reverse shoulder replacements are assigned to 
MS-DRGs 483 and 484. Revisions of upper joint replacements are assigned 
to MS-DRGs 515, 516, and 517. We examined claims data from the December 
2013 update of the FY 2013 MedPAR file for MS-DRGs 483 and 484. The 
following table shows our findings of cases of reverse shoulder 
replacement.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 483--All cases...........................................          14,220            3.20         $18,807
MS-DRG 483--Cases with procedure code 81.88.....................           7,086            3.19          20,699
MS-DRG 484--All cases...........................................          23,183            1.95          16,354
MS-DRG 484--Cases with procedure code 81.88.....................           9,633            2.03          18,719
Proposed Revised MS-DRG 483 with all severity levels included...          37,403             2.4          17,287
----------------------------------------------------------------------------------------------------------------

    As the above table shows, MS-DRG 484 reverse shoulder replacement 
cases have similar average costs to those in MS-DRG 483 ($18,719 for 
reverse shoulder replacements in MS-DRG 484 compared to $18,807 for all 
cases in MS-DRG 483). However, in reviewing the data, we observed that 
the claims data no longer support two severity levels for MS-DRGs 483 
and 484.
    We use the five criteria established in FY 2008 (72 FR 47169) to 
review requests involving the creation of a new CC or MCC subgroup 
within a base MS-DRG. As outlined in the FY 2012 IPPS/LTCH PPS proposed 
rule (76 FR 25819), the original criteria were based on average charges 
but were later converted to average costs. In order to warrant creation 
of a CC or an MCC subgroup within a base MS-DRG, the subgroup must meet 
all of the following five criteria:
     A reduction in variance of 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.
    We found through our examination of the claims data from the 
December 2013 update of the FY 2013 MedPAR file that the two severity 
subgroups of MS-DRG 483 and 484 no longer meet the fourth criterion of 
at least a 20-percent difference in average costs between subgroups. We 
found that there is a $2,453 difference in average costs between MS-DRG 
483 and MS-DRG 484. The difference in average costs would need to be 
$3,761 to meet the fourth criterion. Therefore, our claims data support 
collapsing MS-DRGs 483 and 484 into a single MS-DRG. Our clinical 
advisors reviewed this issue and agreed that there is no longer enough 
difference between the two severity levels to justify separate severity 
subgroups for MS-DRGs 483 and 484, which include a variety of upper 
joint replacements. Therefore, our clinical advisors supported our 
recommendation to collapse MS-DRGs 483 and 484 into a single MS-DRG.
    In the FY 2015 IPPS/LTCH PPS proposed rule, based on the results of 
examination of the claims data and the advice of our clinical advisors, 
we proposed to collapse MS-DRGs 483 and 484 into a single MS-DRG by 
deleting MS-DRG 484 and revising the title of MS-DRG 483 to read 
``Major Joint/Limb Reattachment Procedure of Upper Extremities''.
    The following table shows our findings of cases of revisions of 
upper joint replacement from the December 2013 update of the FY 2013 
MedPAR file.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases...........................................           3,407            9.22         $22,191
MS-DRG 515--Cases with procedure code 81.97.....................              88            5.66          22,085
MS-DRG 516--All cases...........................................           8,502            5.34          14,356
MS-DRG 516--Cases with procedure code 81.97.....................             799            2.84          18,214
MS-DRG 517--All cases...........................................           5,794            3.28          12,172
MS-DRG 517--Cases with procedure code 81.97.....................           1,256            2.07          15,920
MS-DRG 483--All cases...........................................          14,220            3.20          18,807
----------------------------------------------------------------------------------------------------------------

    Cases identified by code 81.97 in MS-DRGs 515, 516, and 517 have 
lower average costs and shorter lengths of stay than all cases in MS-
DRG 515. The average costs of cases in MS-DRG 515 are $3,977 higher 
than the average costs of the cases with procedure code 81.97 in MS-DRG 
516 ($22,191 compared to $18,214). The average costs of cases in MS-DRG 
515 are $6,271 higher than cases with procedure code 81.97 in MS-DRG 
517 ($22,191 compared to $15,920).
    The table above shows that the average costs of cases in MS-DRG 483 
are $3,278 lower than the average costs of cases with procedure code 
81.97 in MS-DRG 515 ($18,807 compared to $22,085). The average costs of 
cases in MS-DRG 483 are $593 higher than the average costs of cases 
with procedure code 81.97 in MS-DRG 516 ($18,807 compared to $18,214). 
The average costs of cases in MS-DRG 483 are $2,887 higher than the 
average costs of cases with procedure code 81.97 in MS-DRG 517 ($18,807 
compared to $15,920).
    The claims data did not support moving all procedure code 81.97 
cases to MS-DRG 515 or MS-DRG 483, whether or not there is a CC or an 
MCC. We also pointed out once again that procedure code 81.97 is a 
nonspecific code that captures revisions to not only the shoulder, but 
also a variety of upper extremity joints including those in the elbow, 
hand, shoulder, and wrist. Therefore, we have no way of determining how 
many cases reporting procedure code 81.97 were actually shoulder 
procedures as opposed to procedures on the elbow, hand, or wrist.
    Our clinical advisors reviewed this issue and determined that the 
revisions of upper joint replacement procedures

[[Page 49896]]

are appropriately classified within MS-DRGs 515, 516, and 517, which 
include other joint revision procedures. They did not support moving 
revisions of upper joint replacement procedures to MS-DRG 515, whether 
or not there is an MCC. They supported the current classification, 
which bases the severity level on the presence of a CC or an MCC. They 
also did not support moving revisions of upper joint replacement 
procedures to MS-DRG 483, whether or not there is a CC or an MCC, 
because these revisions are not joint replacements. Based on the 
results of our examination and the advice of our clinical advisors, in 
the FY 2015 IPPS/LTCH PPS proposed rule, we did not propose moving 
revisions of upper joint replacement procedures to MS-DRG 515 or MS-DRG 
483, whether or not there is a CC or an MCC.
    In summation, we proposed to collapse MS-DRGs 483 and 484 into a 
single MS-DRG by deleting MS-DRG 484 and revising the title of MS-DRG 
483 to read ``Major Joint/Limb Reattachment Procedure of Upper 
Extremities''. We proposed to maintain the current MS-DRG assignments 
for revisions of upper joint replacement procedures in MS DRGs 515, 
516, and 517. We invited public comments on our proposals.
    Comment: A number of commenters supported the proposal to collapse 
MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and 
revising the title of MS-DRG 483 to read ``Major Joint/Limb 
Reattachment Procedure of Upper Extremities.'' The commenters stated 
that the proposal was reasonable given the data and information 
provided.
    One commenter stated that collapsing the two MS-DRGs is supported 
by claims data indicating little cost difference between cases in the 
current two severity levels. Several commenters stated that the new, 
single MS-DRG represented clinically cohesive procedures with similar 
complexity and resource consumption.
    Response: We appreciate the commenters' support for our proposal to 
collapse MS-DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 
484 and revising the title of MS-DRG 483 to read ``Major Joint/Limb 
Reattachment Procedure of Upper Extremities''.
    After consideration of the public comments we received, we are 
adopting as final, without modification, our proposal to collapse MS-
DRGs 483 and 484 into a single MS-DRG by deleting MS-DRG 484 and 
revising the title of MS-DRG 483 to read ``Major Joint/Limb 
Reattachment Procedure of Upper Extremities''.
    Comment: A number of commenters supported the proposal to maintain 
the MS-DRG assignment for code 81.97 in MS-DRGs 515, 516, and 517. The 
commenters stated that the recommendation was reasonable give the data 
and information provided. One commenter disagreed with the proposal and 
stated that code 81.97 would be more accurately classified in MS-DRG 
483 (Major Joint/Limb Reattachment of Upper Extremities with CC/MCC) 
because MS-DRG 483 includes upper extremity procedures.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current MS-DRG assignment for code 81.97 in MS-DRGs 515, 
516, and 517. We disagree with the commenter that code 81.97 is similar 
to other procedures currently assigned to MS-DRG 483. MS-DRG 483 
contains replacements, not revisions, of the wrist, shoulder, and elbow 
as well as reattachments of the forearm. Revision of the joint could 
include a variety of procedures to joints of the upper extremity. 
Procedure code 81.97 is a nonspecific code that captures revisions to 
not only the shoulder, but also a variety of upper extremity joints 
including those in the elbow, hand, shoulder, and wrist. Therefore, we 
have no way of determining how many cases reporting procedure code 
81.97 were actually shoulder procedures as opposed to procedures on the 
elbow, hand, or wrist.
    Our clinical advisors reviewed this issue and continue to advise 
that code 81.97 not be reassigned to MS-DRG 483 because the procedure 
is neither a replacement nor a reattachment procedure as are the 
current procedures within MS-DRG 483. In addition, the code captures a 
variety of joint revisions of the upper extremities and is not 
clinically similar to the replacements and reattachment procedures in 
MS-DRG 483. Our clinical advisors recommend that code 81.97 continue to 
be assigned to MS-DRG 515, 516, and 517.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current assignment of code 
81.97 in MS-DRG 515, 516, and 517.
b. Ankle Replacement Procedures
    We received a request to change the MS-DRG assignment for two ankle 
replacement procedures. The request involved the following two 
procedure codes:
     81.56 (Total ankle replacement); and
     81.59 (Revision of joint replacement of lower extremity, 
not elsewhere classified).
    The reassignment of procedure code 81.56 from MS-DRGs 469 and 470 
(Major Joint Replacement or Reattachment of Lower Extremity with MCC 
and without MCC, respectively) to a new MS-DRG or, alternatively, to 
MS-DRG 469 was discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50536 through 50537). We refer readers to this final rule for a 
discussion of ankle replacement procedures. The requestor asked that we 
again evaluate reassigning total ankle replacement procedures. The 
requestor also asked that we reassign what it referred to as another 
ankle replacement revision procedure captured by procedure code 81.59 
(Revision of joint replacement of lower extremity, not elsewhere 
classified), which is 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).
    The requestor asked that we reassign procedure code 81.56 from MS-
DRGs 469 and 470 to MS-DRG 483 (Major Joint/Limb Reattachment Procedure 
of Upper Extremities with CC/MCC) and rename the MS-DRG to better 
capture the additional lower extremity cases. The requestor stated that 
the result would be assignment of lower joint procedures to an MS-DRG 
that currently captures only upper extremity cases and assignment to 
the highest severity level even if the case did not have a CC or an 
MCC. If CMS did not find this acceptable, the requestor made an 
alternative recommendation of assigning procedure code 81.56 to MS-DRG 
469 and renaming the MS-DRG to better capture the additional cases. 
Cases would be assigned to the highest severity level whether or not 
the case had an MCC.
    The requestor also recommended that procedure code 81.59, which is 
assigned to MS-DRGs 515, 516, and 517, be reassigned to MS-DRG 483 and 
that the MS-DRG be given a new title to better capture the additional 
lower extremity cases. The requestor stated that the result would be 
assignment of lower joint procedures to an MS-DRG that currently 
captures only upper extremity cases and assignment to the highest 
severity level even if the patient did not have a CC or an MCC. If CMS 
did not support this recommendation, the requestor suggested two 
additional recommendations. One involves moving procedure code 81.59 to 
MS-DRG 515 even when the case had no MCC. The other recommendation was 
to move

[[Page 49897]]

procedure code 81.59 to MS-DRG 469, whether or not the case had a MCC.
    We point out that while the requestor refers to procedure code 
81.59 as a revision of an ankle replacement, the code actually includes 
revisions of joint replacements of a variety of lower extremity joints 
including the ankle, foot, and toe.
    The following table shows the number of total ankle replacement 
cases, average length of stay, and average costs for procedure code 
81.56 in MS-DRGs 469 and 470 found in claims data from the December 
2013 update of the FY 2013 MedPAR file compared to all cases within MS-
DRGs 469, 470, and 483.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases...........................................          25,916            7.22         $22,548
MS-DRG 469--Cases with procedure code 81.56.....................              32            6.19          27,419
MS-DRG 470--All cases...........................................         406,344            3.25          15,119
MS-DRG 470--Cases with procedure code 81.56.....................           1,379            2.13          19,332
MS-DRG 483......................................................          14,220            3.20          18,807
----------------------------------------------------------------------------------------------------------------

    In summary, the requestor asked us to reassign procedure code 81.56 
in MS-DRGs 469 and 470 to one of the following two options: MS-DRG 483 
(highest severity level); or MS-DRG 469 (highest severity level).
    As the table for total ankle replacement above shows, the average 
cost of cases with procedure code 81.56 in MS-DRG 469 is $27,419 and 
$19,332 in MS-DRG 470. This compares with the average costs of all 
cases in MS-DRGs 469 and 470 of $22,548 and $15,119, respectively. 
While the average cost of cases reporting procedure code 81.56 in MS-
DRG 469 is $4,871 higher than the average cost for all cases in MS-DRG 
469, we point out that there were only 32 cases. The relatively small 
number of cases may have been impacted by other factors such as 
complications or comorbidities. Several expensive cases could impact 
the average costs for a very small number of patients. The average cost 
of cases reporting procedure code 81.56 in MS-DRG 470 is $4,213 higher 
than the average cost for all cases in MS-DRG 470. While the average 
costs are higher, within all MS-DRGs, some cases have higher and some 
cases have lower average costs. MS-DRGs are groups of clinically 
similar cases that have similar overall costs. Within a group of cases, 
one would expect that some cases have costs that are higher than the 
overall average and some cases have costs that are lower than the 
overall average.
    MS-DRG 469 ankle replacement cases have average costs that are 
$8,612 higher than the average costs of all cases in MS-DRG 483 
($27,419 compared to $18,807). Moving these cases (procedure code 
81.56) to MS-DRG 483 would result in payment below average costs 
compared to the current MS-DRG assignment in MS-DRG 469. Furthermore, 
as noted earlier, moving total ankle replacement cases to MS-DRG 483 
would result in a lower extremity procedure being added to what is now 
an upper extremity MS-DRG. This would significantly disrupt the 
clinical cohesion of MS-DRG 483.
    The average costs of all cases in MS-DRG 469 are $3,216 higher than 
the average costs of those cases with procedure code 81.56 in MS-DRG 
470 ($22,548 compared to $19,332). The data did not support moving 
procedure code 81.56 cases to MS-DRG 483 or 469 because it would not 
result in payments that more accurately reflect their current average 
costs. Our clinical advisors reviewed this issue and determined that 
the ankle replacement cases are appropriately classified within MS-DRGs 
469 and 470 with the severity level leading to the MS-DRG assignment. 
They did not support moving these cases to MS-DRG 483 because ankle 
replacements, which are lower joint procedures, are not clinically 
similar to upper joint replacement procedures. Based on the results of 
examination of the claims data, the issue of clinical cohesion, and the 
recommendations from our clinical advisors, in the FY 2015 IPPS/LTCH 
PPS proposed rule, we did not propose to move total ankle procedures to 
MS-DRG 483 or MS-DRG 469 when there is no MCC. We proposed to maintain 
the current MS-DRG assignments for ankle replacement cases. We invited 
public comments on our proposal.
    Comment: A number of commenters supported the proposal to maintain 
the current MS-DRG assignments for ankle replacement cases. The 
commenters stated the proposal was reasonable given the data and 
information provided. Several other commenters urged CMS to reconsider 
its decision and to create a new MS-DRG for total ankle replacements 
for FY 2015 that is more appropriate both in terms of resource 
utilization and clinical cohesiveness, and reassign ICD-9-CM procedure 
code 81.56 to the new MS-DRG. The commenters stated that, despite 
evidence that the current Medicare assignment results in payments to 
hospitals below the average costs for total ankle replacement 
procedures, and the greater clinical complexity of total ankle 
replacements relative to other procedures that map to these same MS-
DRGs, CMS proposed to maintain the current MS-DRG assignment for total 
ankle replacement procedures. The commenters stated that total ankle 
replacement is a complex surgical procedure involving the replacement 
of the damaged parts of three bones (talus, tibia, and fibula) that 
make up the articulations of the ankle, as compared to two bones in 
most other total joint replacement procedures, including hips and 
knees. The commenters stated that the resources involved with total 
ankle replacement procedures are not comparable to other procedures in 
the major joint MS-DRG and that failure to establish a new MS-DRG that 
more appropriately reflects the higher cost will likely comprise 
patient access to this procedure.
    One commenter acknowledged that there are a relatively small volume 
of total ankle replacement procedures compared to total hip and total 
knee replacements. However, the commenter suggested that this imbalance 
in case volume of total ankle replacements compared to total hip and 
knee replacements dampens the influence of actual hospital cost data 
for the total ankle replacements. The commenter recommended that all 
total ankle replacements be assigned to MS-DRG 469 even if the case 
does not have a MCC. This commenter acknowledged that the average cost 
of cases with procedure code 81.56 in MS-DRG 470 is $19,332 compared to 
average cost of $22,548 for all cases in MS-DRG of 469. However, the 
commenter suggested that moving all total ankle replacements to MS-DRG 
469 was more appropriate than having cases assigned to MS-DRGs 469 and 
470 based on the presence of an MCC. The commenter also acknowledged 
CMS' statement that under the MS-DRG system in general, some cases will 
have average costs

[[Page 49898]]

higher than the overall average costs for the MS-DRG, while other cases 
will have lower average costs. However, the commenter stated that this 
was an insufficient rationale to apply to total ankle replacements. The 
commenter disagreed with the determination of the CMS clinical advisors 
that ankle replacement cases are appropriately classified within MS-
DRGs 469 and 470, based on severity level. The commenter stated that 
total ankle replacement is a complicated surgery that involves the 
replacement of the damaged parts of the three bones that make up the 
ankle joint, as compared to two bones in hip and knee replacement 
procedures. The commenter stated that this surgery required a 
specialized skill set, operative technique, and level of operating room 
resource utilization that is vastly dissimilar from that of total hip 
and total knee replacements. The commenter recommended that CMS create 
a new MS-DRG for total ankle replacements or move all total ankle 
replacements to MS-DRG 469.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current MS-DRG assignment for total ankle replacements. We 
are not accepting the commenter's recommendation to create a new MS-DRG 
for total ankle replacements or to move all cases to MS-DRG 469. We 
point out that there were only 1,411 total ankle replacements with 32 
cases in MS-DRG 469 and 1,379 cases in MS-DRG 470. Creating a new MS-
DRG for this single procedure would not be appropriate. MS-DRGs were 
created to provide payment to hospitals for groups of clinically 
similar conditions and procedures. MS-DRGs were not created to provide 
payment for each single procedure. MS-DRGs 469 and 470 contain 
replacement and reattachment procedures of the lower extremity, 
including those of the hip, knee, ankle, foot, lower leg, and thigh. 
Within each MS-DRG, there will be cases with costs higher than the 
average costs and others with costs below the average costs. Basing a 
new MS-DRG on a small number of cases could lead to distortions in the 
relative payment weights for the MS DRG because several expensive cases 
could impact the overall relative payment weight. Having larger 
clinically cohesive groups within an MS-DRG provides greater stability 
for annual updates to the relative payment weights. We also point out 
that combining total ankle replacements into a single new MS-DRG would 
result in the same payment for cases with an MCC as those without an 
MCC. As indicated above, total ankle replacements with MCCs have 
average costs of $27,419 and those without MCCs have average costs of 
$19,332. Combining all total ankle replacements into a single, newly 
created MS-DRG would reduce the payment accuracy of cases with 
different severity levels.
    We also disagree with the recommendation to move all total ankle 
replacement to MS-DRG 469. As stated earlier, total ankle replacements 
with MCCs have average costs of $27,419 and those without MCCs have 
average costs of $19,332. The average cost of all cases in MS-DRG 469 
(which includes cases with MCCs) is $22,548. We point out again that, 
under the MS-DRGs, some cases will have average costs higher than the 
overall average costs for the MS-DRG while other cases will have lower 
average costs. The total ankle replacements are appropriately assigned 
to MS-DRGs 469 and 470 based on the presence of a MCC.
    Our clinical advisors reviewed the public comments and clinical 
data and continue to support maintaining the current MS-DRG assignment 
for total ankle replacements. They advised that total ankle 
replacements are appropriately assigned to MS-DRGs 469 and 470 along 
with other major joint replacement and reattachment procedures of the 
lower extremities because they are all replacement and reattachment 
procedures of the lower extremities. Our clinical advisors noted that, 
whereas they consider average cost as one element of the decision, they 
expect the average cost of any subset to be different than the average 
cost of the MS-DRG, as that is inherent in a system of averages. They 
note that average length of stay, another metric of resource usage, is 
lower than the MS-DRG average for this subgroup. Even more importantly, 
they further noted that leaving these procedures in a MS-DRG with other 
lower extremity procedures promotes greater clinical consistency than 
could be achieved by moving the ankle procedures into an upper 
extremity DRG. They noted that, for the inpatient prospective system, 
clinical consistency includes not just technical considerations of the 
surgery or device costs but also consideration of pre- and post-
operative patient care needs, medications, and care for common comorbid 
conditions, among other factors. Finally, our clinical advisors also 
pointed out that creating a new MS-DRG for total ankle replacements 
would result in combining cases with average length of stay of 6.19 
days for cases with MCC and 2.13 days for cases without MCC. The cases 
are more appropriately assigned to MS-DRGs 469 and 470 with the two 
severity levels. Our clinical advisors do not support creating a new 
MS-DRG which would contain only total ankle replacements.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG assignment for 
total ankle replacements in MS-DRGs 469 and 470.
    The following table shows our findings from examination of the 
claims data from the December 2013 update of the FY 2013 MedPAR file 
for the number of cases reporting procedure code 81.59 in MS-DRGs 515, 
516, and 517 (revision of joint replacement of lower extremity) and 
their average length of stay and average costs as compared to all cases 
within MS-DRGs 515, 516, and 517 (where procedure code 81.59 is 
currently assigned), as well as data for MS-DRGs 469 and 483.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases...........................................           3,407            9.22         $22,191
MS-DRG 515--Cases with procedure code 81.59.....................               5            6.00          16,988
MS-DRG 516--All cases...........................................           8,502            5.34          14,356
MS-DRG 516--Cases with procedure code 81.59.....................              16            3.00          16,998
MS-DRG 517--All cases...........................................           5,794            3.28          12,172
MS-DRG 517--Cases with procedure code 81.59.....................              40            1.80          13,704
MS-DRG 483--All cases...........................................          25,916             722          22,548
MS-DRG 469--All cases...........................................          14,220            3.20          18,807
----------------------------------------------------------------------------------------------------------------


[[Page 49899]]

    The requestor asked that all cases with procedure code 81.59 in MS-
DRGs 515, 516, and 517 be assigned to one of the following three 
choices:
     MS-DRG 483 (highest severity level);
     MS-DRG 515 (highest severity level) whether or not there 
is an MCC; or
     MS-DRG 469 (highest severity level).
    Our review of data from the above revision of joint replacement of 
lower extremity table shows that cases in MS-DRG 483 have average costs 
that are $5,560 higher than the average costs of cases with procedure 
code 81.59 in MS-DRG 515; $5,550 greater than those in MS-DRG 516; and 
$8,844 greater than those in MS-DRG 517 ($22,548 compared to $16,988; 
$22,548 compared to $16,998, and $22,548 compared to $13,704, 
respectively). As mentioned earlier, MS-DRG 483 is currently composed 
of only upper extremity procedures. Moving lower extremity procedures 
into this MS-DRG would disrupt the clinical cohesiveness of MS-DRG 483.
    The average costs of all cases in MS-DRG 469 are $18,807, compared 
to average costs of $16,988, $16,998, and $13,703 for procedure code 
81.59 cases in MS-DRGs 515, 516, and 517, respectively. The data did 
not support moving all procedure code 81.59 cases to MS-DRG 469 even 
when there is no MCC. We also point out that moving cases with 
procedure code 81.59 to MS-DRG 469 would disrupt the clinical 
cohesiveness of MS-DRG 469, which currently captures major joint 
replacement or reattachment procedures of the lower extremity. 
Procedure code 81.59 includes revisions of joint replacements of a 
variety of lower extremity joints including the ankle, foot, and toe. 
This nonspecific code would not be considered a major joint procedure. 
The code captures revisions of an ankle replacement as well as a more 
minor revision of the toe.
    Our clinical advisors reviewed this issue and determined that the 
revision of joint replacement of lower extremity cases are 
appropriately classified within MS-DRGs 515, 516, and 517 where 
revisions of other joint replacements are captured. They supported the 
current severity levels in MS-DRGs 515, 516, and 517, which allow the 
presence of a CC or an MCC to determine the severity level assignment. 
They did not support moving these cases to MS-DRG 483, which is applied 
to upper extremity procedures because these procedures are not 
clinically consistent with revisions of lower joint procedures. They 
also did not support moving these cases to MS-DRG 469 when there is no 
MCC because these procedures are not joint replacement procedures. 
Based on the findings of our examination of the claims data, the issue 
of clinical cohesion, and the recommendations from our clinical 
advisors, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not 
propose to move the revision of joint replacement of lower extremity 
cases to MS-DRGs 483 or 469, whether or not there is an MCC. We 
proposed to maintain the current MS-DRG assignments for revision of 
joint replacement of lower extremity cases.
    In summary, we proposed to maintain the current MS-DRG assignment 
for total ankle replacements in MS-DRGs 469 and 470 and revision of 
joint replacement of lower extremity procedures in MS-DRGs 515, 516, 
and 517. We invited public comments on our proposals.
    Comment: A number of commenters supported the proposal to maintain 
the current MS-DRG assignment for code 81.59. One commenter agreed with 
this proposal given the lack of specificity for this code which does 
not identify the specific joint being revised. The commenter 
recommended that CMS create the following new ICD-9-CM procedure code: 
81.58 (Revision of ankle replacement, not otherwise specified). Once 
this code is created, the commenter recommended that this new code be 
assigned to MS-DRGs 466, 467, and 468 and that these MS-DRGs be renamed 
Revision of Hip, Knee or Ankle (with MCC, with CC, and without CC/MCC, 
respectively).
    Response: We appreciate the commenters' support for our proposal 
not to change the MS-DRG assignment for code 81.59. We agree with the 
commenter who pointed out that code 81.59 does not identify the joint 
being revised and, therefore, code 81.59 should continue to be assigned 
to MS-DRGs 515, 516, and 517. ICD-10-PCS codes provide greater detail 
than do ICD-9-CM codes and provide the ability to identify the joint 
being revised. As mentioned earlier, the Secretary announced plans to 
release an interim final rule in the near future that will include a 
new compliance date to require the use of ICD-10 beginning October 1, 
2015. The interim final rule will also require HIPAA covered entities 
to continue to use ICD-9-CM through September 30, 2015. Given this 
timeline, it will not be possible to create a new ICD-9-CM procedure 
code for the next annual update on October 1, 2015 because ICD-10 will 
be implemented on that date. However, ICD-10-PCS will provide the 
necessary level of detail.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the current MS-DRG assignment for 
total ankle replacements in MS-DRGs 469 and 470 and revision of joint 
replacement of lower extremity procedures in MS-DRGs 515, 516, and 517.
c. Back and Neck Procedures
    We received a request to reassign cases identified with a 
complication or comorbidity (CC) in MS-DRG 490 (Back & Neck Procedures 
Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) to MS-
DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC or 
Disc Device/Neurostimulator). The requester suggested that we create a 
new MS-DRG that would be subdivided based solely on the ``with MCC or 
Disc Device/Neurostimulator'' and the ``without MCC'' (and no device) 
criteria.
    For the FY 2008 rulemaking cycle, we performed a comprehensive 
analysis of all the spinal DRGs as we proposed (72 FR 24731 through 
24735) and finalized (72 FR 47226 through 47232) adoption of the MS-
DRGs. With the revised spinal MS-DRGs, we were better able to identify 
a patient's level of severity, complexity of service, and utilization 
of resources. This was primarily attributed to the new structure for 
the severity level designations of ``with MCC,'' ``with CC,'' and 
``non-CC'' (or without CC/MCC). Another contributing factor was that we 
incorporated specific procedures and technologies into the GROUPER 
logic for some of those spinal MS-DRGs. Specifically, as noted above, 
in the title of MS-DRG 490, we accounted for disc devices and 
neurostimulators because the data demonstrated that the procedures 
utilizing those technologies were more complex and required greater 
utilization of resources.
    According to the requester, since that time, concerns have been 
expressed in the provider community regarding inadequate payment for 
MS-DRG 490 when these technologies are utilized. An analysis conducted 
by the requester alleged that the subset of patients identified in the 
``with MCC or disc device/neurostimulator'' group are different with 
regard to resource use from the ``without CC/MCC'' (and no device) 
patient group.
    We examined claims data from the December 2013 update of the FY 
2013 MedPAR file for MS-DRGs 490 and 491. The table below shows our 
findings.

[[Page 49900]]



----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 490--All cases...........................................          16,930            4.53         $13,727
MS-DRG 491--All cases...........................................          25,778            2.20           8,151
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, there were a total of 16,930 cases in 
MS-DRG 490 with an average length of stay of 4.53 days and average 
costs of $13,727. For MS-DRG 491, there were a total of 25,778 cases 
with an average length of stay of 2.20 days and average costs of 
$8,151.
    We then analyzed the data for MS-DRGs 490 and 491 by subdividing 
cases based on the ``with MCC or Disc Device/Neurostimulator'' and the 
``without MCC'' (and no device) criteria. We found a total of 3,379 
cases with an average length of stay of 6.6 days and average costs of 
$21,493 in the ``with MCC or Disc Device/Neurostimulator'' group and a 
total of 39,329 cases with an average length of stay of 2.8 days and 
average costs of $9,405 in the ``without MCC'' and no device group. Due 
to the wide range in the volume of cases, length of stay, and average 
costs between these two subgroups, we concluded that further analysis 
of the data using a separate ``with CC'' (and no device) subset of 
patients was warranted.
    Therefore, we evaluated the data using a three-way severity level 
split that consisted of the three subgroups shown in the table below.

        Additional Analysis for Back & Neck Procedures Except Spinal Fusion: Disc Device/Neurostimulator
----------------------------------------------------------------------------------------------------------------
                                                                               Average length
                   Severity level split                      Number of cases       of stay        Average costs
----------------------------------------------------------------------------------------------------------------
--With MCC or disc device/neurostimulator.................             3,379               6.6           $21,493
--With CC.................................................            13,551               3.9            11,791
--Without CC/MCC..........................................            25,778               2.2             8,151
----------------------------------------------------------------------------------------------------------------

    For the first subgroup, ``with MCC or Disc Device/
Neurostimulator,'' we found a total of 3,379 cases with an average 
length of stay of 6.6 days and average costs of $21,493. In the second 
subgroup, ``with CC'' (no device), we found a total of 13,551 cases 
with an average length of stay of 3.9 days and average costs of 
$11,791. In the third subgroup, ``without CC/MCC'' (no device), we 
found a total of 25,778 cases with an average length of stay of 2.2 
days and average costs of $8,151.
    The results of this additional data analysis demonstrate a better 
distribution of cases with regard to length of stay and average costs. 
Our clinical advisors agreed that a patient's severity of illness is 
captured more appropriately with this subdivision. The data also meet 
the established criteria for creating subgroups within a base MS-DRG as 
discussed earlier.
    As the subdivision of the claims data based on these subgroups 
better captures a patient's severity level and utilization of resources 
and is supported by our clinical advisors, in the FY 2015 IPPS/LTCH PPS 
proposed rule, we proposed to create three new MS-DRGs and to delete 
MS-DRGs 490 and 491. We proposed that these proposed new MS-DRGs would 
be titled as follows and would be effective as of October 1, 2014:
     Proposed new MS-DRG 518 (Back & Neck Procedures Except 
Spinal Fusion with MCC or Disc Device/Neurostimulator);
     Proposed new MS-DRG 519 (Back & Neck Procedures Except 
Spinal Fusion with CC); and
     Proposed new MS-DRG 520 (Back & Neck Procedures Except 
Spinal Fusion without CC/MCC).
    We invited public comments on our proposal to create these proposed 
new MS-DRGs for FY 2015.
    Comment: Several commenters supported the proposal to delete MS-
DRGs 490 and 491 and to create three new MS-DRGs that better account 
for a patient's severity of illness and utilization of resources when 
disc devices and neurostimulators are involved. One commenter stated 
that the new MS-DRGs would enable CMS to assess utilization of 
resources for these services and ensure that ``important innovation in 
device dependent neurosurgical procedures is adequately accounted for 
and reimbursed appropriately.'' Another commenter expressed its 
appreciation for CMS' careful data analysis that resulted in the 
development of the proposal. This commenter noted ``that the data 
presented by CMS make a compelling case for the proposed three 
subdivisions, because it would more appropriately compensate hospitals 
for the costs associated with implantation of a disc device or 
neurostimulator than the current two-division framework.'' Another 
commenter applauded CMS' past efforts to assure MS-DRGs 490 and 491 
reflect the most appropriate payment amounts for these procedures. This 
commenter stated ``the proposed three-way split of cases in current MS-
DRGs 490 and 491 demonstrates a better distribution of cases with 
regard to resource use. CMS should proceed with its proposed change to 
this MS-DRG category to improve the accuracy of the payments, 
consistent with its criteria for establishing severity levels within 
the MS-DRGs.'' Another commenter noted that ``subdividing the code set 
into three distinct MS-DRGs is not only a more accurate representation 
of the clinical condition experienced by the patient, but also better 
categorizes the resources expended by the facility, as evidenced by the 
supporting claims data.''
    Response: We thank the commenters for their support. As noted in 
the FY 2015 IPPS/LTCH PPS proposed rule, the additional data analysis 
demonstrated a better distribution of cases with regard to length of 
stay and average costs. Our clinical advisors also agreed that a 
patient's severity of illness is captured more appropriately with this 
subdivision. Lastly, the data also meet the established criteria for 
creating subgroups within a base MS-DRG as discussed earlier.
    After consideration of the public comments we received, for FY 2015 
we are adopting as final our proposal to create new MS-DRG 518 (Back & 
Neck Procedures Except Spinal Fusion with MCC or Disc Device/
Neurostimulator); MS-DRG 519 (Back & Neck Procedures Except Spinal 
Fusion with CC); and MS-DRG 520 (Back & Neck Procedures Except Spinal 
Fusion without CC/MCC).

[[Page 49901]]

6. MDC 10 (Endocrine, Nutritional and Metabolic Diseases and 
Disorders): Disorders of Porphyrin Metabolism
    We received a comment on the FY 2014 IPPS/LTCH PPS proposed rule 
that we considered out of scope for the proposed rule. We stated in the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50550) that we would consider 
this issue in future rulemaking as part of our annual review process. 
The request was for the creation of a new MS-DRG to better identify 
cases where patients with disorders of porphyrin metabolism exist, to 
recognize the resource requirements in caring for these patients, to 
ensure appropriate payment for these cases, and to preserve patient 
access to necessary treatments. This issue has been discussed 
previously in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27904 and 
27905) and final rule (77 FR 53311 through 53313).
    Porphyria is defined as a group of rare disorders (``porphyrias'') 
that interfere with the production of hemoglobin that is needed for red 
blood cells. While some of these disorders are genetic (inborn) and 
others can be acquired, they all result in the abnormal accumulation of 
hemoglobin building blocks, called porphyrins, which can be deposited 
in the tissues where they particularly interfere with the functioning 
of the nervous system and the skin. Treatment for patients suffering 
from disorders of porphyrin metabolism consists of an intravenous 
injection of Panhematin[supreg] (hemin for injection). In 1984, this 
pharmaceutical agent became the first approved drug for a rare disease 
to be designated under the Orphan Drug Act. The requestor stated that 
it is the only FDA-approved prescription treatment for acute 
intermittent porphyria. ICD-9-CM diagnosis code 277.1 (Disorders of 
porphyrin metabolism) describes these cases, which are currently 
assigned to MS-DRG 642 (Inborn and Other Disorders of Metabolism).
    We analyzed claims data from the December 2013 update of the FY 
2013 MedPAR file for cases assigned to MS-DRG 642. Our findings are 
shown in the table below.

----------------------------------------------------------------------------------------------------------------
                                                                               Average  length
                          MS-DRG                             Number of cases       of stay       Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 642--All cases.....................................             1,486              4.61            $8,151
MS-DRG 642--Cases with principal diagnosis code 277.1.....               299              5.98            13,303
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, we found a total of 1,486 cases in MS-
DRG 642, with an average length of stay of 4.61 days and average costs 
of $8,151. We then analyzed the data for cases reporting diagnosis code 
277.1 as the principal diagnosis in this same MS-DRG. We found a total 
of 299 cases, with an average length of stay of 5.98 days and average 
costs of $13,303.
    While the data show that the average costs for the 299 cases 
reporting a principal diagnosis code of 277.1 were higher than the 
average costs for all cases in MS-DRG 642 ($13,303 compared to $8,151), 
the number of cases is small. In the FY 2015 IPPS/LTCH PPS proposed 
rule, we stated that, given the small number of porphyria cases, we did 
not believe there is justification for creating a new MS-DRG. Basing a 
new MS-DRG on such a small number of cases could lead to distortions 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. In addition, as 
discussed earlier, one of the criteria we apply in evaluating whether 
to create new severity subgroups within an MS-DRG is whether there are 
at least 500 cases in the CC or MCC subgroup. While this criterion is 
used to evaluate whether to create a severity subgroup within an MS-
DRG, applying it here suggests that creating a new MS-DRG for cases 
reporting a principal diagnosis of code 277.1 would not be appropriate. 
Our clinical advisors reviewed this issue and recommended no MS-DRG 
change for porphyria cases because they fit clinically within MS-DRG 
642.
    In summary, in the FY 2015 IPPS/LTCH PPS proposed rule, we did not 
propose to create a new MS-DRG for porphyria cases. We invited public 
comments on our proposal to maintain porphyria cases in MS-DRG 642.
    Comment: Several commenters supported the proposal to maintain 
porphyria cases in MS-DRG 642 and to not create a new MS-DRG for these 
cases.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain porphyria cases in MS-DRG 642 and 
to not create a new MS-DRG for these cases.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in 
the Perinatal Period)
    We received a request to evaluate the MS-DRG assignment of seven 
ICD-9-CM diagnosis codes in MS-DRG 794 (Neonate with Other Significant 
Problems) under MDC 15. The requestor stated that these codes have no 
bearing on the infant, and are not representative of a neonate with a 
significant problem. The requestor recommended that we change the MS-
DRG logic so that the following seven ICD-9-CM codes would not lead to 
assignment of MS-DRG 794. The requestor recommended that the diagnoses 
be added to the ``only secondary diagnosis'' list under MS-DRG 795 
(Normal newborn) so that the case would be assigned to MS-DRG 795 
(Normal newborn).

 V17.0 (Family history of psychiatric condition)
 V17.2 (Family history of other neurological Diseases)
 V17.49 (Family history of other cardiovascular diseases)
 V18.0 (Family history of diabetes mellitus)
 V18.19 (Family history of other endocrine and metabolic 
diseases)
 V18.8 (Family history of infectious and parasitic diseases)
 V50.3 (Ear piercing)

    In the case of a newborn with one of these diagnosis codes reported 
as a secondary diagnosis, the case would be assigned to MS-DRG 794. The 
commenter believed that any of these seven diagnosis codes (noted 
above), when reported as a secondary diagnosis for a newborn case, 
should be assigned to MS-DRG 795 instead of MS-DRG 794.
    Our clinical advisors reviewed this request and concurred with the 
commenter that the seven ICD-9-CM diagnosis codes noted above should 
not continue to be assigned to MS-DRG 794, as there is no clinically 
usable information reported in those codes identifying significant 
problems. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28017), we proposed to reassign these following seven diagnoses to the 
``only secondary diagnosis list'' under MS-DRG 795 so that the case 
would be assigned to MS-DRG 795.


[[Page 49902]]


 V17.0 (Family history of psychiatric condition)
 V17.2 (Family history of other neurological diseases)
 V17.49 (Family history of other cardiovascular diseases)
 V18.0 (Family history of diabetes mellitus)
 V18.19 (Family history of other endocrine and metabolic 
diseases)
 V18.8 (Family history of infectious and parasitic diseases)
 V50.3 (Ear piercing)

    We invited public comments on this proposal.
    Comment: Several commenters supported the proposal to reassign the 
identified seven diagnoses to the ``only secondary diagnosis'' list 
under MS-DRG 795 so that the case would be assigned to MS-DRG 795.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign the following seven diagnoses to 
the ``only secondary diagnosis list'' under MS-DRG 795 so that the case 
would be assigned to MS-DRG 795:

 V17.0 (Family history of psychiatric condition)
 V17.2 (Family history of other neurological diseases)
 V17.49 (Family history of other cardiovascular diseases)
 V18.0 (Family history of diabetes mellitus)
 V18.19 (Family history of other endocrine and metabolic 
diseases)
 V18.8 (Family history of infectious and parasitic diseases)
 V50.3 (Ear piercing)
8. Medicare Code Editor (MCE) Changes
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in section II.G.1.a. of the preamble of this final 
rule, we developed an ICD-10 version of the current MS-DRGs, which are 
based on ICD-9-CM codes. We refer to this version of the MS-DRGs as the 
ICD-10 MS-DRGs Version 31.0-R. In November 2013, we also posted a 
Definitions of Medicare Code Edits Manual of the ICD-10 MCE Version 
31.0 on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We produced mainframe and computer software for Version 
31.0 of the MS-DRG GROUPER with Medicare Code Editor, which was made 
available to the public in December 2013. Information on ordering the 
mainframe and computer software through NTIS was posted on the CMS Web 
site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRG GROUPER with Medicare Code Editor Version 31.0 computer 
software facilitated additional review of the ICD-10 MS-DRGs 
conversion. We encouraged the public to submit to CMS any comments on 
areas where they believed the ICD-10 MS-DRG GROUPER and MCE did not 
accurately reflect the logic and edits found in the ICD-9-CM MS-DRG 
GROUPER and MCE Version 31.0.
    We also have posted an ICD-10 version of the current MCE, which is 
based on ICD-9-CM codes, and refer to that version of the MCE as the 
ICD-10 MCE Version 31.0-R. Both of these documents are posted on our 
ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We will 
continue to share ICD-10 MS-DRG and MCE conversion activities with the 
public through this Web site.
    In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we 
proposed to remove extracranial-intracranial (EC-IC) bypass surgery 
from the ``Noncovered Procedure'' edit code list for Version 32.0 of 
the MCE. This procedure is identified by ICD-9-CM procedure code 39.28 
(Extracranial-intracranial (EC-IC) vascular bypass).
    Because of the complexity of appropriately classifying the 
circumstances under which the EC-IC bypass surgery may, or may not, be 
considered reasonable and necessary for certain conditions, we proposed 
to remove the MCE ``Noncovered Procedure'' edit for EC-IC bypass 
surgery from the ``Noncovered Procedure'' edit code list for Version 
32.0 of the MCE. We invited public comments on this proposal.
    Comment: Several commenters supported the proposal to remove the 
MCE ``Noncovered Procedure'' edit for EC-IC bypass surgery (procedure 
code 39.28) from the ``Noncovered Procedure'' edit code list for 
Version 32.0 of the MCE. The commenters stated that the proposal was 
reasonable given the information that was provided. Commenters also 
agreed that because of the complexity of appropriately classifying the 
circumstances under which the EC-IC bypass surgery may be considered 
reasonable and necessary for certain conditions, the Medicare 
noncovered procedure edit for EC-IC bypass surgery should be removed.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove procedure code 39.28 (Extracranial-
intracranial (EC-IC) vascular bypass) from the noncovered procedure 
edit effective FY 2015.
9. 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 2015, 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-

[[Page 49903]]

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 
consumption for the surgical class. The surgical classes would then be 
ordered from the class with the highest average resource utilization to 
that with the lowest, with the exception of ``other O.R. procedures'' 
as discussed below.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients 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.
    Based on the changes that we proposed to make for FY 2015, as 
discussed in sections II.G.4.c., II.G.5.a., and II.G.5.c. of the 
preamble of the FY 2015 IPPS/LTCH PPS proposed rule, we proposed to 
revise the surgical hierarchy for MDC 5 (Diseases and Disorders of the 
Circulatory System) and MDC 8 (Diseases and Disorders of the 
Musculoskeletal System and Connective Tissue) as follows:
    In MDC 5, we proposed to sequence proposed new MS-DRG 266 
(Endovascular Cardiac Valve Replacement with MCC) and proposed new MS-
DRG 267 (Endovascular Cardiac Valve Replacement without MCC) above MS-
DRG 222 (Cardiac Defibrillator Implant with Cardiac Catheterization 
with AMI/HF/Shock with MCC).
    In MDC 8, we proposed to delete MS-DRGs 490 (Back & Neck Procedures 
Except Spinal Fusion with CC/MCC or Disc Device/Neurostimulator) and 
MS-DRG 491 (Back & Neck Procedures Except Spinal Fusion without CC/MCC 
or Disc Device/Neurostimulator) from the surgical hierarchy. We 
proposed to sequence proposed new MS-DRG 518 (Back & Neck Procedure 
Except Spinal Fusion with MCC or Disc Device/Neurostimulator), proposed 
new MS-DRG 519 (Back & Neck Procedure Except Spinal Fusion with CC), 
and proposed new MS-DRG 520 (Back & Neck Procedure Except Spinal Fusion 
without CC/MCC) above MS-DRG 492 (Lower Extremity and Humerus Procedure 
Except Hip, Foot, Femur with MCC).
    We invited public comments on our proposals.
    Comment: We did not receive any public comments opposing our 
proposals for the surgical hierarchy. Commenters expressed general 
support for the proposals, noting they were reasonable given the 
information that was provided.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal for MDC 5 to sequence new MS-DRG 266 
(Endovascular Cardiac Valve Replacement with MCC) and new MS-DRG 267 
(Endovascular Cardiac Valve Replacement without MCC) above MS-DRG 222 
(Cardiac Defibrillator Implant with Cardiac Catheterization with AMI/
HF/Shock with MCC). We also are finalizing our proposal for MDC 8 to 
delete MS-DRG 490 (Back & Neck Procedures Except Spinal Fusion with CC/
MCC or Disc Device/Neurostimulator) and MS-DRG 491 (Back & Neck 
Procedures Except Spinal Fusion without CC/MCC or Disc Device/
Neurostimulator) from the surgical hierarchy. We are sequencing new MS-
DRG 518 (Back & Neck Procedure Except Spinal Fusion with MCC or Disc 
Device/Neurostimulator), new MS-DRG 519 (Back & Neck Procedure Except 
Spinal Fusion with CC), and new MS-DRG 520 (Back & Neck Procedure 
Except Spinal Fusion without CC/MCC) above MS-DRG 492 (Lower Extremity 
and Humerus Procedure Except Hip, Foot, Femur with MCC), effective FY 
2015.
10. Changes to the MS-DRG Diagnosis Codes for FY 2015
a. Major Complications or Comorbidities (MCCs) and Complications or 
Comorbidities (CC) Severity Levels for FY 2015
    A complete updated MCC, CC, and Non-CC Exclusion List is available 
via the Internet on the CMS Web site at: http://cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as 
follows:
     Table 6I (Complete MCC list);
     Table 6J (Complete CC list); and
     Table 6K (Complete list of CC Exclusions).
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
    We received a request that we change the severity level for ICD-9-
CM diagnosis code 414.4 (Coronary atherosclerosis due to calcified 
coronary lesion) from a non-CC to an MCC. This issue was previously 
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522) and 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 through 50542).
    We examined claims data from the December 2013 update of the FY 
2013 MedPAR file for ICD-9-CM diagnosis code 414.4. The following chart 
shows our findings.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Cnt 1                     Cnt 2                     Cnt 3
             Code                   Diagnosis description       CC  level      Cnt 1        impact       Cnt 2        impact       Cnt 3        impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.4........................  Coronary atherosclerosis due         Non-CC        1,796         1.16        3,056         2.18        2,835         3.01
                                to calcified lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 49904]]

    We ran the above data as described in the FY 2008 IPPS final rule 
with comment period (72 FR 47158 through 47161). 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.
    The chart above shows that the C1 finding is 1.16. A value close to 
1.0 in the C1 field suggests that the diagnosis produces the same 
expected value as a non-CC. A value close to 2.0 suggests the condition 
is more like a CC than a non-CC, but not as significant in resource 
usage as an MCC. A value close to 3.0 suggests the condition is 
expected to consume resources more similar to an MCC than a CC or a 
non-CC. The C2 finding was 2.18. A C2 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 when there is at least one other secondary 
diagnosis that is a CC but none that is an MCC. While the C1 value of 
1.16 is above the 1.0 value for a non-CC, it does not support 
reclassification to an MCC. As stated earlier, a value close to 3.0 
suggests the condition is expected to consume resources more similar to 
an MCC than a CC or a non-CC. The C2 finding of 2.18 also does not 
support reclassifying this diagnosis code to an MCC. Our clinical 
advisors reviewed the data and evaluated this condition. They 
recommended that we not change the severity level of diagnosis code 
414.4 from a non-CC to an MCC. They did not believe that this diagnosis 
would increase the severity level of patients. They pointed out that a 
similar code, diagnosis code 414.2 (Chronic total occlusion of coronary 
artery), is a non-CC. Our clinical advisors believe that diagnosis code 
414.4 represents patients who are less severe than diagnosis code 
414.2. Considering the C1 and C2 ratings of diagnosis code 414.4 and 
the input from our clinical advisors, in the FY 2015 IPPS/LTCH PPS 
proposed rule, we did not propose to reclassify diagnosis code 414.4 to 
an MCC; the diagnosis code would continue to be considered a non-CC.
    Therefore, based on the data and clinical analysis, we proposed to 
maintain diagnosis code 414.4 as a non-CC. We invited public comments 
on our proposal.
    Comment: Several commenters supported the proposal to keep 
diagnosis code 414.4 as a non-CC. One commenter requested that 
diagnosis code 414.4, when present as a secondary diagnosis, be 
included on the MCC list. The commenter believed that treating 
calcified coronary lesions with atherectomy is underpaid by the 
Medicare program for patients requiring percutaneous coronary 
intervention when calcified coronary lesions prevent successful 
angioplasty and placement of coronary stents. The commenter further 
stated that treating coronary calcification is significantly more 
difficult to treat, requires more time and equipment, and has clinical 
outcomes that are much worse compared to treating noncalcified or 
mildly calcified coronary obstructions. Consequently, the commenter 
believed it costs hospitals more to treat patients with calcified 
coronary lesions and that hospitals should be compensated for their 
expense to treat coronary atherosclerosis in Medicare beneficiaries. 
The commenter recognized the opinion of our clinical advisors that 
patients with a code 414.4 diagnosis are less severe than those with a 
code 414.2 diagnosis, but disagreed with that opinion. The commenter 
believed that both disease states add substantial treatment time and 
costs to the providers, health care systems, and society and both are 
worthy of classification as an MCC.
    Response: We appreciate the commenters' support for our proposal to 
maintain code 414.4 as a non-CC. We are not accepting the commenter's 
recommendation to change this code to an MCC because our clinical data 
do not support such a change. The data continue to support keeping 
diagnosis code 414.4 as a non-CC and do not support changing the code 
to an MCC, for the reasons described above.
    We examined claims data from the December 2013 update of the FY 
2013 MedPAR file for ICD-9-CM diagnosis code 414.2. The following chart 
shows our findings.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Cnt 1                     Cnt 2                     Cnt 3
             Code                   Diagnosis description       CC  level      Cnt 1        impact       Cnt 2        impact       Cnt 3        impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.2........................  Chronic total occlusion of           Non-CC       15,814         1.25       21,483         2.09       19,955         3.04
                                coronary artery.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The chart above for diagnosis code 414.2 shows that the C1 finding 
is 1.25. A value close to 1.0 in the C1 field suggests that the 
diagnosis produces the same expected value as a non-CC. A value close 
to 2.0 suggests the condition is more like a CC than a non-CC, but not 
as significant in resource usage as an MCC. A value close to 3.0 
suggests the condition is expected to consume resources more similar to 
an MCC than a CC or a non-CC. The C2 finding was 2.09. A C2 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 when there is at least one 
other secondary diagnosis that is a CC but none that is an MCC. While 
the C1 value of 1.25 is above the 1.0 value for a non-CC, it does not 
support reclassification to an MCC. As stated earlier, a value close to 
3.0 suggests the condition is expected to consume resources more 
similar to an MCC than a CC or a non-CC. The C2 finding of 2.09 also 
does not support reclassifying this diagnosis code to an MCC.
    Our clinical advisors reviewed the data and evaluated the severity 
level for both diagnosis code 414.4 and 414.2. They continue to 
recommend that we not change the severity level of diagnosis code 414.4 
from a non-CC to an MCC. Furthermore, they recommend that we not change 
the severity level for diagnosis code 414.2. They do not believe that 
the diagnosis represented by either code would increase the severity 
level of patients. After reviewing the commenter's justification for 
changing diagnosis code 414.4 from a non-CC to an MCC, our clinical 
advisors continue to recommend that we not change the severity level of 
diagnosis code 414.4 from a non-CC to an MCC. They again pointed out 
that diagnosis code 414.2 is a similar code and is a non-CC. As noted, 
they also recommend maintaining diagnosis code 414.2 as a non-CC. Our 
clinical advisors continue to believe that diagnosis code 414.4 
represents patients who are less severe than diagnosis code 414.2.
    After consideration of the public comments we received, the C1 and 
C2 ratings in our claims data, and the input from our clinical 
advisors, we are finalizing our proposal to not reclassify diagnosis 
code 414.4 from a non-CC to an MCC; the diagnosis code will continue to 
be considered a non-CC.

[[Page 49905]]

11. Complications or Comorbidity (CC) Exclusions List
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. CC Exclusions List for FY 2015
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) To preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair. As we indicated above, we 
developed a list of diagnoses, using physician panels, to include those 
diagnoses that, when present as a secondary condition, would be 
considered a substantial complication or comorbidity. In previous 
years, we have made changes to the list of CCs, either by adding new 
CCs or deleting CCs already on the list.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; 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.\1\
---------------------------------------------------------------------------

    \1\ We refer readers to the FY 1989 final rule (53 FR 38485, 
September 30, 1988) for the revision made for the discharges 
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR 
36126, September 4, 1990) for the FY 1991 revision; the FY 1992 
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; 
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY 
1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR 
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996 
final rule (60 FR 45782, September 1, 1995) for the FY 1996 
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for 
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final 
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY 
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002 
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for 
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR 
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final 
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the 
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009 
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the 
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR 
51542); the FY 2013 final rule (77 FR 53315); and the FY 2014 final 
rule (78 FR 50541). In the FY 2000 final rule (64 FR 41490, July 30, 
1999), we did not modify the CC Exclusions List because we did not 
make any changes to the ICD-9-CM codes for FY 2000.
---------------------------------------------------------------------------

    In the FY 2015 IPPS/LTCH PPS proposed rule, for FY 2015, we did not 
propose any changes to the CC Exclusion List. Therefore, we did not 
develop or publish Tables 6G (Additions to the CC Exclusion List) or 
Table 6H (Deletions from the CC Exclusion List). We developed Table 6K 
(Complete List of CC Exclusions), which is available only 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 Table 6K, we are not publishing it in the Addendum to this 
final rule. Each of these principal diagnosis codes for which there is 
a CC exclusion is shown 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.
    A complete updated MCC, CC, and Non-CC Exclusions List is available 
via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Because there were no proposed new, revised, or deleted diagnosis 
or procedure codes for FY 2015, we have not 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 Codes) to the 
final rule and they are not published as part of this final rule.
    We did not propose any additions or deletions to the MS-DRG MCC 
List for FY 2015 nor any additions or deletions to the MS-DRG CC List 
for FY 2015. Therefore, as we proposed, for this final rule, we have 
not developed Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions 
to the MCC List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions 
to the CC List), and they are not published as part of this final rule.
    Alternatively, the complete documentation of the GROUPER logic, 
including the current CC Exclusions List, is available from 3M/Health 
Information Systems (HIS), which, under contract with CMS, is 
responsible for updating and maintaining the GROUPER program. The 
current MS-DRG Definitions Manual, Version 31.0, is available on a CD 
for $225.00. This manual may be obtained by writing 3M/HIS at the 
following address: 100 Barnes Road, Wallingford, CT 06492; or by 
calling (203) 949-0303, or by obtaining an order form at the Web site: 
http://www.3MHIS.com. Please specify the revision or revisions 
requested. Version 32.0 of this manual, which includes the final FY 
2015 MS-DRG changes, is available on a CD for

[[Page 49906]]

$225.00. This manual may be obtained by writing 3M/HIS at the address 
provided above; or by calling (203) 949-0303; or by obtaining an order 
form at the Web site at: http://www/3MHIS.com. Please specify the 
revision or revisions requested.
12. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through 
986; and 987 Through 989
    Each year, we review cases assigned to former CMS DRG 468 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and 
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal 
Diagnosis) to determine whether it would be appropriate to change the 
procedures assigned among these CMS DRGs. Under the MS-DRGs that we 
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989 
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively).
    MS-DRGs 981 through 983, 984 through 986, and 987 through 989 
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for 
those cases in which none of the O.R. procedures performed are related 
to the principal diagnosis. These MS-DRGs are intended to capture 
atypical cases, that is, those cases not occurring with sufficient 
frequency to represent a distinct, recognizable clinical group. MS-DRGs 
984 through 986 (previously CMS DRG 476) are assigned to those 
discharges in which one or more of the following prostatic procedures 
are performed and are unrelated to the principal diagnosis:
     60.0 (Incision of prostate);
     60.12 (Open biopsy of prostate);
     60.15 (Biopsy of periprostatic tissue);
     60.18 (Other diagnostic procedures on prostate and 
periprostatic tissue);
     60.21 (Transurethral prostatectomy);
     60.29 (Other transurethral prostatectomy);
     60.61 (Local excision of lesion of prostate);
     60.69 (Prostatectomy, not elsewhere classified);
     60.81 (Incision of periprostatic tissue);
     60.82 (Excision of periprostatic tissue);
     60.93 (Repair of prostate);
     60.94 (Control of (postoperative) hemorrhage of prostate);
     60.95 (Transurethral balloon dilation of the prostatic 
urethra);
     60.96 (Transurethral destruction of prostate tissue by 
microwave thermotherapy);
     60.97 (Other transurethral destruction of prostate tissue 
by other thermotherapy); and
     60.99 (Other operations on prostate).
    All remaining O.R. procedures are assigned to MS-DRGs 981 through 
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those 
discharges in which the only procedures performed are nonextensive 
procedures that are unrelated to the principal diagnosis.\2\
---------------------------------------------------------------------------

    \2\ The original list of the ICD-9-CM procedure codes for the 
procedures we consider nonextensive procedures, if performed with an 
unrelated principal diagnosis, was published in Table 6C in section 
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part 
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final 
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), 
and the FY 1998 final rule (62 FR 45981), we moved several other 
procedures from DRG 468 to DRG 477, and some procedures from DRG 477 
to DRG 468. No procedures were moved in FY 1999, as noted in the 
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY 
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003 
final rule (67 FR 49999), we did not move any procedures from DRG 
477. However, we did move procedure codes from DRG 468 and placed 
them in more clinically coherent DRGs. In the FY 2004 final rule (68 
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 
477 because the procedures are nonextensive. In the FY 2005 final 
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In 
addition, we added several existing procedures to DRGs 476 and 477. 
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and 
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, 
2010, 2011, 2012, 2013, and 2014, no procedures were moved, as noted 
in the FY 2008 final rule with comment period (72 FR 46241), in the 
FY 2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR 
43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012 
final rule (76 FR 51549), in the FY 2013 final rule (77 FR 53321), 
and in the FY 2014 final rule (78 FR 50545).
---------------------------------------------------------------------------

    Our review of MedPAR claims data showed that there were no cases 
that merited movement or should logically be assigned to any of the 
other MDCs. Therefore, for FY 2015, we did not propose to change the 
procedures assigned among these MS-DRGs.
    We did not receive any public comments on our proposal. Therefore, 
as we proposed, we are not making any changes to the procedures 
assigned to MS-DRGs 981 through 983, MS-DRGs 984 through 986, and MS-
DRGs 987 through 989 for FY 2015.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 
Through 989 Into MDCs
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to 
principal diagnosis with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure 
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, 
respectively) on the basis of volume, by procedure, to see if it would 
be appropriate to move procedure codes out of these MS-DRGs into one of 
the surgical MS-DRGs for the MDC into which the principal diagnosis 
falls. The data are arrayed in two ways for comparison purposes. We 
look at a frequency count of each major operative procedure code. We 
also compare procedures across MDCs by volume of procedure codes within 
each MDC.
    We identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical MS-DRGs for the MDC in which the diagnosis falls. 
As noted above, there were no cases that merited movement or that 
should logically be assigned to any of the other MDCs. Therefore, for 
FY 2015, we did not propose to remove any procedures from MS-DRGs 981 
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs 
for the MDC into which the principal diagnosis is assigned.
    We did not receive any public comments on our proposal. Therefore, 
as we proposed, we are not removing any procedures from MS-DRGs 981 
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs 
into which the principal diagnosis is assigned for FY 2015.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    We also annually review the list of ICD-9-CM procedures that, when 
in combination with their principal diagnosis code, result in 
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R. 
procedure unrelated to principal diagnosis with MCC, with CC, or 
without CC/MCC, respectively), and 987 through 989, to ascertain 
whether any of those procedures should be reassigned from one of these 
three MS-DRGs to another of the three MS-DRGs based on average costs 
and the length of stay. We look at the data for

[[Page 49907]]

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.
    There were no cases representing shifts in treatment practice or 
reporting practice that would make the resulting MS-DRG assignment 
illogical, or that merited movement so that cases should logically be 
assigned to any of the other MDCs. Therefore, for FY 2015, we did not 
propose to move any procedure codes among these MS-DRGs.
    We did not receive any public comments on our proposal. Therefore, 
as we proposed, we are not moving any procedure codes among these MS-
DRGs for FY 2015.
c. Adding Diagnosis or Procedure Codes to MDCs
    Based on the review of cases in the MDCs, as described above in 
sections II.G.2. through 7. of the preamble of this final rule, we did 
not propose to add any diagnosis or procedure codes to MDCs for FY 
2015. We did not receive any public comments on our proposal. 
Therefore, as we proposed, we are not adding any diagnosis or procedure 
codes to MDCs for FY 2015.
13. Changes to the ICD-9-CM System
a. ICD-10 Coordination and Maintenance Committee
    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 to be 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 will address updates to the ICD-
10-CM, ICD-10-PCS, and ICD-9-CM 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 above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA), the 
American Hospital Association (AHA), and various physician specialty 
groups, as well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed at the public 
meetings and in writing, the Committee formulates recommendations, 
which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2015 at a public meeting held on September 18-19, 
2013, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 15, 2013.
    The Committee held its 2014 meeting on March 19-20, 2014. 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 2014 would be included in the 
October 1, 2014 update to ICD-10-CM/ICD-10-PCS. For FY 2015, there are 
no new, revised, or deleted ICD-10-CM diagnosis codes or ICD-10-PCS 
procedure codes, and no new, revised, or deleted ICD-9-CM diagnosis or 
procedure codes.
    Copies of the minutes of the procedure codes discussions at the 
Committee's September 18-19, 2013 meeting and March 19-20, 2014 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 
diagnosis codes discussions at the September 18-19, 2013 meeting and 
March 19-20, 2014 meeting are found at: http://www.cdc.gov/nchs/icd/icd9cm.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 ICD-9-CM codes twice a year instead of a single update on 
October 1 of each year. This requirement was included as part of the 
amendments to the Act relating to recognition of new technology under 
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by 
adding a clause (vii) which states that the ``Secretary shall provide 
for the addition of new diagnosis and procedure codes on April 1 of 
each year, but the addition of such codes shall not require the 
Secretary to adjust the payment (or diagnosis-related group 
classification) . . . until the fiscal year that begins after such 
date.'' This requirement improves the recognition of new technologies 
under the IPPS system by providing information on these new 
technologies at an earlier date. Data will

[[Page 49908]]

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. The public decides 
whether or not to attend the meeting based on the topics listed on the 
agenda. Final decisions on code title revisions are currently made by 
March 1 so that these titles can be included in the IPPS proposed rule. 
A complete addendum describing details of all diagnosis and procedure 
coding changes, both tabular and index, is published on the CMS and 
NCHS Web sites in May of each year. Publishers of coding books and 
software use this information to modify their products that are used by 
health care providers. This 5-month time period has proved to be 
necessary for hospitals and other providers to update their systems.
    A discussion of this timeline and the need for changes are included 
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance 
Committee 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 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, 2014 implementation of a 
code at the September 18-19, 2013 Committee meeting. Therefore, there 
were no new codes implemented on April 1, 2014.
    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/icd10cm.html. 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-9-CM 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.
b. Code Freeze
    In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR 
3340), there was a discussion of the need for a partial or total freeze 
in the annual updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS 
codes. The public comment addressed in that final rule stated that the 
annual code set updates should cease l year prior to the implementation 
of ICD-10. The commenters stated that this freeze of code updates would 
allow for instructional and/or coding software programs to be designed 
and purchased early, without concern that an upgrade would take place 
immediately before the compliance date, necessitating additional 
updates and purchases.
    HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any 
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS 
indicated that the issue of consideration of a moratorium on updates to 
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of 
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the 
Committee at a future public meeting.
    The code freeze was discussed at multiple meetings of the ICD-9-CM 
Coordination and Maintenance Committee and public comment was actively 
solicited. The Committee evaluated all comments from participants 
attending the Committee meetings as well as written comments that were 
received. The Committee also considered the delay in implementation of 
ICD-10 until October 1, 2014. There was an announcement at the 
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee 
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be 
implemented as follows:
     The last regular annual update to both ICD-9-CM and ICD-10 
code sets was made on October 1, 2011.
     On October 1, 2012 and October 1, 2013, there will be only 
limited code updates to both ICD-9-CM and ICD-10 code sets to capture 
new technology and new diseases.
     On October 1, 2014, there were to be only limited code 
updates to ICD-10 code sets to capture new technology and diagnoses as 
required by section 503(a) of Public Law 108-173. There were to

[[Page 49909]]

be no updates to ICD-9-CM on October 1, 2014.
     On October 1, 2015, one year after the originally 
scheduled implementation of ICD-10, regular updates to ICD-10 were to 
begin.
    On May 15, 2014, CMS posted an updated Partial Code Freeze schedule 
on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-9-CM-Coordination-and-Maintenance-Committee-Meetings.html. This updated 
schedule provided information on the extension of the partial code 
freeze until 1 year after the implementation of ICD-10. As stated 
earlier, on April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. On May 1, 
2014, the Department announced that it expects to release a interim 
final rule in the near future that will include a new compliance date 
to require the use of ICD-10 beginning October 1, 2015. The rule will 
also require HIPAA covered entities to continue to use ICD-9-CM through 
September 30, 2015. Accordingly, the updated schedule for the partial 
code freeze is as follows:
     The last regular annual updates to both ICD-9-CM and ICD-
10 code sets were made on October 1, 2011.
     On October 1, 2012, October 1, 2013, and October 1, 2014, 
there will be only limited code updates to both the ICD-9-CM and ICD-10 
code sets to capture new technologies and diseases as required by 
section 1886(d)(5)(K) of the Act.
     On October 1, 2015, there will be only limited code 
updates to ICD-10 code sets to capture new technologies and diagnoses 
as required by section 1886(d)(5)(K) of the Act. There will be no 
updates to ICD-9-CM, as it will no longer be used for reporting.
     On October 1, 2016 (1 year after implementation of ICD-
10), regular updates to ICD-10 will begin.
    The ICD-10 (previously ICD-9-CM) Coordination and Maintenance 
Committee announced that it would continue to meet twice a year during 
the freeze. At these meetings, the public will be encouraged to comment 
on whether or not requests for new diagnosis and procedure codes should 
be created based on the need to capture new technology and new 
diseases. Any code requests that do not meet the criteria will be 
evaluated for implementation within ICD-10 one year after the 
implementation of ICD-10, once the partial freeze is ended.
    Complete information on the partial code freeze and discussions of 
the issues at the Committee meetings can be found on the ICD-10 
Coordination and Maintenance Committee Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting, 
along with both written and audio transcripts of this meeting, is 
posted on the Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
    This partial code freeze has dramatically decreased the number of 
codes created each year as shown by the following information.

                   Total Number of Codes and Changes in Total Number of Codes per Fiscal Year
----------------------------------------------------------------------------------------------------------------
                        ICD-9-CM codes                                   ICD-10-CM and ICD-10-PCS codes
----------------------------------------------------------------------------------------------------------------
            Fiscal year                  No.         Change           Fiscal year           No.         Change
----------------------------------------------------------------------------------------------------------------
FY 2009 (October 1, 2008):           ...........  ............  FY 2009:
    Diagnoses......................       14,025          348      ICD-10-CM..........       68,069           +5
    Procedures.....................        3,824           56      ICD-10-PCS.........       72,589      -14,327
FY 2010 (October 1, 2009):           ...........  ............  FY 2010:
    Diagnoses......................       14,315          290      ICD-10-CM..........       69,099       +1,030
    Procedures.....................        3,838           14      ICD-10-PCS.........       71,957         -632
FY 2011 (October 1, 2010):
    Diagnoses......................       14,432          117      ICD-10-CM..........       69,368         +269
    Procedures.....................        3,859           21      ICD-10-PCS.........       72,081         +124
FY 2012 (October 1, 2011):           ...........  ............  FY 2012:
    Diagnoses......................       14,567          135      ICD-10-CM..........       69,833         +465
    Procedures.....................        3,877           18      ICD-10-PCS.........       71,918         -163
FY 2013 (October 1, 2012):           ...........  ............  FY 2013:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,832           -1
    Procedures.....................        3,878            1      ICD-10-PCS.........       71,920           +2
FY 2014 (October 1, 2013):           ...........  ............  FY 2014:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823           -9
    Procedures.....................        3,882            4      ICD-10-PCS.........       71,924           +4
FY 2015 (October 1, 2014):           ...........  ............  FY 2015:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823            0
    Procedures.....................        3,882            0      ICD-10-PCS.........       71,924            0
----------------------------------------------------------------------------------------------------------------

    As mentioned earlier, 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. The 
public has supported only a limited number of new codes during the 
partial code freeze, as can be seen by data shown above. We have gone 
from creating several hundred new codes each year to creating only a 
limited number of new ICD-9-CM and ICD-10 codes.
    At the September 18-19, 2013 and March 19-20, 2014 Committee 
meetings, we discussed any requests we had received for new ICD-10-CM 
diagnosis and ICD-10-PCS procedure codes that were to be implemented on 
October 1, 2014. We did not discuss ICD-9-CM codes. The public was 
given the opportunity to comment on whether or not new ICD-10-CM and 
ICD-10-PCS codes should be created, based on the partial code freeze 
criteria. The public was to use the criteria as to whether codes were 
needed to capture new diagnoses or new technologies. If the codes do 
not meet those criteria for implementation during the partial code 
freeze, consideration was to be given as to whether the codes should be 
created after the partial code freeze ends one year after the 
implementation of ICD-10-CM/PCS. We invited public

[[Page 49910]]

comments on any code requests discussed at the September 18-19, 2013 
and March 19-20, 2014 Committee meetings for implementation as part of 
the October 1, 2014 update. The deadline for commenting on code 
proposals discussed at the September 18-19, 2013 Committee meeting was 
November 15, 2013. The deadline for commenting on code proposals 
discussed at the March 19-20, 2014 Committee meeting was April 18, 
2014.
14. Public Comments on Issues Not Addressed in the Proposed Rule
    We received three public comments regarding MS-DRG issues that were 
outside of the scope of the proposals included in the FY 2014 IPPS/LTCH 
PPS proposed rule. Below we summarize these public comments. However, 
because we consider these public comments to be outside of the scope of 
the proposed rule, we are not responding to them in this final rule. As 
stated in section II.G.1.b. of the preamble of this final rule, we 
encourage individuals with comments about MS-DRG classifications to 
submit these comments no later than December 7 of each year so they can 
be considered for possible inclusion in the annual proposed rule and, 
if included, may be subjected to public review and comment. We will 
consider these public comments for possible proposals in future 
rulemaking as part of our annual review process.
a. Request for Review and MS-DRG Reassignment for ICD-9-CM Diagnosis 
Code 784.7 Reported With Procedure Codes 39.75 and 39.76
    One commenter expressed concern regarding specific procedure codes 
that are assigned to MS-DRGs 981 through 983; 984 through 986; and 987 
through 989 in relation to our discussion of the annual review of these 
MS-DRGs in section II.G.12. of the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28020). The commenter noted that the endovascular embolization 
of the arteries of the branches of the internal maxillary artery is 
frequently performed for intractable posterior epistaxis. The commenter 
stated that, currently, diagnosis code 784.7 (Epistaxis) reported with 
procedure codes 39.75 (Endovascular embolization or occlusion of 
vessel(s) of head or neck using bare coils) and 39.76 (Endovascular 
embolization or occlusion of vessel(s) of head or neck using bioactive 
coils) groups to MS-DRG 981(Extensive O.R. Procedure Unrelated to 
Principal Diagnosis with MCC), MS-DRG 982 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with CC), and MS-DRG 983 (Extensive 
O.R. Procedure Unrelated to Principal Diagnosis without CC/MCC). The 
commenter indicated that it also found this grouping with ICD-10 
diagnosis code R04.0 (Epistaxis) reported with artery occlusion 
procedure codes. The commenter requested that CMS review these 
groupings and consider the possibility of reassigning these procedure 
codes into a more specific MS-DRG.
    We consider this public comment to be outside of the scope of the 
FY 2015 IPPS/LTCH PPS proposed rule and therefore are not addressing it 
in this final rule. However, we will consider this public comment for 
possible proposals in future rulemaking as part of our annual review 
process.
b. Coding for Extracorporeal Membrane Oxygenation Procedures (ECMO)
    Several commenters expressed concern that hospitals may not be 
correctly reporting extracorporeal membrane oxygenation (ECMO) and 
percutaneous cardiopulmonary bypass procedures. The commenters 
requested that CMS inform hospitals that they should appropriately code 
each procedure separately because each code captures different 
procedures.
    We consider this coding issue to be outside of the scope of the FY 
2015 IPPS/LTCH PPS proposed rule. We refer commenters to the American 
Hospital Association's Central Office on Coding, which has 
responsibility for providing coding advice on such specific coding 
issues through its publication Coding Clinic.
c. Adding Severity Levels to MS-DRGs 245 through 251
    One commenter recommended including additional severity levels 
under MS-DRG 245 (AICD Generator Procedures); MS-DRG 246 (Percutaneous 
Cardiovascular Procedure with Drug-Eluting Stent with MCC or 4+ 
Vessels/Stents); MS-DRG 247 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent without MCC); MS-DRG 248 (Percutaneous 
Cardiovascular Procedure with Non-Drug-Eluting Stent with MCC or 4+ 
Vessels/Stents); MS-DRG 249 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent without MCC); MS-DRG 250 (Percutaneous 
Cardiovascular Procedure without Coronary Artery Stent with MCC); and 
MS-DRG 251 (Percutaneous Cardiovascular Procedure without Coronary 
Artery Stent without MCC).
    We consider this public comment to be outside of the scope of the 
FY 2015 IPPS/LTCH PPS proposed rule, and therefore are not addressing 
it in this final rule. However, we will consider the comment for 
possible proposals in future rulemaking as part of our annual review 
process.

H. Recalibration of the FY 2015 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights
    In developing the FY 2015 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 2013 MedPAR data used in this final rule include 
discharges occurring on October 1, 2012, through September 30, 2013, 
based on bills received by CMS through March 31, 2014, 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 under 
section 1814(b)(3) of the Act). The FY 2013 MedPAR file used in 
calculating the relative weights includes data for approximately 
10,090,385 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 March 31, 2014 update of the FY 2013 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 relative weights for FY 2015 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 FY 2015 
relative weights are based on the ICD-9-CM diagnoses and procedures 
codes from the MedPAR

[[Page 49911]]

claims data, grouped through the ICD-9-CM version of the FY 2015 
GROUPER (Version 32). 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 March 31, 2014 update of the FY 2012 HCRIS for calculating the 
FY 2015 cost-based relative weights.
2. Methodology for Calculation of the Relative Weights
    As we explain in section II.E.2. of the preamble of this final 
rule, we are calculating the FY 2015 relative weights based on 19 CCRs, 
as we did for FY 2014. The methodology we used to calculate the FY 2015 
MS-DRG cost-based relative weights based on claims data in the FY 2013 
MedPAR file and data from the FY 2012 Medicare cost reports is as 
follows:
     To the extent possible, all the claims were regrouped 
using the FY 2015 MS-DRG classifications discussed in sections II.B. 
and II.G. of the preamble of this final rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2012 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is necessary to subtract the acquisition charges from 
the total charges on each transplant bill that showed acquisition 
charges before computing the average cost for each MS-DRG and before 
eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $10.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
special equipment charges, therapy services charges, operating room 
charges, cardiology charges, laboratory charges, radiology charges, 
other service charges, labor and delivery charges, inhalation therapy 
charges, emergency room charges, blood charges, and anesthesia charges 
were also deleted.
     At least 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. (We refer readers to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50551) for the edit threshold related to FY 2014 and prior 
fiscal years).
     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.
    Once the MedPAR data were trimmed and the statistical outliers were 
removed, the charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. These charges were then adjusted to cost by applying the 
national average CCRs developed from the FY 2012 cost report data.
    The 19 cost centers that we used in the relative weight calculation 
are shown in the following table. The table shows the lines on the cost 
report and the corresponding revenue codes that we used to create the 
19 national cost center CCRs.

[[Page 49912]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Cost from  HCRIS     Charges from  HCRIS     Medicare  charges
                                                   Revenue codes                      (Worksheet C,  Part    (Worksheet C,  Part        from  HCRIS
 Cost center  group name  (19    MedPAR charge     contained in       Cost report      1,  Column 5  and    1,  Column 6 & 7  and     (Worksheet D-3,
            total)                   field        MedPAR  charge   line description   line  number)  Form    line  number)  Form   Column & line number)
                                                       field                              CMS-2552-10            CMS-2552-10         Form  CMS-2552-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
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-019X.
                               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...  Electro-          C--1--C5--69.........  C--1--C6--69           D3--HOS--C2--69
                                Charges.                            cardiology.
                                                                                                            C--1--C7--69
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.

[[Page 49913]]

 
                                                                                                            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......  Electro-          C--1--C5--70.........  C--1--C6--70           D3--HOS--C2--70
                                                                    Encephalography.
                                                                                                            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                              C--1--C7--62
                                                                    Blood Cells.
                               Blood Storage/    039x............  Blood Storing,    C--1--C5--63.........  C--1--C6--63           D3--HOS--C2--63
                                Processing.                         Processing, &                           C--1--C7--63
                                                                    Transfusing.
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
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 49914]]

    We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 
48462) for a discussion on the revenue codes included in the Supplies 
and Equipment and Implantable Devices CCRs, respectively.
3. Development of National Average CCRs
    We developed the national average CCRs as follows:
    Using the FY 2012 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 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 relative weight.
    The FY 2015 cost-based relative weights were then normalized by an 
adjustment factor of 1.645837 so that the average case weight after 
recalibration was equal to the average case weight before 
recalibration. The normalization adjustment is intended to ensure that 
recalibration by itself neither increases nor decreases total payments 
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
    The 19 national average CCRs for FY 2015 are as follows:

------------------------------------------------------------------------
                             Group                                 CCR
------------------------------------------------------------------------
Routine Days...................................................    0.489
Intensive Days.................................................    0.407
Drugs..........................................................    0.192
Supplies & Equipment...........................................    0.292
Implantable Devices............................................    0.349
Therapy Services...............................................    0.344
Laboratory.....................................................    0.128
Operating Room.................................................    0.212
Cardiology.....................................................    0.123
Cardiac Catheterization........................................    0.133
Radiology......................................................    0.165
MRIs...........................................................    0.087
CT Scans.......................................................    0.043
Emergency Room.................................................    0.195
Blood and Blood Products.......................................    0.360
Other Services.................................................    0.405
Labor & Delivery...............................................    0.398
Inhalation Therapy.............................................    0.181
Anesthesia.....................................................    0.114
------------------------------------------------------------------------

    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. In the FY 2015 IPPS/LTCH PPS proposed 
rule, we proposed to use that same case threshold in recalibrating the 
MS-DRG relative weights for FY 2015. Using data from the FY 2013 MedPAR 
file, there were 8 MS-DRGs that contain fewer than 10 cases. Under the 
MS-DRGs, we have fewer low-volume DRGs than under the CMS DRGs because 
we no longer have separate DRGs for patients aged 0 to 17 years. With 
the exception of newborns, we previously separated some DRGs based on 
whether the patient was age 0 to 17 years or age 17 years and older. 
Other than the age split, cases grouping to these DRGs are identical. 
The DRGs for patients aged 0 to 17 years generally have very low 
volumes because children are typically ineligible for Medicare. In the 
past, we have found that the low volume of cases for the pediatric DRGs 
could lead to significant year-to-year instability in their relative 
weights. Although we have always encouraged non-Medicare payers to 
develop weights applicable to their own patient populations, we have 
received frequent complaints from providers about the use of the 
Medicare relative weights in the pediatric population. We believe that 
eliminating this age split in the MS-DRGs will provide more stable 
payment for pediatric cases by determining their payment using adult 
cases that are much higher in total volume. Newborns are unique and 
require separate MS-DRGs that are not mirrored in the adult population. 
Therefore, it remains necessary to retain separate MS-DRGs for 
newborns. All of the low-volume MS-DRGs listed below are for newborns. 
In FY 2015, because we do not have sufficient MedPAR data to set 
accurate and stable cost relative weights for these low-volume MS-DRGs, 
we proposed to compute relative weights for the low-volume MS-DRGs by 
adjusting their final FY 2014 relative weights by the percentage change 
in the average weight of the cases in other MS-DRGs. The crosswalk 
table is shown below:

------------------------------------------------------------------------
Low[dash]volume MS-DRG       MS-DRG title         Crosswalk to MS-DRG
------------------------------------------------------------------------
768...................  Vaginal Delivery with  Final FY 2014 relative
                         O.R. Procedure         weight (adjusted by
                         Except Sterilization   percent change in
                         and/or D&C.            average weight of the
                                                cases in other MS-DRGs).
789...................  Neonates, Died or      Final FY 2014 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 2014 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 2014 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
792...................  Prematurity without    Final FY 2014 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
793...................  Full-Term Neonate      Final FY 2014 relative
                         with Major Problems.   weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).

[[Page 49915]]

 
794...................  Neonate with Other     Final FY 2014 relative
                         Significant Problems.  weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
795...................  Normal Newborn.......  Final FY 2014 relative
                                                weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
------------------------------------------------------------------------

    We did not receive any public comments on this proposal and, 
therefore, are finalizing it for FY 2015 as proposed.
4. Bundled Payments for Care Improvement (BPCI) Initiative
    The Bundled Payments for Care Improvement (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. 
On January 31, 2013, CMS announced the health care organizations 
selected to participate in the BPCI initiative. For additional 
information on 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) for a discussion on the BPCI initiative.
    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 BPCI initiative the same as prior fiscal years for the IPPS 
payment modeling and ratesetting process without regard to a hospital's 
participation within these bundled payment models (that is, as if a 
hospital were not participating in those models under the BPCI 
initiative). Therefore, for FY 2015, we proposed 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.
    Comment: One commenter was concerned about the policy to treat all 
providers that participate in the BPCI initiative the same as prior 
fiscal years for the IPPS payment modeling and ratesetting process 
without regard to a hospital's participation within these bundled 
payment models. The commenter stated that while it is unlikely to have 
a demonstrable effect in FY 2015, the BPCI initiative has just begun 
and has few participants compared to the total number of PPS hospitals. 
The commenter further stated that the cohort is expected to expand 
dramatically, given the additional round of applications, and it 
expected participants to focus their cost reduction activities in 
select MS-DRGs, which could skew specific weights and inappropriately 
shift payments to other MS-DRGs. The commenter added that providers 
that are not part of the initiative cannot be expected to reach the 
same performance levels without the same tools available within the 
BPCI. The commenter recommended that CMS reconsider removing BPCI 
participants from the IPPS relative weight setting process.
    Response: As the commenter stated, the BPCI initiative is unlikely 
to have a demonstrable effect for FY 2015. Accordingly, we are 
finalizing our proposal 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 for FY 2015. 
However, we will monitor the possible impact that hospitals enrolled in 
the BPCI initiative may have on the MS-DRG relative weights in future 
fiscal years.

I. Add-On Payments for New Services and Technologies

1. Background
    Sections 1886(d)(5)(K) and (L) of the Act establish a process of 
identifying and ensuring adequate payment for new medical services and 
technologies (sometimes collectively referred to in this section as 
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the 
Act specifies that a medical service or technology will be considered 
new if it meets criteria established by the Secretary after notice and 
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act 
specifies that a new medical service or technology may be considered 
for new technology add-on payment if, ``based on the estimated costs 
incurred with respect to discharges involving such service or 
technology, the DRG prospective payment rate otherwise applicable to 
such discharges under this subsection is inadequate.'' We note that 
beginning with 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 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, it may not 
necessarily be considered ``new'' for purposes of new technology add-on 
payments if it is ``substantially similar'' to a technology that was 
approved by FDA and has been on the market for more than 2 to 3 years. 
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our 
policy regarding substantial similarity in detail.
    Under the second criterion, Sec.  412.87(b)(3) further provides 
that, to be eligible for the add-on payment for

[[Page 49916]]

new medical services or technologies, the MS-DRG prospective payment 
rate otherwise applicable to the discharge involving the new medical 
services or technologies must be assessed for adequacy. Under the cost 
criterion, to assess the adequacy of payment for a new technology paid 
under the applicable MS-DRG prospective payment rate, we evaluate 
whether the charges for cases involving the new technology exceed 
certain threshold amounts. Table 10 that was released with the FY 2014 
IPPS/LTCH PPS final rule contains the final thresholds that we use to 
evaluate applications for new technology add-on payments for FY 2015. 
We refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2014-IPPS-Final-Rule-Home-Page.html for a complete viewing of Table 10 from the FY 2014 
IPPS/LTCH PPS final rule.
    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 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 (if the 
estimated costs for the case including the new technology exceed 
Medicare's payment); or (2) 50 percent of the difference between the 
full DRG payment and the hospital's estimated cost for the case. Unless 
the discharge qualifies for an outlier payment, the additional Medicare 
payment is limited to the full MS-DRG payment plus 50 percent of the 
estimated costs of the new technology.
    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 also 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 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 (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 claims-payment contractors (in 
the case of local coverage and payment decisions). The CTI supplements, 
rather than replaces, these processes by working to assure that all of 
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to 
streamline, accelerate, and improve coordination of these processes to 
ensure that they remain up to date as new issues arise. To achieve its 
goals, the CTI works to streamline and create a more transparent coding 
and payment process, improve the quality of medical decisions, and 
speed patient access to effective new treatments. It is also dedicated 
to supporting better decisions by patients and doctors in using 
Medicare-covered services through the promotion of better evidence 
development, which is critical for improving the quality of care for 
Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is 
available on the CMS Web site at: http://www.cms.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 
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 2016 must submit a

[[Page 49917]]

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 2016, 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 2015 prior 
to publication of the FY 2015 IPPS/LTCH PPS proposed rule, we published 
a document in the Federal Register on November 29, 2013 (78 FR 71555 
through 71557), and held a town hall meeting at the CMS Headquarters 
Office in Baltimore, MD, on February 12, 2014. In the announcement 
notice for the meeting, we stated that the opinions and alternatives 
provided during the meeting would assist us in our evaluations of 
applications by allowing public discussion of the substantial clinical 
improvement criterion for each of the FY 2015 new medical service and 
technology add-on payment applications before the publication of the FY 
2015 proposed rule.
    Approximately 91 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: http://www.youtube.com/watch?v=WXyR_TILfKo&list=TLiu1B_AxXsinTW6EEn4BVUdR4iEM61eV4. 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 January 21, 2014, in our evaluation of the 
new technology add-on payment applications for FY 2015 in the proposed 
rule.
    In response to the published document and the New Technology Town 
Hall meeting, we received written comments regarding the applications 
for FY 2015 new technology add-on payments. We summarized these 
comments in the preamble of the proposed rule or, if applicable, 
indicated that there were no comments received, at the end of each 
discussion of the individual applications in the proposed rule.
    A number of attendees at the New Technology Town Hall meeting 
provided comments that were unrelated to the ``substantial clinical 
improvement'' criterion. As explained above and in the Federal Register 
document announcing the New Technology Town Hall meeting (78 FR 71555 
through 71557), 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 2015. Therefore, we did 
not summarize those comments in the proposed rule. Commenters were 
informed that they were welcome to resubmit these comments during the 
comment period in response to proposals presented in the proposed rule. 
We summarize and respond to these comments under the applicable 
discussions within this final rule.
    We also received public comments in response to the proposed rule 
relating to topics such as marginal cost factors for new technology 
add-on payments, mapping new technologies to the appropriate MS-DRG, 
deeming a new technology a substantial clinical improvement if it 
receives HDE approval from the FDA, and the use of external data in 
determining the cost threshold. Because we did not request public 
comments nor propose to make any changes to any of the issues above, we 
are not summarizing these public comments nor responding to them in 
this final rule.
    Another commenter asked CMS to consider the implications of the new 
technology add-on payment policy on antibiotics that fall under the 
current IPPS and, in particular, the Hospital VBP Program for which the 
inclusion of the MRSA bacteremia measure and the C-difficile measure 
are proposed. The commenter was concerned that current payment policy 
will be inadequate and place further financial pressure on hospitals. 
The commenter stated that CMS must consider the evolving payment 
paradigm facing inpatient facilities (IQR, HAC, and VBP) and ensure 
that these various policies do not have competing goals. Although we 
agree with the commenter that CMS should consider the evolving payment 
paradigm facing inpatient facilities regarding payment reductions under 
the Hospital IQR Program, the HAC Reduction Program, and the Hospital 
VBP Program and ensure that these various policies do not have 
competing goals, we are not providing a detailed response because we 
did not present any policy proposals concerning these issues.
    Comment: One commenter expressed concern that services identified 
as appropriate for new technology add-on payments do not receive the 
new technology add-on payment even when the claims for these services 
are correctly submitted to the Medicare administrative contractors 
(MACs). The commenter stated that the MACs are often unable to explain 
the reason for the failure to include the new technology add-on payment 
or answer inquiries regarding this issue. The commenter recommended 
that CMS provide additional education to the MACs regarding CMS 
regulations related to services available for new technology add-on 
payments.
    Response: We encourage providers to work with their MACs to ensure 
that the

[[Page 49918]]

new technology add-on payments are accurately and appropriately made. 
If MACs are having any issues, they can contact the CMS Central Office 
for further assistance. Also, the regulations at Sec.  412.88 explain 
how the new technology add-on payments are made. We note that, under 
certain conditions, even if an approved new technology was billed on 
the claim, a new technology add-on payment may not be made, such as if 
the total payment for the claim without the new technology add-on 
payment exceeds the costs of the case. In addition, each year after the 
final rule, CMS issues a transmittal to the MACs listing the 
eligibility and maximum add-on payment for each approved new 
technology.
3. FY 2015 Status of Technologies Approved for FY 2014 Add-On Payments
a. Glucarpidase (Trade Brand Voraxaze[supreg])
    BTG International, Inc. submitted an application for new technology 
add-on payments for Glucarpidase (trade brand Voraxaze[supreg]) for FY 
2013. Glucarpidase is used in the treatment of patients who have been 
diagnosed with toxic methotrexate (MTX) concentrations as of result of 
renal impairment. The administration of Glucarpidase causes a rapid and 
sustained reduction of toxic MTX concentrations.
    Voraxaze[supreg] was approved by the FDA on January 17, 2012. 
Beginning in 1993, certain patients could obtain expanded access for 
treatment use to Voraxaze[supreg] as an investigational drug. Since 
2007, the applicant has been authorized to recover the costs of making 
Voraxaze[supreg] available through its expanded access program. We 
describe expanded access for treatment use of investigational drugs and 
authorization to recover certain costs of investigational drugs in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). 
Voraxaze[supreg] was available on the market in the United States as a 
commercial product to the larger population as of April 30, 2012. In 
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we 
expressed concerns about whether Voraxaze[supreg] could be considered 
new for FY 2013. After consideration of all of the public comments 
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we 
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which 
is the date of market availability.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for Voraxaze[supreg] 
and consideration of the public comments we received in response to the 
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for 
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg] 
are identified with ICD-9-CM procedure code 00.95 (Injection or 
infusion of glucarpidase). The cost of Voraxaze[supreg] is $22,500 per 
vial. The applicant stated that an average of four vials is used per 
Medicare beneficiary. Therefore, the average cost per case for 
Voraxaze[supreg] is $90,000 ($22,500 x 4). Under Sec.  412.88(a)(2), 
new technology add-on payments are limited 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 Voraxaze[supreg] is $45,000 per case.
    As stated above, the new technology add-on payment regulations 
provide 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 (Sec.  412.87(b)(2)). 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 on the market occurs in 
the latter half of the fiscal year (70 FR 47362).
    With regard to the newness criterion for Voraxaze[supreg], as 
stated above, we consider the beginning of the newness period to 
commence when Voraxaze[supreg] was first available on the market on 
April 30, 2012. Because the 3-year anniversary date for 
Voraxaze[supreg] will occur in the latter half of FY 2015 (April 30, 
2015), we proposed to continue new technology add-on payments for this 
technology for FY 2015.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on this proposal.
    Comment: Several public commenters supported the proposal to 
continue new technology add-on payments for Voraxaze[supreg] for FY 
2015.
    Response: We appreciate the commenters' support. Because the 3-year 
anniversary date for Voraxaze[supreg] will occur in the latter half of 
FY 2015 (April 30, 2015), we are finalizing our proposal to continue to 
make new technology add-on payments for Voraxaze[supreg] for FY 2015.
b. DIFICIDTM (Fidaxomicin) Tablets
    Optimer Pharmaceuticals, Inc. submitted an application for new 
technology add-on payments for FY 2013 for the use of 
DIFICIDTM tablets. As indicated on the labeling submitted to 
the FDA, the applicant noted that Fidaxomicin is taken twice a day as a 
daily dosage (200 mg tablet twice daily = 400 mg per day) as an oral 
antibiotic. The applicant asserted that Fidaxomicin provides potent 
bactericidal activity against C. Diff., and moderate bactericidal 
activity against certain other gram-positive organisms, such as 
enterococcus and staphylococcus. Unlike other antibiotics used to treat 
CDAD, the applicant noted that the effects of Fidaxomicin preserve 
bacteroides organisms in the fecal flora. These are markers of normal 
anaerobic microflora. The applicant asserted that this helps prevent 
pathogen introduction or persistence, which potentially inhibits the 
re-emergence of C. Diff., and reduces the likelihood of overgrowths as 
a result of vancomycin-resistant Enterococcus (VRE). Because of this 
narrow spectrum of activity, the applicant asserted that Fidaxomicin 
does not alter this native intestinal microflora.
    In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through 
27941), we expressed concern that DIFICIDTM may not be 
eligible for new technology add-on payments because eligibility is 
limited to new technologies associated with procedures described by 
ICD-9-CM codes. We further stated that drugs that are only taken orally 
(such as DIFICIDTM) may not be eligible for consideration 
for new technology add-on payments because there is no procedure 
associated with these drugs and, therefore, no ICD-9-CM code(s). In the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53350 through 53358), after 
consideration of the public comments received, we revised our policy to 
allow the use of National Drug Codes (NDCs) to identify oral 
medications that have no inpatient procedure for the purposes of new 
technology add-on payments. The revised policy is effective for 
payments for discharges occurring on or after October 1, 2012. We refer 
readers to the FY 2013 IPPS/LTCH PPS final rule for a complete 
discussion on this issue.
    With regard to the newness criterion, Fidaxomicin was approved by 
the FDA on May 27, 2011, for the treatment of CDAD in adult patients, 
18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we 
established that the beginning of the newness period for this 
technology is its FDA approval date of May 27, 2011.

[[Page 49919]]

    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
DIFICIDTM and consideration of the public comments we 
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we 
approved DIFICIDTM for new technology add-on payments for FY 
2013. Cases of DIFICIDTM are identified with ICD-9-CM 
diagnosis code 008.45 (Intestinal infection due to Clostridium 
difficile) in combination with NDC code 52015-0080-01. Providers must 
report the NDC on the 837i Health Care Claim Institutional form (in 
combination with ICD-9-CM diagnosis code 008.45) in order to receive 
the new technology add-on payment. According to the applicant, the cost 
of DIFICIDTM is $2,800 for a 10-day dosage. The average cost 
per day for DIFICIDTM is $280 ($2,800/10). Cases of 
DIFICIDTM within the inpatient setting typically incur an 
average dosage of 6.2 days, which results in an average cost per case 
for DIFICIDTM of $1,736 ($280 x 6.2). Under Sec.  
412.88(a)(2), new technology add-on payments are limited 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 DIFICIDTM is 
$868.
    As stated above, the new technology add-on payment regulations 
provide 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 (Sec.  412.87(b)(2)).
    The manufacturer commented through a letter to CMS, prior to the 
publication of the proposed rule, requesting that CMS extend the 
eligibility for a third year of new technology add-on payments for 
DIFICIDTM in FY 2015. The manufacturer maintained that the 
technology still meets all three criteria for new technology add-on 
payments. Regarding the substantial clinical improvement criterion, the 
applicant stated that DIFICIDTM continues to remain the only 
FDA-approved treatment to demonstrate substantial clinical improvement 
over existing therapies. No new treatments for CDAD have been approved 
by the FDA since DIFICIDTM. The applicant further stated 
that a third year of new technology add-on payments for 
DIFICIDTM would continue to reduce access barriers in the 
acute care hospital inpatient setting, which would support the 
appropriate use of DIFICIDTM, a treatment that offers a 
substantial clinical improvement over existing therapies.
    With respect to the cost criterion, the applicant stated that 
DIFICIDTM continues to meet the cost criterion. Using claims 
data from the FY 2012 MedPAR file, the applicant provided updated data 
from the two analyses described in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53350 through 53358), and demonstrated that the average case-
weighted standardized charge per case exceeded the average case-
weighted thresholds under both analyses. The applicant stated that the 
new technology add-on payment is intended to offer additional payments 
to support patient access and appropriate use of new technologies for a 
period of time until the MS-DRGs are adjusted to reflect the cost of 
the new technology. The applicant believed that the analyses conducted 
with the most recent MedPAR claims data available demonstrate that the 
MS-DRG recalibrations are insufficient to accommodate the cost 
associated with CDAD and new technologies to treat CDAD under the IPPS 
within the allotted timeframe of 2 years. According to the applicant, 
these payment amounts remain an obstacle for the appropriate use of new 
technologies for CDAD that demonstrate substantial clinical improvement 
over existing treatments, such as DIFICIDTM. The applicant 
concluded that a third year of new technology add-on payments for 
DIFICIDTM is needed to allow sufficient data for future MS-
DRG recalibration analyses.
    With regard to newness criterion, the manufacturer commented that 
it believed that the technology still meets the newness criterion for 
the following reason: Sec.  412.87(b)(2) states 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 
International Classification of Diseases, Ninth Revision, Clinical 
Modification (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.'' The manufacturer noted that DIFICIDTM was 
not assigned an ICD-9-CM procedure code and DIFICIDTM is the 
first product for which no inpatient procedure is associated to receive 
a new technology add-on payment since the implementation of the new 
technology add-on payment policy.
    The manufacturer also cited the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53352), which indicated that ``Hospitals currently code and 
report procedures and more invasive services such as surgeries, 
infusion of drugs, and specialized procedures such as cardiac 
catheterizations. Hospitals neither code nor report self-administered 
drugs.'' Therefore, the manufacturer contended that, as an oral 
therapy, neither DIFICIDTM nor its administration was 
assigned an ICD-9-CM procedure code and, therefore, the technology 
should still be eligible for the new technology add-on payments.
    The manufacturer further noted that, in the FY 2013 IPPS/LTCH PPS 
final rule, because an ICD-9-CM procedure code for the administration 
of an oral medication did not exist and hospitals had no other 
mechanism to report the use of DIFICIDTM, for FY 2013, CMS 
instructed hospitals to report the DIFICIDTM NDC on hospital 
inpatient claims to receive the new technology add-on payment for 
DIFICIDTM. Prior to October 1, 2012, hospitals did not use 
NDCs on hospital inpatient claims, which prevented CMS from isolating 
DIFICIDTM cases and their associated costs. The manufacturer 
further stated that the NDC methodology was a bold change in policy and 
inpatient billing processes, and it stands to reason that, because of 
hospitals unfamiliarity with reporting NDCs on inpatient claims, 
hospitals' use of the DIFICIDTM NDC would greatly lag behind 
the traditional use of ICD-9-CM procedure codes. As such, the 
manufacturer reasoned that any lag in hospital reporting would directly 
impact CMS' ability to track and analyze the cost data associated with 
DIFICIDTM cases.
    The manufacturer also noted that on August 31, 2012, CMS issued 
Transmittal 2539, which is a change request for MACs concerning updates 
for the upcoming fiscal year. The manufacturer stated that because the 
new technology add-on heading was omitted in the transmittal, this 
change request did not highlight the NDC billing approach to ensure 
that hospitals recognized the important change, which may have caused 
hospitals to overlook the claim reporting instructions for 
DIFICIDTM.
    The manufacturer added that Transmittal 2539 and a Medicare 
Learning Network[supreg] Matters (MLN) article were rescinded and 
replaced by Transmittal 2627 on January 4, 2013. The manufacturer noted 
that among CMS' reasons for replacing the transmittal was to insert the 
omitted

[[Page 49920]]

new technology add-on section heading. The manufacturer stated that, 
although the original transmittal further supports that collection of 
DIFICIDTM-specific data did not begin until at least October 
1, 2012, CMS' reissuance of the claims processing instructions, and the 
missing header in the initial instructions, effectively delayed 
implementation of the new technology add-on payments for 3 months past 
the October 2012 beginning date. The manufacturer also believed that 
the need to replace the transmittal underlies hospitals' difficulties 
instituting claims' reporting instructions to receive new technology 
add-on payments for DIFICIDTM at the hospital level.
    The manufacturer noted that anecdotal feedback from hospitals, 
which was shared with CMS during a meeting in June 2013, suggests that 
some hospitals faced challenges implementing the appropriate billing 
and coding processes. The manufacturer was concerned that that these 
challenges were, in part, caused by the missing header, and that these 
challenges may have impacted whether eligible cases were properly 
billed and coded to receive the new technology add-on payment for 
DIFICIDTM. The manufacturer was further concerned that the 
effects of any lag or delay caused by unfamiliarity with reporting NDCs 
and the missing header would also impact the data available to CMS to 
recalibrate the MS-DRGs and, separately, to evaluate the impact of the 
new technology add-on payment for DIFICIDTM. The 
manufacturer further explained that, while DIFICIDTM was 
available to hospitals after its launch in July 2011, hospitals had no 
experience reporting NDCs until October 2012, and may not have 
recognized the opportunity to, or understood the mechanism for doing 
so, until after January 2013. For the purposes of inpatient data 
collection and ratesetting, the manufacturer believed that this meant 
that 2 complete years of DIFICIDTM costs would not be fully 
reflected in the Medicare claims data for the FY 2015 MS-DRG 
recalibrations.
    The manufacturer also analyzed the 100 percent sample of the 
Standard Analytical File (SAF) for CY 2012, which contained first 
quarter claims data for FY 2013, the first 3 months that 
DIFICIDTM was eligible for the new technology add-on 
payments. The manufacturer found a total of 43,608 cases with a 
diagnosis of CDI. Of these 43,608 cases, the manufacturer found 38 
cases across 26 hospitals that reported new technology add-on payments 
for DIFICIDTM on submitted claims. The manufacturer stated 
that this preliminary data suggests that the number of cases available 
for MS-DRG recalibrations for FY 2015 is limited. The manufacturer 
stated that it is currently attempting to secure FY 2013 MedPAR claims 
data and that it will likely provide further insights on these issues.
    In addition, the manufacturer noted that prior new technology add-
on payment application approvals have involved technologies with much 
narrower patient populations compared to DIFICIDTM, allowing 
the costs of those technologies to influence the MS-DRG relative 
payment weights for the small number of MS-DRGs with which they are 
associated. The manufacturer explained that, unlike other technologies 
approved for new technology add on payments, the DIFICIDTM 
therapeutic value, while limited to patients with CDAD, is used in 
patients across a wide range of MS-DRGs due to it being reported as a 
secondary diagnosis in two-thirds of the cases compared to other 
technologies, which are assigned to a relatively small number of MS-
DRGs. For example, cases involving the Spiration IBV[supreg] Valve 
System, which was granted approval for new technology add-on payments 
in FY 2010, primarily mapped to three MS-DRGs: 163 (Major Chest 
Procedures with MCC); 164 (Major Chest Procedures with CC); and 165 
(Major Chest Procedures without CC/MCC). In its analysis of the FY 2012 
MedPAR data for the cost criterion, the manufacturer found cases using 
DIFICIDTM mapped to 544 unique MS-DRGs. Under the 100 
percent sample of the SAF for CY 2012, the 38 cases mentioned above 
mapped to 20 different MS-DRGs. The manufacturer maintained that 
because of the diffuse nature of the DIFICIDTM cases mapping 
to many MS-DRGs, it believed an extension of the newness period is 
required for the costs to be adequately reflected in the MS-DRG 
relative payment weights. In the unique case of DIFICIDTM 
for the treatment of CDAD, the manufacturer stated that 2 years of new 
technology add-on payments is insufficient to allow the 544 MS-DRGs to 
be recalibrated to sufficiently reflect the cost of the use of 
DIFICIDTM, a treatment that offers significant clinical 
improvement over existing therapies.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28032 through 
28033), we responded to the comments above. Specifically, with regard 
to the technology's newness, as discussed in the FY 2005 IPPS final 
rule (69 FR 49003), the timeframe that a new technology can be eligible 
to receive new technology add-on payments begins when data become 
available. Section 412.87(b)(2) clearly states 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). Section 412.87(b)(2) also states that 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. Therefore, regardless of whether a 
technology can be individually identified by a separate ICD-9-CM code 
or whether it can only be identified using a NDC code, if the costs of 
the technology are included in the charge data, and the MS-DRGs have 
been recalibrated using that data, then the technology can no longer be 
considered ``new'' for the purposes of this provision. We further 
stated in that final rule that the period of newness does not 
necessarily start with the approval date for the medical service or 
technology, and does not necessarily start with the issuance of a 
distinct code. Instead, it begins with availability of the product on 
the U.S. market, which is when data become available. We have 
consistently applied this standard, and believe that it is most 
consistent with the purpose of new technology add-on payments.
    In addition, similar to our discussion in the FY 2006 IPPS final 
rule (70 FR 47349), we do not believe that case volume is a relevant 
consideration for making the determination as to whether a product is 
``new.'' Consistent with the statute, a technology no longer qualifies 
as ``new'' once it is more than 2 to 3 years old, irrespective of how 
frequently it has been used in the Medicare population. Similarly, this 
same determination is applicable no matter how many MS-DRGs the 
technology is spread across. Therefore, if a product is more than 2 to 
3 years old, we consider its costs to be included in the MS-DRG 
relative weights whether its use in the Medicare population has been 
frequent or infrequent. We recognize that using an NDC was a novel 
billing practice under the IPPS. Nevertheless, even though hospitals 
may not have coded all uses of DIFICIDTM with the NDC, 
hospital bills would still include charges for all items and services 
furnished to a Medicare patient, including use of DIFICIDTM. 
Therefore, even though we may be not be able to

[[Page 49921]]

identify all uses of DIFICIDTM in the Medicare charge data, 
hospital charges for the MS-DRGs would continue to reflect use of this 
technology.
    With respect to the Transmittal 2539 omitting the header referenced 
above, as noted above, CMS corrected this issue as soon as possible by 
rescinding and reissuing this transmittal. Additionally, as noted by 
the manufacturer, this transmittal was meant for MACs and not 
hospitals. We believe the guidance issued in Transmittal 2539 clearly 
described to MACs how hospitals were to report the NDC on the inpatient 
claim in order to identify cases using DIFICIDTM for 
purposes of new technology add-on payments. Additionally, the MLN 
article that the manufacturer referred to above (MLN articles are 
typically a summary of transmittals for the general public) clearly 
indicated that DIFICIDTM was new for FY 2013 new technology 
add-on payments and clearly described how to properly code 
DIFICIDTM on the inpatient bill in order to receive the new 
technology add-on payment for FY 2013. The MLN article can be 
downloaded from the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM8041.pdf.
    After considering the manufacturer's comments above, as we 
explained in the FY 2015 IPPS/LTCH PPS proposed rule, we continue to 
consider the beginning of the newness period to commence when 
DIFICIDTM was first approved by the FDA on May 27, 2011. 
Because the 3-year anniversary date of the product's entry on the U.S. 
market occurred in the second half of the fiscal year (after April 1, 
2014), we continued new technology add-on payments for 
DIFICIDTM for FY 2014. However, for FY 2015, the 3-year 
anniversary date of the product's entry on the U.S. market occurred on 
May 27, 2014, which is prior to the beginning of FY 2015. Therefore, we 
proposed to discontinue new technology add-on payments for 
DIFICIDTM for FY 2015.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on this proposal.
    Comment: One commenter stated that CMS has the authority to grant a 
third year of new technology add-on payments for DIFICIDTM. 
The commenter stated that if Congress intended for the Secretary to 
begin the data collection period described in the statute based on the 
date of FDA approval, Congress would have done so. The commenter added 
that it agrees that, as a threshold matter, a product must be ``new.'' 
Specifically, the commenter reasoned that Congress did not intend to 
make available the new technology add-on payment for technologies that 
have been approved for years and received a unique code years later. 
The commenter believed that once a product is deemed ``new,'' the 
statute requires that data are to be collected for 2 to 3 years from 
the date of the ICD-9-CM code assignment. The commenter believed that 
CMS has the authority to first deem a product new and then collect data 
two to three years from the date of the inpatient code assignment. The 
commenter explained that sections 1886(d)(5)(K)(i) and 
1886(d)(5)(K)(ii) of the Act mandate two separate legal requirements. 
The commenter further stated that this policy would mitigate the effect 
of older technologies that receive ICD-9-CM codes many years after 
their FDA approval date being eligible for new technology add-on 
payments. Therefore, the commenter stated that, under this policy, 
DIFICIDTM is eligible for a third year of new technology 
add-on payments.
    The commenter also quoted the FY 2005 IPPS final rule (69 FR 49002 
through 49003) where CMS stated the following: ``Using the ICD-9-CM 
code alone is not an appropriate test of newness because technologies 
that are new to the market are automatically placed into the closest 
ICD-9-CM category when they first come on the market, unless the 
manufacturer requests the assignment of a new ICD-9-CM code because 
existing codes do not adequately reflect or describe the medical 
service or device. The services and technologies that have been placed 
into existing ICD-9-CM codes have been paid for using those 
descriptors.'' The commenter believed that this policy is not relevant 
to oral drugs because hospitals do not typically code for oral 
medications. Therefore, the commenter stated that CMS must make a 
special exception for oral drugs and rely on the statutory authority to 
measure the length of time for data collection for new technology add-
on payments based on the date of the ``hospital inpatient code.''
    Response: As discussed above, and as we stated in the FY 2005 IPPS 
final rule (69 FR 49003), the timeframe that a new technology can be 
eligible to receive new technology add-on payments begins when data 
become available. We have consistently applied this standard, and 
believe that it is most consistent with the purpose of new technology 
add-on payments. We refer readers to the discussion above and the FY 
2005 IPPS final rule (69 FR 49002 through 49003) for further details 
regarding this issue. For these reasons, we disagree with the commenter 
that DIFICIDTM is eligible for a third year of new 
technology add-on payments.
    With respect to the second comment, while oral drugs are not 
typically coded by hospitals, we maintain what we stated in the FY 2005 
IPPS final rule that the services and technologies that have been 
assigned existing ICD-9-CM codes have been paid for using those 
descriptors. Although DIFICIDTM did not receive a specific 
ICD-9-CM code, it can be described or identified through additional 
ICD-9-CM procedure or diagnosis codes (such as diagnosis code 008.45, 
Intestinal infection due to Clostridium difficile). Moreover, as we 
noted above and in the proposed rule, hospital charges would include 
charges for all items and services furnished to a Medicare beneficiary, 
including use of DIFICIDTM. Therefore, we disagree with the 
commenter and continue to believe that DIFICIDTM is no 
longer new nor is any special exception warranted.
    Comment: Several commenters reiterated the arguments made by the 
manufacturer as explained above and in the proposed rule that 
DIFICIDTM should be eligible for new technology add-on 
payments in FY 2015.
    Response: After considering these comments, for the reasons stated 
above and in the proposed rule, we consider the beginning of the 
newness period to commence when DIFICIDTM was first approved 
by the FDA on May 27, 2011. The 3-year anniversary date of the 
product's entry on the U.S. market occurred on May 27, 2014, which is 
prior to the beginning of FY 2015. Therefore, we are finalizing our 
proposal to discontinue new technology add-on payments for 
DIFICIDTM for FY 2015.
c. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA) 
Endovascular Graft
    Cook[supreg] Medical submitted an application for new technology 
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic 
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY 
2013. The applicant stated that the current treatment for patients who 
have had an AAA is an endovascular graft. The applicant explained that 
the Zenith[supreg] F. Graft is an implantable device designed to treat 
patients who have an AAA and who are anatomically unsuitable for 
treatment with currently approved AAA endovascular grafts because of 
the length of the infrarenal aortic neck. The applicant noted that, 
currently, an AAA is treated through an open surgical repair or medical 
management for those patients not

[[Page 49922]]

eligible for currently approved AAA endovascular grafts.
    With respect to newness, the applicant stated that FDA approval for 
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we 
stated that because the Zenith[supreg] F. Graft was approved by the FDA 
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the 
newness criterion as of that date.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
Zenith[supreg] F. Graft and consideration of the public comments we 
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we 
approved the Zenith[supreg] F. Graft for new technology add-on payments 
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are 
eligible for new technology add-on payments are identified by ICD-9-CM 
procedure code 39.78 (Endovascular implantation of branching or 
fenestrated graft(s) in aorta). In the application, the applicant 
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The 
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal) 
alignment stents was $17,264. Of the $17,264 in costs for the 
Zenith[supreg] F. Graft, $921 is for components that are used in a 
standard Zenith AAA Endovascular Graft procedure. Because the costs for 
these components are already reflected within the MS-DRGs (and are no 
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated 
that we do not believe it is appropriate to include these costs in our 
calculation of the maximum cost to determine the maximum add-on payment 
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for 
the Zenith[supreg] F. Graft is $16,343 ($17,264--$921). Under Sec.  
412.88(a)(2), new technology add-on payments are limited to the lesser 
of 50 percent of the average cost of the device or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum add-on payment for a case involving the Zenith[supreg] F. Graft 
is $8,171.50.
    As stated above, the new technology add-on payment regulations 
provide 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'' (Sec.  412.87(b)(2)). With regard to the newness criterion 
for the Zenith[supreg] F. Graft, as stated above, we consider the 
beginning of the newness period to commence when the Zenith[supreg] F. 
Graft was approved by the FDA on April 4, 2012. Because the 3-year 
anniversary date of the entry of the Zenith[supreg] F. Graft on the 
U.S. market will occur in the second half of the fiscal year (April 4, 
2015), we proposed to continue new technology add-on payments for this 
technology for FY 2015.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on this proposal.
    Comment: Several commenters supported the proposal to continue new 
technology add-on payments for the Zenith[supreg] F. Graft [supreg] for 
FY 2015.
    Response: We appreciate the commenters' support. Because the 3-year 
anniversary date for Zenith[supreg] F. Graft will occur in the latter 
half of FY 2015 (April 4, 2015), we are finalizing our proposal to 
continue to make new technology add-on payments for the Zenith[supreg] 
F. Graft for FY 2015.
d. KcentraTM
    CSL Behring submitted an application for new technology add-on 
payments for KcentraTM for FY 2014. KcentraTM is 
a replacement therapy for fresh frozen plasma (FFP) for patients with 
an acquired coagulation factor deficiency due to warfarin and who are 
experiencing a severe bleed. KcentraTM contains the Vitamin 
K dependent coagulation factors II, VII, IX and X, together known as 
the prothrombin complex, and antithrombotic proteins C and S. Factor IX 
is the lead factor for the potency of the preparation. The product is a 
heat-treated, non-activated, virus filtered and lyophilized plasma 
protein concentrate made from pooled human plasma. KcentraTM 
is available as a lyophilized powder that needs to be reconstituted 
with sterile water prior to administration via intravenous infusion. 
The product is dosed based on Factor IX units. Concurrent Vitamin K 
treatment is recommended to maintain blood clotting factor levels once 
the effects of KcentraTM have diminished.
    KcentraTM was approved by the FDA on April 29, 2013. In 
the FY 2014 IPPS/LTCH PPS final rule, we approved new ICD-9-CM 
procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex 
Concentrate) which uniquely identifies KcentraTM.
    In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted 
that we were concerned that KcentraTM may be substantially 
similar to FFP and/or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS 
final rule, in response to comments submitted by the manufacturer, we 
stated that we agree that KcentraTM may be used in a patient 
population that is experiencing an acquired coagulation factor 
deficiency due to Warfarin and who are experiencing a severe bleed 
currently but are ineligible for FFP, particularly for use by IgA 
deficient patients and other patient populations that have no other 
treatment option to resolve severe bleeding in the context of an 
acquired Vitamin K deficiency. In addition, FFP is limited because it 
requires special storage conditions while KcentraTM is 
stable for up to 36 months at room temperature thus allowing hospitals 
that otherwise would not have access to FFP (for example, small rural 
hospitals as discussed by the applicant in its comments) to keep a 
supply of KcentraTM and treat patients who would possibly 
have no access to FFP. We noted that FFP is considered perishable and 
can be scarce by nature (due to production and other market 
limitations) thus making some hospitals unable to store FFP, which 
limits access to certain patient populations in certain locations. 
Therefore, we stated that we believe that KcentraTM provides 
a therapeutic option for a new patient population and is not 
substantially similar to FFP. Also, we gave credence to the information 
presented by the manufacturer that KcentraTM provides a 
simple and rapid repletion relative to FFP and reduces the risk of a 
transfusion reaction relative to FFP because it does not contain ABO 
antibodies and does not require ABO typing. As a result, we concluded 
that KcentraTM is not substantially similar to FFP, and that 
it meets the newness criterion.
    After evaluation of the newness, cost, and substantial clinical 
improvement criteria for new technology add-on payments for 
KcentraTM and consideration of the public comments we 
received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we 
approved KcentraTM for new technology add-on payments for FY 
2014 (78 FR 50575 through 50580). Cases involving KcentraTM 
that are eligible for new technology add-on payments are identified by 
ICD-9-CM procedure code 00.96. In the application, the applicant 
estimated that the average Medicare beneficiary would require an 
average dosage of 2500 International Units (IU). Vials contain 500 IU 
at a cost of $635 per vial. Therefore, cases of KcentraTM 
would incur an average cost per case of $3,175 ($635 x 5). Under Sec.  
412.88(a)(2), new technology add-on payments are limited 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 add-on payment for a

[[Page 49923]]

case of KcentraTM is $1,587.50 for FY 2014.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated 
that new technology add-on payments for KcentraTM would not 
be available with respect to discharges for which the hospital received 
an add-on payment for a blood clotting factor administered to a 
Medicare beneficiary with hemophilia who is a hospital inpatient. Under 
section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG 
prospective payment rate is ``the amount of the payment with respect to 
the operating costs of inpatient hospital services (as defined in 
subsection (a)(4) of this section)'' for discharges on or after April 
1, 1988. Section 1886(a)(4) of the Act excludes from the term 
``operating costs of inpatient hospital services'' the costs with 
respect to administering blood clotting factors to individuals with 
hemophilia. The costs of administering a blood clotting factor to a 
Medicare beneficiary who has hemophilia and is a hospital inpatient are 
paid separately from the IPPS. (For information on how the blood 
clotting factor add-on payment is made, we refer readers to Section 
20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which 
can be downloaded from the CMS Web site at: http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we 
stated that if KcentraTM is approved by the FDA as a blood 
clotting factor, we believed that it may be eligible for blood clotting 
factor add-on payments when administered to Medicare beneficiaries with 
hemophilia. We make an add-on payment for KcentraTM for such 
discharges in accordance with our policy for payment of a blood 
clotting factor, and the costs would be excluded from the operating 
costs of inpatient hospital services as set forth in section 1886(a)(4) 
of the Act.
    Section 1886(d)(5)(K)(i) of the Act requires the Secretary to 
``establish a mechanism to recognize the costs of new medical services 
and technologies under the payment system established under this 
subsection'' beginning with discharges on or after October 1, 2001. We 
believe that it is reasonable to interpret this requirement to mean 
that the payment mechanism established by the Secretary recognizes only 
costs for those items that would otherwise be paid based on the 
prospective payment system (that is, ``the payment system established 
under this subsection''). As noted above, under section 
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective 
payment rate is the amount of payment for the operating costs of 
inpatient hospital services, as defined in section 1886(a)(4) of the 
Act, for discharges on or after April 1, 1988. We understand this to 
mean that a new medical service or technology must be an operating cost 
of inpatient hospital services paid based on the prospective payment 
system, and not excluded from such costs, in order to be eligible for 
the new technology add-on payment. We pointed out that new technology 
add-on payments are based on the operating costs per case relative to 
the prospective payment rate as described in Sec.  412.88. Therefore, 
we believe that new technology add-on payments are appropriate only 
when the new technology is an operating cost of inpatient hospital 
services and are not appropriate when the new technology is excluded 
from such costs.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated 
that we believe that hospitals may only receive new technology add-on 
payments for discharges where KcentraTM is an operating cost 
of inpatient hospital services. In other words, a hospital would not be 
eligible to receive the new technology add-on payment when it is 
administering KcentraTM in treating a Medicare beneficiary 
who has hemophilia. In those instances, KcentraTM is 
specifically excluded from the operating costs of inpatient hospital 
services in accordance with section 1886(a)(4) of the Act and paid 
separately from the IPPS. However, when a hospital administers 
KcentraTM to a Medicare beneficiary who does not have 
hemophilia, the hospital would be eligible for a new technology add-on 
payment because KcentraTM would not be excluded from the 
operating costs of inpatient hospital services. Therefore, discharges 
where the hospital receives a blood clotting factor add-on payment are 
not eligible for a new technology add-on payment for the blood clotting 
factor. We refer readers to Chapter Three, Section 20.7.3 of the 
Medicare Claims Processing Manual for a complete discussion on when a 
blood clotting factor add-on payment is made. The manual can be 
downloaded from the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
    As stated above, the new technology add-on payment regulations 
provide 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 (Sec.  412.87(b)(2)). With regard to the newness criterion 
for KcentraTM, as stated above, we consider the beginning of 
the newness period to commence when KcentraTM was approved 
by the FDA on April 29, 2013. Because KcentraTM is still 
within the 3-year newness period, we proposed to continue new 
technology add-on payments for this technology for FY 2015.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on this proposal.
    Comment: Several commenters supported the proposal to continue new 
technology add-on payments for KcentraTM for FY 2015.
    Response: We appreciate the commenters' support. Because the 3-year 
anniversary date for KcentraTM will occur in the second half 
of FY 2016 (April 29, 2016), we are finalizing our proposal to continue 
to make new technology add-on payments for KcentraTM FY 
2015.
e. Argus[supreg] II Retinal Prosthesis System
    Second Sight Medical Products, Inc. submitted an application for 
new technology add-on payments for the Argus[supreg] II Retinal 
Prosthesis System (Argus[supreg] II System) for FY 2014. The 
Argus[supreg] II System is an active implantable medical device that is 
intended to provide electrical stimulation of the retina to induce 
visual perception in patients who are profoundly blind due to retinitis 
pigmentosa (RP). These patients have bare or no light perception in 
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally 
worn video camera. The Argus[supreg] II implant is intended to be 
implanted in a single eye, typically the worse-seeing eye. Currently, 
bilateral implants are not intended for this technology. According to 
the applicant, the surgical implant procedure takes approximately 4 
hours and is performed under general anesthesia.
    The Argus[supreg] II System consists of three primary components: 
(1) An implant which is an epiretinal prosthesis that is fully 
implanted on and in the eye (that is, there are no percutaneous leads); 
(2) external components worn by the user; and (3) a ``fitting'' system 
for the clinician that is periodically used to perform diagnostic tests 
with the system and to custom-program the external unit for use by the 
patient. We describe these components more fully below.
     Implant: The retinal prosthesis implant is responsible for 
receiving information from the external components of the system and 
electrically stimulating the retina to induce visual perception. The 
retinal

[[Page 49924]]

implant consists of: (a) A receiving coil for receiving information and 
power from the external components of the Argus[supreg] II System; (b) 
electronics to drive stimulation of the electrodes; and (c) an 
electrode array. The receiving coil and electronics are secured to the 
outside of the eye using a standard scleral band and sutures, while the 
electrode array is secured to the surface of the retina inside the eye 
by a retinal tack. A cable, which passes through the eye wall, connects 
the electronics to the electrode array. A pericardial graft is placed 
over the extra-ocular portion on the outside of the eye.
     External Components: The implant receives power and data 
commands wirelessly from an external unit of components, which include 
the Argus II Glasses and Video Processing Unit (VPU). A small 
lightweight video camera and transmitting coil are mounted on the 
glasses. The telemetry coils and radio-frequency system are mounted on 
the temple arm of the glasses for transmitting data from the VPU to the 
implant. The glasses are connected to the VPU by a cable. This VPU is 
worn by the patient, typically on a belt or a strap, and is used to 
process the images from the video camera and convert the images into 
electrical stimulation commands, which are transmitted wirelessly to 
the implant.
     ``Fitting System'': To be able to use the Argus[supreg] II 
System, a patient's VPU needs to be custom-programmed. This process, 
which the applicant called ``fitting'', occurs in the hospital/clinic 
shortly after the implant surgery and then periodically thereafter as 
needed. The clinician/physician also uses the ``Fitting System'' to run 
diagnostic tests (for example, to obtain electrode and impedance 
waveform measurements or to check the radio-frequency link between the 
implant and external unit). This ``Fitting System'' can also be 
connected to a ``Psychophysical Test System'' to evaluate patients' 
performance with the Argus[supreg] II System on an ongoing basis.
    These three components work together to stimulate the retina and 
allow a patient to perceive phosphenes (spots of light), which they 
then need to learn to interpret. While using the Argus[supreg] II 
System, the video camera on the patient-worn glasses captures a video 
image. The video camera signal is sent to the VPU, which processes the 
video camera image and transforms it into electrical stimulation 
patterns. The electrical stimulation data are then sent to a 
transmitter coil mounted on the glasses. The transmitter coil sends 
both data and power via radio-frequency (RF) telemetry to the implanted 
retinal prosthesis. The implant receives the RF commands and delivers 
stimulation to the retina via an array of electrodes that is secured to 
the retina with a retinal tack.
    In patients with RP, the photoreceptor cells in the retina, which 
normally transduce incoming light into an electro-chemical signal, have 
lost most of their function. The stimulation pulses delivered to the 
retina via the electrode array of the Argus[supreg] II System are 
intended to mimic the function of these degenerated photoreceptors 
cells. These pulses induce cellular responses in the remaining, viable 
retinal nerve cells that travel through the optic nerve to the visual 
cortex where they are perceived as phosphenes (spots of light). 
Patients learn to interpret the visual patterns produced by these 
phosphenes.
    With respect to the newness criterion, according to the applicant, 
the FDA designated the Argus[supreg] II System a Humanitarian Use 
Device in May 2009 (HUD designation #09-0216). The applicant 
submitted a Humanitarian Device Exemption (HDE) application 
(#H110002) to the FDA in May 2011 to obtain market approval for 
the Argus[supreg] II System. The HDE was referred to the Ophthalmic 
Devices Panel of the FDA's Medical Devices Advisory Committee for 
review and recommendation. At the Panel's meeting held on September 28, 
2012, the Panel voted 19 to 0 that the probable benefits of the 
Argus[supreg] II System outweigh the risks of the system for the 
proposed indication for use. The applicant received the HDE approval 
from the FDA on February 14, 2013. Currently there are no other 
approved treatments for patients with severe to profound RP. The 
Argus[supreg] II System has an IDE number of G050001 and is a Class III 
device. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50580 through 
50583), we approved new ICD-9-CM procedure code 14.81 (Implantation of 
Epiretinal Visual Prosthesis), which uniquely identifies the 
Argus[supreg] II System. The other two codes approved by CMS are for 
removal, revision, or replacement of the device. More information on 
these codes can be found on the CMS Web site at: http://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html.
    After evaluation of the new technology add-on payment application 
and consideration of public comments received, we concluded that the 
Argus[supreg] II System met all of the new technology add-on payment 
policy criteria. Therefore, we approved the Argus[supreg] II System for 
new technology add-on payments in FY 2014 (78 FR 50580 through 50583). 
Cases involving the Argus[supreg] II System that are eligible for new 
technology add-on payments are identified by ICD-9-CM procedure code 
14.81. We note that section 1886(d)(5)(K)(i) of the Act requires that 
the Secretary establish a mechanism to recognize the costs of new 
medical services or technologies under the payment system established 
under that subsection, which establishes the system for paying for the 
operating costs of inpatient hospital services. The system of payment 
for capital costs is established under section 1886(g) of the Act, 
which makes no mention of any add-on payments for a new medical service 
or technology. Therefore, it is not appropriate to include capital 
costs in the add-on payments for a new medical service or technology. 
In the application, the applicant provided a breakdown of the costs of 
the Argus[supreg] II System. The total operating cost of the 
Argus[supreg] II System is $144,057.50. Under Sec.  412.88(a)(2), new 
technology add-on payments are limited to the lesser of 50 percent of 
the average cost of the device or 50 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum add-on 
payment for a case involving the Argus[supreg] II System for FY 2014 is 
$72,028.75.
    As stated above, the new technology add-on payment regulations 
provide 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 (Sec.  412.87(b)(2)). With regard to the newness criterion 
for the Argus[supreg] II System, as stated above, we consider the 
beginning of the newness period to commence when the Argus[supreg] II 
System was approved by the FDA on February 14, 2013. Because the 
Argus[supreg] II System is still within the 3-year newness period, we 
proposed to continue new technology add-on payments for this technology 
for FY 2015.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on this proposal.
    Comment: Several commenters supported the proposal to continue new 
technology add-on payments for the Argus[supreg] II System for FY 2015. 
Some commenters noted that, while the Argus[supreg] II System received 
FDA approval on February 14, 2013, it was not available on the U.S. 
market until December 20, 2013. The commenters explained that as part 
of this lengthy process, the manufacturer first had to submit a request 
to the Federal Communications Commission (FCC) for a waiver of section 
15.209(a) of the FCC

[[Page 49925]]

rules to allow the manufacturer to then apply for FCC authorization to 
utilize this specific RF band. The FCC granted the request for a waiver 
of the rules on November 30, 2011. After receiving the FCC waiver of 
section 15.209(a), the manufacturer was required to obtain a Grant of 
Equipment Authorization to utilize the specific RF band, which the FCC 
issued on December 20, 2013. Therefore, the commenters stated that the 
date the Argus[supreg] II System first became available for commercial 
sale in the United States was December 20, 2013.
    Response: We appreciate the commenters' input and support. We agree 
with the commenters that due to the delay described above, the date of 
newness for the Argus[supreg] II System is now December 20, 2013, 
instead of February 14, 2013. Because the 3-year anniversary date for 
the Argus[supreg] II System will occur in the first half of FY 2017 
(December 20, 2016), we are finalizing our proposal to continue to make 
new technology add-on payments for the Argus[supreg] II System for FY 
2015.
f. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
    Cook[supreg] Medical submitted an application for new technology 
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting 
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The 
Zilver[supreg] PTX[supreg] is intended for use in the treatment of 
peripheral artery disease (PAD) of the above-the-knee femoropopliteal 
arteries (superficial femoral arteries). According to the applicant, 
the stent is percutaneously inserted into the artery(s), usually by 
accessing the common femoral artery in the groin. The applicant stated 
that an introducer catheter is inserted over the wire guide and into 
the target vessel where the lesion will first be treated with an 
angioplasty balloon to prepare the vessel for stenting. The applicant 
indicated that the stent is self-expanding, made of nitinol (nickel 
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug 
approved for use as an anticancer agent and for use with coronary 
stents to reduce the risk of renarrowing of the coronary arteries after 
stenting procedures.
    The applicant received FDA approval on November 15, 2012, for the 
Zilver[supreg] PTX[supreg]. The applicant maintains that the 
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for 
superficial femoral arteries. The technology is currently described by 
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of 
the superficial femoral artery).
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through 
50585), after evaluation of the new technology add-on payment 
application and consideration of the public comments received, we 
approved the Zilver[supreg] PTX[supreg] for new technology add-on 
payments in FY 2014. Cases involving the Zilver[supreg] PTX[supreg] 
that are eligible for new technology add-on payments are identified by 
ICD-9-CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH 
PPS final rule, to determine the amount of Zilver[supreg] PTX[supreg] 
stents per case, instead of using the amount of stents used per case 
based on the ICD-9-CM codes, the applicant used an average of 1.9 
stents per case based on the Zilver[supreg] PTX[supreg] Global Registry 
Clinical Study. The applicant stated in its application that the 
anticipated cost per stent is approximately $1,795. Therefore, cases of 
the Zilver[supreg] PTX[supreg] would incur an average cost per case of 
$3,410.50 ($1,795 x 1.9). Under Sec.  412.88(a)(2), new technology add-
on payments are limited to the lesser of 50 percent of the average cost 
of the device or 50 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, the maximum add-on payment for a 
case of the Zilver[supreg] PTX[supreg] is $1,705.25 for FY 2014.
    As stated above, the new technology add-on payment regulations 
provide 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'' (Sec.  412.87(b)(2)). With regard to the newness criterion 
for the Zilver[supreg] PTX[supreg], as stated above, we consider the 
beginning of the newness period to commence when the Zilver[supreg] 
PTX[supreg] was approved by the FDA on November 15, 2012. Because the 
Zilver[supreg] PTX[supreg] is still within the 3-year newness period, 
we proposed to continue new technology add-on payments for this 
technology for FY 2015.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on this proposal.
    Comment: Several commenters supported the proposal to continue new 
technology add-on payments for the Zilver[supreg] PTX[supreg] for FY 
2015.
    Response: We appreciate the commenters' support. Because the 3-year 
anniversary date for the Zilver[supreg] PTX[supreg] will occur in the 
first half of FY 2016 (November 12, 2015), we are finalizing our 
proposal to continue to make new technology add-on payments for the 
Zilver[supreg] PTX[supreg] FY 2015.
4. FY 2015 Applications for New Technology Add-On Payments
    We received seven applications for new technology add-on payments 
for FY 2015, three of which were applications resubmitted from FY 2014. 
However, one applicant withdrew its application prior to the 
publication of the proposed rule. In addition, the applicant for the 
Watchman[supreg] System withdrew its application prior to the 
publication of this final rule. In accordance with the regulations 
under Sec.  412.87(c), applicants for new technology add-on payments 
must have FDA approval by July 1 of each year prior to the beginning of 
the fiscal year that the application is being considered. A discussion 
of the five remaining applications is presented below.
    Comment: One commenter stated that CMS was critical of evidence 
presented by the applicants to support their claims that the new 
technology represents a substantial clinical improvement. The commenter 
explained that CMS finds fault with peer-reviewed literature, registry 
data, meta-analysis of clinical trials, lack of long-term outcome data, 
age of clinical trial participants below the age of Medicare 
beneficiaries, single arm studies, non-inferiority studies, and weak 
primary efficacy results. The commenter urged CMS to avoid blanket 
judgments on what types of evidence are considered adequate and to 
carefully consider the totality of the circumstances associated with a 
particular product. The applicant concluded that, given the list of 
evidence cited by CMS, it would appear that only head to head trials 
are sufficient to show substantial clinical improvement over standard 
of care, but it is important to note that in the case of first in class 
products, such trials are not feasible.
    Another commenter shared similar concerns and stated that a study 
may be designed to measure noninferiority when compared to conventional 
treatment, but the results of the study may demonstrate superiority in 
terms of other measures, such as reduced pain, decreased recovery time 
or shorter hospitalizations. In addition, the commenter stated that 
study data that provide information regarding patient outcomes may be 
more important than whether the study was designed as a superiority 
trial or a noninferiority trial. The commenter concluded that a policy 
to require superiority studies, or at least to question noninferiority 
studies, could have negative results, including delaying patient access 
to innovative treatments, improved care outcomes, curtailing 
innovation, and discouraging competition. The commenter stated that CMS 
should give great weight to the totality of the evidence, including 
non-inferiority studies and other methodological approaches, as it

[[Page 49926]]

considers approval of applications for new technology add-on payments.
    Some commenters stated that CMS has a precedent of accepting 
noninferiority studies to evaluate technologies under the substantial 
clinical improvement criterion. In particular, these commenters 
indicated that CMS approved new technology add-on payments for 
Fidaxomicin in FY 2013 (77 FR 53350-53358) and KcentraTM in 
FY 2014 (78 FR 50575-50580) and that both of these technologies 
submitted data from clinical trials demonstrating non-inferiority. One 
commenter stated that CMS' approval of Fidaxomicin for new technology 
add-on payments establishes a precedent for approval for a technology 
that shows non-inferiority for a primary end point in addition to the 
acceptance of other clinically important secondary analysis, and that 
precedent should be used to approve all technologies. Another commenter 
stated that CMS' approval of KcentraTM for new technology 
add-on payments is an example of how a technology can use data from 
randomized controlled trials demonstrating noninferiority to show that 
the technology represents a substantial clinical improvement.
    One commenter stated that non-inferiority trials are a well-
established and appropriately accepted standard, and noninferiority 
designs are the only affordable and ethical option for drug developers 
in researching acute bacterial skin and skin structure infections. The 
commenter also stated that primary focus for developing new agents 
targeted for acute bacterial skin and skin structure infection patients 
is not to improve clinical cure rates, but to ``enhance the efficiency 
and cost effectiveness of achieving clinical cures, ease therapeutic 
administration (and, therefore, improve compliance) and limit avoidable 
exposure to healthcare acquired infections (which, when they occur, 
significantly increase costs and create patient safety risks).'' The 
commenter urged CMS to clarify that it has not suggested or proposed to 
adopt a blanket judgment approach against technologies studied on a 
noninferiority basis.
    Response: We appreciate the commenters' input and support. CMS 
always considers the totality of the clinical evidence whenever it 
makes a substantial clinical improvement determination. We agree with 
the commenters that we approved new technology add-on payments for 
Fidaxomicin and KcentraTM by determining that both of these 
technologies not only met the newness and cost criteria for new 
technology add-on payments, but also represented a substantial clinical 
improvement in the treatment options available for Medicare 
beneficiaries. We also appreciate that the commenter reviewed the 
policies we established in FY 2002 (66 FR 46902) with regard to the 
substantial clinical improvement criterion and clarified in FY 2008 (72 
FR 47301). We continue to believe, as we did in FY 2008, that it is a 
reasonable concern that establishing specific data standards may make 
it more difficult for an applicant to qualify for a new technology add-
on payment because such standards cannot account for the various types 
of new technologies that may become available in the future and the 
types of requirements that those novel technologies may or may not be 
able to meet. In other words, we clarify that we did not propose to 
establish nor are we establishing a blanket judgment approach against 
technologies studied on a non-inferiority basis. As we stated in the 
final rule that appeared in the Federal Register on September 7, 2001 
(referred to hereinafter as the Inpatient New Technology Add-on Payment 
Final Rule), one of the ways to determine if a technology meets the 
substantial clinical improvement criterion is for the applicant to 
demonstrate that use of the technology significantly improves clinical 
outcomes for a patient population as compared with currently available 
treatments (66 FR 46914). In that rule, we finalized the policy that we 
would require applicants to submit evidence to demonstrate this. For 
the purposes of seeking additional payment from Medicare under the 
IPPS, we believe that it is preferable, when possible, for applicants 
to submit evidence that demonstrates superiority of the applicant 
technology as compared with currently available treatments. We note 
that this superiority can be derived, extrapolated, or inferred from 
noninferiority studies in which the results demonstrate a far greater 
delta than proposed in the power analysis. This belief is based on 
earlier experiences, which we described in the FY 2002 final rule: 
``[W]e would point out that various new technologies introduced over 
the years have been demonstrated to have been less effective than 
initially thought, or in some cases even potentially harmful. We 
believe it is in the best interest of Medicare beneficiaries to proceed 
very carefully with respect to the incentives created to quickly adopt 
new technology'' (66 FR 46913). However, we point out that in that same 
rule, we provide two additional ways for an applicant technology to 
demonstrate substantial clinical improvement: if the device offers a 
treatment option for a patient population unresponsive to, or 
ineligible for, currently available treatments; or if the device offers 
the ability to diagnose a medical condition in a patient population 
where that medical condition is currently undetectable or offers the 
ability to diagnose a medical condition earlier in a patient population 
than allowed by currently available methods. There must also be 
evidence that the use of the device to make a diagnosis affects the 
management of the patient's care. (We refer readers to the Inpatient 
New Technology Add-on Payment Final Rule (66 FR 46914).) Similarly, for 
these two additional ways to meet the substantial clinical improvement 
criterion, we continue to believe that it is appropriate to require 
that applicants submit evidence that the technology in fact meets the 
criterion through one of these two ways. We do not require an applicant 
to meet the criterion in more than one of these ways, but emphasize 
that we require evidence to support an applicant's claim. If an 
applicant chooses to demonstrate that use of its technology 
significantly improves clinical outcomes, we believe that it is 
appropriate for CMS to consider all of the evidence presented in 
determining whether there is sufficient objective clinical evidence to 
determine if a new technology meets the substantial clinical 
improvement criterion.
a. Dalbavancin (Durata Therapeutics, Inc.)
    Durata Therapeutics, Inc. submitted an application for new 
technology add-on payments for FY 2015 for the use of Dalbavancin. 
Dalbavancin is an intravenous (IV) lipoglycopeptide antibiotic 
administered as a once-weekly 30-minute infusion via a peripheral line 
for the treatment of patients with acute bacterial skin and skin 
structure infections, or ABSSSI. According to the applicant, 
Dalbavancin's unique pharmacokinetic profile demonstrates rapid 
bactericidal activity that is potent and sustained against serious 
gram-positive bacteria, including methicillin-resistant Staphylococcus 
aureus (MRSA).
    With respect to the newness criterion, the applicant stated that 
Dalbavancin's once-weekly dosing, a simpler regimen than the current 
standard of care (Vancomycin) of daily or multiple-times daily 
intravenous dosing, allows for the discontinuation of IV access with 
its attendant risks of line-related thrombosis and infection. The 
applicant submitted a New Drug Approval Application (NDA) on September 
26,

[[Page 49927]]

2013, and as stated in the FY 2015 IPPS/LTCH PPS proposed rule, 
anticipated FDA approval of Dalbavancin sometime in May of 2014. The 
applicant also applied for a new ICD-10-PCS code to describe the 
administration of Dalbavancin, which was presented at the March 19-20, 
2014 ICD-10 Coordination and Maintenance Committee meeting. To date, no 
ICD-10-PCS code specifically describes the administration of 
Dalbavancin. However, if approved, the new ICD-10-PCS code will be 
effective on October 1, 2014. We also note in section II.G. of the 
preamble of this final rule that, per section 212 of the PAMA (Pub. L. 
113-93), the Secretary announced plans to establish a new compliance 
date for ICD-10. We also discuss in that section the requests for ICD-
10-PCS codes for FY 2015. We refer readers to section II.G. of the 
preamble of this final rule for a complete discussion of these issues.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the technology meets the newness criterion. 
However, we did not receive any public comments regarding whether the 
technology meets the newness criterion. After the publication of the FY 
2015 IPPS/LTCH PPS proposed rule, we were informed that the applicant 
received FDA approval for the use of the technology on May 23, 2014. 
Therefore, for purposes of consideration for FY 2015 IPPS new 
technology add-on payments, we believe that the technology should be 
considered ``new'' as of May 23, 2014, when the technology received FDA 
approval.
    We note that 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 the criteria above, it would be 
considered substantially similar to an existing technology and would 
not be considered ``new'' for purposes of new technology add-on 
payments.
    In evaluating the first criterion, the applicant stated that 
Dalbavancin's mechanism of action is unique compared to other 
antibiotics as it involves the interruption of cell wall synthesis 
resulting in bacterial cell death. Furthermore, the applicant cited 
Dalbavancin's long half-life as the factor that differentiates itself 
from existing antibacterial agents active against MRSA. With respect to 
the second criterion, as we stated in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28036), we believe that cases of ABSSSI that use 
Dalbavancin or other antibiotics for treatment would be assigned to the 
same MS-DRGs. Finally, with respect to the third criterion, we believe 
that Dalbavancin and other antibiotics used to treat cases of ABSSSI 
treat the same disease and patient population. Based on evaluation of 
the substantially similarity criteria, we stated in the FY 2015 IPPS/
LTCH PPS proposed rule, it appears that Dalbavancin is not 
substantially similar to other antibiotics for the treatment of ABSSSI 
because it does not use the same or a similar mechanism of action to 
achieve a therapeutic outcome.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments regarding whether Dalbavancin is substantially similar to 
existing antibiotics and whether Dalbavancin meets the newness 
criterion. However, we did not receive any public comments discussing 
whether Dalbavancin is substantially similar to existing antibiotics in 
the context of the newness criterion. After further evaluation of the 
new technology add-on payment application, we believe that Dalbavancin 
is not substantially similar to other antibiotics for the treatment of 
ABSSSI because it does not use the same or a similar mechanism of 
action to achieve a therapeutic outcome.
    According to the applicant, Dalbavancin is indicated to treat gram-
positive ABSSSIs, such as cellulitis or erysipelas, and MRSA. These 
conditions may be a primary diagnosis, but are often secondary to an 
underlying condition such as diabetes, heart failure, and pressure 
ulcers, among others. Therefore, the technology is eligible to be used 
across all MS-DRGs. To demonstrate that it meets the cost criterion, 
the applicant searched the FY 2012 MedPAR file (across all MS-DRGs) for 
cases where at least one ABSSSI ICD-9-CM code was present on the claim, 
including those where MRSA was present on a claim with an ABSSSI 
diagnosis. Specifically, the applicant searched for cases with one of 
the following diagnosis codes: 035 (Erysipelas); 681.00 (Cellulitis and 
abscess of finger, unspecified); 681.01 (Felon); 681.02 (Onychia and 
paronychia of finger); 681.10 (Cellulitis and abscess of toe, 
unspecified); 681.11 (Onychia and paronychia of toe); 681.9 (Cellulitis 
and abscess of unspecified digit); 682.0-682.9 (Other cellulitis and 
abscess of face, neck, trunk, upper arm and forearm, hand except 
fingers and thumb, buttock, leg except foot, foot except toes, 
specified sites, unspecified sites); 686.00 (Pyoderma, unspecified); 
686.01 (Pyoderma gangrenosum); 686.09 (Other pyoderma); 686.1 (Pyogenic 
granuloma of skin and subcutaneous tissue); 686.8 (Other specified 
local infections of skin and subcutaneous tissue); 686.9 (Unspecified 
local infection of skin and subcutaneous tissue); 958.3 (Posttraumatic 
wound infection not elsewhere classified); 998.51 (Infected 
postoperative seroma); and 998.59 (Other postoperative infection). The 
applicant believed that these cases represent potential cases eligible 
for the administration of Dalbavancin.
    The applicant found 570,698 cases across 682 MS-DRGs and noted that 
almost 25 percent of the total number of cases would map to MS-DRGs 603 
(Cellulitis without MCC), while the top 10 MS-DRGs accounted for almost 
half (or 49 percent) of the total number of cases. Of the 682 MS-DRGs, 
only 90 of these MS-DRGs accounted for 1,000 cases or more. The 
applicant standardized the charges for all 570,698 cases, which equated 
to an average case-weighted standardized charge per case of $46,138. We 
note that the applicant did not inflate the charges nor did it include 
charges for Dalbavancin in the average case-weighted standardized 
charge per case. The applicant calculated an average case-weighted 
threshold of $44,255 across all MS-DRGs. Therefore, the applicant 
asserted the average case-weighted standardized charge per case 
(without inflating and including charges for Dalbavancin) exceeds the 
average case-weighted threshold of $44,255 (as indicated in Table 10 of 
the FY 2014 IPPS/LTCH PPS final rule). Therefore, the applicant 
maintained that Dalbavancin meets the cost criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments regarding whether Dalbavancin meets the cost criterion, 
particularly with regard to the assumptions and methodology used in the 
applicant's analysis.
    Comment: The applicant submitted a public comment maintaining that 
Dalbavancin meets the cost criterion requirement because the cost of 
the target cases exceeds the average case-weighted cost threshold 
requirement prior to accounting for an inflation factor, or including 
the costs of Dalbavancin. The applicant further stated that it also 
included the ``costs of Dalbavancin in its analysis to further

[[Page 49928]]

demonstrate that Dalbavancin exceeds the established NTAP cost 
threshold.''
    Response: We appreciate the applicant's response. We reviewed the 
applicant's analysis. We note that, while the applicant's analysis 
included the charges associated with Dalbavancin in their final cost 
estimate, the applicant did not remove the charges for the current 
therapy for treating acute bacterial skin and skin structure 
infections. We agree that the applicant's analysis using data from all 
570,698 cases across 682 MS-DRGs showed that Dalbavancin exceeds the 
average case-weighted threshold prior to the inclusion of inflation 
factors and charges associated with Dalbavancin.
    We note that it is unclear to what degree Dalbavancin would be used 
in each of these cases across the specific MS-DRGs, in part, because a 
procedure code has not been established to identify the technology's 
use in the claims data. Therefore, we reviewed the additional analyses 
using the claims data submitted by the applicant to substantiate that 
the technology meets the cost criterion. For example, in the data 
submitted by the applicant, the top 10 MS-DRGs ranked by case volume 
constitute roughly half of the cases with at least one ICD-9-CM code 
associated with acute bacterial skin infections. These 10 MS-DRGs 
include: MS-DRG 0603 (Cellulitics Without MCC); MS-DRG 0602 
(Cellulitics With MCC); MS-DRG 0871 (Septicemia or Severe Sepsis 
Without MV 96+ Hours With MCC); MS-DRG 0863 (Postoperative & Post-
Traumatic Infections Without MCC); MS-DRG 0872 (Septicemia or Severe 
Sepsis Without MV 96+ Hours Without MCC); MS-DRG 0300 (Peripheral 
Vascular Disorders With CC); MS-DRG 0292 (Heart Failure & Shock with 
CC); MS-DRG 0862 (Postoperative & Post-Traumatic Infections With MCC); 
MS-DRG 0857 (Postoperative or Post-Traumatic Infections With O.R. 
Procedure With CC); and MS-DRG 0853 (Infectious and Parasitic Diseases 
With O.R. Procedure With MCC). An average case-weighted threshold and 
standardized charges could be calculated using these MS-DRGs and 
compared to determine if the standardized charges exceed the average 
case-weighted threshold for these top 10 MS-DRGs.
    In summary, we agree with the applicant that the technology meets 
the cost criterion.
    With regard to substantial clinical improvement, as previously 
stated by the applicant, Dalbavancin is a new intravenous (IV) 
lipoglycopeptide antibiotic administered as a once-weekly 30 minute 
infusion via a peripheral line for the treatment of patients with acute 
bacterial skin and skin structure infections, or ABSSSI. The applicant 
noted that, in the setting of continuing emergence of resistance among 
gram-positive pathogens worldwide, there is an increasing medical need 
for new antibacterial agents with enhanced gram-positive activity. The 
applicant cited the Infectious Diseases Society of America (IDSA),\3\ 
stating the need for a multi-pronged approach to address the impact of 
antibiotic resistance. In addition, the applicant stated the FDA has 
also designated MRSA as a pathogen of special interest which allows an 
antibiotic effective against this organism to be designated as a 
``Qualified Infectious Disease Product,'' recognizing the medical need 
for drugs to treat infections caused by this pathogen. The applicant 
believed that having a medicinal agent with clinical efficacy against 
gram-positive pathogens, including MRSA and CA-MRSA, a favorable 
benefit/risk ratio, and a favorable pharmacokinetics profile allowing 
convenient dosing in inpatients and outpatients with the potential for 
minimizing patient noncompliance would be a valuable addition to the 
antibacterial armamentarium for the treatment of ABSSSI. The applicant 
also noted that, when taking Dalbavancin, there is no need for oral 
step-down therapy.
---------------------------------------------------------------------------

    \3\ ``Bad Bugs, No Drugs,'' July 2004.
---------------------------------------------------------------------------

    The applicant suggested that Dalbavancin offers treatment 
advantages over other available options for therapy for skin infections 
as a result of the following:
     Improved potency against key bacterial pathogens with the 
concentration of Dalbavancin required to kill key target pathogens 
lower relative to other antibiotics commonly used to treat such 
pathogens;
     Retained activity against staphylococcus aureus resistant 
to other antibiotics;
     Improved safety profile as Dalbavancin exhibits more 
favorable tolerability and safety than alternative approved 
antibacterial drugs in areas such as no evidence of thrombocytopenia as 
seen with linezolid and tedezolid, superior infusion related 
tolerability relative to other antibiotics, an absence or reduction of 
drug specific toxicities, and once a week dosing of IV Dalbavancin 
avoids pitfalls of patient noncompliance with an oral medication;
     Lack of drug interactions due to metabolic profile which 
minimizes risk of unexpected adverse events when co-administered with 
other compounds as seen with linezolid and quinupristin/dalfopristin;
     Decreased requirement for therapeutic interventions, 
specifically the need for an intravenous catheter as Dalbavancin is 
administered once a week, thus reducing catheter related infection as 
well;
     Reduced time to patient defined recovery;
     Reduced mortality rate as demonstrated in the combined 
phase of the Discover 1 and Discover 2 clinical trials;
     The potential for avoidance of admission to the hospital 
as Dalbavancin allows the utilization of a weekly treatment regimen, 
thus potentially increasing the convenience of outpatient therapy for 
patients.
    The applicant conducted three phase three randomized, controlled, 
double blinded clinical trials. The first was the pivotal VER001-9 
study with a total of 873 patients with ABSSSIs, which compared the 
safety and efficacy of IV Dalbavancin with possible switch to oral 
placebo to IV Linezolid with possible switch to oral Linezolid. 
According to the applicant, the primary efficacy endpoint of clinical 
response at test of 14 days with a plus or minus of 2 days after 
completion of therapy demonstrated comparable clinical efficacy to 
linezolid and met the requirement of statistical demonstration of non-
inferiority. In the clinically evaluable population, 88.9 percent of 
patients who received Dalbavancin compared to 91.2 percent of patients 
who received vancomycin/linezolid were clinical successes. The 
applicant also noted that Dalbavancin had an improved safety profile 
compared to Linezolid as the overall incidence and percentage of 
adverse events and deaths were lower in the Dalbavancin group, which 
was statistically significant.
    The second and third clinical trials were the Discover 1 and 
Discover 2 trials, which enrolled a total of 1,312 patients with ABSSSI 
and compared IV Dalbavancin with IV placebo every 12 hours to match 
Vancomycin with possible switch to oral Vancomycin to IV Vancomycin 
with IV placebo to match IV Dalbavancin with possible switch to oral 
Linezolid. The applicant reported that in both studies, the primary 
efficacy outcome measure was clinical response in 48 to 72 hours post-
study drug initiation and a secondary outcome measure was clinical 
status at the end of treatment visit (day 14) in the Intent to Treat 
(ITT) and clinically evaluable at End of Treatment populations. 
Clinical status was also

[[Page 49929]]

determined at the short-term follow-up and long-term follow-up visits.
    According to the applicant, the Discover 1 trial demonstrated that 
83.3 percent of patients in the ITT population who received Dalbavancin 
were responders at 48 to 72 hours after the start of therapy compared 
to 81.8 percent of patients who received Vancomycin/Linezolid. The 
applicant also noted that Dalbavancin was non-inferior to Vancomycin/
Linezolid (Absolute Difference in Success Rates (95 percent confidence 
interval): -4.6 percent; 7.9 percent).
    The applicant further noted that the Discover 2 trial showed 
similar results to the Discover 1 trial. Specifically, the trial 
demonstrated that 76.8 percent of patients in the ITT population who 
received Dalbavancin were responders at 48 to 72 hours after the start 
of therapy compared to 78.3 percent of patients who received 
Vancomycin/Linezolid. The applicant again noted that Dalbavancin was 
non-inferior to Vancomycin/Linezolid (Absolute Difference in Success 
Rates (95 percent confidence interval): -7.4 percent; 4.6 percent).
    The applicant found Dalbavancin to be effective against MRSA and 
other gram-positive bacteria associated with ABSSSI. The applicant 
stated that 25 percent of patients in the study were treated without an 
inpatient admission.
    We stated in the FY 2015 IPPS/LTCH PPS proposed rule that we are 
concerned with the details of the trial design and the primary efficacy 
endpoints used within those trials that were used to provide the 
clinical data supplied by the applicant. All of the trials were 
noninferiority studies, which prevent any determination as to 
substantial clinical improvement from the trial data. The primary 
efficacy endpoint was defined as having no increase in lesion size, and 
no fever 48 to 72 hours after drug initiation. The secondary endpoint 
was a >20 percent reduction in infection area at defined points in 
time. At neither endpoint is the patient oriented endpoint of 
resolution of infection increased. With these limitations in using 
efficacy data to establish substantial clinical improvement, the 
applicant suggested that the outpatient treatment, elimination of 
central lines and avoidance of hospitalization all may improve safety, 
avoid treatment-associated infections and improve patient satisfaction, 
and that these factors demonstrate substantial clinical improvement. 
While the factors mentioned may be true, the applicant did not present 
any evidence to support its assertions.
    We invited public comments on whether Dalbavancin meets the 
substantial clinical improvement criterion, including public comments 
in response to our concern that the applicant has only provided 
efficacy data of noninferiority, and no data for the other suggested 
benefits.
    Comment: Several commenters stated that Dalbavancin meets the 
substantial clinical improvement criteria and, therefore, CMS should 
approve the application for new technology add-on payments in FY 2015.
    Response: We appreciate the commenters' input. We considered these 
public comments in our determination of whether this technology 
represents a substantial clinical improvement in the treatment options 
currently available to Medicare beneficiaries.
    Comment: As previously summarized, some of the commenters stated 
that CMS has a precedent of accepting noninferiority studies to 
evaluate technologies under the substantial clinical improvement 
criterion. In particular, these commenters indicated that CMS approved 
new technology add-on payments for Fidaxomicin in FY 2013 (77 FR 53350 
through 53358) and KcentraTM in FY 2014 (78 FR 50575 through 
50580), and both of these technologies submitted data from clinical 
trials demonstrating non-inferiority. One commenter stated that CMS' 
approval of Fidaxomicin for new technology add-on payments establishes 
a precedent for approval for a technology that shows noninferiority for 
a primary end point in addition to the acceptance of other clinically 
important secondary analysis. The commenters believed that precedent 
should be used to approve the application for new technology add-on 
payments for Dalbavancin. Another commenter stated that CMS' approval 
of KcentraTM for new technology add-on payments is an 
example of how a technology can use data from randomized controlled 
trials demonstrating noninferiority to show that technology represents 
a substantial clinical improvement.
    The applicant also provided additional data from its clinical 
trials on the degree to which patients who were improving were 
permitted to stop their treatment after 10 days. The data showed that 
patients randomized to Dalbavancin were more likely to stop therapy at 
10 days, and less likely to continue treatment through 14 days. The 
applicant stated that by day 10 most patients were being treated on an 
outpatient basis on oral therapy (either with an oral placebo or oral 
linezolid), and that treatment was discontinued at the patient's 
discretion. The applicant further stated that ``the implication of this 
finding is that, from the patient's perspective, resolution of the 
underlying infection was occurring more rapidly for those randomized to 
Dalbavancin.''
    Response: We refer readers to section II.I.4. of the preamble of 
this final rule for our detailed response to commenters' concerns 
regarding noninferiority trials.
    We believe that our preliminary assessment (and final determination 
described later in this section) with regard to Dalbavancin is 
consistent with prior determinations made with regard to other approved 
technologies, including the two technologies identified by the 
commenters, Fidaxomicin and KcentraTM. With regard to 
Fidaxomicin, we note that we stated that we believed that it 
represented a treatment option with the potential to decrease 
utilization, reduce the recurrence of clostridium-difficile associated 
disease (CDAD), and improve quality of life. We also note that we 
considered the information the applicant provided with regard to the 
endpoints in its clinical trial, which as the commenters point out, 
were indeed to demonstrate that the effects of administering 
Fidaxomicin were non-inferior to administering Vancomycin. (We refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53357 through 
53358).) Similarly, with regard to KcentraTM, we note that 
we stated that we believed that it provided a rapid beneficial 
resolution of the patient's blood clotting factor deficiency, decreases 
the risk of exposure to blood borne pathogens, and reduces the rate of 
transfusion-associated complications. These conclusions also were based 
on information the applicant provided with regard to the endpoints in 
its clinical trial. (We refer readers to the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50578 through 50579).) However, we note that in their 
clinical trials, these applicants were able to show a wider margin of 
difference between the treatment and control groups. The small margin 
of difference between the groups in this study leads us to conclude 
that any additional analysis of the trial data would be unlikely to 
demonstrate superiority of the treatment group.
    With regard to the additional data the applicant provided regarding 
days of therapy, it is our understanding that most patients in both 
groups were on oral therapy by day 10 and that patients in both groups 
were allowed to discontinue their therapy at their discretion. The 
treatment group was more likely to discontinue use of

[[Page 49930]]

Dalbavancin by day 10. We believe that it is difficult to assess the 
degree to which this implied that resolution of the underlying 
infection was occurring more rapidly, or would meet our definition of 
substantial clinical improvement. However, in light of the data from 
the applicant's non-inferiority trial, which did not show a wide margin 
of difference between the treatment and control groups, we do not 
believe that this is sufficient objective evidence to determine that 
Dalbavancin is a substantial clinical improvement in the treatment 
options available for Medicare beneficiaries.
    Comment: Many commenters described how they believed that 
Dalbavancin's administration would improve patient safety and reduce 
adverse events, improve medication compliance, and reduce potential 
additional health care utilization.
    With regard to patient safety and adverse events, many commenters 
asserted that using Dalbavancin does not require an indwelling IV 
access, unlike treatments using Vancomycin and, therefore, it is self-
evident that the potential for catheter-associated infections is 
eliminated. Some of these commenters emphasized the importance of 
reducing catheter-associated infections, and noted that Dalbavancin 
could help achieve this goal.
    In addition, with regard to patient safety and adverse events, the 
applicant provided references discussing the frequency of central 
venous catheter complications nationally. The applicant also provided 
data from their pivotal clinical trial showing the number and 
proportion of patients who died and those with adverse events, 
including drug-related adverse events and treatment-related serious 
adverse events. The applicant asserted that the data showed that fewer 
patients randomized to Dalbavancin died relative to the standard of 
care, showing that one patient (0.2 percent) treated with Dalbavancin 
died while 7 patients (1.1 percent) treated with Vancomycin/Linezolid 
died. Notably, while these data showed with a p value of 0.05 that 33 
percent of patients treated with Dalbavancin had an adverse event 
compared to 38 percent of patients treated with Vancomycin or 
Linezolid, the data also showed that it was difficult to distinguish 
between the two groups in terms of drug-related adverse events and 
treatment-related serious adverse event. The data showed that 12 
percent of patients treated with Dalbavancin experienced a drug-related 
adverse event compared to 14 percent of patients treated with 
Vancomycin/Linezolid with a p value of 0.45. The data also showed that 
0.3 percent of patients treated with Dalbavancin experienced a 
treatment-related serious adverse event compared to 0.6 percent of 
patients treated with Vancomycin/Linezolid with a p value of 0.41. In 
addition to these data, the applicant also presented data collected in 
their clinical program that compared the infusion-related adverse 
events of patients receiving Dalbavancin to those of patients receiving 
commonly used alternative agents. These data showed that 2.2 percent of 
patients treated with Dalbavancin experienced an infusion-related 
adverse event, while 3.1 of comparator agent patients experienced an 
infusion-related adverse event.
    One commenter, having reviewed the applicant's clinical trial data, 
concluded that while the safety profile to date of Dalbavancin appears 
similar to Vancomycin, the ultimate determination of safety must await 
broader clinical use. The commenter noted that future clinical trials 
are needed to define the safety profile of Dalbavancin.
    Response: We appreciate commenters' input and the additional data 
submitted by the applicant.
    We disagree with commenters that it is self-evident that the 
technology eliminates the potential for catheter-associated infections, 
particularly with respect to indwelling catheters. It is not clear if 
these patients already would have had indwelling catheters in place, 
whether for antibiotic administration or other purposes. Therefore, it 
is not evident that simply having the option of an antibiotic that does 
not require an indwelling catheter would eliminate the potential for 
catheter-associated infections. We agree with the commenters that the 
administration of Dalbavancin could reduce the potential for these 
infections in patients that otherwise would not have an indwelling 
catheter, but note that it was not possible to discern the degree to 
which this potential reduction occurs based on the data and comments 
provided.
    As previously stated, we appreciate the applicant's submission of 
additional data from its trials regarding safety and adverse events. We 
agree with the applicant that Dalbavancin appears to be associated with 
fewer infusion-associated adverse events and patient deaths relative to 
the comparator group. We note that the applicant's data showed that 
drug-related and treatment-related serious adverse events appeared to 
be less frequent for patients treated with Dalbavancin relative to the 
comparator group, but that it was not clear to what degree the groups 
actually differed because the p values were in excess of 0.4. We also 
agree with the commenter that stated that it would appear that more 
clinical use and data should be gathered to more fully develop 
Dalbavancin's safety profile.
    Comment: Many commenters stated that they believed that Dalbavancin 
would improve medication compliance and reduce potential additional 
health care utilization. Some commenters noted that patients diagnosed 
with acute bacterial skin and skin structure infections are often 
treated as inpatients. One commenter noted that the rate of these skin 
and skin structure infections are higher than they have ever 
historically been. One commenter described these hospitalizations as 
unnecessary. Another commenter stated that while Dalbavancin is not 
more efficacious than Vancomycin, it is easier to administer. The 
commenter concluded that Dalbavancin would make it possible to treat 
patients with complicated skin and skin structure infections that might 
otherwise require hospitalization on an outpatient basis without 
compromising efficacy and without the need for either laboratory 
monitoring or an indwelling intravenous catheter. Several commenters 
noted that less pharmacist monitoring time was required for the 
administration of Dalbavancin relative to Vancomycin. Several 
commenters stated that no additional data beyond the pivotal trials are 
needed to show that a single infusion involves fewer administrations 
and requires less health care resources than a course of therapy that 
lasts a week or more. One commenter described the importance of 
medication compliance in the context of treating a patient population 
that faces socioeconomic hardships. Specifically, the commenter noted 
that noncompliant patients are more likely to present to the emergency 
department with worsening infections and that Dalbavancin's dosing 
profile reduces the risk of noncompliance that is typically associated 
with oral therapy.
    Response: We appreciate the commenters' input. We agree with the 
commenters that there is the possibility that Dalbavancin could make it 
possible for certain patients to be treated on an outpatient basis 
rather than as inpatients of a hospital. We further agree with 
commenters that there is the potential for treatment benefits for 
Medicare beneficiaries that would help avoid hospitalizations, 
including avoiding potential future iatrogenic events. However, we are 
concerned that neither the applicant, nor any of the commenters, 
provided specific information or data regarding the reduced resource 
use that they believe would occur. It is common that benefits

[[Page 49931]]

from events that appear to be ``self-evident,'' as suggested by the 
commenters, prove to not be beneficial events when subjected to the 
rigors of a clinical trial.
    After consideration of the public comments we received, we do not 
believe that Dalbavancin meets the substantial clinical improvement 
criterion to qualify the technology for new technology add-on payments 
under the IPPS in FY 2015. In particular, we do not believe there is 
sufficient objective clinical evidence to determine that Dalbavancin 
significantly improves clinical outcomes for Medicare beneficiaries in 
order for the technology to qualify for new technology add-on payments. 
While we recognize that Dalbavancin has met FDA standards for safety 
and effectiveness, the new technology add-on payment application 
process and approval requires a demonstration of a substantial clinical 
improvement, which is not inherent in the FDA's regulatory process. We 
recognize that the technology is the first drug designated as a 
Qualified Infectious Disease Product (QIDP) to receive FDA approval and 
was granted QIDP designation because it is an antibacterial or 
antifungal human drug intended to treat serious or life-threatening 
infections. We are equally committed to encouraging increased 
development and approval of new antibacterial drugs, providing 
physicians and patients with important new treatment options and will 
support this endeavor by providing payment for Dalbavancin through our 
prospective payment processes. However, in the case of this 
application, we do not believe that the technology meets the 
substantial clinical improvement criterion. Therefore, we are not 
approving new technology add-on payments for Dalbavancin for FY 2015.
b. Heli-FXTM EndoAnchor System (Aptus Endosystems, Inc.)
    The Heli-FXTM EndoAnchor System is indicated for use in 
the treatment of patients whose endovascular grafts during treatment of 
aortic aneurysms have exhibited migrations or endoleaks, or in the 
treatment of patients who are at risk of such complications, and in 
whom augmented radial fixation and/or sealing is required to regain or 
maintain adequate aneurysm exclusion.
    The Heli-FXTM EndoAnchor System is comprised of the 
following three components: (1) The EndoAnchor Implant; (2) the Heli-
FXTM Applier; and (3) the Heli-FXTM Guide with 
Obturator. The Heli-FXTM EndoAnchor System is a mechanical 
fastening device that is designed to enhance the long-term durability 
and reduce the risk of repeat interventions in endovascular aneurysm 
repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). By 
deploying a small helical screw (the Heli-FXTM EndoAnchors) 
to connect the endograft to the aorta, the Heli-FXTM System 
seeks to provide a permanent seal and fixation, similar to the 
stability achieved with an open surgical anastomosis.
    The original Heli-FXTM EndoAnchor System, designed for 
treating abdominal aortic aneurysms (AAA), was cleared by the FDA 
through the ``de novo'' 510(k) process on November 21, 2011 (reference 
K102333). The Heli-FXTM Thoracic System, which allows the 
expanded use of the Heli-FXTM EndoAnchor System technology 
to the treatment of thoracic aortic aneurysms (TAA), was cleared by the 
FDA on August 14, 2012 (reference K121168).
    The applicant submitted two applications for approval for new 
technology add-on payment in FY 2015: one for the treatment of AAAs and 
the other for the treatment of TAA repair. We note that, as stated in 
the Inpatient New Technology Add-on Payment Final Rule (66 FR 46915), 
two applications are necessary in this instance, because patients that 
may be eligible for use of the technology under the first indication 
are not expected to be assigned to the same MS-DRGs as patients 
receiving treatment using the new technology under the second 
indication. Specifically, patients who have endovascular grafts 
implanted for the treatment of AAA map to MS-DRGs 237 (Major 
Cardiovascular Procedures with MCC) and 238 (Major Cardiovascular 
Procedures without MCC), while patients who have endovascular grafts 
implanted for the treatment of TAA map to MS-DRGs 219 (Cardiac Valve 
and Other Major Cardiothoracic Procedure without Cardiac Catheter with 
MCC), 220 (Cardiac Valve and Other Major Cardiothoracic Procedure 
without Cardiac Catheter with CC), and 221 (Cardiac Valve and Other 
Major Cardiothoracic Procedure without Cardiac Catheter without CC/
MCC). Each indication/application must also meet the cost criterion and 
the substantial clinical improvement criterion in order to be eligible 
for new technology add-on payments beginning in FY 2015. We discuss 
both of these applications below.
(1) Heli-FXTM EndoAnchor System for the Treatment of AAA 
(Heli-FXTM AAA)
    As mentioned above, the original Heli-FXTM EndoAnchor 
System, designed for treating patients diagnosed with AAA, was cleared 
by the FDA through the ``de novo'' 510(k) process on November 21, 2011 
(reference K102333). According to the applicant, the device became 
available to Medicare beneficiaries following the product launch at the 
Society of Vascular Surgery (SVS) Annual Meeting held on June 7-9, 
2012. Therefore, the applicant maintained that the Heli-FXTM 
AAA meets the ``newness'' criterion because the technology was not 
available on the U.S. market until June 2012. The applicant explained 
that the delay in the general market availability of the original Heli-
FXTM AAA, following initial FDA clearance, was mainly 
because of the regulatory uncertainty inherent in the ``de novo'' 
510(k) process. This uncertainty prevented the manufacturer from being 
able to secure the venture capital funding that was necessary to 
prepare for commercialization before obtaining market clearance. The 
ability to secure venture capital through the fundraising process was 
dependent upon the FDA clearance. According to the applicant, funding 
to commercially market the technology was not obtained until June 2012. 
In subsequent discussions with the applicant, the applicant confirmed 
that the Heli-FXTM AAA was available on the U.S. market as 
of November 2011. Further, the applicant acknowledged that four 
implantations were performed on Medicare beneficiaries between November 
2011 and June 2012. Therefore, the Heli-FXTM AAA is 
considered ``new'' as of November 2011 when the technology was cleared 
by the FDA and became available on the U.S. market.
    Section 412.87(b)(2) of the regulations 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. Our past practice 
has been to begin and end the eligibility for new technology add-on 
payments on a fiscal year basis. We have generally followed a guideline 
that uses a 6-month window, before and after the beginning of the 
fiscal year, to determine whether to still consider a technology 
``new'' and extend approved new technology add-on payments for an 
additional fiscal year. In general, a technology is still considered 
``new'' (and eligible to receive new technology add-on payments) only 
if the 3-year anniversary date of the product's entry on the market 
occurs in the latter half of the fiscal year. (We refer readers to 70 
FR 47362.) With regard to the newness criterion for the Heli-
FXTM AAA, as stated above, we consider the beginning

[[Page 49932]]

of the newness period for the device to begin when the technology first 
became available on the U.S. market in November 2011. As previously 
stated, the applicant acknowledged that four implantations were 
performed on Medicare beneficiaries between November 2011 and June 
2012. Therefore, the costs of the Heli-FXTM AAA are 
currently reflected in the MS-DRGs, and the 3-year anniversary date 
under the newness criterion for the product's entry on the U.S. market 
will occur during November 2014 (the first half of FY 2015). As such, 
we do not believe that the Heli-FXTM AAA meets the newness 
criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the Heli-FXTM AAA meets the newness 
criterion. We note that the applicant requested an ICD-10-PCS code, and 
presented comments at the March 2014 ICD-10 Coordination & Maintenance 
Committee meeting. We also note in section II.G. of the preamble of 
this final rule that, per section 212 of the PAMA (Pub. L. 113-93), the 
Secretary announced plans to establish a new compliance date for ICD-
10-PCS. We also discuss in that section requests for ICD-10-PCS codes 
for FY 2015. We refer readers to section II.G. of the preamble of this 
final rule for a complete discussion of these issues.
    Comment: The applicant submitted a public comment in response to 
the concerns that CMS presented in the FY 2015 IPPS/LTCH PPS proposed 
rule regarding the newness criterion. The applicant noted that 
questions raised by CMS centered solely on whether the Heli-
FXTM AAA was charged to Medicare prior to the product launch 
in June 2012. Additionally, the applicant asserted that CMS did not 
reference the relevance of the April 1 date for purposes of determining 
whether a technology meets the newness criterion.
    Based on CMS' concerns presented in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28039), the applicant conducted another review of 
the data previously provided to CMS. As previously submitted, there 
were four cases where the applicant was able to determine that the 
Heli-FX AAA was implanted in Medicare beneficiaries, and where charges 
were submitted to Medicare, prior to the product launch. These 
procedures occurred on April 24, 2012, May 7, 2012, May 23, 2012, and 
June 4, 2012. The applicant stated that because all of these cases were 
completed after April 1, 2012, it believes that the Heli-
FXTM AAA meets the newness criterion for FY2015.
    Response: In a further follow-up discussion to clarify the 
availability of the Heli-FXTM AAA, the applicant's 
representatives noted that, although not in large quantities, the Heli-
FX AAA was available to patients prior to April 1, 2012. We appreciate 
the information the applicant provided regarding the newness criterion. 
As we explained in the FY 2015 IPPS/LTCH PPS proposed rule, in general, 
a new technology is still considered ``new'' (and eligible to receive 
new technology add-on payments) only if the 3-year anniversary date of 
the product's entry on the market occurs in the latter half of the 
fiscal year. Although the applicant has stated that the initial four 
implantations were after April 1, 2012, the technology was still 
available prior to April 1, 2012. Therefore, we still consider the 
beginning of the newness period for the device to begin when the 
technology first became available on the U.S. market in November 2011, 
which is prior to April 1, 2012. As stated in the FY 2015 IPPS/LTCH PPS 
proposed rule, the 3-year anniversary date under the newness criterion 
for the product's entry on the U.S. market will occur during November 
2014 (the first half of FY 2015). As such, the Heli-FXTM AAA 
does not meet the newness criterion and, therefore, is not eligible for 
new technology add-on payments for FY 2015.
    To demonstrate that the technology meets the cost criterion, the 
applicant researched claims data from the 100 percent sample of the 
2012 Inpatient Hospital Standard Analytical File (SAF) for cases 
reporting either procedure code 39.71 (Endovascular implantation of 
other graft in abdominal aorta), or procedure code 39.79 (Other 
endovascular procedures on other vessels) in the first or second 
procedure position on the claim, in combination with one of the 
following primary diagnosis codes: 441.4 (Abdominal aneurysm without 
mention of rupture); 996.1 (Mechanical complication of other vascular 
device, implant, and graft); or 996.74 (Other complications due to 
other vascular device, implant, and graft). The applicant believed that 
this combination of ICD-9-CM codes identifies cases treated for AAA. We 
note that the 2012 SAF dataset includes all claims submitted from 
hospitals paid under the IPPS for calendar year 2012.
    The applicant focused its analysis on MS-DRGs 237 and 238 because 
these are the MS-DRGs that cases treated with the implantation of 
endovascular grafts for AAAs would most likely map to. The applicant 
found a total of 8,142 cases, and noted that 9.35 percent of the total 
number of cases would map to MS-DRG 237, and 90.65 percent of the total 
number of cases would map to MS-DRG 238. The applicant standardized the 
charges for all 8,142 cases. Using the inflation factor of 1.47329 
published in the FY 2014 IPPS/LTCH final rule (78 FR 50982), the 
applicant inflated the standardized charges by 14.88 percent (the 
applicant multiplied 1.47329 x 1.47329 x 1.47329 in order to inflate 
the charges from 2012 to 2015). The applicant then added the charges 
for the Heli-FXTM AAA to the standardized charges by 
dividing the cost of the Heli-FXTM AAA device by each 
individual hospital specific CCR from the FY 2012 impact file. This 
equated to an average case-weighted inflated standardized charge per 
case of $111,613. The applicant noted that the average case-weighted 
inflated standardized charge per case did not contain additional 
operating room charges that relate to the Heli-FXTM AAA. 
Therefore, the applicant determined that it was necessary to add an 
additional $1,440 for operating room charges, which was based on an 
additional half hour of operating room time from one hospital, to the 
average case-weighted standardized charge per case. This resulted in an 
average case-weighted standardized charge per case of $113,053. The 
applicant calculated an average case-weighted threshold of $86,278 
across both MS-DRGs 237 and 238. The applicant noted that the average 
case-weighted standardized charge per case, computed without including 
the additional operating room charges that relate to the Heli-
FXTM AAA, exceeded the average case-weighted threshold of 
$86,278. Therefore, the applicant maintained that the technology meets 
the cost criterion.
    The applicant also submitted claims data from the ANCHOR (Aneurysm 
Treatment Using the Heli-FX Aortic Securement System Global Registry) 
study to demonstrate that the technology meets the cost criterion. A 
total of 51 cases were submitted with 11.76 percent of all the cases 
mapping to MS-DRG 237, and 88.24 percent of all the cases mapping to 
MS-DRG 238. The applicant standardized the charges for all 51 cases, 
and determined an average case-weighted standardized charge per case of 
$128,196. The applicant calculated an average case-weighted threshold 
of $87,118 across MS-DRGs 237 and 238. Therefore, because the average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold, the applicant maintained that the technology meets 
the cost criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the Heli-FXTM AAA meets the cost 
criterion,

[[Page 49933]]

particularly with regard to the assumptions and methodology used in the 
applicant's analyses.
    Comment: Some commenters believed that the high cost of the Heli-
FXTM device would deter facilities from using it.
    Response: As discussed above, because the Heli-FXTM AAA 
does not meet the newness criterion, it is not eligible for new 
technology add-on payments for FY 2015. Therefore, we are not 
summarizing the details of this comment nor are we responding to the 
issues presented in this discussion. However, we do address this 
comment in the later discussion of the Heli-FXTM EndoAnchor 
System for the Treatment of Thoracic Aortic Aneurysms.
    We discuss whether the Heli-FXTM EndoAnchor System (for 
the treatment of AAA and TAA) represents a substantial clinical 
improvement over other treatments used for the repair of both abdominal 
and thoracic aortic aneurysms in one discussion below.
(2) Heli-FXTM EndoAnchor System for the Treatment of 
Thoracic Aortic Aneurysms (Heli-FXTM TAA)
    The Heli-FXTM TAA, which allows the expanded use of the 
Heli-FXTM EndoAnchor System technology to TAA repair, was 
cleared by the FDA on August 14, 2012 (reference K121168). The new 
system consists of a longer delivery device with additional tip 
configurations to allow the helical EndoAnchor technology to treat TAA. 
A line extension to the original Heli-FXTM EndoAnchor 
System, allowing improved treatment of AAA patients with larger aortic 
neck diameters, was cleared by the FDA on April 12, 2013 (reference 
K130677).
    With regard to the newness criterion for the Heli-FXTM 
TAA, we consider the newness period for the device to begin when the 
technology was approved by the FDA on August 14, 2012. Because the 3-
year anniversary date of the product's entry on the U.S. market would 
occur in the second half of FY 2015 (August 14, 2015), we believe that 
the Heli-FXTM TAA meets the newness criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the Heli-FXTM TAA meets the newness 
criterion. As noted above, the applicant requested an ICD-10-PCS code, 
and presented comments at the March 2014 ICD-10 Coordination & 
Maintenance Committee meeting. We also note in section II.G. of the 
preamble of this final rule that, per section 212 of the PAMA (Pub. L. 
113-93), the Secretary announced plans to establish a new compliance 
date for the ICD-10-PCS. We also discuss in that section requests for 
ICD-10-PCS codes for FY 2015. We refer readers to section II.G. of the 
preamble of this final rule for a complete discussion these issues. We 
did not receive any public comments on whether the Heli-FXTM 
TAA meets the newness criterion.
    To demonstrate that the Heli-FXTM TAA meets the cost 
criterion, similar to the analysis performed for the Heli-
FXTM AAA, the applicant researched claims data from the 100 
percent sample of the 2012 SAF for cases reporting procedure code 39.73 
(Endovascular implantation of graft in thoracic aorta) in the first or 
second procedure position on the claim, in combination with one of the 
following primary diagnosis codes: 404.93 (Hypertensive heart and 
chronic kidney disease, unspecified, with heart failure and chronic 
kidney disease stage V or end-stage renal disease); 441.01 (Dissection 
of aorta, thoracic); 441.03 (Dissection of aorta, thoracoabdominal); 
441.2 (Thoracic aneurysm without mention of rupture); 441.4 (Abdominal 
aneurysm without mention of rupture); 441.7 (Thoracoabdominal aneurysm, 
without mention of rupture); 996.1 (Mechanical complication of other 
vascular device, implant, and graft); or 996.74 (Other complications 
due to other vascular device, implant, and graft). The applicant 
believed that this combination of ICD-9-CM codes identifies cases 
treated for TAA. We note that the 2012 SAF dataset includes all claims 
submitted from hospitals paid under the IPPS for CY 2012.
    The applicant focused its analysis on MS-DRGs 219, 220, and 221 
because these are the MS-DRGs to which cases treated with the 
implantation of endovascular grafts for TAA repair would most likely 
map. The applicant found a total of 642 cases, and noted that 27.88 
percent of the total number of cases would map to MS-DRG 219, 40.50 
percent of the total number of cases would map to MS-DRG 220, and 31.62 
percent of the total number of cases would map to MS-DRG 221. The 
applicant standardized the charges for all 642 cases. Using the 
inflation factor of 1.47329 published in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50982), the applicant inflated the standardized 
charges by 14.88 percent (the applicant multiplied 1.47329 x 1.47329 x 
1.47329 in order to inflate the charges from 2012 to 2015). The 
applicant then added the charges for the Heli-FXTM TAA to 
the standardized charges by dividing the cost of the Heli-
FXTM TAA by each individual hospital specific CCR from the 
FY 2012 impact file. This equated to an average case-weighted inflated 
standardized charge per case of $156,625. The applicant noted that the 
average case-weighted inflated standardized charge per case did not 
contain additional operating room charges related to the use of this 
technology. Therefore, the applicant determined that it was necessary 
to add an additional $2,160 for operating room charges, which was based 
on an additional 45 minutes of operating room time from one hospital, 
to the average case-weighted standardized charge per case. This 
resulted in an average case-weighted standardized charge per case of 
$158,785. The applicant calculated an average case-weighted threshold 
of $141,194 across MS-DRGs 219, 220, and 221. The applicant noted that 
the average case-weighted standardized charge per case, without 
including charges for additional operating room time, exceeded the 
average case-weighted threshold of $141,194. Therefore, the applicant 
maintained that the technology meets the cost criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the Heli-FXTM TAA meets the cost 
criterion, particularly with regard to the assumptions and methodology 
used in the applicant's analysis.
    Comment: Some commenters stated that the high cost of the Heli-
FXTM device would deter facilities from using it. Therefore, 
the commenters supported the approval of the Heli-FXTM TAA 
for new technology add-on payment in order to assist with cost coverage 
so that more facilities would be willing to use the device in the 
treatment of their patients.
    Response: We appreciate the commenters' input and support. We agree 
with the commenters that the Heli-FXTM TAA meets the cost 
criterion.
(3) Evaluation of the Substantial Clinical Improvement Criterion for 
the Heli-FXTM EndoAnchor System for the Treatment of 
Abdominal and Thoracic Aortic Aneurysms
    The applicant stated that the Heli-FXTM EndoAnchor 
System represents a substantial clinical improvement for the following 
reasons: the technology improves overall rates of aneurysm exclusion 
and long-term success after EVAR by increasing the integrity and long-
term durability of the proximal seal and fixation; the technology 
reduces the risk and rate of secondary interventions and readmissions 
due to aneurysm-related complications (for example, endoleaks, 
migration, aneurysm enlargement) caused by failure of the proximal 
seal; the technology improves the general applicability of EVAR to

[[Page 49934]]

patients with a broader spectrum of aortoiliac anatomy, including those 
with hostile proximal neck anatomy; and the technology reduces the 
rigor of life-long imaging follow-up for EVAR patients by reducing the 
rate of late failure and increasing the post-EVAR rates of aneurysm sac 
regression due to complete, endoleak-free durable aneurysm exclusion.
    While current devices and capabilities are greatly improved over 
the first generation of devices, the applicant noted that EVAR 
treatments using the first generation of devices has not proven to be 
as durable, anatomically applicable, or complication-free as open 
surgery.4 5 6 7 Several critical and life-threatening 
limitations continue to require improvement to these devices and 
procedures, including the need to reduce serious early and late device 
and procedure-related complications, such as loss of stability, and 
integrity and robustness of the clinical proximal aortic landing zone, 
and to offer an alternative method of EVAR to a broader segment of the 
patient population.
---------------------------------------------------------------------------

    \4\ Abbruzzese, T.A., Kwolek, C.J., Brewster, DC, et al, 
``Outcomes following endovascular abdominal aortic aneurysm repair 
(EVAR): An anatomic and device-specific analysis,'' Journal of 
Vascular Surgery, 2008, Vol. 48, pp. 19-28.
    \5\ Dangas, G., O'Connor, D., Firwana, B., et al, ``Open Versus 
Endovascular Stent Graft Repair of Abdominal Aortic Aneurysms: A 
Meta-Analysis of Randomized Trials,'' JACC, 2012, Vol. 5 (10), pp. 
1072-1080.
    \6\ De Bruin, J.L., Baas, A.F., Buth, J., et al, ``Long-Term 
Outcome of Open or Endovascular Repair of Abdominal Aortic 
Aneurysm,'' New England Journal of Medicine, May 2010, Vol. 362(20), 
pp.1881-1889.
    \7\ Greenhalgh, R.M., Brown, L.C., Powell, J.T., et al, 
``Endovascular versus open repair of abdominal aortic aneurysm,'' 
New England Journal of Medicine, May 2010, Vol. 362(20), pp. 1863-
1871.
---------------------------------------------------------------------------

    The applicant provided literature, analyses of data from the 
``STAPLE-2'' clinical trial and the ANCHOR Registry, and a meta-
analysis of EVAR trials to demonstrate that the Heli-FXTM 
EndoAnchor System represents a substantial clinical improvement above 
current treatments available. We summarize the information provided by 
the applicant that supports the clinically beneficial results of using 
the Heli-FXTM EndoAnchor System.
    The ``STAPLE-2'' clinical trial enrolled 155 patients at 25 U.S. 
centers between September 2007 and January 2009. Clinical (and imaging) 
data are available for 147, 139 and 125 patients at 1-year, 2-year, and 
3-year follow-up, respectively, representing the complete data sets at 
these time points. Patients enrolled in the clinical trial and observed 
under the study will continue to be followed per protocol for 5 years 
following aneurysm repair. According to the applicant, the results of 
the trial and study demonstrate that the Heli-FXTM 
EndoAnchor System is associated with an extremely low rate of proximal 
neck-related issues in long-term follow-up. The applicant maintained 
that this determination results in improved outcomes for aortic 
aneurysm patients, and reduced rate of re-interventions, which are 
associated with hospital admissions, procedural risks, and reversions 
to increased follow-up frequency requiring more physician visits and 
radiographic imaging studies.
    The data used for this analysis was extracted from the clinical 
database on February 1, 2013, and are identical to those used to 
generate the most recent Annual Progress Report (APR) submitted to the 
FDA, as required under the U.S. IDE regulations.
    While the ``STAPLE-2'' clinical trial was conducted exclusively 
with the Aptus AAA endograft (which remains investigational), the 
applicant believed that the use of the Heli-FXTM EndoAnchor 
System-related data is applicable to the use of the anchor with the 
compatible Cook, Gore, and Medtronic manufactured endografts in 
treatment anatomies for AAA and TAA cases.
    Through 3-year follow-up, the applicant noted that there have been 
no anchor fractures as observed by the core lab. Further, there have 
been no relative migrations of the Heli-FXTM EndoAnchor 
System as compared to other endografts reported by the core laboratory.
    In the analysis of the ``STAPLE-2'' clinical trial data at 1-year 
follow-up, the applicant noted that the core lab observed no proximal 
migrations, and a single case of Type I endoleak. A single secondary 
intervention was required to address the Type I endoleak in a patient 
with a circumferentially incomplete proximal neck within the 1-year 
follow-up period.
    The applicant further noted that no additional Type I endoleaks 
have been observed beyond the 1-year follow-up in any patient enrolled 
in the trial. In addition, there were no reported instances of aneurysm 
rupture, vessel perforation, vessel dissection, catheter embolization, 
enteric fistula, infection, Type III endoleak, conversion, allergic 
reactions, renal emboli, or patient death associated with the use of 
the Heli-FXTM EndoAnchor System. Further, there have been no 
reports of bleeding or hematoma at the EndoAnchor penetration locations 
in the aortic neck.
    Beyond the 1-year follow-up, three patients have demonstrated 
proximal migrations less than 1 cm. None of these cases were associated 
with Type I endoleaks or aneurysm sac expansions.
    The applicant then compared migrations and Type I endoleaks data 
from the ``STAPLE-2'' clinical trial to analogous data from five 
compatible AAA endografts that were not anchored (data taken from 
published SSE data obtained from the FDA's Web site). One year of data 
was compared because this timeframe is what is reported in a standard 
fashion from IDE trials of endografts. The applicant noted that the 
Heli-FXTM EndoAnchor System data compares favorably against 
the data obtained in U.S. pivotal trials of devices that did not employ 
discrete independent fixation means, particularly when viewed in light 
of the shorter average neck lengths treated in the ``STAPLE-2'' 
clinical trial versus those involving the Cook, Gore, and Medtronic 
manufactured endografts. According to the applicant, the number of 
proximal migrations were low across devices as reported in the SSE 
data, and an analysis using the Fisher's exact method demonstrated no 
statistically significant differences when compared to the anchored 
endografts used in the ``STAPLE-2'' clinical trial (all p=NS). The 
incidence of Type I endoleaks and the need for secondary interventions 
to address them was significantly lower for the Heli-FXTM 
EndoAnchor System endografts analyzed under the ``STAPLE-2'' clinical 
trial versus the Medtronic, AneuRx, and Talent manufactured endografts 
(p=0.026 versus AneuRx and p=0.015 versus Talent). The applicant stated 
that the applicability of post-hoc statistical analyses is limited. 
However, the applicant believed that because the data being compared 
under the analyses were collected through similar protocols and with 
the same endpoint definitions, post-hoc comparisons were deemed 
appropriate. The applicant further believed that the comparison of this 
data demonstrates that the Heli-FXTM EndoAnchor System is 
associated with very low rates of Type I endoleaks and migrations.
    The applicant also provided data from the ANCHOR Registry, which is 
a post-market, prospective, observational, multi-center, international, 
dual-arm study designed to capture real-world data on the usage 
patterns and clinical results associated with the use of the Heli-
FXTM EndoAnchor System as a method of treatment for patients 
in need of EVAR. The applicant explained that the ANCHOR Registry 
represents a growing body of data on the application of the Heli-
FXTM EndoAnchor System used as a method of endovascular 
aortic aneurysm repair. The applicant noted

[[Page 49935]]

that to its knowledge, the anatomical challenges present in the 
registry are greater than those in any large scale published series. 
The applicant further noted that, although long-term results are 
limited, the acute results demonstrate a high level of device safety, 
technical feasibility and acute success in a patient population with 
few viable options.
    Primary safety for the ANCHOR Registry is being measured as a 
composite of freedom from device or procedure-related serious adverse 
events through 1-year follow-up following the Heli-FXTM 
EndoAnchor System implantation. Primary effectiveness is being measured 
as a composite of acute technical success and freedom from Type Ia 
endoleaks and endograft migrations through 1-year follow-up. Inclusion 
and exclusion criteria are minimal, essentially following the IFU 
requirements. Patients are being followed in the registry by their 
physician's standard of care for 5 years.
    Enrollment in the ANCHOR Registry began in March 2012. Through 
August 2013, a total of 258 patients were enrolled at 40 participating 
centers (29 located in the United States and 11 located in the European 
Union), and data are available in the registry's database. Of these, 
195 patients (76 percent) were enrolled in the primary arm, having the 
Heli-FXTM EndoAnchor System implanted at the time of their 
initial aneurysm treatment, either as a prophylactic measure, or to 
address an acute leak seen on completion arteriography. The remaining 
patients (63 or 24 percent) were enrolled in the revision arm, having 
the Heli-FXTM EndoAnchor Systems implanted at a secondary 
procedure to arrest migration, or address endoleaks discovered on 
follow-up in previously implanted endografts.
    The applicant noted that physicians are choosing to apply the Heli-
FXTM EndoAnchor System in a subset of patients that are at a 
higher risk for proximal neck-related complications during follow-up. 
The large average sac diameter in the revision arm suggested that these 
patients' initial treatments were unsuccessful and, as such, they have 
experienced continued sac expansion post-EVAR. These patients also 
represent a high-risk subset of patients.
    Acute results are measured in terms of technical success. In the 
primary arm, 193 of 194 procedures were successful, and in the revision 
arm, 57 of 63 procedures were successful. All technical failures were 
persistence of Type Ia endoleaks. There has been a single re-
intervention at 69 days post-Endoanchor implantation for a persistent 
Type Ia endoleak in one patient in the revision arm, in which the Heli-
FXTM EndoAnchor System combined with a proximal cuff were 
unable to completely resolve the endoleak. There have been no device-
related serious adverse events.
    As mentioned above, because the ``STAPLE-1'',\8\ and ``STAPLE-2'' 
clinical trials were single-arm studies, no data are available from 
them to assess the impact of the Heli-FXTM EndoAnchor System 
on endograft performance. To make this assessment, a meta-analysis was 
conducted. The meta-analysis combined long-term AAA endograft 
performance from endografts marketed in the United States, and compared 
these measures to those from long-term follow-up in the ``STAPLE-2'' 
trial.
---------------------------------------------------------------------------

    \8\ Deaton, D.H., Mehla, M., Kasirajan, K., et al, ``The Phase I 
Multi-center Trial (Staple-1) of the Aptus Endovascular Repair 
System: Results at 6 Months and 1 Year,'' Journal of Vascular 
Surgery, 2009, Vol. 49, pp. 851-857 (discussion on pp. 857-858.)
---------------------------------------------------------------------------

    According to the applicant, the key findings from the meta-analysis 
are as follows:
     Heli-FXTM EndoAnchors reduced the proportion of 
treated aneurysms with enlargement greater than 5 mm at 3 years from 
12.7 percent to 3.9 percent (p=.002).
     Heli-FX EndoAnchor System reduced the proportion of leaks 
requiring treatment at 3 years from 12 percent to 1.3 percent (p.001).
     Heli-FXTM EndoAnchor System reduced (all-cause) 
mortality at 3 years from 18.8 percent to 8.4 percent (p=.002). 
However, this does not appear to have been totally mediated by AAA-
related mortality, which was reduced by the Heli-FXTM 
EndoAnchor System from 2.5 percent to 0.7 percent at 3 years (but was 
not statistically significant, p=.372).
    According to the applicant, in general, patients in the ANCHOR 
Registry were similar to the patients in the AAA endograft studies. The 
applicant noted that the results of the analysis using the Fisher's 
Exact Tests were consistent between the All-Studies' comparisons and 
the IDE-Studies' comparisons: All-Cause Mortality, Leaks requiring 
Treatment, and Enlargement were all significantly lower at 3 years in 
the endografts implanted with the Heli-FXTM EndoAnchor 
System than in standard endografts.
    The applicant asserted that the meta-analysis shows that there is 
objective evidence that the Heli-FXTM EndoAnchor System 
effectively reduces well-documented problems with endografts. By 
providing the endograft with better apposition to the native artery, 
the applicant noted that the Heli-FXTM EndoAnchor System 
reduces the rates of enlargement and endoleaks requiring treatment. The 
applicant further noted that these results were consistent in the All-
Studies' and IDE Studies' meta-analyses. The applicant believed that 
lower rates of leaks requiring intervention would save payers money 
over the long term.
    The applicant observed that, while there was no significant 
improvement in the rate of ruptures with the Heli-FXTM 
EndoAnchor System, this may be due to the fact that leaks were treated 
and, thereby, prevented any ruptures. The applicant believed that the 
higher rate of treated endoleaks in endografts implanted without the 
Heli-FXTM EndoAnchor System provides for this hypothesis. 
Also, migration did not appear to be significantly reduced by the Heli-
FXTM EndoAnchor System (3.5 percent at 3 years in both 
groups; p=1.0).
    Finally, the applicant concluded that, overall, the lower 
complication rates seen with the Heli-FXTM EndoAnchor System 
in the meta-analysis provide evidence of the clinical benefits and 
likely economic benefits associated with the use of the Heli-
FXTM EndoAnchor System. The applicant believed that the 
technology may be especially helpful in patients with difficult 
anatomy, and that it may be reasonable to consider using the Heli-
FXTM EndoAnchor System prophylactically in the treatment of 
all such patients.
    In addition to the formal study data from the ``STAPLE-2'' trial, 
the Global ANCHOR Registry, and the meta-analysis based on these, the 
applicant provided published peer-reviewed literature that represent an 
early state of scientific data dissemination outside of non-company 
sponsored clinical studies, which is commensurate with the recent 
market approvals of the Heli-FXTM EndoAnchor System 
technology. The applicant believed that these data demonstrate strong 
initial physician enthusiasm and resulting favorable clinical results 
in their experience to date. The applicant noted that the general body 
of scientific literature is considered meaningful and growing for this 
early stage of market introduction. However, the applicant asserted 
that the literature supports the study and meta-analysis data above 
that documents that improved clinical outcomes were observed, including 
outcomes in a broader range of patients that are often ineligible for, 
or at greatest risk with, EVAR.

[[Page 49936]]

    In the FY 2015 IPPS/LTCH PPS proposed rule, we stated that we are 
concerned that the three sources of data, the ``STAPLE-2'' clinical 
trial, the Anchor registry, and the literature review that the 
applicant submitted to support their application are not high quality 
evidence. The `STAPLE-2'' study was a single-arm study and only used 
one endograft, the registry is an observational study, and the 
literature review does not provide clinical data. Also, the meta-
analysis of all the submitted data is only as good as the data used. 
While the clinical data submitted suggests that some outcomes such as 
EVAR failure are improved, we stated that we are concerned that there 
is not enough clinical evidence to support the substantial clinical 
improvement criterion.
    We invited public comments on whether the submitted data 
demonstrate that the Heli-FXTM EndoAnchor System represents 
a substantial clinical improvement in the treatment of Medicare 
beneficiaries, particularly in regard to the concerns we identified.
    Comment: Several commenters stated that the Heli-FXTM 
System meets the substantial clinical improvement criterion and, 
therefore, CMS should approve the Heli-FXTM System for new 
technology add-on payments in FY 2015.
    Response: We appreciate the commenters' support. We considered 
these comments in our determination of whether the Heli-FXTM 
System represents a substantial clinical improvement in the treatment 
options available to Medicare beneficiaries.
    Comment: The applicant commented in response to CMS' concerns 
presented in the FY 2015 IPPS/LTCH PPS proposed rule regarding the lack 
of enough high quality evidence to support the substantial improvement 
criterion because the three sources of data submitted by the applicant 
were not considered to be `high quality evidence.' Specifically, CMS 
stated that it believed that the meta-analysis of submitted data is 
only as good as the data used, the STAPLE-2 Pivotal FDA Study was a 
single arm study and only used one Endograft, and the ANCHOR Registry 
is an observational study and the literature review does not provide 
clinical data. The applicant first outlined some basic background 
information into the EVAR regulatory process.
    With respect to the concerns regarding the meta-analysis of 
submitted data being only as good as the data used, the applicant 
asserted that it has not attempted to substantiate the finding of 
substantial clinical improvement through a single source of 
information. The applicant believed that the entirety of evidence 
demonstrated that this criterion was met as stated in its application. 
Specifically, the applicant stated that the Heli-FXTM 
EndoAnchor System offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatments, 
including the primary cases with hostile necks and complex revisions 
(refer to the ANCHOR Registry data demonstrating 90.2 percent of 
hostile necks in the population). The technology has shown 
significantly improved clinical outcomes for the short proximal aortic 
neck patient population when compared to current available treatments 
(refer to STAPLE-2 average neck length of 22.1mm, shorter than any 
conventional Endograft IDE Study), and has been shown to reduce 
aneurysm related mortality (refer to the meta-analysis results). The 
applicant further stated that the Heli-FXTM has also been 
shown to reduce proximal neck related device complications and reduced 
subsequent therapeutic interventions (refer to STAPLE-2 where no late 
Type 1 endoleaks or proximal neck related revisions were required), and 
with previously unseen aneurysm sac regression (refer to STAPLE-2 which 
showed the highest reported at 81.7 percent at 3 years), indicating 
more rapid resolution of the disease process. Based on all of the above 
information, the applicant stated that it believes that the Heli-
FXTM EndoAnchor System has met this evidentiary threshold 
for the substantial clinical improvement criterion.
    The applicant also addressed CMS' concerns about the quality of 
evidence that the Aptus' single arm STAPLE-2 study may provide, 
specifically, that the STAPLE-2 Pivotal FDA Study was a single arm 
study and only used one Endograft. According to the applicant, the 
STAPLE-2 Study was a two arm study of patients treated with the Aptus 
Stent Graft in conjunction with the EndoAnchors versus an historical 
open surgical control (SVS Lifeline database). The applicant stated 
that this kind of trial design is typical for U.S. pre-market IDE EVAR 
Studies with current Endovascular stent grafts. According to the 
applicant, many of the recently approved endografts in the United 
States used a similar study design and the FDA has no requirement for a 
concurrent surgical control. The applicant noted that in no case for 
the device regulatory approval processes for recent endografts were 
randomization or blinding utilized.
    The applicant also addressed CMS' concern that the STAPLE-2 Study 
utilized a single type of Endograft. According to the applicant, while 
the STAPLE-2 Study utilized a single type of Endograft, this may 
provide a uniquely compelling indication of substantial clinical 
improvement based on two aspects relating to STAPLE-2. While the 
Endograft was an entirely conventional design utilizing Polyester 
fabric supported by a Nitinol stent structure with infrarenal fixation 
and an unsupported main body (eliminating any contribution of columnar 
strength to aid in fixation), the applicant stated that this Endograft 
has no other means of fixation beyond the Aptus EndoAnchors. Despite 
this, the applicant stated that results indicated highly favorable 
proximal seal related outcomes in this most challenging proximal neck 
anatomy patient population. In this cohort, the proximal necks in 
STAPLE-2 patients contained the shortest average neck length of any 
conventional (non-Fenestrated) Endograft evaluated in a U.S. PMA trial 
to date. The applicant further stated that unlike other endografts, 
such as the Medtronic Endurant or the Gore Excluder, being utilized 
with Heli-FX currently both in the ANCHOR trial and commercially 
worldwide, the graft studied in STAPLE-2 has no inherent fixation, 
active or otherwise. The applicant explained that this is because there 
are no integral hooks, barbs, supra-renal fixation, ``anatomical 
fixation'' or ``anchor pins'' or other means to secure the Aptus 
Endograft beyond the fixation provided by the Heli-FXTM 
EndoAnchors. In effect, because the Heli-FXTM is the only 
source of fixation for the graft studied, the applicant stated that it 
represents a ``worst case'' and significant performance challenge of 
the clinical effectiveness of the Heli-FXTM EndoAnchors. 
Despite this worst-case aspect of no inherent fixation in the STAPLE-2 
Endograft other than Heli-FXTM EndoAnchors for Endograft 
fixation and sealing to the aortic wall, the applicant reported that 
there were excellent clinical and technical results with respect to 
proximal neck seal and fixation. This was observed despite the very 
short proximal necks treated in the study cohort. The applicant noted 
that the aneurysm size regression is also among the most rapid and 
highest frequency seen with any Endograft U.S. IDE study. The applicant 
stated that in the setting of an Endograft with no means of fixation 
beyond the Heli-FXTM EndoAnchors, this is especially 
meaningful and indicative of the EndoAnchor capabilities with more 
advanced, current generation commercial Endografts.

[[Page 49937]]

    With respect to CMS' concern that the ANCHOR Registry is an 
observational study, the applicant believed that the Anchor Registry 
provides important, highly valuable and meaningful evidence in support 
of the substantial clinical improvement criterion. The applicant stated 
that the ANCHOR Registry is a formal, Institutional Review Board (IRB) 
and Ethics Committee (EC) approved Post-Market Study that utilizes a 
Core Lab and a Safety Medical Reviewer for aneurysm related outcomes, 
anatomical adjudication for all patients at each follow-up time-point, 
as well as clinical outcomes acutely and in follow- up. The applicant 
further noted that the use of a Core Lab and a Safety Medical Reviewer 
in the setting of EVAR for both baseline and outcome data and the 
associated aneurysm anatomical aspects is extremely rare and, 
therefore, so far only the ANCHOR Registry has utilized this approach 
within the known EVAR Registries. The applicant stated that this 
optimizes the scientific rigor and robustness of this real-world study. 
The applicant further noted that there are currently 417 patients 
enrolled (there were 258 patients at the time of the application), with 
core lab analysis available for 311 subjects, and the data has 
continued to be highly favorable in what is now among the most hostile 
proximal necks studied in any Endograft population seen in the 
scientific literature. The applicant asserted that a key and applicable 
aspect where Heli-FXTM is having significant patient impact 
(including as seen in the patients' challenging proximal neck anatomy 
in STAPLE-2 and ANCHOR cohorts) is offering a treatment option for a 
patient population ineligible for currently available treatments. While 
the applicant acknowledged the important and favorable aneurysm 
exclusion results and expanded patient applicability provided by the 
recently FDA-approved Cook Zenith Fenestrated Endograft system, which 
expanded proximal neck capabilities as low as 4mm in length, there are 
situations affecting patients which limit access to this advanced 
Endograft technology. The applicant believed that these higher risk 
situations often require physicians to utilize Heli-FXTM 
EndoAnchors with conventional Endografts in sub-optimal proximal neck 
anatomy. The applicant asserted that this is especially applicable in 
patients deemed unsuitable for open surgical repair.
    With respect to CMS' concern that the literature review did not 
provide clinical data, the applicant acknowledged that the non-STAPLE-2 
and ANCHOR related Heli-FXTM peer-reviewed scientific 
literature did not constitute formal clinical data in themselves, but 
nonetheless the applicant believed that the information provided the 
manuscripts to highlight the various applicability and utility of the 
Heli-FXTM in various settings, including primary revision, 
in AAA and TAA.
    Response: We appreciate the applicant's response to our concerns 
presented in the proposed rule. While we recognize that Heli-
FXTM EndoAnchor System has received regulatory approval for 
marketing, therefore meeting FDA standards for safety and 
effectiveness, the new technology add-on payment process requires 
demonstration of a substantial clinical improvement, which is not 
inherent in the FDA's regulatory process. As previously stated, we 
believe that data used to support substantial clinical improvement 
should come from high quality evidence. For example, well-designed 
studies that compare the new technology to other similar services that 
the applicant is contending will be replaced by the new technology. We 
did not suggest that the comparative should have been an open, surgical 
procedure. The substantial clinical improvement criterion requires that 
technologies demonstrate substantial clinical improvement over existing 
technologies. In this case, we would have liked to have seen a 
randomized trial comparing the use of Heli-FXTM anchors with 
various endografts such as hooks, barbs, supra-renal fixation, 
anatomical fixation or anchor pins using the same brands of endografts. 
That data, if positive, would have been sufficient to demonstrate 
substantial clinical improvement over existing technologies.
    Further, we also believe that the alternatives just mentioned--
hooks, barbs, supra-renal fixation, anatomical fixation, or anchor 
pins--are alternatives to the Heli-FXTM System and the data 
submitted does not support that patients have no other alternatives. 
Therefore, based on the reasoning above, we do not believe that the 
Heli-FXTM System meets the substantial clinical improvement 
criterion.
    After consideration of the public comments we received, and as 
discussed above, we conclude that the Heli-FXTM AAA does not 
meet the newness criterion and, therefore, the technology is not 
eligible for new technology add-on payments for FY 2015. The Heli-
FXTM TAA meets the newness and cost criteria. However, as 
discussed above, the Heli-FXTM AAA and TAA do not meet the 
substantial clinical improvement criterion. Therefore, we are not 
approving new technology add-on payments for the Heli-FXTM 
TAA because the technology does not meet the substantial clinical 
improvement criterion.
c. CardioMEMSTM HF (Heart Failure) Monitoring System
    CardioMEMS, Inc. submitted an application for new technology add-on 
payment 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 believed that a large majority of patients receiving 
the sensor would be admitted as an inpatient to a hospital with a 
diagnosis of acute or chronic heart failure, which is typically 
described by ICD-9-CM diagnosis code 428.43 (Acute or chronic combine 
systolic and diastolic heart failure) and the sensor would be implanted 
during

[[Page 49938]]

the inpatient stay. The applicant stated that for safety 
considerations, a small portion of these patients may be discharged and 
the sensor would be implanted at a future date in the hospital 
outpatient setting. In addition, there would likely be a group of 
patients diagnosed with chronic heart failure who are not currently 
hospitalized, but who have been hospitalized in the past few months for 
which the treating physician believes that regular pulmonary artery 
pressure readings are necessary to optimize patient management. 
Depending on the patient's status, the applicant stated that these 
patients may have the sensor implanted in the hospital inpatient or 
outpatient setting.
    The applicant received FDA approval on May 28, 2014. The 
CardioMEMSTM HF Monitoring System is currently described by 
ICD-9-CM procedure code 38.26 (Insertion of implantable pressure sensor 
without lead for intracardiac or great vessel hemodynamic monitoring).
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments regarding how the CardioMEMSTM HF System meets the 
newness criterion. We did not receive any public comments concerning 
how the CardioMEMSTM HF Monitoring System meets the newness 
criterion. Therefore, after evaluation of the information provided by 
the applicant, we believe that the CardioMEMSTM HF 
Monitoring System meets the newness criterion, and we consider the 
technology to be ``new'' as of May 28, 2014, when the technology 
received FDA approval.
    With respect to cost criterion, the applicant submitted actual 
claims from the CHAMPION \9\ clinical trial. Of the 550 patients 
enrolled in the trial, the applicant received 310 hospital bills. The 
applicant excluded the following claims: incomplete or missing 
procedure codes, incomplete charge information and bills that were 
statistical outliers (three standard deviations away from the geometric 
mean). This resulted in a final cohort of 138 claims. The applicant 
noted that cases treated with the CardioMEMSTM HF Monitoring 
System would typically map to MS-DRG 264 (Other Circulatory System 
Operating Room Procedures). Using the 138 clinical trial claims, the 
applicant standardized the charges and added charges for the 
CardioMEMSTM HF Monitoring System (because the clinical 
trial claims did not contain charges for the CardioMEMSTM HF 
Monitoring System). This resulted in an average case-weighted 
standardized charge per case of $79,218.
---------------------------------------------------------------------------

    \9\ Abraham WT, Adamson PB, Bourge RC, Aaron MF, Costanzo MR, 
Stevenson LW, Strickland W, Neelagaru S, Raval N, Krueger S, Weiner 
S, Shavelle D, Jeffries B, Yadav JS; for the CHAMPION Trial Study 
Group. Wireless pulmonary artery hemodynamic monitoring in chronic 
heart failure: a randomized controlled trial, Lancet, February 19, 
2011, Vol. 377(9766), pp:658-666.
---------------------------------------------------------------------------

    Using the FY 2014 Table 10 thresholds, the threshold for MS-DRG 264 
is $60,172. Because the average case-weighted standardized charge per 
case exceeded the threshold amount, the applicant maintained that the 
CardioMEMSTM HF Monitoring System would meet the cost 
criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether or not the CardioMEMSTM HF System meets 
the cost criterion. We did not receive any public comments regarding 
whether or not the CardioMEMSTM HF System meets the cost 
criterion. Based on the analysis above, we believe the 
CardioMEMSTM HF System meets the cost criterion.
    With regard to substantial clinical improvement, the applicant 
asserted that elevated PA pressures occur prior to signs and symptoms 
of heart failure and changes in PA pressures provide a sound 
physiologic basis for its management. The applicant also contended 
that, until the creation of the CardioMEMS wireless PA implant, 
knowledge of PA pressure was only feasible in the hospital with the 
performance of a right heart catheterization. According to the 
applicant, the CardioMEMS HF Monitoring System provides physicians 
knowledge of PA pressure while the patient is at home, allowing 
proactive management to prevent heart failure decompensation and 
hospitalization.
    The applicant cited clinical data from the CHAMPION trial. The 
trial is a prospective, multicenter, randomized, single-blinded 
clinical trial conducted in the United States, designed to evaluate the 
safety and efficacy of the CardioMEMSTM HF Monitoring System 
in reducing heart failure-related hospitalizations in a subset of 
subjects suffering from heart failure. The applicant shared several 
major findings from the CHAMPION trial as described below.
    The primary efficacy endpoint of the CHAMPION trial was the rate of 
HF hospitalizations during the first 6 months of randomized access. 
There were 84 heart failure hospitalizations in the treatment group 
compared with 120 heart failure hospitalizations in the control group. 
This difference between the groups represented a 28-percent reduction 
in the rate of hospitalization for heart failure in the treatment group 
(0.32 hospitalizations per patient in the treatment group versus 0.44 
hospitalizations per patient in the control group, p=0.0002). Although 
not a primary end point, the rate of HF hospitalizations after 18 
months was 33 percent lower in the treatment group than in the control 
group.
    According to the applicant, secondary endpoints of the CHAMPION 
trial are changes in pulmonary artery pressures, proportion of subjects 
hospitalized, days alive outside of the hospital, quality of life 
(QOL), and heart failure management which demonstrated the following 
results:
     Pulmonary Artery Pressures: At baseline, both treatment 
and control patients had similar PA mean pressures. The change in 
pressure over the first 6 months was evaluated by integrating the area 
under the pressure curve (AUC). At 6 months of follow-up, the treatment 
group had a significantly greater reduction in AUC of -155.7 mmHg days 
compared to the control group which had an increase in AUC of +33.1 
mmHg-days; p=0.0077.
     Proportion of Subjects Hospitalized: During the 6-month 
follow-up period, the proportion of subjects hospitalized for 1 or more 
HF hospitalizations was significantly lower in the treatment group (55 
out of 270 patients) than in the control group (80 out of 280 patients) 
(20.4 percent versus 28.6 percent; p=0.0292).
     Days Alive Outside of the Hospital: At 6 months, treatment 
patients had a nonsignificant and clinically not meaningful increase in 
days alive outside of the hospital (174.4 versus 172.1; p=0.0280) and 
fewer average days in the hospital (2.2 versus 3.8; p=0.0246) compared 
to control patients.
     Quality of Life: The heart failure specific quality of 
life was assessed with the MLHFQ total score at 6 months. The average 
total score in the treatment group was 45.2  26.4 which was 
significantly better than the average total score in the control group 
50.6  24.8 (p=0.0236). The difference in total quality of 
life was primarily due to the physical domain. The average physical 
score for the treatment group (19.8  11.2) was 
significantly better than the control group (22.4  10.9) 
(p=0.0096). There was also a significant difference in the emotional 
domain with an average score of 9.5  8.1 for the treatment 
group and 11.0  7.7 for the control group (p=0.0398).
     Heart Failure Management: Physicians responded to 
treatment of patients' elevated PA pressures by making medication 
changes to lower PA pressures and reduce the risk for HF 
hospitalization. Physicians documented

[[Page 49939]]

all medication changes for all patients and indicated whether the 
change was made in response to PA pressures or standard of care 
information. During the 6-month follow-up period, physicians made 
approximately one additional HF medication change per patient per month 
in the treatment group when compared to the control group. 
Specifically, treatment patients had 1.55 medication changes per month 
on average compared to control patients having 0.65 medication changes 
per month (p<0.0001). The difference in HF management between the 
treatment and control group was due to HF medication changes made in 
response to PA pressures.
    The study met the two primary safety endpoints: (1) freedom from 
device/system related complications (DSRC); and (2) freedom from sensor 
failure. The protocol pre-specified objective performance criterion 
(OPC) were that at least 80 percent of patients were to be free from 
DSRC and at least 90 percent were to be free from pressure sensor 
failure. Of the 575 patients in the safety population, 567 (98.6 
percent) were free from DSRC at 6 months (lower confidence limit 97.3 
percent, p<0.0001). This lower limit of 97.3 percent is greater than 
the pre-specified OPC of 80 percent. There were no sensor explants or 
repeat implants and all sensors were operational at 6 months for a 
freedom from sensor failure of 100 percent (lower confidence limit 99.3 
percent, p<0.0001). This lower limit of 99.3 percent is greater than 
the pre-specified OPC of 90 percent.
    The applicant also noted that the CardioMEMSTM HF System 
reduces the occurrence of HF hospitalizations in NYHA Class III heart 
failure patients. According to the applicant, the device had very few 
device and system related complications occurring over the course of 
the clinical trial. All primary and secondary study endpoints were 
successfully achieved. In addition, the CHAMPION trial suggests the 
safety and effectiveness of the device was maintained during longer 
term follow-up.
    After reviewing the information provided by the applicant, we 
stated in the FY 2015 IPPS/LTCH PPS proposed rule that we have the 
following concerns. The applicant did not discuss long-term outcomes, 
specifically death. We stated that we believe additional long-term 
outcome information and information regarding how the technology 
changes long-term outcomes would further assist in our determination of 
whether the technology represents a substantial clinical improvement. 
With regard to the clinical trial, information from the randomized 
access period and the open access period did not include the total 
number of deaths in each group. While the data support a reduction in 
total hospitalizations, the rate of hospitalization in each group (0.32 
versus 0.44) does not appear to be clinically meaningful. This is 
supported by total days alive out of the hospital being virtually 
identical in both groups. Finally, we stated that we are concerned 
about the cause of the significant dropouts in the Kaplan Meier curves 
which further demonstrates lack of impact on survival.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether or not the CardioMEMSTM HF Monitoring 
System technology represents a substantial clinical improvement in the 
treatment options available to Medicare beneficiaries.
    Comment: Several commenters, including various physicians, 
supported the approval of new technology add-on payment for the 
CardioMEMSTM HF Monitoring System.
    Response: We appreciate the commenters' support. We considered 
these comments in our determination of whether the 
CardioMEMSTM HF Monitoring System represents a substantial 
clinical improvement.
    Comment: The applicant submitted a public comment, which included 
responses to each of CMS' concerns presented in the proposed rule. CMS' 
major concern outlined in the FY 2015 IPPS/LTCH PPS proposed rule was 
the lack of mortality data to support the improvement seen in the 
specified endpoint, hospitalizations. The applicant provided 
information that the Randomized Access Period includes approximately 
800 patient-years of follow-up, with an average patient follow-up of 18 
months. The primary endpoint of the CHAMPION trial was HF 
hospitalizations because it remains a major clinical and public health 
problem, which is inadequately addressed by current treatment options. 
Although the trial was not powered to assess mortality, the applicant 
stated that the data showed strong favorable trends for reduced 
mortality, and a highly significant reduction for HF hospitalization or 
mortality. During the first 6 months of follow-up, the applicant stated 
that the proportion of patients who died that were enrolled in the 
treatment group (n=15, 5.6 percent) was lesser than in the proportion 
patients who died that were enrolled in the control Group (n=20, 7.1 
percent), with a nonsignificant but favorable relative risk reduction 
rate of 23 percent (HR 0.77, 95 percent CI 0.40-1.51, p=0.4484). During 
the entire Randomized Access Period, the applicant stated that the 
proportion of patients who died that were enrolled in the treatment 
group (n=50, 18.5 percent) was lesser than the proportion of patients 
that were enrolled in the control group (n=64, 22.9 percent), with a 
nonsignificant but favorable relative risk reduction rate of 20 percent 
(HR 0.80, 95 percent CI 0.55-1.15, p=0.2303).
    The applicant further stated that in measuring the combined impact 
of mortality and HF hospitalizations on the study population, analysis 
of the time to death or first HF hospitalization is frequently used. 
During the first 6 months of the Randomized Access Period, the 
applicant noted that the proportion of patients who died or that had at 
least one HF hospitalization that were enrolled in the treatment group 
(n=63, 23.3 percent) was lesser than the proportion of patients who 
died or that had at least one HF hospitalization that were enrolled in 
the control group (n=91, 32.5 percent), with a significant relative 
risk reduction rate of 31 percent (HR 0.69, 95 percent CI 0.50-0.95; 
p=0.0239). During the entire Randomized Access Period, the applicant 
noted that the proportion of patients who died or had at least one HF 
hospitalization that were enrolled in the treatment group (n=121, 44.8 
percent) was lesser than the proportion of patients who died or had at 
least one HF hospitalization that were enrolled in the control group 
(n=145, 51.8 percent), with a significant relative risk reduction rate 
of 23 percent (HR 0.77, 95 percent CI 0.60-0.98, p=0.0330). The 
applicant further noted that other endpoints other than time to event 
analyses are event rate analyses for repeat events, including HF 
hospitalization rates (primary efficacy endpoint) and all cause 
hospitalization rates. The applicant also indicated that event rate 
analyses for composite events also are frequently used to assess the 
impact of both mortality and HF hospitalizations (combined deaths and 
HF hospitalization rates) and total morbidity and mortality (combined 
deaths and all cause hospitalizations rates). According to the 
applicant, the large treatment effect size on long-term outcomes and 
the low number needed to treat and prevent hospitalizations and deaths 
demonstrated that CardioMEMSTM HF Monitoring System 
represents a substantial clinical improvement.
    CMS also was concerned that while the data supported a reduction in 
total hospitalizations, the rate of

[[Page 49940]]

hospitalization in each group (0.32 versus 0.44) does not appear to be 
clinically meaningful. The applicant stated in response that the days 
alive outside of the hospital (DAOH) endpoint was a secondary endpoint 
in the CHAMPION trial. The applicant further stated that the endpoint 
is used in clinical trials as an alternative measure for evaluating the 
combined impact of mortality and hospitalizations on the study 
population. Endpoints that are traditionally used to measure this 
combined effect include time to event analyses (for example, time to 
death or first HF hospitalization) and composite event rate analyses 
(for example, rate of death and repeat HF hospitalizations). The 
applicant noted that, for many HF drug and device trials, these more 
traditional analyses are frequently used as the primary or co-primary 
efficacy endpoints. The applicant further stated that the DAOH endpoint 
is susceptible to many influences including variable follow-up time 
(that is, patients with longer follow-up time have the potential for 
more DAOH than patients with shorter follow-up time), the length of the 
study duration interval for which the DAOH endpoint is being analyzed, 
and differences in proportion of patients experiencing a mortality or 
hospitalization event relative to the proportion of patients not 
experiencing a mortality or hospitalization event (that is, a shorter 
duration interval will have a greater proportion of patients without 
any events when compared to a longer duration interval where the 
proportion of patients experiencing events increases over time). In 
response to CMS' concerns in regard to the numerical similarity of DAOH 
between the treatment and control groups which is based on the shorter 
follow-up interval of 6 months, the applicant stated that during this 
shorter follow-up interval, approximately 70 percent of the patients 
did not experience a mortality or HF hospitalization event. The 
applicant stated that indication skews the dataset because these 
patients are experiencing 100 percent in measurement of DAOH. Despite 
this fact, the applicant stated that there was a statistically 
significant difference of 2.3 days in favor of the treatment group. The 
applicant asserted that a treatment effect that increases the number of 
DAOH by 2.3 days over a 6-month period is clinically meaningful to this 
patient population, as evidenced by the improved quality of life of the 
patients that were enrolled in the treatment group. DAOH rates were 
also analyzed over a longer period of follow-up during the Randomized 
Access Period. To reduce the effects of variable follow-up time and to 
have a consistent study duration interval, DAOH was analyzed over the 
first 12 months of follow-up. Patients enrolled in the treatment group 
being managed using the CardioMEMSTM HF Monitoring System 
experienced 6.1 more DAOH than the patients that were enrolled in the 
control group after 12 months of follow-up. The applicant believed that 
this increase represents a substantial clinical improvement with 
respect to current treatment options available to Medicare 
beneficiaries.
    In regard to CMS' concern about the cause of the significant 
dropouts in the Kaplan Meier curves, which further demonstrates lack of 
impact on survival, the applicant provided the following information in 
response. According to the applicant, the dropout rates in the CHAMPION 
trial were low; the patients transitioning from Randomized to Open 
Access are being misconstrued as dropouts. The applicant reported that 
CHAMPION enrolled 550 patients from September 2007 to October 2009. In 
addition, all of the patients remained in their randomized groups until 
the last patient enrolled in the CHAMPION trial completed at least 6 
months of follow-up. As result of this enrollment over time, the 
applicant stated that the average patient follow-up in the Randomized 
Access Period was significantly longer at 18 months. The applicant 
further indicated that patients with a lower enrollment number and 
implanted earlier in 2008 had the potential for longer follow-up times 
in the Randomized Access Period than patients with a higher enrollment 
number and implanted later in 2009. As a result, the applicant believed 
that these patients are being construed as dropouts on the Kaplan Meier 
curve, but actually are patients being censored at the time of their 
transition to the Open Access Period. According to the applicant, 
because the maximum follow-up for the Randomized Access Period was 
already achieved, patients in this category were not eligible or ``at 
risk'' for the longer follow-up periods represented in the Kaplan Meier 
curve understanding that the follow-up time is now part of the Open 
Access Period.
    In response to CMS' invitation for public comments on whether or 
not the CardioMEMSTM HF Monitoring System technology 
represents a substantial clinical improvement in the Medicare 
population, the applicant stated that heart failure is a significant 
clinical burden to Medicare beneficiaries, their caregivers, and 
hospitals throughout the U.S. health care system. The applicant 
believed that rising HF hospitalizations rates and the increasing cost 
of care for Medicare beneficiaries diagnosed with HF and the 
detrimental effect the condition is having on the U.S. health care 
system is not sustainable.
    The applicant believed that the CardioMEMSTM HF 
Monitoring System technology represents a substantial clinical 
improvement treatment options available to Medicare beneficiaries. In 
the CHAMPION trial, 245 patients (45 percent) were 65 years or older at 
the time of sensor implantation (120 in the treatment group and 125 in 
the control group). Patients who were enrolled in the treatment group 
and managed on the basis of PA pressure information obtained from the 
CardioMEMSTM HF Monitoring System had a significantly 
reduced HF hospitalization rate (0.34 events/patient-year) compared to 
patients who were enrolled in the control group (0.67 events/patient-
year) and managed according to best available practices (HR 0.51, 95 
percent CI 0.37-0.70, p<0.0001).
    Response: We appreciate the applicant's response to each of CMS' 
concerns and the additional data provided. Other than data indicating 
that the primary endpoint of reduced hospitalizations was met, 
additional longer term data demonstrated improved mortality. Therefore, 
we believe that the data indicates that the CardioMEMSTM 
Monitoring System meets the substantial clinical improvement criterion.
    After consideration of the public comments we received, we believe 
that the CardioMEMSTM HF Monitoring System meets all of the 
new technology add-on payment policy criteria. Therefore, we are 
approving the CardioMEMSTM HF Monitoring System for new 
technology add-on payments in FY 2015. Cases involving the 
CardioMEMSTM HF Monitoring System that are eligible for new 
technology add-on payments will be identified by ICD-9-CM procedure 
code 38.26 (Insertion of implantable wireless pressure sensor for 
intracardiac or great vessel hemodynamic monitoring), which was 
effective October 1, 2011. 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), new technology add-on payments are limited to the lesser 
of 50 percent of the average cost of the device or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum payment for a case involving the CardioMEMSTM HF 
Monitoring System is $8,875 for FY 2015.

[[Page 49941]]

d. MitraClip[supreg] System

    Abbott Vascular submitted an application for new technology add-on 
payments for the MitraClip[supreg] System for FY 2015. (We note that 
the applicant submitted an application for new technology add-on 
payments for FY 2014 but failed to receive FDA approval by the July 1 
deadline.) The MitraClip[supreg] System is a transcatheter mitral valve 
repair system that includes a MitraClip[supreg] device implant, a 
Steerable Guide Catheter, and a Clip Delivery System. It is designed to 
perform reconstruction of the insufficient mitral valve for high-risk 
patients who are not candidates for conventional open mitral valve 
repair surgery.
    Mitral regurgitation (MR), also referred to as mitral insufficiency 
or mitral incompetence, occurs when the mitral valve fails to close 
completely causing the blood to leak or flow backwards (regurgitate) 
into the left ventricle. If the amount of blood that leaks backwards 
into the left ventricle is minimal, then intervention is usually not 
necessary. However, if the amount of blood that is regurgitated becomes 
significant, this can cause the left ventricle to work harder to meet 
the body's need for oxygenated blood. Severity levels of MR can range 
from grade 1+ through grade 4+. If left untreated, severe MR can lead 
to heart failure and death. The American College of Cardiology (ACC) 
and the American Heart Association (AHA) issued practice guidelines in 
2006 that recommended intervention for moderate/severe or severe MR 
(grade 3+ to 4+). The applicant stated that the MitraClip[supreg] 
System is ``indicated for percutaneous reduction of significant mitral 
regurgitation . . . in patients who have been determined to be at 
prohibitive risk for mitral value surgery by a heart team, which 
includes a cardiac surgeon experienced in mitral valve surgery and a 
cardiologist experienced in mitral valve disease and in whom existing 
comorbidities would not preclude the expected benefit from correction 
of the mitral regurgitation.''
    The MitraClip[supreg] System mitral valve repair procedure is based 
on the double-orifice surgical repair technique that has been used as a 
surgical technique in open chest, arrested-heart surgery for the 
treatment of MR since the early 1990s. According to the applicant, in 
utilizing ``the double-orifice technique, a portion of the anterior 
leaflet is sutured to the corresponding portion of the posterior 
leaflet using standard techniques and forceps and suture, creating a 
point of permanent cooptation (``approximation'') of the two leaflets. 
When the suture is placed in the middle of the valve, the valve will 
have a functional double orifice during diastole.''
    With regard to the newness criterion, the MitraClip[supreg] System 
received a premarket approval from the FDA on October 24, 2013. The 
MitraClip[supreg] System is indicated ``for the percutaneous reduction 
of significant symptomatic mitral regurgitation (MR >= 3+) due to 
primary abnormality of the mitral apparatus (degenerative MR) in 
patients who have been determined to be at prohibitive risk for mitral 
valve surgery by a heart team, which includes a cardiac surgeon 
experienced in mitral valve surgery and a cardiologist experienced in 
mitral valve disease, and in whom existing comorbidities would not 
preclude the expected benefit from reduction of the mitral 
regurgitation.'' The MitraClip[supreg] System became immediately 
available on the U.S. market following FDA approval. The 
MitraClip[supreg] System is a Class III device, and has an 
investigational device exemption (IDE) for the EVEREST study 
(Endovascular Valve Edge-to-Edge Repair Study)--IDE G030061, and for 
the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip 
Percutaneous Therapy for Health Failure Patients with Functional Mitral 
Regurgitation)--IDE G120024. Effective October 1, 2010, ICD-9-CM 
procedure code 35.97 (Percutaneous mitral valve repair with implant) 
was created to identify and describe the MitraClip[supreg] System 
technology.
    CMS received a formal National Coverage Decision (NCD) request from 
the Society of Thoracic Surgeons (STS), the American College of 
Cardiology Foundation (ACCF), the Society for Cardiovascular 
Angiography and Interventions (SCAI), and the American Association for 
Thoracic Surgery (AATS) jointly asking that CMS cover Transcatheter 
Mitral Valve Repair procedures using a system that has received FDA 
premarket approval (PMA) for the treatment of MR when performed 
according to an FDA-approved indication. We refer readers to the CMS 
Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=273 for information related to this ongoing 
NCD. The tracking sheet for this National Coverage Analysis (NCA) 
indicates an expected NCA completion date of August 13, 2014, which is 
after the FY 2015 IPPS/LTCH PPS final rule is scheduled to be 
published. The processes for evaluation and determination of an NCD, 
and the processes for evaluation and approval of an application for new 
technology add-on payments are made independent of each other. However, 
any payment made under the Medicare program for services provided to a 
beneficiary would be contingent on CMS' coverage of the item, and any 
restrictions on the coverage would apply.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on how the MitraClip[supreg] System meets the newness 
criterion for purposes of new technology add-on payments and the issues 
that may arise from concurrent NCD requests and new technology add-on 
payment application review and approval processes.
    Comment: The applicant stated that the technology is a first in 
kind and is not substantially similar to any FDA approved technology on 
the market. Therefore, the applicant believed that the technology meets 
the newness criterion. Several other public comments believed that the 
MitraClip[supreg] System meets the newness criterion.
    Response: We appreciate the commenters' input. After consideration 
of the application, we agree with the commenters that the 
MitraClip[supreg] System meets the newness criterion. Therefore, for 
purposes of determining eligibility for FY 2015 IPPS new technology 
add-on payments, we consider the technology to be ``new'' as of October 
24, 2013, and will use ICD-9-CM procedure code 35.97 (Percutaneous 
mitral valve repair with implant) to identify the technology for new 
technology add-on payments.
    Comment: One commenter noted that the application to request a NCD 
was not made by the applicant, as stated in the proposed rule. Rather, 
the commenter stated that this request was made by a coalition of four 
national physician specialty societies that specialize in treating 
patients diagnosed with valve disease.
    Response: We appreciate the commenter's input concerning this 
clarification.
    With regard to the cost criterion, the applicant conducted two 
analyses. The applicant noted that, while ICD-9-CM procedure code 35.97 
maps to MS-DRGs 246 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent with Major Complication or Comorbidity (MCC) or 4+ 
Vessels/Stents), 247 (Percutaneous Cardiovascular Procedure with Drug-
Eluting Stent without MCC), 248 (Percutaneous Cardiovascular Procedure 
with Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents), 249 
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent 
without MCC), 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent or AMI with

[[Page 49942]]

MCC), and 251 (Percutaneous Cardiovascular Procedure without Coronary 
Artery Stent or AMI without MCC), clinical experience with the 
MitraClip[supreg] System device has demonstrated that it is extremely 
rare for a patient to receive stents concurrently during procedures 
using the MitraClip[supreg] System device. The applicant further cited 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53308) which stated, 
``According to the Food and Drug Administration's (FDA's) terms of the 
clinical trial for MitraClip[supreg] System, the device is to be 
implanted in patients without any additional surgeries performed. 
Therefore, based on these terms, we stated that while the procedure 
code is assigned to MS-DRGs 246 through 251, the most likely MS-DRG 
assignments would be MS-DRGs 250 and 251.'' As a result, the applicant 
stated that it conducted its analyses solely for MS-DRGs 250 and 251 to 
demonstrate that the cases involving the MitraClip[supreg] System 
device meet the incremental cost thresholds provided in Table 10 for 
those MS-DRGs.
    The applicant researched the FY 2012 MedPAR file for claims for 
cases reporting ICD-9-CM procedure code 35.97. Under the first analysis 
and methodology, the applicant noted that this search yielded actual 
claims for cases in which the MitraClip[supreg] System device was used 
in procedures performed in an IDE study type setting, and hospitals 
obtained the MitraClip[supreg] System device at a reduced 
investigational price. The applicant further stated that it is likely 
that hospitals did not report the charges for the investigational 
device, or submitted claims for charges that were significantly less 
than the actual device acquisition costs (we refer readers to the 
explanation below). The applicant found 57 cases in MS-DRG 250 (29.38 
percent of the total number of cases), and 137 cases in MS-DRG 251 
(70.61 percent of the total number of cases), which resulted in an 
average case-weighted standardized charge per case of $232,670.
    The applicant standardized the charges using the FY 2014 IPPS final 
rule impact file, and inflated the result using three different 
inflation factors. We note that, since the applicant used FY 2012 
MedPAR data, we believe it is appropriate to use comparable data for 
standardization. Therefore, we believe use of the FY 2012 final rule 
impact file is more appropriate rather than the FY 2014 final rule 
impact file. The first analysis and methodology used an inflation 
factor of 4.57 percent, which was based on data from the BLS' non-
seasonally adjusted CPI for all urban consumers between January 2011 
and January 2013. This resulted in an average case-weighted 
standardized charge per case of $94,517. The second methodology under 
the first analysis used an inflation factor of 9.92 percent, which was 
based on the 2-year charge inflation factor listed in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50982). This resulted in an average case-
weighted standardized charge per case of $96,199. The third methodology 
used under the first analysis used an inflation factor of 4.63 percent, 
which was based on the Medicare Economic Index (MEI) from the IPPS 
market basket update between the third quarter of 2012 projected 
through the third quarter of 2014. This resulted in an average case-
weighted standardized charge per case of $91,570. The applicant noted 
that all three methodologies used under the first analysis to determine 
each respective average case-weighted standardized charge per case were 
calculated without any adjustments to reflect the reduced 
investigational price, or inadequate hospital claim reporting and 
billing.
    Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $71,467 (all calculations 
above were performed using unrounded numbers). Because the average 
case-weighted standardized charge per case for the applicable MS-DRGs 
calculated under each methodology under the first analysis discussed 
above exceeds the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion.
    Under the second analysis, which used the same premise as the first 
analysis, the applicant researched the FY 2012 MedPAR file for claims 
for cases reporting procedure code 35.97 that mapped to MS-DRGs 250 and 
251, except that the applicant excluded charges related to the 
MitraClip[supreg] System by removing all charges from the claim that 
would map to the implantable cost center on the cost report. The 
applicant then standardized the charges, inflated the result using the 
three inflation factors above, and added a fixed amount of commercial 
charges based on post-FDA approval pricing. This resulted in an average 
case weighted standardized charge per case of $139,536 under the first 
inflation factor (4.57 percent), $142,364 under the second inflation 
factor (9.2 percent), and $139,568 under the third inflation factor 
(4.63 percent).
    Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $71,467 (all calculations 
above were performed using unrounded numbers). Because the average 
case-weighted standardized charge per case for the applicable MS-DRGs 
calculated under all three methodologies discussed above exceeds the 
average case-weighted threshold amount, the applicant maintained that 
the MitraClip[supreg] System meets the cost criterion.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether or not the MitraClip[supreg] System meets the cost 
criterion. In addition, we invited public comments on the methodologies 
used by the applicant in its two analyses.
    Comment: In response to CMS' statement in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28049) that it believed use of the FY 2012 final 
rule impact file is more appropriate rather than the FY 2014 final rule 
impact file for standardization, the applicant submitted the following 
supplemental data updating its cost analyses.
    With regard to the second analysis, the applicant submitted revised 
data using the FY 2012 MedPAR file and the FY 2012 impact file to 
standardize the charges. We note that in the proposed rule we 
inadvertently listed $232,670 as the average case-weighted standardized 
charge per case. This amount is the average case-weighted non-
standardized charge per case. Based on the revised data, the corrected 
average case-weighted standardized charge per case is $151,111.
    Using the same methodology described above and the FY 2012 impact 
file, under the second analysis, the applicant determined an inflated 
average case-weighted standardized charge per case of $136,479 under 
the first inflation factor (4.57 percent), $139,151 under the second 
inflation factor (9.2 percent), and $139,509 under the third inflation 
factor (4.63 percent). The applicant compared these amounts to the 
average case-weighted threshold of $71,467 for MS-DRGs 250 and 251 (all 
calculations above were performed using unrounded numbers). Because the 
inflated average case-weighted standardized charge per case for the 
applicable MS-DRGs calculated under all three methodologies discussed 
above exceeds the average case-weighted threshold amount of $71,467, 
the applicant maintained that the MitraClip[supreg] System meets the 
cost criterion.
    The applicant also revised the second analysis using FY 2013 MedPAR 
and the FY 2013 impact file. Based on this data, similar to above, the 
applicant searched the FY 2013 MedPAR file for claims for cases 
reporting ICD-9-CM procedure code 35.97. The applicant found 43 cases 
in MS-DRG 250 (28.66

[[Page 49943]]

percent of the total number of cases), and 107 cases in MS-DRG 251 
(71.33 percent of the total number of cases), which resulted in an 
average case-weighted standardized charge per case of $149,725.
    The first methodology used an inflation factor of 3.20 percent, 
which was based on data from the BLS' non-seasonally adjusted CPI for 
all urban consumers between January 2012 and January 2013. This 
resulted in an inflated average case-weighted standardized charge per 
case of $152,945 (which included a fixed amount of commercial charges 
based on post-FDA approval pricing). The second methodology used an 
inflation factor of 11.46 percent (second quarter of FY 2012 through 
first quarter of FY 2014), which was based on the outlier inflation 
factor in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28321). This 
resulted in an inflated average case-weighted standardized charge per 
case of $158,425 (which included a fixed amount of commercial charges 
based on post-FDA approval pricing). The third methodology used an 
inflation factor of 4.53 percent, which was based on the MEI from the 
IPPS market basket update between the third quarter of 2013 projected 
through the third quarter of 2015. This resulted in an average case-
weighted standardized charge per case of $153,827 (which included a 
fixed amount of commercial charges based on post-FDA approval pricing).
    Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRGs 250 and 251 is $75,772 (all calculations 
above were performed using unrounded numbers). Because the inflated 
average case-weighted standardized charge per case for the applicable 
MS-DRGs calculated under each methodology under this analysis discussed 
above exceeds the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion.
    Several other commenters believed that the MitraClip[supreg] System 
meets the cost criterion.
    Response: We appreciate the applicant's submission of the 
supplemental data. We agree with the commenters that the 
MitraClip[supreg] System meets the cost criterion. We note that in 
section II.I.4.b. of the preamble of this final rule, we denied the 
applicant's request to reassign cases reporting a TMVR using the 
MitraClip[supreg] System from MS-DRGs 250 and 251 to 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). We also denied the applicant's request to create a new base MS-
DRG for transcatheter valve therapies. We refer readers to section 
II.G. for a complete discussion on these requests.
    The applicant asserted that the MitraClip[supreg] System meets the 
substantial clinical improvement criterion. Severe MR is associated 
with significant morbidity and mortality rates, and is a progressive 
condition. For symptomatic patients diagnosed with significant MR, 
surgical repair or replacement is considered the gold standard--
offering improvements in symptoms and longer survival rates. However, 
the applicant explained that studies have indicated that a significant 
proportion of patients are not eligible for mitral valve repair and/or 
replacement surgery because of risk factors, including reduced left 
ventricular function, significant comorbidities, and advanced age. As a 
result, the applicant stated that there is a significant unmet clinical 
need for patients diagnosed with severe MR who are too high-risk for 
surgery, who are receiving palliative medical management.
    The applicant also stated that the MitraClip[supreg] System meets 
the substantial clinical improvement criterion based on clinical 
studies 10 11 12 13 14 15 16 17 18 that have consistently 
shown that procedures performed using the MitraClip[supreg] System 
device lead to a significant reduction of MR; improvements in left 
ventricular (LV) function including LV volumes and dimensions; improved 
patient outcomes as measured by improvements in New York Heart 
Association (NYHA) functional class, improvement in health-related 
quality of life measures, and reductions in heart-failure related 
hospitalizations; and significantly lower mortality rates than 
predicted surgical mortality rates.
---------------------------------------------------------------------------

    \10\ Feldman, et al., ``Percutaneous Repair or Surgery for 
Mitral Regurgitation,'' New England Journal of Medicine, 2011, Vol. 
364, pp. 1395-1406.
    \11\ Foster, et al., ``Percutaneous Mitral Valve Repair in the 
Initial EVEREST Cohort: Evidence of Reverse Left Ventricular 
Remodeling,'' Circulation in Cardiovascular Imaging, July 2013, Vol. 
6(4), pp. 522-530.
    \12\ Grayburn, et al., ``The Relationship between the Magnitude 
of Reduction in Mitral Regurgitation Severity and Left Ventricular 
and Left Atrial Reverse Remodeling after MitraClip Therapy,'' 
Circulation in Cardiovascular Imaging, September 2013, epub, 
September 6, 2013.
    \13\ Lim, et al., ``Improved Functional Status and Quality of 
Life in Prohibitive Surgical Risk Patients With Degenerative Mitral 
Regurgitation Following Transcatheter Mitral Valve Repair with the 
MitraClip[supreg] System,'' Journal of American College of 
Cardiology, 2013, In Press, Accepted Manuscript, Available online, 
October 31, 2013.
    \14\ Maisano, F., et al., ``Percutaneous Mitral Valve 
Interventions in the Real World: Early and One Year Results From the 
ACCESS-EU, a Prospective, Multicenter, Non-Randomized Post-Approval 
Study of the MitraClip Therapy in Europe,'' Journal of American 
College of Cardiology, 2013, doi: 10.1016/j.jacc.2013.02.094.
    \15\ Mauri, et al., ``4-Year Results of a Randomized Controlled 
Trial of Percutaneous Repair Versus Surgery for Mitral 
Regurgitation,'' Journal of American College of Cardiology, Volume 
62, Issue 4, 2013, p. 317-328.
    \16\ Munkholm, et al., ``Asystemic Review on the Safety and 
Efficacy of Percutaneousedge-to-edge Mitral Valve Repair with the 
MitraClip System for high surgical risk candidates,'' Heart, June 
27, 2013.
    \17\ Reichenspurner, H., et al., ``Clinical Outcomes Through 12 
Months in Patients With Degenerative Mitral Regurgitation Treated 
With the MitraClip Device in the ACCESS-Europe Phase I Trial,'' 
European Journal of Cardiology-and Thoracic Surgy, 2013, Vol. 15, 
pp. 919-927.
    \18\ Whitlow, et al,. ``Acute And 12-Month Results With 
Catheter-Based Mitral Valve Leaflet Repair: The EVEREST II 
(Endovascular Valve Edge-to-Edge Repair) High Risk Study,'' Journal 
of American College of Cardiology, 2012, Vol. 59, pp. 130-139.
---------------------------------------------------------------------------

    The applicant cited clinical data from the EVEREST II High-Risk 
Study and the EVEREST II (REALISM) Continued Access Study/Registry. The 
applicant also cited clinical data from a high-risk cohort of patients 
(the EVEREST II High-Risk Cohort), which is an integrated analysis of 
the following: (1) patients within the EVEREST II High-Risk Study who 
met eligibility criteria for being too high-risk to undergo mitral 
valve repair surgery; and (2) patients within the EVEREST II (REALISM) 
Continued Access Study/Registry who were too high-risk for surgery 
using identical eligibility inclusion criteria. The applicant also 
cited data from the Prohibitive Risk Degenerative Mitral Regurgitation 
(DMR) Cohort, which is an analysis of retrospectively evaluated high-
risk patients diagnosed with DMR enrolled in the EVEREST II studies 
that had 1-year follow-up available.
    In addition to the published clinical experience from the EVEREST 
studies, the applicant cited data on the use of the MitraClip[supreg] 
System device in a ``real-world'' setting published recently by a 
select number of European centers as part of their individual and/or 
multi-center commercial experience or enrollment in the 
MitraClip[supreg] System device group of the ACCESS-EU post-approval 
clinical trial in Europe. The European use of the MitraClip[supreg] 
System device is focused on patients who are

[[Page 49944]]

too high-risk for surgery, and patients who are selected for therapy 
using a multi-disciplinary ``heart team'' approach.
    The applicant stated that published reports on the 
MitraClip[supreg] System device and the procedures in which the device 
was used have consistently demonstrated a significant reduction in MR 
incidents that have been durable out to 1, 2, 3, and 4 years. The 
applicant cited the EVEREST II High-Risk Study (an analysis of 78 
patients diagnosed with degenerative or functional MR enrolled in the 
trial), which stated that ``objective measures of MR grade improved in 
the MitraClipTM group, including MR grade of <=2+ in 78 
percent of surviving patients at 1 year. These patients also 
experienced clinically significant improvements in left ventricular 
volume measurements. The clinical significance of these improvements is 
reflected in the NYHA class improvements. At baseline, 89 percent of 
patients were NYHA III/IV, improving to Class I/II in 74 percent of 
surviving patients at 12 months. Quality of life scores also improved 
significantly. Finally, the number of admissions for heart failure was 
significantly reduced compared to the year prior to 
MitraClipTM therapy.''
    The applicant cited clinical outcomes from the Prohibitive Risk DMR 
cohort. These results are the basis of the FDA premarket approval. 
Major effectiveness endpoints evaluated at 12 months demonstrated 
clinically important improvements in MR severity, with MR severity 
grades of 3+/4+ decreasing from 90.4 percent at baseline to 16.7 
percent at 1 year; NYHA Class III/IV decreasing from 86.6 percent at 
baseline to 13.1 percent at 1 year; and the SF-36 Physical/Mental scale 
measuring 33.4/46.6 at baseline increasing to 39.4/52.2 at 1 year.
    The applicant stated in its new technology add-on payment 
application that, ``Heart failure hospitalizations were reduced by 73 
percent in the 12 months post MitraClipTM procedure from the 
12 month pre-MitraClipTM procedure . . .,'' and ``the 
primary safety analysis indicated low procedural (30-day) mortality 
(6.3 percent) after MitraClipTM in comparison with the STS 
predicted surgical mortality risk score for these patients (13.2 
percent).''
    The applicant discussed published results \19\ ``assessing the 
relationship between the magnitude of reduction in MR and left 
ventricular (LV) and left atrial (LA) remodeling after the 
MitraClipTM therapy.'' In this study of patients diagnosed 
with significant (grade 3+ or 4+) DMR or functional MR (FMR), the 
authors found that, ``even reduction of MR severity to moderate (2+) is 
associated with LV and LA reverse remodeling. In both DMR and FMR, 
reduction in left ventricular end-diastolic volume (LVEDV) and LA 
volumes were improved proportionally to the degree of MR reduction at 
one year.''
---------------------------------------------------------------------------

    \19\ Grayburn, et al., ``The Relationship between the Magnitude 
of Reduction in Mitral Regurgitation Severity and Left Ventricular 
and Left Atrial Reverse Remodeling after MitraClip Therapy,'' 
Circulation in Cardiovascular Imaging, September 2013, epub, 
September 6, 2013.
---------------------------------------------------------------------------

    In conclusion, the applicant cited data from the ACCESS-EU study, 
which noted improvement in disease-specific quality of life measures, 
including the Minnesota Living with Heart Failure Questionnaire and 
Six-Minute Walk Test. The applicant also provided data supporting the 
overall safety and effectiveness of the MitraClip[supreg] System device 
in European ``real-world'' outcome studies.
    We stated in the FY 2015 IPPS/LTCH PPS proposed rule that, as noted 
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27547 through 27552), 
we are concerned that the applicant revised its initial FDA request for 
the use of the MitraClip[supreg] System device in all patients 
diagnosed with significant MR, after learning that the FDA expressed 
concern that the initial study, EVEREST II, demonstrated that, while 
the MitraClip[supreg] System device had clinically meaningful 
improvements in LV volume and QOL, the surgical option had better 
outcomes than the MitraClip[supreg] System device in surgical 
candidates. The FDA then required a second trial focused on high 
surgical risk patients. We noted that the data evaluated by the FDA and 
presented by the applicant in its application for new technology add-on 
payments included information from the following:
    [ssquf] EVEREST I feasibility trial; enrollment 2003-2006; 55 
patients.
    [ssquf] EVEREST II RCT; enrollment 2005-2008; 279 patients.
    [ssquf] EVEREST II High-Risk Study; enrollment 2007-2008; 78 
patients. (A comparator group of 36 patients was identified from 
patients who were screened for the study, but did not meet the mitral 
valve anatomic criteria for placement of the device.)
    [ssquf] EVEREST (REALISM) Continued Access Study and compassionate 
use; enrollment 2009-2013; 49 patients.
    The applicant provided comparisons of various outcomes prior to the 
procedure using the MitraClip[supreg] System device and outcomes 12 
months later. MR severity, LV end diastolic volume, NYHA Class, SF36 
Physical/Mental scale, and heart failure hospitalization rates all had 
clinically meaningful improvements. For the EVEREST II HRS, the 
applicant provided analysis demonstrating a significant survival 
benefit (76 percent versus 55 percent/p<0.047) over the comparator 
group.
    We stated in the FY 2015 IPPS/LTCH PPS proposed rule that in our 
review of the clinical trials' data, we have the following key points 
of concern:
     Post-hoc analyses of pooled data sets retain all of the 
individual shortcomings of the individual data sets;
     Pooling does not enhance the utility and scientific value 
of uncontrolled single-arm registries with no comparators; and
     Inappropriate pooling introduces additional confounders.
    We stated that it is also unclear if the appropriate target 
population for the MitraClip[supreg] System device has been identified 
because the clinical trials conducted by the applicant included 
patients diagnosed with both DMR and FMR. This makes it difficult to 
determine which group of patients may benefit more, or less, from the 
new technology. For example, in a subgroup analysis of the EVEREST II 
RCT, the authors concluded that, older patients and those patients 
diagnosed with FMR or abnormal left ventricular function had results 
more comparable to surgical repair. Data results from 2 years of the 
EVEREST II RCT also demonstrated that surgery reduced incidents of MR 
more than the procedures performed using the percutaneous 
MitraClip[supreg] System device. However, both the surgical patients 
and the patients who were treated using the MitraClip[supreg] System 
device showed comparable results for improved left ventricular 
function, NYHA functional class, and quality of life.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether this technology meets the substantial clinical 
improvement criterion, particularly in comparison to other surgical 
therapies, such as mitral valve repair or replacement, and the 
appropriate target population for this technology.
    Comment: A number of commenters agreed with the applicant that the 
MitraClip[supreg] System meets the substantial clinical improvement 
criterion. The commenters also recommended the approval of the 
MitraClip[supreg] System for new technology add-on payments in FY 2015. 
One commenter, an association of thoracic surgeons, expressed support 
for the approval of the MitraClip[supreg] System for new technology 
add-on payments. The commenter explained that the MitraClip[supreg] 
System provides a treatment option to Medicare beneficiaries that

[[Page 49945]]

represents a substantial clinical improvement for patients who are too 
high risk for surgical mitral valve repair or replacement. Other 
commenters indicated that they had experience using the 
MitraClip[supreg] System.
    Response: We appreciate the commenters' support. Many of the 
commenters described their positive experiences using the 
MitraClip[supreg] System, which improved the clinical outcome of the 
patients treated. Furthermore, the commenters believed that most, if 
not all, of the cases treated using the MitraClip[supreg] System would 
have had no other treatment option available. In addition, the 
commenters asserted that the MitraClip[supreg] System helped to provide 
improvements to the quality of life of the patients treated with the 
technology. We considered the commenters' positive experiences using 
the MitraClip[supreg] System in our determination of whether the 
MitraClip[supreg] System represents a substantial clinical improvement 
in the treatment options available to Medicare beneficiaries.
    Comment: The applicant submitted a public comment that stated peer-
reviewed evidence supported the belief that the MitraClip[supreg] 
System meets the substantial clinical improvement criterion. The 
applicant further noted that in previous rulemaking, CMS has indicated 
that new technologies represent a substantial clinical improvement if 
``the device offers a treatment option for a patient population 
unresponsive to, or ineligible for, currently available treatment.'' 
The commenter believed that the MitraClip[supreg] System meets this 
criterion when used in accordance with the FDA-approved indication for 
the treatment of prohibitive risk degenerative mitral regurgitation 
(DMR). Specifically, the applicant stated that for those patients who 
are ineligible for surgery due to prohibitive surgical risk, the 
MitraClip[supreg] System offers the first available option to 
mechanically correct their mitral valve disease and, therefore, improve 
cardiac functioning and functional status and quality of life, while 
decreasing heart failure related hospitalizations and potentially 
reducing mortality.
    The applicant reiterated the opinion that the clinical evidence 
20 21 demonstrated that the technology represents a 
substantial clinical improvement in the treatment options available to 
Medicare beneficiaries for the following reasons:
---------------------------------------------------------------------------

    \20\ Lim et al. Improved Functional Status and Quality of Life 
in Prohibitive Surgical Risk Patients With Degenerative Mitral 
Regurgitation Following Transcatheter Mitral Valve Repair with the 
MitraClip[supreg] System, JACC (2013), In Press, Accepted 
Manuscript, Available online 31 October 2013.
    \21\ MitraClip[supreg] Clip Delivery System Instructions for 
Use, at abbottvascular.com/ifu.
---------------------------------------------------------------------------

     A majority of patients experience MR reduction from 3+/4+ 
to <=2+ after the procedure. This improvement is sustained in 83 
percent of patients at 12 months. Results at 2 years demonstrated that 
82.5 percent of surviving patients remained at <=2+, which demonstrated 
that there is no evidence of deterioration of MR severity between 1-
year and 2-year follow up.
     Reduction in MR with the MitraClip therapy to <=2+ has 
been shown to provide significant symptomatic DMR patients with 
meaningful clinical benefits including reduction of left ventricular 
volumes.
     Patients experienced clinically important improvement in 
NYHA Functional Class at 12 months; roughly 87 percent of patients 
experienced NYHA Class III or Class IV symptoms at baseline, which 
improved to less than 15 percent at 12 months.
     Despite the elderly and highly comorbid nature of the 
population, quality of life scores improved. The improvements in both 
the Physical Component Summary and Mental Component Summary scores 
exceeded the 2-3 point threshold generally considered to represent a 
minimum clinically important difference.
     Heart failure hospitalizations were reduced by 73 percent 
in the 12 months post-MitraClip procedure from the 12 months pre-
MitraClip procedure.
    The commenter concluded that, in recognition of these benefits, the 
2014 AHA/ACC Guidelines for the Management of Patients with Valvular 
Heart Disease recommended the MitraClip therapy as a treatment option 
for the FDA-approved indication. The commenter noted that the 
guidelines state that TMVR may be considered for severely symptomatic 
patients (NYHA Class III to Class IV) with chronic severe primary MR 
(stage D) who have favorable anatomy for the repair procedure and a 
reasonable life expectancy, but who have a prohibitive surgical risk 
because of severe comorbidities and remain severely symptomatic despite 
optimal GDMT for HF.
    The applicant also addressed CMS' concerns presented in the 
proposed rule. Specifically, with respect to the concern regarding the 
appropriate target population for this technology, the commenter 
believed that the target population has been clearly defined in the FDA 
approval indication and associated labeling for the MitraClip[supreg] 
System. The applicant noted that since the publication of the proposed 
rule, as stated above, the AHA/ACC has reviewed the MitraClip[supreg] 
System evidence and updated their guidelines to recommend consideration 
for the use of the MitraClip[supreg] System for patients meeting the 
FDA-approved indication. In addition, the applicant indicated that the 
CMS Coverage and Analysis Group has also reviewed the MitraClip[supreg] 
evidence and issued a proposed decision memorandum to extend coverage 
for the FDA-approved indication at highly experienced centers of 
excellence meeting specific criteria. Further, the applicant noted that 
detailed multi-society requirements have been published specifying 
operator and institutional criteria for performing the 
MitraClip[supreg] System procedure, and these have been incorporated by 
CMS into the proposed decision memorandum. Finally, the applicant 
stated that it has worked together with national societies and CMS to 
establish a new mitral module of the national TVT registry to 
systematically track adherence to these requirements by all health care 
centers using the MitraClip[supreg] System and to collect data on 
patient outcomes with linkage to the CMS claims database.
    With respect to CMS' concerns regarding how the MitraClip[supreg] 
system compares to other surgical therapies, such as mitral valve 
repair or replacement, the applicant stated that clinical outcomes from 
the prohibitive risk DMR Cohort were determined by the FDA to 
adequately establish the safety, effectiveness, and positive benefit-
risk profile of the MitraClip[supreg] System for the indicated 
population, and these data are the basis for Premarket Approval 
Application (PMA) approval. In conclusion of thought, the applicant 
stated that the FDA concluded that the totality of clinical evidence 
demonstrated the reasonable assurance of safety and effectiveness of 
the MitraClip[supreg] System to reduce MR and provide patient benefit 
in this discrete and specific patient population.
    The applicant also commented that the prohibitive risk DMR Cohort, 
on which FDA approval was granted, included 127 consecutively-enrolled 
patients who completed 12 months of follow-up after treatment with the 
MitraClip[supreg] System device. The applicant explained that this 
Cohort included 25 patients from the EVEREST II High Risk Registry 
(HRR) study, 98 patients from the high risk arm of the REALISM 
Continued Access study, and 4 Compassionate Use patients. The applicant 
further explained that the four Compassionate Use patients are included 
for analysis in the Prohibitive

[[Page 49946]]

Risk DMR Cohort because they meet the definition of prohibitive risk 
and all valve anatomic criteria for eligibility. For inclusion in this 
Cohort, three physicians (two experienced mitral valve surgeons and one 
experienced mitral valve cardiologist) had to concur that the patient 
met the definition of prohibitive risk.
    The applicant further stated that patients in the prohibitive risk 
DMR Cohort were all enrolled under a highly-rigorous IDE clinical trial 
protocol that included pre-specified eligibility criteria and 
adjudicated endpoints. The applicant stated that pooling of the EVEREST 
II Continued Access Study (REALISM) data with EVEREST II HRR was 
intended and pre-specified in the REALISM protocol. The applicant noted 
that one of the REALISM protocol's stated objectives was to gather 
additional safety and effectiveness data to support the PMA. The 
applicant further stated that the same device design was used, and care 
was taken to ensure the two studies had identical entry criteria, data 
collection, monitoring, and analysis methods. In addition, the 
applicant stated that the REALISM protocol defined the evaluation of 
poolability and specified clinically important baseline variables to be 
compared. The applicant stated that the majority (10/13) of these 
baseline characteristics, especially high-risk characteristics/
comorbidities, was similar in REALISM and HRR, resulting in comparable 
average STS predicted mortality risk scores.
    The applicant stated that the findings from the prohibitive risk 
DMR Cohort were highly consistent with real-world evidence from a large 
number of published European studies that included similar groups of 
high-risk patients.
    The applicant concluded that despite some limitations in evaluating 
evidence from pooled datasets, it should be noted that all available 
evidence on the MitraClip[supreg] System consistently indicate that the 
use of this technology provides both mechanistic and clinical benefit 
for these high surgical risk patients.
    Response: We appreciate the applicant's subsequent analysis of 
data. With respect to the substantial clinical improvement represented 
by this technology, we considered all the case specific clinical 
information presented by the applicant and the public to determine 
whether there is evidence to support a conclusion that the use of the 
MitraClip[supreg] System represents a substantial clinical improvement 
in the treatment options available to Medicare beneficiaries. 
Specifically, we considered the peer-reviewed medical literature, 
clinical studies, and the clinically accepted use of the device. We 
believe that it is important that the MitraClip[supreg] System be used 
in the treatment of the appropriate target population and that the NCD 
will establish the appropriate Medicare patient population for this 
procedure. We agree with the applicant that the MitraClip[supreg] 
System offers a treatment option for a patient population unresponsive 
to, or ineligible for, currently available treatment; specifically 
those patients that have been determined to be at prohibitive risk for 
mitral valve surgery (per the FDA indications). In addition, we 
received positive comments from a major cardiovascular and a major 
thoracic society and from many physicians who indicated that the 
MitraClip[supreg] System helped to produce positive clinical outcomes 
by providing a treatment option for patients with no other available 
options, as well as resolving MR. Furthermore, the MitraClip[supreg] 
System is the only device currently available to mechanically correct 
mitral valve disease. Without the availability of this device, patients 
with DMR might otherwise receive general treatment to maintain their 
condition, which would eventually result in death rather than a 
treatment to resolve their condition. Also, the MitraClip[supreg] 
System can be an effective treatment option that improves quality of 
life and reduces heart failure symptoms and hospitalizations. 
Therefore, after reviewing the totality of the evidence, we believe 
that the MitraClip[supreg] System represents a substantial clinical 
improvement over existing therapies. We remain interested in seeing 
whether the clinical evidence will continue to find that the 
MitraClip[supreg] System will be effective. We will continue to monitor 
the clinical data as the data become available.
    After consideration of the public comments we received, we are 
approving the MitraClip[supreg] System for new technology add-on 
payments in FY 2015. As noted above, any payment made under the 
Medicare program for services provided to a beneficiary is contingent 
upon CMS' coverage of the item, and any restrictions on the coverage 
apply. This approval is on the basis of using the MitraClip[supreg] 
consistent with any coverage decision that will be issued by CMS after 
the publication of this final rule. Subject to any coverage 
determinations made by CMS regarding the MitraClip[supreg] System, 
cases involving the MitraClip[supreg] System that are eligible for the 
new technology add-on payments will be identified by ICD-9-CM procedure 
code 35.97. The average cost of the MitraClip[supreg] System is 
reported as $30,000. Under section 412.88(a)(2), new technology add-on 
payments are limited to the lesser of 50 percent of the average cost of 
the device or 50 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, the maximum add-on payment for a case 
involving the MitraClip[supreg] System is $15,000 for FY 2015.
e. Responsive Neurostimulator (RNS[supreg]) System
    NeuroPace, Inc. submitted an application for new technology add-on 
payments for FY 2015 for the use of the RNS[supreg] System. (We note 
that the applicant submitted an application for new technology add-on 
payments for FY 2014, but failed to receive FDA approval prior to the 
July 1 deadline.) Seizures occur when brain function is disrupted by 
abnormal electrical activity. Epilepsy is a brain disorder 
characterized by recurrent, unprovoked seizures. According to the 
applicant, the RNS[supreg] System is the first implantable medical 
device (developed by NeuroPace, Inc.) for treating persons diagnosed 
with epilepsy whose partial onset seizures have not been adequately 
controlled with antiepileptic medications. The applicant further stated 
that, the RNS[supreg] System is the first closed-loop, responsive 
system to treat partial onset seizures. Responsive electrical 
stimulation is delivered directly to the seizure focus in the brain 
when abnormal brain activity is detected. A cranially implanted 
programmable neurostimulator senses and records brain activity through 
one or two electrode-containing leads that are placed at the patient's 
seizure focus/foci. The neurostimulator detects electrographic patterns 
previously identified by the physician as abnormal, and then provides 
brief pulses of electrical stimulation through the leads to interrupt 
those patterns. Stimulation is delivered only when abnormal 
electrocorticographic activity is detected. The typical patient is 
treated with a total of 5 minutes of stimulation a day. The RNS[supreg] 
System incorporates remote monitoring, which allows patients to share 
information with their physicians remotely.
    With respect to the newness criterion, the applicant stated that 
some patients diagnosed with partial onset seizures that cannot be 
controlled with antiepileptic medications may be candidates for the 
vagus nerve stimulator (VNS) or for surgical removal of the seizure 
focus. According to the applicant, these treatments are not appropriate 
for, or helpful to, all

[[Page 49947]]

patients. Therefore, the applicant believed that there is an unmet 
clinical need for additional therapies for partial onset seizures. The 
applicant further stated that the RNS[supreg] System addresses this 
unmet clinical need by providing a novel treatment option for treating 
persons diagnosed with medically intractable partial onset seizures. 
The applicant received FDA premarket approval in November 2013. The 
following ICD-9-CM procedure codes are used to identify this 
technology: 01.20 (Cranial implantation or replacement of 
neurostimulator pulse generator); 01.29 (Removal of cranial 
neurostimulator pulse generator); and 02.93 (Implantation or 
replacement of intracranial neurostimulator lead(s)).
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the technology meets the newness criterion. 
However, we did not receive any public comments in response to the 
proposed rule regarding whether the technology meets the newness 
criterion. The applicant received FDA premarket approval on November 
14, 2013. Therefore, for the purpose of evaluation for determinng 
eligibility for FY 2015 IPPS new technology add-on payments, we 
consider this technology to be ``new'' as of November 14, 2013, and we 
will use the following ICD-9-CM procedure codes to identify the 
technology for purposes of new technology add-on payments: 01.20 
(Cranial implantation or replacement of neurostimulator pulse 
generator); 01.29 (Removal of cranial neurostimulator pulse generator); 
and 02.93 (Implantation or replacement of intracranial neurostimulator 
lead(s)).
    With regard to the cost criterion, the applicant stated that 
substantially all cases eligible for the RNS[supreg] System would map 
to MS-DRG 024 (Craniotomy with Major Device Implant/Acute Complex 
Central Nervous System Principal Diagnosis without MCC). The applicant 
further stated that, while it is possible for some cases to occur in 
MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex Central 
Nervous System Principal Diagnosis with MCC or Chemotherapy Implant), 
it would be extremely rare because the applicant believed that these 
major complications and/or comorbidities would probably preclude a 
patient from receiving treatment using the RNS[supreg] System because 
the technology is an elective procedure.
    The applicant submitted two analyses to demonstrate that the 
technology meets the cost criterion. For the first analysis, the 
applicant used clinical trial claims data collected in the RNS[supreg] 
System Pivotal Clinical Investigation to calculate the anticipated 
average case-weighted standardized charge per case. The applicant 
maintained that this analysis best represents the anticipated charges 
for the technology because it is based on actual cases treated using 
this technology. The applicant analyzed 163 claims from 28 hospitals 
participating in the clinical trial. Five claims from one hospital were 
excluded because no hospital-specific information regarding 
standardization was available. The resulting 158 claims included dates 
of service ranging from May 2006 through May 2009. The average case-
weighted standardized charge per case for these 158 claims was $54,691.
    The applicant then standardized the charges for each claim. The 
applicant noted that it was not necessary to remove any charges from 
these claims because the technology was provided at no charge in the 
trial. After standardizing the charges for each claim, the applicant 
inflated the charges reported on each claim using the BLS' CPI-IP data 
covering the same period. Specifically, because the publicly available 
FY 2012 MedPAR data do not identify the month of the discharge on 
inpatient claims, but do identify the calendar quarter, the applicant 
used a mid-month convention to determine the relevant monthly CPI-IP 
for each calendar quarter. The applicant then calculated the percentage 
change from the relevant quarter to the quarter of the most recently 
available CPI-IP, which was the August 2013 CPI-IP. Specifically, the 
applicant used the following assumptions:

----------------------------------------------------------------------------------------------------------------
                                                                                                  Percent change
           FY 2012 calendar quarter                    Midpoint of quarter            CPI IP        to  August
                                                                                                       2013
----------------------------------------------------------------------------------------------------------------
Q4 2011.......................................  Nov-11..........................         242.672            7.93
Q1 2012.......................................  Feb-11..........................         245.721            6.59
Q2 2012.......................................  May-11..........................         247.646            5.76
Q3 2012.......................................  Aug-11..........................         248.856            5.25
Most recent as of application.................  Aug-13..........................         261.915
----------------------------------------------------------------------------------------------------------------
Source as cited by applicant: Bureau of Labor Statistics' Web site, accessed October 13, 2013; Base Period:
  December 1996 = 100.

    After inflating the charges, the applicant estimated charges for 
the RNS[supreg] System by multiplying the device cost to the hospital 
by an anticipated hospital markup of 100 percent, or conversely by 
dividing the device cost by a CCR of 0.50. The applicant based its 
estimated CCR on four analyses. First, the applicant reviewed the 2007 
and 2008 reports prepared by RTI for CMS on charge compression, which 
found that the national aggregate CCR for devices and implants was 0.43 
and 0.467, as presented in the respective reports. Second, the 
applicant queried hospitals participating in the RNS[supreg] System 
Pivotal trial, and these queries yielded a mean and median CCR for 
implantable devices of 0.37 and 0.36, respectively. Third, the 
applicant reviewed data from the (All Payor) Premier database for cases 
performed during 2000 through 2010 that reported ICD-9 CM procedure 
codes 02.93 and/or 86.95 on a claim, and calculated a mean and median 
CCR for implanted leads and neurostimulators of 0.50 and 0.44, 
respectively. The applicant then reviewed other discussions of past new 
technology add-on payment applications published in the Federal 
Register, and noted that other applicants used lower CCRs (higher 
markups) for implanted devices than the CCR of 0.50 used in the 
applicant's analyses.
    Using this approach, the applicant added the anticipated hospital 
charge for the implantable RNS[supreg] System to the average case-
weighted standardized charge per case, and determined a final average 
case-weighted standardized charge per case of $128,723. The anticipated 
hospital charge for the implantable RNS[supreg] System is $73,900. 
Using the FY 2014 IPPS Table 10 thresholds, the threshold for MS-DRG 
024 is $91,197. Because the final average case-weighted standardized 
charge per case of $128,723 for MS-DRG 024 exceeds the average case-
weighted threshold amount, the applicant maintained that the 
RNS[supreg] System meets the cost criterion.
    In the second analysis, which the applicant characterizes as 
supplementary, the applicant

[[Page 49948]]

researched the FY 2012 MedPAR file for cases reporting the following 
combinations of ICD-9-CM procedures codes: 02.93 and 86.95, or 
procedures codes 02.93 and 01.20 that mapped to MS-DRG 024. The 
applicant found 383 claims for cases reporting the combination of ICD-
9-CM procedures codes 02.93 and 01.20, and pointed out that these cases 
were coded with procedure code 01.20 in error because no new 
RNS[supreg] System implantations occurred after May 2009. The applicant 
analyzed these 383 claims, and found that more than 90 percent of these 
cases had a primary or secondary diagnosis of Parkinson's disease, 
essential tremor, or dystonia. These diagnoses are FDA-approved 
indications for deep brain stimulation (DBS). In addition, the 
applicant noted that the total covered charges for these cases were 
less than the estimated charges for a full DBS system, and hypothesized 
that these cases did not represent implantation of a full DBS system, 
but did represent the implantation of leads only. The applicant 
contacted two hospitals that reported claims for cases where total 
covered charges were less than the charges for a full DBS system, and 
the hospitals confirmed that their claims represented lead 
implantations only. Therefore, for the second analysis, the applicant 
included all of the cases assigned to MS-DRG 024 reporting a 
combination of ICD-9-CM procedures codes 02.93 and 86.95, and all of 
the cases assigned to MS-DRG 024 reporting a combination of ICD-9-CM 
procedures codes 02.93 and 01.20 where the covered charges were greater 
than, or equal to, the estimated charges of a full DBS system. The 
applicant maintained that 374 claims from 106 providers met this 
criterion, and data represented claims from the fourth calendar quarter 
of 2011 through the third calendar quarter of 2012. Based on this 
assumption, the applicant calculated an average case-weighted 
standardized charge per case of $65,555.
    The applicant then removed DBS charges from the average case-
weighted standardized charge per case. The applicant estimated charges 
for a full DBS system, and maintained that the average cost for a full 
DBS system is $25,979. Similar to its first analysis, the applicant 
assumed a CCR of 0.50, or 100 percent markup, which resulted in 
estimated charges for a full DBS system of $51,958. After removing the 
DBS system charges, the applicant inflated the charges to the current 
period using the same methodology in the first analysis, added charges 
for the RNS[supreg] System, and determined a final average case-
weighted standardized charge per case of $130,233. As noted above, the 
anticipated hospital charge for the implantable RNS[supreg] System is 
$73,900. Using the FY 2014 IPPS Table 10 thresholds, the average case-
weighted threshold for MS-DRG 024 is $91,197. Because the final average 
standardized charge per case of $130,233 for MS-DRG 024 exceeds the 
threshold amount, the applicant maintained that the RNS[supreg] System 
meets the cost criterion.
    Under either analysis, the applicant maintained that the final 
average case-weighted standardized charge per case would exceed the 
average case-weighted threshold.
    In the FY 2015 IPPS/LTCH PPS proposed rule, we invited public 
comments on whether the RNS[supreg] System meets the cost criterion, 
particularly based on the assumptions and methodology used in the 
applicant's analyses. However, we did not receive any public comments 
in response to the proposed rule regarding whether this technology 
meets the cost criterion. After further evaluation of the new 
technology add-on payment application, we believe that the technology 
meets the cost criterion.
    With regard to substantial clinical improvement, as previously 
stated, some patients diagnosed with partial onset seizures may not be 
able to control their seizures with antiepileptic medications, VNS, or 
with surgical removal of the seizure focus. The applicant stated that 
the RNS[supreg] System provides treatment for those patients diagnosed 
with partial onset seizures who fail treatment with antiepileptic 
medications, or VNS therapy, and who are ineligible for respective 
surgery because of the extent and/or location of the seizure focus, or 
patients who do not elect surgery. According to the applicant, the 
RNS[supreg] System clinical trials provide Class I evidence that 
treatment using the RNS[supreg] System substantially reduces disabling 
seizures in patients diagnosed with severe epilepsy, who have tried and 
failed treatment with antiepileptic medications, and in many cases, VNS 
or epilepsy surgery. The applicant maintained that the results from 
their clinical trials demonstrate significant and sustained 
improvements in health outcomes over the controlled period and over the 
long term. The applicant conducted a feasibility trial, which was 
designed to demonstrate adequate safety of its treatment, and provide 
evidence of effectiveness to support commencement of a randomized 
double-blinded pivotal trial. In addition, the applicant has an ongoing 
long-term treatment clinical investigation trial (LTT trial) to assess 
the long-term safety and effectiveness of the treatment on patients who 
have completed either the Feasibility trial, or the RNS[supreg] System 
Pivotal trial for an additional seven years. The LTT trial started in 
April 2006, and the final patient is expected to complete the trial in 
2018. The applicant noted that patients enrolled in the LTT trial 
continued to experience a reduction in seizures over several years of 
follow-up, further demonstrating the positive effect of responsive 
stimulation from the RNS[supreg] System is durable.
    The applicant stated that their pivotal trial met its primary 
effectiveness endpoint by proving that there was a statistically 
significant greater reduction in seizures in the treatment group 
compared to the control group (p = 0.012). Significant improvements at 
1 and 2 years post-implant included:
     A significant reduction in disabling seizures of 44 
percent and 53 percent at 1 and 2 years, respectively;
     Fifty-five percent of patients who reached 2 years post-
implant experienced a 50 percent or greater reduction in seizures; and
     Significant improvements in overall quality of life, as 
well as individual quality of life measures including memory, language, 
attention, concentration and medication effects.
    The applicant asserted that there was no negative effect of 
treatment using the RNS[supreg] System on neuropsychological function 
(including verbal functioning, visual spatial processing, and memory) 
or mood. The applicant concluded that the RNS[supreg] System Pivotal 
trial provides Class I evidence that responsive cortical stimulation is 
effective in significantly reducing seizure frequency in adults with 
one or two seizure foci who have failed two or more antiepileptic 
medication trials. The applicant stated that experience across all of 
the RNS[supreg] System trials demonstrates the reduction in seizure 
frequency of disabling partial onset seizures improves over time. In 
addition, the applicant noted that sustained improvements were also 
seen in quality of life. Finally, the applicant noted that safety and 
tolerability measures compare favorably to alternative treatments, such 
as antiepileptic medications, VNS, and epilepsy surgery.
    With regard to the substantial clinical improvement criterion, we 
stated in the proposed rule that we are concerned that the average age 
of the patients enrolled in the applicant's trials was 35 years. 
Although the applicant maintained that 31 percent of the patients 
enrolled in the pivotal trial were Medicare beneficiaries, we are 
unsure of the extent to which this

[[Page 49949]]

technology would be used by Medicare beneficiaries because of the 
relatively young age of the majority of the patients enrolled in the 
pivotal trial. We also are concerned that further clarification on how 
the RNS[supreg] System compares to other neurostimulation treatments 
was not provided by the applicant.
    Because the applicant included claims with DBS charges in one of 
its cost analyses, we believe that the similarities and differences 
between DBS and the RNS[supreg] System may also be relevant under the 
substantial clinical improvement criterion. In addition, we stated in 
the proposed rule that we are concerned that the time period in the 
clinical trial may not be sufficient to confirm durability. In the 
RNS[supreg] System Pivotal Clinical Investigation, the primary 
effectiveness endpoint considered seizure frequency over the last 3 
months of the blinded period of the trial. We note that the applicant 
is currently conducting a 5-year study.
    We invited public comments on whether the RNS[supreg] System meets 
the substantial clinical improvement criterion, particularly in regard 
to the degree in which the technology would be used by Medicare 
beneficiaries, the comparison to other neurostimulation treatments, and 
its durability.
    Comment: Commenters stated that the technology is currently used 
and will continue to be used in the treatment of Medicare beneficiaries 
who have been diagnosed with epilepsy. One commenter noted that 31 
percent of individuals in the RNS[supreg] System clinical trial were 
Medicare beneficiaries, and all of these individuals were enrolled in 
the Medicare program because of a disability as opposed to being 
enrolled in the Medicare program because of their age. In addition, the 
commenter provided an analysis of data obtained from publicly available 
databases, specifically using the Premier Perspective all payor 
database for the time period from 2008 through 2013 and the CMS MedPAR 
database for FY 2012 and FY 2013. This analysis showed that, for 
Medicare beneficiaries who have been diagnosed with medically 
intractable partial epilepsy, 72 to 77 percent of the Medicare claims 
were submitted for payment of services provided to patients who were 
under the age of 65. The commenter also queried the public Web sites of 
the healthcare centers that participated in the RNS[supreg] System 
Pivotal trial, which included data on patients who have participated in 
specific programs directed by 120 adult comprehensive epilepsy centers, 
and found that these centers reported that 33 percent of their patients 
who have been diagnosed with epilepsy were enrolled in the Medicare 
program and 76 percent of these Medicare beneficiaries were under the 
age of 65. Several other commenters asserted that patients who have 
been diagnosed with epilepsy and receive treatment using this 
technology would be eligible for Medicare based on a disabling 
condition. The commenter provided examples of the types of patients 
that they have treated who are younger than the age of 65, but who are 
insured through the Medicare program based on a disabling condition.
    Response: We appreciate the information detailed within the 
commenter's analysis. We agree with the commenters that this technology 
will be available for use by Medicare beneficiaries.
    Comment: Commenters provided comparison analyses for this 
technology and VNS therapy, DBS, surgical resection, and other 
medications, and also conducted assessments of the durability of the 
RNS[supreg] System. (We further discuss the results of the comparison 
analyses and assessments conducted by these commenters below.) Many of 
these commenters pointed out that this technology is capable of 
capturing and storing information regarding seizure activity, which 
could enable the use of this technology to initiate possible changes in 
medical management of patients treated with an implant over time.
    In comparison to VNS therapy, commenters stated that the 
RNS[supreg] System is a closed loop system that provides electrical 
stimulation in response to brain activity, while VNS therapy is an open 
loop system that provides electrical stimulation continuously or 
intermittently at programmed intervals. In addition, commenters stated 
that the RNS[supreg] System can be applied directly to the seizure 
focus or foci in the brain, while VNS therapy provides stimulation to 
the vagus nerve. The commenters noted that this distinction represents 
an improvement relative to VNS therapy because patients receive less 
stimulation using the RNS[supreg] System. The commenters also pointed 
out that the side effects of VNS therapy, such as hoarseness, coughing, 
and throat pain, are distressing and uncomfortable for patients and can 
make VNS therapy difficult to tolerate. These commenters also noted 
that these side effects do not emerge with the use of the RNS[supreg] 
System. One commenter provided data from the clinical trials for VNS 
therapy, which showed that more than half of the patients treated with 
VNS therapy ``perceived'' stimulation. The commenter also provided data 
from clinical trials for VNS therapy that showed that the side effects 
for VNS therapy included voice alternation, increased coughing, 
pharyngitis, dyspnea, dyspepsia, nausea, and laryngismus. The commenter 
compared the indications from the clinical trial data with data from 
the RNS[supreg] System trials, which indicate that there were no 
patients with ongoing complaints related to ``perception of 
stimulation,'' although some patients experienced symptoms such as 
flashing lights or focal muscle twitching. The commenter stated that 
stimulation with the RNS[supreg] System was adjusted for patients 
experiencing these symptoms, such that the symptoms became 
imperceptible. Many commenters stated that they were able to use the 
RNS[supreg] System to reduce the frequency of seizures in patients who 
have been diagnosed with epilepsy for whom VNS therapy did not reduce 
seizures. One commenter provided clinical trial data regarding VNS 
therapy that showed that in two studies in blinded periods VNS therapy 
reduced median seizures per day by 6 to 23 percent, and that over 3 
years VNS therapy reduced median seizures per day by 31 to 41 percent. 
The commenter also provided clinical trial data regarding the 
RNS[supreg] System that showed in the blinded period a 28 percent 
reduction of median seizures per day compared to 19 percent for the 
control group. In addition, the commenter also provided clinical trial 
data regarding the RNS[supreg] System that showed that over 3 years the 
RNS[supreg] System reduced median seizures by 44 to 60 percent. The 
commenter also pointed out that 34 percent of patients enrolled in the 
RNS[supreg] System trial were previously treated with VNS therapy, but 
experienced positive outcomes with the RNS[supreg] System.
    In comparison to DBS, commenters stated that the RNS[supreg] System 
was not approved by the FDA for treatment of epilepsy, and DBS is not 
considered to be the standard of care for the treatment of epilepsy by 
the American Academy of Neurology or the American Epilepsy Society. The 
commenters stated that they did not have experience with the 
RNS[supreg] System to compare with DBS to because it is not typically 
used, or approved for, treating patients diagnosed with epilepsy. One 
commenter noted that DBS is only available to patients on an 
experimental or investigational basis for the treatment of epilepsy. 
Another commenter stated that no direct comparison trial has been 
conducted between DBS and the RNS[supreg] System. The commenter 
reviewed data from a clinical trial that studied the use

[[Page 49950]]

of DBS treatment of the anterior nucleus of the thalamus in subjects 
with medically intractable partial seizures. While the commenter stated 
that some of the data appeared to be comparable to the results of the 
RNS[supreg] System trials in terms of seizure reduction and quality of 
life, differences existed in the construction of the trials, including 
inclusion and exclusion criteria and primary efficacy endpoints. The 
commenter also stated that, similar to VNS therapy, DBS provides 
continuous or intermittent stimulation at program intervals, resulting 
in more stimulation being delivered than delivered using the 
RNS[supreg] System.
    In comparison to surgical resection, commenters noted that the 
RNS[supreg] System can be used when surgical resection is not available 
as a treatment option. Commenters stated that some patients who have 
been diagnosed with epilepsy have seizure focus or foci area(s) in 
regions of the brain that should not be removed because removal would 
result in serious neurological defects. Therefore, commenters stated 
that the RNS[supreg] System represents a treatment option for patients 
who have been diagnosed with epilepsy for whom surgery is not an 
option. In addition, commenters stated that they were able to use the 
RNS[supreg] System to reduce the frequency of seizures in patients who 
had been treated with surgical resection and did not experience a 
reduction in seizures after surgery.
    In comparison to antiepileptic medications used to treat patients 
who have been diagnosed with epilepsy, commenters stated that the 
RNS[supreg] System offers a treatment option that does not have the 
unpleasant side effects associated with some of these medications. The 
commenters stated that these side effects include problems with 
cognition or coordination, depression, and fatigue.
    With regard to durability, one commenter provided data from the 
RNS[supreg] System clinical trial for 6 years. The results of the trial 
indicate that the median percent reduction in seizures compared to the 
baseline year was sustained or improved at 60 percent 3 years after 
implantation and 66 percent 6 years after implantation. The median 
follow-up time for this group of patients based on the trial's data was 
5.4 years. The commenter indicated that these results are comparable, 
or better, for the subset of patients who were enrolled in the 
RNS[supreg] System clinical trial and that were Medicare beneficiaries. 
The commenter further stated that the updated data showed that the 
proportion of patients who were enrolled in the RNS[supreg] System 
clinical trial that experienced extended periods of seizure freedom of 
3 or 6 months was slightly larger than previously shared in the 
November 1, 2012 new technology add-on payment application for the 
RNS[supreg] System.
    Response: We appreciate the commenters' input. We agree with the 
commenters that the RNS[supreg] System offers a treatment option for a 
patient population that is unresponsive to currently available 
treatments. Specifically, we agree with the commenters that the 
RNS[supreg] System clinical trial data showed that the technology 
reduces seizure frequency in patients who have received treatment with 
VNS therapy or surgical resection and continued to have seizures 
subsequent to those treatments. We also agree with the commenters that 
the technology could be a treatment option for patients for whom 
surgical resection is not appropriate due to the location of the 
seizure focus or foci area(s). In addition, we agree with the 
commenters that use of the device improves clinical outcomes compared 
to currently available treatments. For example, it appears that seizure 
reduction over time using the RNS[supreg] System appears to be at least 
comparable with documented seizure reductions using VNS therapy, 
although no direct comparison of the two systems has been completed, 
and the RNS[supreg] System appears not to have the side effects that 
have been associated with VNS therapy. We agree with the commenters 
that it is inappropriate to compare the RNS[supreg] System to a 
technology that is not FDA approved for the same treatment.
    After consideration of the public comments we received, we believe 
that the RNS[supreg] System meets all of the new technology add-on 
payment criteria. Therefore, we are approving new technology add-on 
payments for the RNS[supreg] System for FY 2015. Cases involving the 
RNS[supreg] System that are eligible for new technology add-on payments 
will be identified using the following ICD-9-CM procedure codes: 01.20 
(Cranial implantation or replacement of neurostimulator pulse 
generator) in combination with 02.93 (Implantation or replacement of 
intracranial neurostimulator lead(s)). According to the applicant, 
cases using the RNS[supreg] System would incur an anticipated cost per 
case of $36,950. Under Sec.  412.88(a)(2) of the regulations, new 
technology add-on payments are limited to the lesser of 50 percent of 
the average costs of the device or 50 percent of the costs in excess of 
the MS-DRG payment rate for the case. As a result, the maximum add-on 
payment for cases involving the RNS[supreg] System is $18,475 for FY 
2015.

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

A. Background

    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary 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 FY 2015 hospital wage index based on the 
statistical areas appears under section III.B. of the preamble of this 
final 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. 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 adjustment for FY 2015 is 
discussed in section II.B. of the Addendum to this final rule.
    As discussed in section III.H. of the preamble of this final 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 budget neutrality adjustment for FY 2015 is discussed in section 
II.A.4.b. of the Addendum to this final rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we are applying to 
the FY 2015 wage index

[[Page 49951]]

appears under section III.F. of the preamble of this final rule.

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

1. Background
    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 the Core-Based Statistical Areas 
(CBSAs) established by the Office of Management and Budget (OMB). The 
statistical areas used in FY 2014 are based on OMB standards published 
on December 27, 2000 (65 FR 82228) and Census 2000 data and Census 
Bureau population estimates for 2007 and 2008 (OMB Bulletin No. 10-02). 
For a discussion of OMB's delineations of CBSAs and our implementation 
of the CBSA definitions, we refer readers to the preamble of the FY 
2005 IPPS final rule (69 FR 49026 through 49032). We also discussed in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582) and the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013, OMB planned to 
announce new labor market area delineations based on new standards 
adopted in 2010 (75 FR 37246) and the 2010 Census of Population and 
Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 
FR 27552) and final rule (78 FR 50586), on February 28, 2013, OMB 
issued OMB Bulletin No. 13-01, which established revised delineations 
for Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas, and provided guidance on the use of the 
delineations of these statistical areas. A copy of this bulletin may be 
obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. According to OMB, ``[t]his bulletin 
provides the delineations of all Metropolitan Statistical Areas, 
Metropolitan Divisions, Micropolitan Statistical Areas, Combined 
Statistical Areas, and New England City and Town Areas in the United 
States and Puerto Rico based on the standards published on June 28, 
2010, in the Federal Register (75 FR 37246 through 37252) and Census 
Bureau data.'' In this FY 2015 IPPS/LTCH PPS final rule, when 
referencing the new OMB geographic boundaries of statistical areas, we 
are using the term ``delineations'' rather than the term '' 
definitions'' that we have used in the past, consistent with OMB's use 
of the terms (75 FR 37249).
    In order to implement these changes for the IPPS, it is necessary 
to identify the new labor market area delineation for each county and 
hospital in the country. While the revisions OMB published on February 
28, 2013 are not as sweeping as the changes OMB announced in 2003, the 
February 28, 2013 bulletin does contain a number of significant 
changes. For example, under the new OMB delineations, there would be 
new CBSAs, urban counties that would become rural, rural counties that 
would become urban, and existing CBSAs would be split apart. In 
addition, the effect of the new OMB delineations on various hospital 
reclassifications, the out-migration adjustment (established by section 
505 of Pub. L. 108-173), and treatment of hospitals located in certain 
rural counties (that is, ``Lugar'' hospitals) provided for under 
section 1886(d)(8)(B) of the Act must be considered. These are just a 
few of the many issues that need to be reviewed regarding the effects 
of the new OMB labor market area delineations prior to proposing and 
establishing policies.
    However, because the bulletin was not issued until February 28, 
2013, with supporting data not available until later, and because the 
changes made by the bulletin and their ramifications needed to be 
extensively reviewed and verified, we were unable to undertake such a 
lengthy process before publication of the FY 2014 IPPS/LTCH PPS 
proposed rule and, thus, did not implement changes to the wage index 
for FY 2014 based on these new OMB delineations. In the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50586), we stated that we intended to 
propose changes to the wage index based on the new OMB delineations in 
the FY 2015 IPPS/LTCH PPS proposed rule. As discussed below, in the FY 
2015 IPPS/LTCH PPS proposed rule (79 FR 28054 through 28064, we 
proposed to implement the new OMB delineations as described in the 
February 28, 2013 OMB Bulletin No. 13-01, effective for the FY 2015 
IPPS wage index.
2. Implementation of New Labor Market Area Delineations
    As discussed previously, CMS did not implement the new OMB labor 
market area delineations for FY 2014 because we needed sufficient time 
to assess the new changes. We believe it is important for the IPPS to 
use the latest labor market area delineations available as soon as is 
reasonably possible in order to maintain a more accurate and up-to-date 
payment system that reflects the reality of population shifts and labor 
market conditions. While CMS and other stakeholders have explored 
potential alternatives to the current CBSA-based labor market system 
(we refer readers to the CMS Web site at: www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html), no consensus has been achieved regarding how best to 
implement a replacement system. As discussed in the FY 2005 IPPS final 
rule (69 FR 49027), ``While we recognize that MSAs are not designed 
specifically to define labor market areas, we believe they do represent 
a useful proxy for this purpose.'' We further believe that using the 
most current delineations will increase the integrity of the IPPS wage 
index system by creating a more accurate representation of geographic 
variations in wage levels. We have reviewed our findings and impacts 
relating to the new OMB delineations, and find no compelling reason to 
delay implementation. Therefore, we proposed to implement the new OMB 
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, effective for the FY 2015 IPPS wage index. In the FY 2015 IPPS/LTCH 
PPS proposed rule (79 FR 28055), we also proposed to use these new 
delineations 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 refined in subsequent rulemaking. We also 
proposed a wage index transition period applicable to all hospitals 
that experience negative impacts due to the proposed implementation of 
the new OMB delineations. This transition is discussed in more detail 
below.
    Comment: Commenters were supportive of the proposal to adopt the 
new OMB delineations. One commenter, while supportive of CMS' proposal 
to adopt the new OMB delineations, effective for FY 2015, recommended 
that CMS adopt an alternative hospital wage index system in future 
rulemaking. Another commenter suggested that CMS implement new labor 
market area definitions to distinguish ``core'' urban areas from 
surrounding areas within a CBSA.
    Response: We appreciate the support for our proposal to adopt the 
new OMB delineations. For FY 2015, we did not propose any modification 
to the current CBSA-based labor market area methodology, aside from 
proposing to adopt the new OMB labor market area delineations. However, 
we thank the commenters for their continued interest in examining 
alternative means for defining labor market areas. CMS presented an 
alternative wage index methodology in a Report to Congress on April 11, 
2012 (http://www.cms.gov/

[[Page 49952]]

Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/
Wage-Index-Reform-Report-to-Congress-2012.zip). As discussed in the 
report, implementation of such a reform would require revisions to 
several statutory provisions that provide various forms of wage index 
reclassification and redesignation. Until a consensus on wage index 
reform is achieved, we believe that implementing the most recent OMB 
delineations is critical in maintaining the efficacy and integrity of 
the Medicare hospital wage index system. We did not propose, nor will 
we finalize, any additional changes to the CBSA-based labor market area 
delineations, including the concept of defining core and noncore 
portions of a CBSA.
    After consideration of the public comments we received, we are 
finalizing the implementation of the new OMB delineations as described 
in the February 28, 2013 OMB Bulletin No. 13-01, effective beginning 
with the FY 2015 IPPS wage index. We received public comments on our 
proposals with respect to the use of these new OMB delineations to 
calculate the area wage indexes and the transition periods, which we 
address in sections III.B.2.a. through d. of the preamble of this final 
rule. We also finalize our policies in those sections.
a. Micropolitan Statistical Areas
    As discussed in the FY 2005 IPPS final rule (69 FR 49029 through 
49032), CMS considered whether to use Micropolitan Statistical Areas to 
define the labor market areas for the purpose of the IPPS wage index. 
OMB defines a ``Micropolitan Statistical Area'' as a CBSA ``associated 
with at least one urban cluster that has a population of at least 
10,000, but less than 50,000'' (75 FR 37252). We refer to these areas 
as Micropolitan Areas. After extensive impact analysis, CMS determined 
the best course of action would be to treat all hospitals located in 
Micropolitan Areas as ``rural'' and include them in the calculation of 
each State's rural wage index. Because Micropolitan areas tend to 
encompass smaller population centers and contain fewer hospitals than 
MSAs, we determined that if Micropolitan Areas were to be treated as 
separate labor market areas, the IPPS wage index would have included 
drastically more single-provider labor market areas. This larger number 
of labor market areas with fewer hospitals could create instability in 
year-to-year wage index values for a large number of hospitals; could 
reduce the averaging effect of the wage index, thus lessening some of 
the efficiency incentive inherent in a system based on the average 
hourly wages for a large number of hospitals; and could arguably create 
an inequitable system when so many hospitals have wage indexes based 
solely on their own wage data while other hospitals' wage indexes are 
based on an average hourly wage across many hospitals. For these 
reasons, we adopted a policy to include Micropolitan Areas in the 
State's rural wage area, and have continued this policy through the 
present.
    Based upon the new 2010 Decennial Census data, a number of urban 
counties have switched status and have joined or became Micropolitan 
Areas, and some counties that once were part of a Micropolitan Area, 
under current OMB delineations, have become urban. Overall, there are 
fewer Micropolitan Areas (541) under the new OMB delineations based on 
the 2010 Census than existed under the latest data from the 2000 Census 
(581). We believe that the best course of action would be to continue 
the policy established in the FY 2005 IPPS final rule and include 
hospitals located in Micropolitan Areas in each State's rural wage 
index. These areas continue to be defined as having relatively small 
urban cores (populations of 10,000-49,999). We do not believe it would 
be appropriate to calculate a separate wage index for areas that 
typically may include only a few hospitals for the reasons set forth in 
the FY 2005 IPPS/LTCH PPS final rule, as discussed above. Therefore, in 
conjunction with our proposal to implement the new OMB labor market 
area delineations beginning in FY 2015, in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28055), we proposed to continue to treat 
Micropolitan Areas as ``rural'' and to include the Micropolitan Areas 
in the calculation of each State's rural wage index.
    Comment: A number of commenters supported CMS' proposal to continue 
to treat Micropolitan Areas as rural for hospital wage index purposes.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, in 
conjunction with our policy to implement the new OMB labor market area 
delineations beginning in FY 2015, we are continuing to treat 
Micropolitan Areas as ``rural'' and to include the Micropolitan Areas 
in the calculation of each State's rural wage index.
b. Urban Counties That Became Rural Under the New OMB Delineations
    As previously discussed, we proposed to implement the new OMB labor 
market area delineations (based upon the 2010 Decennial Census data) 
beginning in FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28055 through 28056), we stated that our analysis shows that a total of 
37 counties (and county equivalents) and 12 hospitals that were once 
considered part of an urban CBSA would be considered to be located in a 
rural area, beginning in FY 2015, under these new OMB delineations. In 
the proposed rule, we included a listing of the 37 urban counties that 
would be rural if we finalized our proposal to implement the new OMB 
delineations.
    We proposed that the wage data for all hospitals currently located 
in the 37 urban counties listed in the proposed rule would be 
considered rural under the new OMB delineations when calculating their 
respective State's rural wage index. We stated that we recognize that 
rural areas typically have lower area wage index values than urban 
areas, and hospitals located in these counties may experience a 
negative impact in their IPPS payment due to the proposed adoption of 
the new OMB delineations. We refer readers to section III.B.2.e. of the 
preamble of this final rule for a discussion of the proposed and 
finalized wage index transition period, in particular, the discussion 
regarding the 3-year transition for hospitals located in these specific 
counties.
    Comment: Commenters were supportive of the proposal to adopt the 
new OMB delineations, including the proposed reassignment of counties 
from urban areas to rural areas.
    Response: We appreciate the commenters' support.
    As discussed above, we are finalizing our proposal to adopt the new 
OMB delineations. After consideration of the public comments we 
received, we also are finalizing our proposed reassignment of counties 
from urban areas to rural areas based on these new OMB delineations. 
The following chart lists the 37 urban counties that are considered to 
be rural under this policy.

[[Page 49953]]



                                                  Counties That Will Lose Urban Status and Become Rural
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Previous
                 County                         State           CBSA No.                                        CBSA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Greene County..........................  IN                         14020  Bloomington, IN.
Anson County...........................  NC                         16740  Charlotte-Gastonia-Rock Hill, NC-SC.
Franklin County........................  IN                         17140  Cincinnati-Middletown, OH-KY-IN.
Stewart County.........................  TN                         17300  Clarksville, TN-KY.
Howard County..........................  MO                         17860  Columbia, MO.
Delta County...........................  TX                         19124  Dallas-Fort Worth-Arlington, TX.
Pittsylvania County....................  VA                         19260  Danville, VA.
Danville City..........................  VA                         19260  Danville, VA.
Preble County..........................  OH                         19380  Dayton, OH.
Gibson County..........................  IN                         21780  Evansville, IN-KY.
Webster County.........................  KY                         21780  Evansville, IN-KY.
Franklin County........................  AR                         22900  Fort Smith, AR-OK.
Ionia County...........................  MI                         24340  Grand Rapids-Wyoming, MI.
Newaygo County.........................  MI                         24340  Grand Rapids-Wyoming, MI.
Greene County..........................  NC                         24780  Greenville, NC.
Stone County...........................  MS                         25060  Gulfport-Biloxi, MS.
Morgan County..........................  WV                         25180  Hagerstown-Martinsburg, MD-WV.
San Jacinto County.....................  TX                         26420  Houston-Sugar Land-Baytown, TX.
Franklin County........................  KS                         28140  Kansas City, MO-KS.
Tipton County..........................  IN                         29020  Kokomo, IN.
Nelson County..........................  KY                         31140  Louisville/Jefferson County, KY-IN.
Geary County...........................  KS                         31740  Manhattan, KS.
Washington County......................  OH                         37620  Parkersburg-Marietta-Vienna, WV-OH.
Pleasants County.......................  WV                         37620  Parkersburg-Marietta-Vienna, WV-OH.
George County..........................  MS                         37700  Pascagoula, MS.
Power County...........................  ID                         38540  Pocatello, ID.
Cumberland County......................  VA                         40060  Richmond, VA.
King and Queen County..................  VA                         40060  Richmond, VA.
Louisa County..........................  VA                         40060  Richmond, VA.
Washington County......................  MO                         41180  St. Louis, MO-IL.
Summit County..........................  UT                         41620  Salt Lake City, UT.
Erie County............................  OH                         41780  Sandusky, OH.
Franklin County........................  MA                         44140  Springfield, MA.
Ottawa County..........................  OH                         45780  Toledo, OH.
Greene County..........................  AL                         46220  Tuscaloosa, AL.
Calhoun County.........................  TX                         47020  Victoria, TX.
Surry County...........................  VA                         47260  Virginia Beach-Norfolk-Newport News, VA-NC.
--------------------------------------------------------------------------------------------------------------------------------------------------------

c. Rural Counties That Became Urban Under the New OMB Delineations
    As previously discussed, we proposed to implement the new OMB labor 
market area delineations (based upon the 2010 Decennial Census data) 
beginning in FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28056 through 28058), we indicated that analysis of these OMB labor 
market area delineations shows that a total of 105 counties (and county 
equivalents) and 81 hospitals that were located in rural areas would be 
located in urban areas under the new OMB delineations. In the proposed 
rule, we included a listing of the 105 rural counties that would be 
urban if we finalized our proposal to implement the new OMB 
delineations.
    We proposed that when calculating the area wage index, the wage 
data for hospitals located in these 105 rural counties would be 
included in their new respective urban CBSAs. Typically, hospitals 
located in an urban area would receive a higher wage index value than 
hospitals located in their State's rural area. However, with regard to 
the wage index applicable to individual hospitals, we proposed to 
implement a transitional wage index adjustment for any hospital that 
would receive a lower wage index under the new OMB delineations than it 
would have received under the current CBSA definitions. We refer 
readers to section III.B.2.e. of the preamble of this final rule for 
further discussion of this transition.
    Comment: Commenters were supportive of the proposal to adopt the 
new OMB delineations, including the proposed reassignments of counties 
from rural areas to urban areas for purposes of the wage index.
    Response: We appreciate the commenters' support.
    As discussed above, we are finalizing our proposal to adopt the new 
OMB delineations. After consideration of the public comments we 
received, we also are finalizing our proposed reassignment of counties 
from rural to urban for purposes of the wage index based on these new 
OMB delineations. The following chart lists the 105 rural counties that 
will be urban for purposes of the wage index for FY 2015 under this 
policy.

                                                  Counties That Will Lose Rural Status and Become Urban
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               New  CBSA
                 County                         State             No.                                           CBSA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Utuado Municipio.......................  PR                         10380  Aguadilla-Isabela, PR.
Linn County............................  OR                         10540  Albany, OR.
Oldham County..........................  TX                         11100  Amarillo, TX.

[[Page 49954]]

 
Morgan County..........................  GA                         12060  Atlanta-Sandy Springs-Roswell, GA.
Lincoln County.........................  GA                         12260  Augusta-Richmond County, GA-SC.
Newton County..........................  TX                         13140  Beaumont-Port Arthur, TX.
Fayette County.........................  WV                         13220  Beckley, WV.
Raleigh County.........................  WV                         13220  Beckley, WV.
Golden Valley County...................  MT                         13740  Billings, MT.
Oliver County..........................  ND                         13900  Bismarck, ND.
Sioux County...........................  ND                         13900  Bismarck, ND.
Floyd County...........................  VI                         13980  Blacksburg-Christiansburg-Radford, VA.
De Witt County.........................  IL                         14010  Bloomington, IL.
Columbia County........................  PA                         14100  Bloomsburg-Berwick, PA.
Montour County.........................  PA                         14100  Bloomsburg-Berwick, PA.
Allen County...........................  KY                         14540  Bowling Green, KY.
Butler County..........................  KY                         14540  Bowling Green, KY.
St. Mary's County......................  MD                         15680  California-Lexington Park, MD.
Jackson County.........................  IL                         16060  Carbondale-Marion, IL.
Williamson County......................  IL                         16060  Carbondale-Marion, IL.
Franklin County........................  PA                         16540  Chambersburg-Waynesboro, PA.
Iredell County.........................  NC                         16740  Charlotte-Concord-Gastonia, NC-SC.
Lincoln County.........................  NC                         16740  Charlotte-Concord-Gastonia, NC-SC.
Rowan County...........................  NC                         16740  Charlotte-Concord-Gastonia, NC-SC.
Chester County.........................  SC                         16740  Charlotte-Concord-Gastonia, NC-SC.
Lancaster County.......................  SC                         16740  Charlotte-Concord-Gastonia, NC-SC.
Buckingham County......................  VA                         16820  Charlottesville, VA.
Union County...........................  IN                         17140  Cincinnati, OH-KY-IN.
Hocking County.........................  OH                         18140  Columbus, OH.
Perry County...........................  OH                         18140  Columbus, OH.
Walton County..........................  FL                         18880  Crestview-Fort Walton Beach-Destin, FL.
Hood County............................  TX                         23104  Dallas-Fort Worth-Arlington, TX.
Somervell County.......................  TX                         23104  Dallas-Fort Worth-Arlington, TX.
Baldwin County.........................  AL                         19300  Daphne-Fairhope-Foley, AL.
Monroe County..........................  PA                         20700  East Stroudsburg, PA.
Hudspeth County........................  TX                         21340  El Paso, TX.
Adams County...........................  PA                         23900  Gettysburg, PA.
Hall County............................  NE                         24260  Grand Island, NE.
Hamilton County........................  NE                         24260  Grand Island, NE.
Howard County..........................  NE                         24260  Grand Island, NE.
Merrick County.........................  NE                         24260  Grand Island, NE.
Montcalm County........................  MI                         24340  Grand Rapids-Wyoming, MI.
Josephine County.......................  OR                         24420  Grants Pass, OR.
Tangipahoa Parish......................  LA                         25220  Hammond, LA.
Beaufort County........................  SC                         25940  Hilton Head Island-Bluffton-Beaufort, SC.
Jasper County..........................  SC                         25940  Hilton Head Island-Bluffton-Beaufort, SC.
Citrus County..........................  FL                         26140  Homosassa Springs, FL.
Butte County...........................  ID                         26820  Idaho Falls, ID.
Yazoo County...........................  MS                         27140  Jackson, MS.
Crockett County........................  TN                         27180  Jackson, TN.
Kalawao County.........................  HI                         27980  Kahului-Wailuku-Lahaina, HI.
Maui County............................  HI                         27980  Kahului-Wailuku-Lahaina, HI.
Campbell County........................  TN                         28940  Knoxville, TN.
Morgan County..........................  TN                         28940  Knoxville, TN.
Roane County...........................  TN                         28940  Knoxville, TN.
Acadia Parish..........................  LA                         29180  Lafayette, LA.
Iberia Parish..........................  LA                         29180  Lafayette, LA.
Vermilion Parish.......................  LA                         29180  Lafayette, LA.
Cotton County..........................  OK                         30020  Lawton, OK.
Scott County...........................  IN                         31140  Louisville/Jefferson County, KY-IN.
Lynn County............................  TX                         31180  Lubbock, TX.
Green County...........................  WI                         31540  Madison, WI.
Benton County..........................  MS                         32820  Memphis, TN-MS-AR.
Midland County.........................  MI                         33220  Midland, MI.
Martin County..........................  TX                         33260  Midland, TX.
Le Sueur County........................  MN                         33460  Minneapolis-St. Paul-Bloomington, MN-WI.
Mille Lacs County......................  MN                         33460  Minneapolis-St. Paul-Bloomington, MN-WI.
Sibley County..........................  MN                         33460  Minneapolis-St. Paul-Bloomington, MN-WI.
Maury County...........................  TN                         34980  Nashville-Davidson--Murfreesboro--Franklin, TN.
Craven County..........................  NC                         35100  New Bern, NC.
Jones County...........................  NC                         35100  New Bern, NC.
Pamlico County.........................  NC                         35100  New Bern, NC.
St. James Parish.......................  LA                         35380  New Orleans-Metairie, LA.
Box Elder County.......................  UT                         36260  Ogden-Clearfield, UT.

[[Page 49955]]

 
Gulf County............................  FL                         37460  Panama City, FL.
Custer County..........................  SD                         39660  Rapid City, SD.
Fillmore County........................  MN                         40340  Rochester, MN.
Yates County...........................  NY                         40380  Rochester, NY.
Sussex County..........................  DE                         41540  Salisbury, MD-DE.
Worcester County.......................  MD                         41540  Salisbury, MD-DE.
Highlands County.......................  FL                         42700  Sebring, FL.
Webster Parish.........................  LA                         43340  Shreveport-Bossier City, LA.
Cochise County.........................  AZ                         43420  Sierra Vista-Douglas, AZ.
Plymouth County........................  IA                         43580  Sioux City, IA-NE-SD.
Union County...........................  SC                         43900  Spartanburg, SC.
Pend Oreille County....................  WA                         44060  Spokane-Spokane Valley, WA.
Stevens County.........................  WA                         44060  Spokane-Spokane Valley, WA.
Augusta County.........................  VA                         44420  Staunton-Waynesboro, VA.
Staunton City..........................  VA                         44420  Staunton-Waynesboro, VA.
Waynesboro City........................  VA                         44420  Staunton-Waynesboro, VA.
Little River County....................  AR                         45500  Texarkana, TX-AR.
Sumter County..........................  FL                         45540  The Villages, FL.
Pickens County.........................  AL                         46220  Tuscaloosa, AL.
Gates County...........................  NC                         47260  Virginia Beach-Norfolk-Newport News, VA-NC.
Falls County...........................  TX                         47380  Waco, TX.
Columbia County........................  WA                         47460  Walla Walla, WA.
Walla Walla County.....................  WA                         47460  Walla Walla, WA.
Peach County...........................  GA                         47580  Warner Robins, GA.
Pulaski County.........................  GA                         47580  Warner Robins, GA.
Culpeper County........................  VA                         47894  Washington-Arlington-Alexandria, DC-VA-MD-WV.
Rappahannock County....................  VA                         47894  Washington-Arlington-Alexandria, DC-VA-MD-WV.
Jefferson County.......................  NY                         48060  Watertown-Fort Drum, NY.
Kingman County.........................  KS                         48620  Wichita, KS.
Davidson County........................  NC                         49180  Winston-Salem, NC.
Windham County.........................  CT                         49340  Worcester, MA-CT.
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. Urban Counties That Moved to a Different Urban CBSA Under the New 
OMB Delineations
    As we stated in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28058 through 28060), in addition to rural counties becoming urban and 
urban counties becoming rural, several urban counties would shift from 
one urban CBSA to another urban CBSA under our proposal to adopt the 
new OMB delineations. In certain cases, adopting the new OMB 
delineations would involve a change only in CBSA name or number, while 
the CBSA continues to encompass the same constituent counties. For 
example, CBSA 29140 (Lafayette, IN) would experience both a change to 
its number and its name, and become CBSA 29200 (Lafayette-West 
Lafayette, IN), while all of its three constituent counties would 
remain the same. For the proposed rule, we identified 19 counties that 
would remain in a CBSA that experienced a change in name or number 
under the new delineations, but would retain the same constituent 
counties. In the proposed rule, we included a table listing those 19 
counties.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28059), we did 
not discuss further in this section the above proposed changes because 
they are inconsequential changes with respect to the IPPS wage index. 
However, we did discuss that, in other cases, which if we adopted the 
new OMB delineations, counties would shift between existing and new 
CBSAs, changing the constituent makeup of the CBSAs.
    In one type of change, an entire CBSA would be subsumed by another 
CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single 
county (Flagler, FL) CBSA. Flagler County would become a part of CBSA 
19660 (Deltona-Daytona Beach-Ormond Beach, FL) under the new OMB 
delineations.
    In another type of change, some CBSAs have counties that would 
split off to become part of or to form entirely new labor market areas. 
For example, CBSA 37964 (Philadelphia Metropolitan Division) currently 
is comprised of five Pennsylvania counties (Bucks, Chester, Delaware, 
Montgomery, and Philadelphia). We stated that if we adopted the new OMB 
delineations, Montgomery, Bucks, and Chester counties would split off 
and form the new CBSA 33874 (Montgomery County-Bucks County-Chester 
County, PA Metropolitan Division), while Delaware and Philadelphia 
counties would remain in CBSA 37964.
    Finally, in some cases, a CBSA would lose counties to another 
existing CBSA if we adopted the new OMB delineations. For example, 
Lincoln County and Putnam County, WV would move from CBSA 16620 
(Charleston, WV) to CBSA 26580 (Huntington-Ashland, WV-KY-OH). CBSA 
16620 still would exist in the new labor market delineations with fewer 
constituent counties.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28059 through 
28060), we included a listing of the urban counties that would move 
from one urban CBSA to another urban CBSA if we adopted the new OMB 
delineations. If hospitals located in these counties move from one CBSA 
to another under the new OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values. We 
referred readers to section III.B.2.e. of the preamble of the proposed 
rule for a discussion of our proposals to moderate the impact of our 
proposed adoption of the new OMB delineations.
    Comment: Commenters were supportive of the proposal to adopt the 
new OMB delineations, including the proposed reassignments of counties

[[Page 49956]]

from one urban area to another urban area.
    Response: We appreciate the commenters' support.
    As discussed above, we are finalizing our proposal to adopt the new 
OMB delineations. After consideration of the public comments we 
received, we also are finalizing our proposed reassignment of counties 
from one urban area to another urban area for purposes of the wage 
index based on these new OMB delineations. The following chart 
identifies the 19 counties that remain in a CBSA that experienced a 
change in name or number under this policy, but will retain the same 
constituent counties for purposes of the FY 2015 wage index.

                              Counties That Will Remain in CBSA That Changed Number
----------------------------------------------------------------------------------------------------------------
              Prior CBSA No.                  New CBSA No.               County                     State
----------------------------------------------------------------------------------------------------------------
14484....................................              14454  Norfolk County..............  MA
14484....................................              14454  Plymouth County.............  MA
14484....................................              14454  Suffolk County..............  MA
47644....................................              47664  Lapeer County...............  MI
47644....................................              47664  Livingston County...........  MI
47644....................................              47664  Macomb County...............  MI
47644....................................              47664  Oakland County..............  MI
47644....................................              47664  St. Clair County............  MI
26180....................................              46520  Honolulu County.............  HI
29140....................................              29200  Benton County...............  IN
29140....................................              29200  Carroll County..............  IN
29140....................................              29200  Tippecanoe County...........  IN
42044....................................              11244  Orange County...............  CA
42060....................................              42200  Santa Barbara County........  CA
44600....................................              48260  Jefferson County............  OH
44600....................................              48260  Brooke County...............  WV
44600....................................              48260  Hancock County..............  WV
13644....................................              43524  Frederick County............  MD
13644....................................              43524  Montgomery County...........  MD
----------------------------------------------------------------------------------------------------------------

    The following chart lists the urban counties that will move from 
one urban CBSA to another urban CBSA under our adoption of the new OMB 
delineations for purposes of the FY 2015 wage index.

                                    Counties That Will Change to Another CBSA
----------------------------------------------------------------------------------------------------------------
                Prior CBSA                      New CBSA                 County                     State
----------------------------------------------------------------------------------------------------------------
11300....................................              26900  Madison County..............  IN
11340....................................              24860  Anderson County.............  SC
14060....................................              14010  McLean County...............  IL
37764....................................              15764  Essex County................  MA
16620....................................              26580  Lincoln County..............  WV
16620....................................              26580  Putnam County...............  WV
16974....................................              20994  DeKalb County...............  IL
16974....................................              20994  Kane County.................  IL
21940....................................              41980  Ceiba Municipio.............  PR
21940....................................              41980  Fajardo Municipio...........  PR
21940....................................              41980  Luquillo Municipio..........  PR
26100....................................              24340  Ottawa County...............  MI
31140....................................              21060  Meade County................  KY
34100....................................              28940  Grainger County.............  TN
35644....................................              35614  Bergen County...............  NJ
35644....................................              35614  Hudson County...............  NJ
20764....................................              35614  Middlesex County............  NJ
20764....................................              35614  Monmouth County.............  NJ
20764....................................              35614  Ocean County................  NJ
35644....................................              35614  Passaic County..............  NJ
20764....................................              35084  Somerset County.............  NJ
35644....................................              35614  Bronx County................  NY
35644....................................              35614  Kings County................  NY
35644....................................              35614  New York County.............  NY
35644....................................              20524  Putnam County...............  NY
35644....................................              35614  Queens County...............  NY
35644....................................              35614  Richmond County.............  NY
35644....................................              35614  Rockland County.............  NY
35644....................................              35614  Westchester County..........  NY
37380....................................              19660  Flagler County..............  FL
37700....................................              25060  Jackson County..............  MS
37964....................................              33874  Bucks County................  PA
37964....................................              33874  Chester County..............  PA
37964....................................              33874  Montgomery County...........  PA

[[Page 49957]]

 
39100....................................              20524  Dutchess County.............  NY
39100....................................              35614  Orange County...............  NY
41884....................................              42034  Marin County................  CA
41980....................................              11640  Arecibo Municipio...........  PR
41980....................................              11640  Camuy Municipio.............  PR
41980....................................              11640  Hatillo Municipio...........  PR
41980....................................              11640  Quebradillas Municipio......  PR
48900....................................              34820  Brunswick County............  NC
49500....................................              38660  Gu[aacute]nica Municipio....  PR
49500....................................              38660  Guayanilla Municipio........  PR
49500....................................              38660  Pe[ntilde]uelas Municipio...  PR
49500....................................              38660  Yauco Municipio.............  PR
----------------------------------------------------------------------------------------------------------------

e. Transition Period
(1) Background
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060), we stated 
that, overall, we believe implementing the new OMB labor market area 
delineations would result in wage index values being more 
representative of the actual costs of labor in a given area. However, 
we recognized that some hospitals would experience decreases in wage 
index values as a result of the implementation of the new labor market 
area delineations. We also realize that some hospitals would have 
higher wage index values due to the implementation of the new labor 
market area delineations.
    We explained that, in the past, we have provided for transition 
periods when adopting changes that have significant payment 
implications, particularly large negative impacts. For example, when 
implementing the new OMB definitions after the 2000 Census in the FY 
2005 IPPS final rule (69 FR 49032 through 49034) for FY 2005, we 
evaluated several options to ease the transition to the new CBSA 
system.
    As discussed in that FY 2005 IPPS final rule, we determined that 
the transition to the current wage index system would have the largest 
negative impacts upon hospitals that were originally considered urban, 
but would be considered rural under the new labor market area 
definitions. To alleviate the decreased payments associated with having 
a rural wage index, in calculating the area wage index, in the FY 2005 
IPPS final rule, we allowed urban hospitals that became rural under new 
definitions to maintain their assignment to the labor market area where 
they were located for FY 2004. This adjustment was granted for a period 
of 3 fiscal years.
    In the FY 2005 IPPS final rule, for all hospitals that experienced 
negative payment impacts due to adoption of new labor market area 
definitions (for example, they were moved to an urban CBSA with a lower 
wage index value than their previous rural or urban labor market area), 
we implemented a 1-year blended adjustment. We calculated wage indexes 
for all hospitals using both old and new labor market definitions. 
Hospitals received 50 percent of their wage index based on the new OMB 
delineations, and 50 percent of their wage index based on their current 
labor market area. This adjustment only applied to hospitals that would 
have experienced a drop in wage index values due to a change in labor 
market area definitions. Hospitals that benefitted from the labor 
market area transition received their new wage index at the time the 
new labor market area definitions became effective.
    We continue to have the same concerns expressed in the FY 2005 IPPS 
final rulemaking. Therefore, in the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28060 through 28064), we proposed a similar transition 
methodology to mitigate any negative financial impacts experienced by 
hospitals due to our proposal to implement the new OMB labor market 
area delineations for FY 2015.
(2) Transition for Hospitals in Urban Areas That Would Become Rural
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28060 through 
28061), for hospitals that are currently located in an urban county 
that would become rural under the new OMB delineations, and would have 
no form of wage index reclassification or redesignation in place for FY 
2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the 
Act, redesignations under section 1886(d)(8)(B) of the Act, or rural 
reclassifications under section 1886(d)(8)(E) of the Act), we proposed 
a policy to assign them the urban wage index value of the CBSA in which 
they are physically located for FY 2014 for a period of 3 fiscal years 
(with the rural and imputed floors applied and with the rural floor 
budget neutrality adjustment applied to the area wage index). As stated 
in the FY 2005 IPPS proposed rule (69 FR 28252), we have in the past 
provided transitions when adopting changes that have significant 
payment implications, particularly large negative impacts. We believe 
it is appropriate to apply a 3-year transition period for hospitals 
located in urban counties that would become rural under the new OMB 
delineations, given the potentially significant payment impacts for 
these hospitals. This is consistent with the transition policy adopted 
in FY 2005 (69 FR 49032 through 49034). We continue to believe, as we 
stated in the FY 2005 IPPS final rule (69 FR 49033), that the longer 
transition period is appropriate because, as a group, we expect these 
hospitals would experience a steeper and more abrupt reduction in their 
wage index due to the labor market revisions compared to other 
hospitals. Assigning these hospitals the urban wage index value of the 
CBSA in which they are physically located for FY 2014 for a period of 3 
fiscal years (with the rural and imputed floors applied and with the 
rural floor budget neutrality adjustment applied to the area wage 
index) would be the most similar to the actual payment wage index that 
these hospitals received in FY 2014, thereby minimizing the negative 
impact of adopting the new OMB delineations for these hospitals. 
Accordingly, for FYs 2015, 2016, and 2017, assuming no other form of 
wage index reclassification or redesignation is granted, we proposed to 
assign these hospitals the area wage index value of the urban CBSA in 
which they were geographically located in FY 2014 (with the rural and 
imputed floors applied and with the rural floor budget neutrality 
adjustment applied to the area wage index). For example, if urban CBSA 
12345 consisted of three counties in FY 2014, and, under the new OMB

[[Page 49958]]

delineations, one of those counties, County X, would no longer be part 
of CBSA 12345 and would become rural for FY 2015, we proposed that 
hospitals in County X would be assigned the FY 2015 wage index of CBSA 
12345, computed using the remaining two counties, with the rural and 
imputed floors applied and with the rural floor budget neutrality 
adjustment applied to the area wage index. We believe that assigning 
the wage index of the hospitals' current area is the simplest and most 
effective method for mitigating negative payment impacts due to the 
proposed adoption of the new OMB delineations. We have identified 
relatively few hospitals that are located in urban counties that would 
become rural, and fewer yet that do not have a reclassification or 
redesignation in effect for FY 2015. Because we believe that these 
urban to rural transitions would be the most likely to cause 
significant negative payment impacts, we believe that these hospitals 
should be granted a longer transition period than hospitals that may be 
switching between urban labor market areas, which as discussed later, 
we proposed to apply a 1-year blended wage index.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061), we noted 
that there are situations where a hospital cannot be assigned the wage 
index value of the CBSA to which it geographically belonged in FY 2014 
because that CBSA would be split and no longer exist and some or all of 
the constituent counties would be added to another urban labor market 
area under the new OMB delineations. If the hospital cannot be assigned 
the wage index value of the CBSA to which it is geographically located 
in FY 2014 because that CBSA would be split apart and no longer exist, 
and some or all of its constituent counties would be added to another 
urban labor market area under the new OMB delineations, we proposed 
that hospitals located in such counties that would become rural under 
the new OMB delineations would be assigned the wage index of the FY 
2015 urban labor market area that contains the urban county in their FY 
2014 CBSA to which they are closest (with the rural and imputed floors 
applied and with the rural floor budget neutrality adjustment applied) 
for a period of 3 fiscal years. We believe this approach of assigning 
the wage index of the FY 2015 urban labor market area that contains the 
urban county in their FY 2014 CBSA to which they are closest (with the 
rural and imputed floors applied and with the rural floor budget 
neutrality adjustment applied) would most closely approximate the 
hospitals' FY 2014 actual payment wage index, thereby minimizing the 
negative effects of the proposed change in the OMB delineations. For 
example, George County, MS and Jackson County, MS, together, in FY 
2014, comprise the urban CBSA 37700 (Pascagoula, MS). Under the new OMB 
delineations, George County would be considered rural and Jackson 
County, MS would become part of the urban labor market area of 
Gulfport-Biloxi-Pascagoula, MS (CBSA 25060). In this instance, we 
proposed that hospitals in George County, MS would be assigned the FY 
2015 wage index for CBSA 25060 (Gulfport-Biloxi-Pascagoula, MS), with 
the rural and imputed floors applied and with the rural floor budget 
neutrality adjustment applied.
    Furthermore, we proposed that any hospital that is currently 
located in an urban county that would become rural for FY 2015 under 
the new OMB delineations, but also has a reclassification or 
redesignation in effect for FY 2015 (from a pre-existing 
reclassification or redesignation granted prior to FY 2015), would not 
be eligible for the 3-year transition wage index. This is because if 
the hospital is reclassified or redesignated in some manner, it would 
instead receive a wage index that reflects its own choice to obtain its 
reclassified or redesignated status. Accordingly, if a hospital is 
currently located in an urban county that would become rural for FY 
2015 under the new OMB delineations and such hospital sought and was 
granted reclassification or redesignation for FY 2015 or such hospital 
seeks and is granted any reclassification or redesignation for FY 2016 
or FY 2017, we proposed that the hospital would permanently lose its 3-
year transitional assigned wage index status, and would not be eligible 
to reinstate it. For example, if a hospital that is currently urban but 
would become rural under the new OMB delineations received a 3-year 
transition wage index in FY 2015 based on the wage index of the urban 
CBSA to which it was geographically located in FY 2014 and then by its 
own choice, reclassifies to obtain a different area wage index in FY 
2016, the hospital would not be eligible to reinstate the transition 
wage index, even if it opts to cancel its reclassification for FY 2017. 
We proposed the transition adjustment to assist hospitals if they 
experience a negative payment impact specifically due to the proposed 
adoption of the new OMB delineations in FY 2015. If a hospital chooses 
in a future fiscal year to forego this transition adjustment by 
obtaining some form of reclassification or redesignation, we do not 
believe reinstatement of this transition adjustment would be 
appropriate. The purpose of the adjustment is to assist hospitals that 
may be negatively impacted by the new OMB delineations in transitioning 
to a wage index based on these delineations. By obtaining a 
reclassification or redesignation, we believe that the hospital has 
made the determination that the transition adjustment is not necessary 
because it has other viable options for mitigating the impact of the 
transition to the new OMB delineations.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28061), with 
respect to the wage index computation, we proposed to follow our 
existing policy regarding the inclusion of a hospital's wage index data 
in the CBSA in which it is geographically located (we refer readers to 
Step 6 of the method for computing the unadjusted wage index in the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51592)). Accordingly, beginning 
with FY 2015, we proposed that the wage data of all hospitals receiving 
this type of 3-year transition adjustment would be included in the 
statewide rural area in which they are geographically located under the 
new OMB labor market area delineations. After the 3-year transition 
period, beginning in FY 2018, we proposed that these formerly urban 
hospitals discussed above would receive their statewide rural wage 
index, absent any reclassification or redesignation.
    In addition, we proposed that the hospitals receiving this 3-year 
transition because they are in counties that were urban under the 
current CBSA definitions, but would be rural under the new OMB 
delineations, would not be considered urban hospitals. Rather, they 
would maintain their status as rural hospitals for other payment 
considerations. This is because our proposal to apply a 3-year 
transitional wage index for these newly rural hospitals only applies 
for the purpose of calculating the wage index under our proposal to 
adopt the new CBSA delineations. We did not propose transitions for 
other IPPS payment policies that may be impacted by the proposed 
adoption of the new CBSA delineations. However, we will continue to 
apply the existing regulations at Sec.  412.102 with respect to 
determining DSH payments in the first year after a hospital loses urban 
status (we refer readers to section II.B.2.e.(7) of the preambles of 
the proposed rule and this final rule).
    Comment: Commenters were supportive of CMS' proposals to provide

[[Page 49959]]

a 3-year transition adjustment for hospitals that are shifting from 
urban to rural areas. Commenters appreciated CMS' attempt to mitigate 
the negative effects of the application of the new OMB labor market 
delineations. Some commenters questioned why hospitals that switch from 
urban to rural could benefit from a longer 3-year transition 
adjustment, while other hospitals that would also be negatively 
affected by the transition could only benefit from a single year of a 
blended transition adjustment. They suggested a similar 3-year 
transition adjustment for all hospital experiencing a negative impact, 
including hospitals that are moving from urban to urban, or are not 
moving at all, but are being impacted by other hospitals moving in or 
out of the labor market area.
    Response: We appreciate the commenters' support for our proposals. 
We address comments pertaining to the difference between the 3-year 
urban to rural transition adjustment and the 1-year 50/50 blended wage 
index transition adjustment, as well as the requested 3-year transition 
period for all hospitals experiencing a negative impact in section 
III.B.2.e.(4) of the preamble of this final rule.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification. We will provide 
hospitals that are changing from an urban to a rural labor market area 
a 3-year wage index adjustment. Specifically, for hospitals that are 
currently located in an urban county that became rural under the new 
OMB delineations, and have no form of wage index reclassification or 
redesignation in place for FY 2015 (that is, MGCRB reclassifications 
under section 1886(d)(10) of the Act, redesignations under section 
1886(d)(8)(B) of the Act, or rural reclassifications under section 
1886(d)(8)(E) of the Act), we will assign them the urban wage index 
value of the CBSA in which they are physically located for FY 2014 for 
a period of 3 fiscal years (with the rural and imputed floors applied 
and with the rural floor budget neutrality adjustment applied to the 
area wage index). If the hospital cannot be assigned the wage index 
value of the CBSA to which it is geographically located in FY 2014 
because that CBSA is split apart and no longer exists, and some or all 
of its constituent counties are added to another urban labor market 
area under the new OMB delineations, hospitals located in such counties 
that became rural under the new OMB delineations will be assigned the 
wage index of the FY 2015 urban labor market area that contains the 
urban county in their FY 2014 CBSA to which they are closest (with the 
rural and imputed floors applied and with the rural floor budget 
neutrality adjustment applied) for a period of 3 fiscal years. Any 
hospital that is currently located in an urban county that would become 
rural for FY 2015 under the new OMB delineations, but also has a 
reclassification or redesignation in effect for FY 2015 (from a 
preexisting reclassification or redesignation granted prior to FY 
2015), will not be eligible for the 3-year transition wage index. 
Accordingly, if a hospital is currently located in an urban county that 
would become rural for FY 2015 under the new OMB delineations and such 
hospital sought and was granted reclassification or redesignation for 
FY 2015 or such hospital seeks and is granted any reclassification or 
redesignation for FY 2016 or FY 2017, the hospital will permanently 
lose its 3-year transitional assigned wage index status, and will not 
be eligible to reinstate it.
    With respect to the wage index computation, we will follow our 
existing policy regarding the inclusion of a hospital's wage index data 
in the CBSA in which it is geographically located (we refer readers to 
Step 6 of the method for computing the unadjusted wage index in the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51592)). Beginning with FY 2015, 
the wage data of all hospitals receiving this type of 3-year transition 
adjustment will be included in the statewide rural area in which they 
are geographically located under the new OMB delineations. After the 3-
year transition period, beginning in FY 2018, these formerly urban 
hospitals discussed above will receive their statewide rural wage 
index, absent any reclassification or redesignation. In addition, the 
hospitals receiving this 3-year transition because they are in counties 
that are urban under the current CBSA definitions, but become rural 
under the new OMB delineations, will not be considered urban hospitals. 
Rather, they will maintain their status as rural hospitals for other 
payment considerations.
(3) Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B) 
of the Act Where the Urban Area Became Rural Under the New OMB 
Delineations
    As discussed in section II.H.3. of the preamble of the FY 2015 
IPPS/LTCH PPS proposed rule (79 FR 28061 through 28062) and this final 
rule, there are some hospitals that are currently geographically 
located in rural areas but are deemed to be urban under section 
1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals 
currently redesignated under section 1886(d)(8)(B) of the Act would no 
longer be eligible for deemed urban status under the new OMB 
delineations, as discussed in detail in section III.H.3. of the 
preamble of this final rule. Similar to the policy implemented in the 
FY 2005 IPPS final rule (69 FR 49059), and consistent with the policy 
we proposed for other hospitals in counties that were urban and would 
become rural under the new OMB delineations, we proposed to apply the 
3-year transition to these hospitals currently redesignated to urban 
areas under section 1886(d)(8)(B) of the Act that would no longer be 
deemed urban under the new OMB delineations and would revert to being 
rural. That is, for FYs 2015, 2016, and 2017, assuming no other form of 
wage index reclassification or redesignation is granted, we proposed to 
assign these hospitals the FY 2015 area wage index value of hospitals 
reclassified to the urban CBSA (that is, the attaching wage index) to 
which they were redesignated in FY 2014 (with the rural and imputed 
floors applied and with the rural floor budget neutrality adjustment 
applied). If the hospital cannot be assigned the reclassified wage 
index value of the CBSA to which it was redesignated in FY 2014 because 
that CBSA would split apart and no longer exist, and some or all of its 
constituent counties would be added to another urban labor market area 
under the new OMB delineations, we proposed that such hospitals would 
be assigned the wage index of the hospitals reclassified to the FY 2015 
urban labor market area that contains the urban county in their FY 2014 
redesignated CBSA to which they are closest for a period of 3 fiscal 
years. We proposed to assign these hospitals the area wage index of 
hospitals reclassified to a CBSA because hospitals deemed urban under 
section 1886(d)(8)(B) of the Act are treated as reclassified under 
current policy, under which such hospitals receive an area wage index 
that includes wage data of all hospitals reclassified to the area.
    We did not receive any specific public comment addressing these 
proposals. In general, commenters were supportive of CMS' proposal to 
implement the new OMB labor market delineations, including the policy 
to mitigate the negative effects of the transition to a new labor 
market area. We are finalizing our proposal to provide a 3-year 
adjustment to hospitals that were deemed urban under 1886(d)(8)(B) of 
the Act under the current labor market delineations, but are considered 
rural under the new delineations. We will

[[Page 49960]]

apply the 3-year transition to these hospitals currently redesignated 
to urban areas under section 1886(d)(8)(B) of the Act that are no 
longer be deemed urban under the new OMB delineations and will revert 
to being rural. That is, for FYs 2015, 2016, and 2017, assuming no 
other form of wage index reclassification or redesignation is granted, 
we will assign these hospitals the FY 2015 area wage index value of 
hospitals reclassified to the urban CBSA (that is, the attaching wage 
index) to which they were redesignated in FY 2014 (with the rural and 
imputed floors applied and with the rural floor budget neutrality 
adjustment applied). If the hospital cannot be assigned the 
reclassified wage index value of the CBSA to which it was redesignated 
in FY 2014 because that CBSA was split apart and no longer exists, and 
some or all of its constituent counties were added to another urban 
labor market area under the new OMB delineations, such hospitals will 
be assigned the wage index of the hospitals reclassified to the FY 2015 
urban labor market area that contains the urban county in their FY 2014 
redesignated CBSA to which they are closest for a period of 3 fiscal 
years. We will assign these hospitals the area wage index of hospitals 
reclassified to a CBSA because hospitals deemed urban under section 
1886(d)(8)(B) of the Act are treated as reclassified under current 
policy, under which such hospitals receive an area wage index that 
includes wage data of all hospitals reclassified to the area. Beginning 
in FY 2015, affected hospitals will be assigned the reclassified wage 
index of an urban area (as described above) for a period of up to 3 
years. This wage index assignment will be forfeited if the hospital 
obtains any form of wage index reclassification or redesignation.
(4) Transition for Hospitals That Will Experience a Decrease in Wage 
Index Under the New OMB Delineations
    While we believe that instituting the latest OMB labor market area 
delineations would create a more accurate wage index system, we also 
recognize that implementing the new OMB delineations may cause some 
short-term instability in hospital payments. Therefore, in addition to 
the 3-year transition adjustment for hospitals being transitioned from 
urban to rural status as discussed above, in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28062), we proposed a 1-year blended wage index 
for all hospitals that would experience any decrease in their actual 
payment wage index (that is, a hospital's actual wage index used for 
payment, which accounts for all applicable effects of reclassification 
and redesignation) exclusively due to the proposed implementation of 
the new OMB delineations. Similar to the policy adopted in the FY 2005 
IPPS final rule (69 FR 49033), we proposed that a post-reclassified 
wage index with the rural and imputed floor applied would be computed 
based on the hospital's FY 2014 CBSA (that is, using all of its FY 2014 
constituent county/ies), and another post-reclassified wage index with 
the rural and imputed floor applied would be computed based on the 
hospital's new FY 2015 CBSA (that is, the FY 2015 constituent county/
ies). We proposed to compare these two wage indexes. If the proposed FY 
2015 wage index with FY 2015 CBSAs would be lower than the proposed FY 
2015 wage index with FY 2014 CBSAs, we proposed that a blended wage 
index would be computed, consisting of 50 percent of each of the two 
wage indexes added together. We proposed that this blended wage index 
would be the hospital's wage index for FY 2015. We stated our belief 
that a 1-year, 50/50 blend would mitigate the short-term instability 
and negative payment impacts due to the proposed implementation of the 
new OMB delineations, providing hospitals with a transition period 
during which they may adjust to their new geographic CBSA or may assess 
any reclassification options that would be available to them starting 
in FY 2016. We proposed a longer 3-year transition adjustment for 
hospitals losing urban status because there are significantly fewer 
affected urban-to-rural hospitals, and we believe the negative impacts 
to a hospital shifting from urban to rural status would typically be 
greater than other types of transitions. We believe that a transition 
period longer than 1 year to address other impacts of the proposed 
adoption of new OMB delineations would reduce the accuracy of the 
overall labor market area wage index system because far more hospitals 
would be affected.
    In addition, for FY 2015, for hospitals that would receive the 
proposed 3-year transition, it is possible that receiving the FY 2015 
wage index (with the rural and imputed floors applied and with the 
rural floor budget neutrality adjustment applied) of the CBSA where the 
hospital is geographically located for FY 2014 might still be less than 
the FY 2015 wage index that the hospital would have received in the 
absence of the adoption of the new OMB delineations (particularly in 
States where the rural floor is historically very high). Therefore, 
such a hospital may additionally benefit from application of the 50/50 
blended wage indexes. Accordingly, we proposed to include the 
assignment of the 3-year transitional wage index in our calculation of 
the FY 2015 portion of the 50/50 blended wage index for that hospital. 
After FY 2015, such a hospital may revert to the second year of the 3-
year transition. For example, if Hospital X (formerly part of CBSA 
12345, now rural) is assigned CBSA 12345's FY 2015 wage index value of 
1.0000 as part of the 3-year transition, but that FY 2015 wage index 
value would have been 1.1000 under the previous OMB delineations, that 
hospital would receive a 50/50 blended wage index of 1.0500 for FY 
2015. In FY 2016 and FY 2017, Hospital X would still be eligible to 
receive the remaining 2 years of the 3-year transition wage index of 
CBSA 12345 (that is, in FY 2016, Hospital X would receive the FY 2016 
wage index of CBSA 12345 (with the rural and imputed floors applied and 
with the rural floor budget neutrality adjustment applied)), and in FY 
2017, Hospital X would receive the FY 2017 wage index of CBSA 12345 
(with the rural and imputed floors applied and with the rural floor 
budget neutrality adjustment applied).
    Comment: Commenters were generally supportive of CMS' efforts to 
mitigate the negative impacts from the transition to the new OMB 
delineations. A number of commenters requested that CMS expand the 1-
year 50/50 blended wage index adjustment for a longer period of time. 
One commenter suggested the adjustment be phased in over multiple 
years, with a first year adjustment equal to the hospital's wage index 
under the current CBSA definitions. Several of these commenters stated 
that because hospitals cannot obtain an MGCRB reclassification under 
the new OMB delineations until FY 2016, the adjustment for FY 2015 
should negate any negative impacts from the transition to the new OMB 
delineations. These commenters explained that the MGCRB timetable would 
not allow them to benefit from newly available reclassification 
opportunities until at least 1 year following the implementation of new 
OMB delineations. Other commenters questioned why hospitals that switch 
from urban to rural could benefit from a longer 3-year transition 
adjustment, while other hospitals that also would be negatively 
affected by the transition could only benefit from a single year of a 
blended transition adjustment, and requested a 3-year transition period 
for all hospitals experiencing a negative impact. They suggested a 
similar 3-year

[[Page 49961]]

transition adjustment for affected hospitals experiencing a negative 
impact, including the hospitals that are moving from urban to urban, or 
are not moving at all, but are being impacted by other hospitals moving 
in or out of the labor market area.
    Response: We appreciate the commenters' support. We explored 
multiple alternatives to the proposed 1-year 50/50 blended wage index 
adjustment. While we acknowledge that some providers will see negative 
impacts based upon the adoption of the new OMB delineations, we also 
point out that some providers will experience increases in their wage 
index values from the new OMB delineations. It is CMS' longstanding 
policy to provide temporary adjustments to mitigate negative impacts 
from the adoption of new policies or procedures. However, these 
adjustments must be made in a budget-neutral manner, and all wage index 
values would be reduced to provide for any such transition benefit.
    We continue to believe that, in general, rural labor markets tend 
to have lower area wage index values than nearby urban areas. We 
proposed a longer 3-year transition adjustment for hospitals losing 
urban status because there are significantly fewer affected urban-to-
rural hospitals, and we believe the negative impacts on a hospital 
shifting from urban to rural status would typically be greater than 
other types of transitions. We believe that a transition period longer 
than 1 year to address other impacts of the proposed adoption of new 
OMB delineations would reduce the accuracy of the overall labor market 
area wage index system because far more hospitals would be affected. We 
identified nine hospitals that could be negatively affected by their 
transition from urban to rural status under the new OMB delineations. 
Based on our experience regarding the impact of the policy established 
in FY 2005, we believe it is necessary to provide up to a 3-year 
transition adjustment for these hospitals to prevent the potential for 
drastic reductions in wage index values. The relatively small number of 
affected providers causes little concern for potential budget 
neutrality adjustment distortions in overall wage index values. 
However, significantly more providers will be negatively affected by 
other impacts from adopting the new labor market area delineations. 
Moving away from a 1-year 50/50 blend to an adjustment value that more 
closely approximates the hospital's previous labor market assignment, 
or providing for a longer transition period, would result in a 
significantly larger national budget neutrality adjustment. We believe 
the implementation of the new labor market area delineations will 
create more accurate representations of a hospital's labor market 
areas, and we do not believe it is appropriate to expand or extend the 
50/50 blended wage index adjustment further than what was proposed, 
because doing so would only further delay what we believe are the more 
refined and accurate labor market areas, based on the recent 2010 
Census. Because the wage index is a relative measure of the value of 
labor in prescribed labor market areas, we believe it is important to 
implement the new delineations with as minimal a transition as is 
reasonable.
    Hospitals currently must wait more than a year for an MGCRB 
reclassification application to become effective. We do not believe the 
implementation of new OMB delineations requires any modification to 
this policy. We believe the 1-year 50/50 blended wage index adjustment 
provides an adequate safeguard against significant hospital payment 
reductions, and provides hospitals time to assess their 
reclassification options for future fiscal years.
    Comment: One group of commenters suggested CMS made an error in 
calculating the Connecticut rural wage index value under the old FY 
2014 OMB definitions. Commenters claimed that CMS incorrectly assigned 
a hospital as being reclassified under section 1886(d)(8)(B) of the Act 
(that is, a ``Lugar'' hospital) when calculating the wage index under 
the old delineations. This hospital is located in a county that became 
urban under the new OMB delineations. Commenters claimed that the 
hospital opted to waive its ``Lugar'' status effective for FYs 2013, 
2014, and FY 2015 in order to receive its outmigration adjustment. 
However, when CMS calculated the FY 2014 rural wage index for the 
purpose of applying the proposed transition blend, CMS calculated the 
rural wage index with this hospital being reclassified. By including 
this hospital as reclassified to an urban area, the commenters claimed 
that the wage index based on the ``old'' labor market area definitions, 
and therefore, the proposed FY 2015 payment wage index was 
significantly lower than it would be if this provider was properly 
identified as rural under the old definitions.
    Response: In prior fiscal years, the Connecticut rural wage index 
was set by a single hospital. While there were multiple hospitals 
located in rural areas in the State, all but one obtained or was 
granted some form of reclassification to another area. The wage data of 
rural hospitals that reclassify elsewhere may only be included in their 
State's rural wage index if doing so would increase the wage index 
value (section 1886(d)(8)(C)(ii) of the Act). Because including the 
reclassified rural Connecticut hospitals would have lowered the State's 
rural area wage index value, the wage index was instead based on that 
single hospital's data. That hospital was designated urban under 
section 1886(d)(8)(B) of the Act but waived this status to receive an 
out-migration adjustment. As discussed in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51599 through 51600), a hospital may submit a request 
to waive its ``Lugar'' status for a period of 3 years. By doing so, we 
would no longer consider the hospital to be reclassified and would 
always use that hospital's data in the calculation the State's rural 
wage index. (We note that while we agree that the hospital waived its 
reclassification status for FY 2014 by accepting the out-migration 
adjustment, we disagree that the hospital in question waived its 
reclassified status for FY 2015. According to our records, the hospital 
sent a letter to CMS dated July 15, 2011, requesting to accept the out-
migration adjustment and waive its Lugar redesignation for FYs 2012, 
2013, and 2014.) When calculating the wage index based on the ``old'' 
labor market area definitions, CMS considered this hospital as being 
reclassified under section 1886(d)(8)(B) of the Act. Because all the 
rural Connecticut hospitals were now considered reclassified, the wage 
index was based upon their combined data because the baseline rural 
wage index did not include any hospitals. The result of including all 
reclassified hospitals was a rural wage index value that was 
significantly lower than in previous years. Considering that several 
hospitals in Connecticut benefited from the State's rural floor, this 
reduction in the rural wage index affected multiple hospitals in the 
State.
    After further consideration of the commenters' concerns, we agree 
with the commenters that this hospital should be treated as rural for 
the portion of the 1-year blended wage index under the FY 2014 
delineations because this hospital had waived it Lugar status by 
accepting the out-migration adjustment in FY 2014. Therefore, we are 
revising this hospital's wage index and the wage index of the hospitals 
affected by this change for FY 2015, as reflected in Tables 2-2, 4A-2 
and 4B-2, 4C-2, and 4D-2.
    After consideration of the public comments we received, we are 
finalizing the transition policy as proposed. We will apply a 1-year

[[Page 49962]]

blended wage index for all hospitals that would experience any decrease 
in their actual payment wage index (that is, a hospital's actual wage 
index used for payment, which accounts for all applicable effects of 
reclassification and redesignation) exclusively due to the proposed 
implementation of the new OMB delineations. In FY 2015, a post-
reclassified wage index with the rural and imputed floor applied will 
be computed based on the hospital's FY 2014 CBSA (that is, using all of 
its FY 2014 constituent county/ies), and another post-reclassified wage 
index with the rural and imputed floor applied will be computed based 
on the hospital's new FY 2015 CBSA (that is, the FY 2015 constituent 
county/ies). We will compare these two wage indexes. If the FY 2015 
wage index with FY 2015 CBSAs is lower than the FY 2015 wage index with 
FY 2014 CBSAs, a blended wage index will be computed, consisting of 50 
percent of each of the two wage indexes added together. This blended 
wage index will be the hospital's wage index for FY 2015.
    For FY 2015, for hospitals that would receive the proposed 3-year 
transition, it is possible that receiving the FY 2015 wage index (with 
the rural and imputed floors applied and with the rural floor budget 
neutrality adjustment applied) of the CBSA where the hospital is 
geographically located for FY 2014 might still be less than the FY 2015 
wage index that the hospital would have received in the absence of the 
adoption of the new OMB delineations (particularly in States where the 
rural floor is historically very high). In this situation, we will 
include the assignment of the 3-year transitional wage index in our 
calculation of the FY 2015 portion of the 50/50 blended wage index for 
that hospital. After FY 2015, such a hospital may revert to the second 
year of the 3-year transition.
(5) Impact of Adoption of New OMB Labor Market Area Delineations
    As we did for the proposed rule (79 FR 28062 through 28063), for 
this final rule, to illustrate how the adoption of the new OMB labor 
market area delineations will impact hospitals' FY 2015 wage indexes, 
we compared the final FY 2015 occupational mix adjusted post-
reclassified wage indexes with rural floor budget neutrality applied 
under the FY 2014 CBSAs and under the FY 2015 CBSAs using the new OMB 
delineations. (This analysis does not include the effects of the out-
migration adjustment, the frontier floor, the 3-year hold harmless 
transition wage indexes, or the 1-year transition blended wage 
indexes). As a result of applying the new OMB delineations to the wage 
data, the wage index values for 2,409 urban hospitals (85.6 percent) 
and 412 (65.2 percent) rural hospitals will increase. The wage index 
values of 2,372 (84.3 percent) urban hospitals will increase by less 
than 5 percent, and the wage index values of 14 (0.5 percent) urban 
hospitals will increase by at least 5 percent but less than 10 percent. 
The wage index values of 23 (0.8 percent) urban hospitals will increase 
by greater than or equal to 10 percent. The wage index values of 383 
(60.6 percent) rural hospitals will increase by less than 5 percent, 18 
rural hospitals (2.8 percent) will increase by at least 5 percent but 
less than 10 percent, and 11 rural hospitals (1.7 percent) will 
increase by greater than or equal to 10 percent. However, the wage 
index values for 397 urban hospitals (14.1 percent) and 220 (34.8 
percent) rural hospitals will decrease. The wage index values of 341 
(12.1 percent) urban hospitals will decrease by less than 5 percent, 50 
urban hospitals (1.8 percent) will decrease by at least 5 percent but 
less than 10 percent, and 6 urban hospitals (0.2 percent) will decrease 
by greater than or equal to 10 percent. The wage index values of 191 
(30.2 percent) rural hospitals will decrease by less than 5 percent, 28 
rural hospitals (4.4 percent) will decrease by 5 percent and less than 
10 percent, and 1 rural hospital (0.2 percent) will decrease by greater 
than or equal to 10 percent. The wage index values of 8 (0.3 percent) 
urban hospitals and zero rural hospitals will remain unchanged by the 
adoption of the new OMB delineations. The largest positive impacts are 
for 8 hospitals in 5 States (Texas, Michigan, Minnesota, Louisiana, and 
Alabama) that will be moving from a rural to an urban area under the 
new OMB delineations (ranging from a 17.23 percent increase in Texas to 
a 24.02 percent increase in wage index in Alabama), and for 14 
hospitals that will be moving from one urban CBSA (FY 2014 CBSA 20764, 
Edison-New Brunswick, NJ) to new urban CBSA 35614 (New York-Jersey 
City-White Plains, NY-NJ) under the new OMB delineations, representing 
a 15.13 percent increase in wage index. The largest negative impacts 
will be for 5 hospitals in 4 States (New York, Alabama, Idaho, and 
North Carolina) that will be moving from an urban to a rural area under 
the new OMB delineations (ranging from a 12.18 percent decrease in 
North Carolina to a 27.06 percent decrease in wage index in New York). 
One hospital in Delaware is moving from a rural to an urban area under 
the new OMB delineations and will experience an 11.38 percent decrease 
in wage index. Another hospital in Texas is moving from one urban area 
to another urban area under the new OMB delineations and will 
experience a 10.19 percent decrease in wage index. These results 
illustrate that hospitals that move from rural CBSAs to urban CBSAs 
under the new OMB delineations generally will benefit significantly, 
while hospitals that move from urban to rural CBSAs generally will have 
negative impacts. For all hospitals combined, the wage index values of 
2,821 hospitals (81.9 percent) overall will increase, and 617 hospitals 
(17.9 percent) overall will decrease, indicating that most hospitals 
will be positively affected by the adoption of the new OMB 
delineations. Furthermore, the magnitude of the changes will be 
relatively small overall, with only 151 hospitals (4.4 percent) 
experiencing either an increase or decrease of at least 5 percent.
    The following table shows the impact of the adoption of the new OMB 
delineations on hospitals' FY 2015 wage indexes, comparing the FY 2015 
occupational mix adjusted post-reclassified wage indexes with rural 
floor budget neutrality applied under the FY 2014 CBSAs and the FY 2015 
CBSAs using the new OMB delineations. (This analysis does not include 
the effects of the out-migration adjustment, the frontier floor, the 3-
year hold harmless transition wage indexes, or the 1-year transition 
blended wage indexes.)

----------------------------------------------------------------------------------------------------------------
                                                            Number of  post-  Number of  post-
                                                              reclassified      reclassified
           Percent change in FY 2015 wage index              rural hospitals   urban hospitals   Total number of
                                                              based on  FY      based on  FY        hospitals
                                                                2014 CBSA         2014 CBSA
----------------------------------------------------------------------------------------------------------------
Decrease greater than or equal to 10.0....................                 1                 6                 7
Decrease greater than or equal to 5.0 but less than 10.0..                28                50                78
Decrease greater than or equal to 2.0 but less than 5.0...                33                88               121

[[Page 49963]]

 
Decrease greater than 0.0 but less than 2.0...............               158               253               411
No change.................................................                 0                 8                 8
Increase greater than 0.0 but less than 2.0...............               376             2,331             2,707
Increase greater than or equal to 2.0 but less than 5.0...                 7                41                48
Increase greater than or equal to 5.0 but less than 10.0..                18                14                32
Increase greater than or equal to 10.0....................                11                23                34
                                                           -----------------------------------------------------
    Total.................................................               632             2,814             3,446
----------------------------------------------------------------------------------------------------------------

    We did not receive any public comments on the analysis in the 
proposed rule showing the effects of adopting the new CBSA 
delineations.
(6) Budget Neutrality
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28063), for FY 
2015, we proposed to apply both the 3-year transition and 50/50 blended 
wage index adjustments in a budget neutral manner. We proposed to make 
an adjustment to the standardized amount to ensure that the total 
payments, including the effect of the transition provisions, would 
equal what payments would have been if we would not be providing for 
any transitional wage indexes under the new OMB delineations.
    We did not receive any public comments specific to our proposal to 
implement the 3-year transition and the 50/50 blended wage index 
adjustments in a budget neutral manner. We are finalizing the policy as 
proposed. For a complete discussion on this budget neutrality 
adjustment for FY 2015, we refer readers to section II.A.4.b. of the 
Addendum to this final rule.
    We note that, consistent with past practice (69 FR 49034), we are 
not adopting the new OMB delineations themselves in a budget neutral 
manner. We do not believe that the revision to the labor market areas 
in and of itself constitutes an ``adjustment or update'' to the 
adjustment for area wage differences, as provided under section 
1886(d)(3)(E) of the Act.
(7) Determining Disproportionate Share Hospital (DSH) Payments Under 
the New OMB Delineations
    As noted in the FY 2005 IPPS final rule (69 FR 49033), the 
provisions of Sec.  412.102 of the regulations continue to apply with 
respect to determining DSH payments for hospitals affected by our 
adoption of the new OMB delineations. Specifically, in the first year 
after a hospital loses urban status, the hospital would receive an 
additional payment that equals two-thirds of the difference between the 
urban DSH payments applicable to the hospital before its redesignation 
from urban to rural and the rural DSH payments applicable to the 
hospital subsequent to its redesignation from urban to rural. In the 
second year after a hospital loses urban status, the hospital would 
receive an additional payment that equals one-third of the difference 
between the urban DSH payments applicable to the hospital before its 
redesignation from urban to rural and the rural DSH payments applicable 
to the hospital subsequent to its redesignation from urban to rural.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28063 through 
28064), we proposed to make changes to the regulations to delete Sec.  
412.64(b)(1)(ii)(D). In this provision, we currently define a 
``hospital reclassified as rural'' as a hospital located in a county 
that, in FY 2004, was urban but was redesignated as rural after 
September 30, 2004, as a result of the most recent census data and 
implementation of the new MSA definitions announced by OMB on June 6, 
2003. Because the term ``hospital reclassified as rural'' is not used 
in Sec.  412.64, but is used in Sec.  412.102, we proposed to delete 
Sec.  412.64(b)(1)(ii)(D) and revise the language at Sec.  412.102 to 
address the circumstances set forth in Sec.  412.64(b)(1)(ii)(D). The 
regulation at Sec.  412.102, which addresses special treatment of 
hospitals located in areas that are changing from urban to rural as a 
result of a geographic redesignation, is the only location that 
currently references a ``hospital reclassified as rural'', as defined 
at Sec.  412.64(b)(1)(ii)(D). To avoid confusion with urban hospitals 
that choose to reclassify as rural under Sec.  412.103, we proposed to 
revise the regulation text at Sec.  412.102 so that it no longer refers 
to the defined term ``hospital reclassified as rural,'' and instead 
specifically states the circumstances in which Sec.  412.102 applies. 
In addition, we proposed to modify the regulation text so that it would 
apply to all transitions from urban to rural status that occur as a 
result of any future adoption of new or revised OMB standards for 
delineating statistical areas adopted by CMS. Specifically, we proposed 
to revise the regulations at Sec.  412.102 to state that an urban 
hospital that was part of an MSA, but was redesignated as rural as a 
result of the most recent OMB standards for delineating statistical 
areas adopted by CMS, may receive an adjustment to its rural Federal 
payment amount for operating costs for 2 successive fiscal years as 
provided in paragraphs (a) and (b) of the section.
    We did not receive any public comments regarding either of these 
proposals. We are finalizing the changes to Sec.  412.102 and Sec.  
412.64(b)(1)(ii)(D) as proposed, effective for FY 2015.

C. Worksheet S-3 Wage Data for the FY 2015 Wage Index

    The FY 2015 wage index values are based on the data collected from 
the Medicare cost reports submitted by hospitals for cost reporting 
periods beginning in FY 2011 (the FY 2014 wage indexes were based on 
data from cost reporting periods beginning during FY 2010).
1. Included Categories of Costs
    The FY 2015 wage index includes the following categories of data 
associated with costs paid under the IPPS (as well as outpatient 
costs):
     Salaries and hours from short-term, acute care hospitals 
(including paid lunch hours and hours associated with military leave 
and jury duty);
     Home office costs and hours;
     Certain contract labor costs and hours (which includes 
direct patient care, certain top management, pharmacy, laboratory, and 
nonteaching physician Part A services, and certain contract indirect 
patient care services (as discussed in the FY 2008 final rule with 
comment period (72 FR 47315 through 47318)); and
     Wage-related costs, including pension costs (based on 
policies adopted in the FY 2012 IPPS/LTCH PPS

[[Page 49964]]

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 2014, the wage 
index for FY 2015 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 FY 2015 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.

D. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 2015 wage index were obtained from 
Worksheet S-3, Parts II and III of the Medicare cost report for cost 
reporting periods beginning on or after October 1, 2010, and before 
October 1, 2011. For wage index purposes, we refer to cost reports 
during this period as the ``FY 2011 cost report,'' the ``FY 2011 wage 
data,'' or the ``FY 2011 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 for Form CMS-2552-10. The data file used 
to construct the FY 2015 wage index includes FY 2011 data submitted to 
us as of June 25, 2014. 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 2015 wage index, we stated 
that we identified and excluded 50 providers with aberrant data that 
should not be included in the wage index, although we stated that if 
data elements are corrected, we intended to include data from those 
providers in the final FY 2015 wage index (79 FR 28064). We have since 
determined that we had only removed 49, not 50, providers with aberrant 
data from the proposed wage index. We have received corrected data from 
19 providers and data from an additional provider, and therefore, we 
are including the data for these 20 providers in the final FY 2015 wage 
index. However, since issuance of the proposed rule, we have determined 
that the data from 4 other providers (not included in the original 49 
providers) were aberrant and should not be included in the final FY 
2015 wage index. Therefore, in total, we are excluding the data of 34 
providers from the final FY 2015 wage index.
    In constructing the FY 2015 wage index, we included the wage data 
for facilities that were IPPS hospitals in FY 2011, inclusive of those 
facilities that have since terminated their participation in the 
program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believe that including the wage data for 
these hospitals is, in general, appropriate to reflect the economic 
conditions in the various labor market areas during the relevant past 
period and to ensure that the current wage index represents the labor 
market area's current wages as compared to the national average of 
wages. However, we excluded the wage data for CAHs as discussed in the 
FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed 
rule, we removed 6 hospitals that converted to CAH status on or after 
February 14, 2013, the cut-off date for CAH exclusion from the FY 2014 
wage index, and through and including February 13, 2014, the cut-off 
date for CAH exclusion from the FY 2015 wage index. After removing 
hospitals with aberrant data and hospitals that converted to CAH 
status, the final FY 2015 wage index is calculated based on 3,416 
hospitals.
    For the final FY 2015 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 2014 wage index (78 FR 50587). Table 2 
containing the final FY 2015 wage index associated with this final rule 
(available via the Internet on the CMS Web site) includes separate wage 
data for the campuses of 6 multicampus hospitals.
    Comment: Commenters representing hospitals located in CBSA 46140 
disagreed with the removal of the wage data of one hospital in that 
CBSA from the FY 2015 wage index. They argued that CMS's removal of the 
hospital's data is arbitrary and capricious, based only on the fact 
that the hospital's average hourly wage is higher than those of the 
other hospitals in the CBSA. The commenters noted that the hospital's 
data were included in the wage index in previous years, and CMS has 
provided ``no rational explanation for its inconsistent treatment 
now.'' The commenters further stated that ``if CMS were to adopt a 
policy of excluding the hospital with the highest wage data from each 
CBSA, fairness would require that CMS also exclude the hospital with 
the lowest wage data from each CBSA.'' The commenters stated that if 
CMS is employing a ``bright-line cut off,'' CMS must publish such 
``bright-line tests.''
    Response: 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 area of the hospital compared to 
the national average hospital wage level. We also refer readers to 
section 1886(d)(9)(C)(iv)(I) of the Act. 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. Hospitals are aware that both the MACs 
(via instructions issued by CMS) and CMS evaluate the accuracy and 
reasonableness of hospitals' wage index data. Each year, in every IPPS 
proposed rule, we discuss the process wherein CMS asks the MACs to 
``revise or verify data elements that result in specific edit 
failures'' (most recently, in the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28064)). We state that, in constructing the wage index, we 
include the wage data for facilities that were IPPS hospitals in the 
relevant cost reporting year (that is, FY 2011 for the FY 2015 wage 
index), and that we include ``those facilities that have since 
terminated their participation in the program as hospitals, as long as 
those data did not fail any of our edits for reasonableness. We believe 
that including the wage data for these hospitals is, in general, 
appropriate to reflect the economic conditions in the various labor 
market

[[Page 49965]]

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'' (emphasis added; 79 FR 28064). CMS 
has historically exercised its discretion in developing a wage index 
that reflects a relative measure of the value of the labor provided to 
a typical hospital in a particular labor market area. We applied these 
same procedures, as discussed below, to the hospital at issue, and we 
disagree with the commenters that we have arbitrarily and capriciously 
removed the wage data of the cited hospital from the FY 2015 wage 
index.
    In the instance of the particular hospital to which the commenters 
refer, while the hospital's wage data was properly documented, it did 
not merely have the highest average hourly wage in the CBSA; its 
average hourly wage was extremely and unusually high, significantly 
higher than the next highest average hourly wage in that CBSA and in 
the surrounding areas. We do not believe that the average hourly wage 
of this particular hospital accurately reflects the economic conditions 
in its labor market area during the FY 2011 cost reporting period, and, 
therefore, its inclusion in the wage index would not ensure that the FY 
2015 wage index represents the labor market area's current wages as 
compared to the national average of wages. Accordingly, we have 
exercised our discretion to remove this hospital's wage data from the 
February 20, 2014 PUF, and from the May 2, 2014 PUF as well. Similarly, 
we have exercised our discretion by removing from the wage index (in FY 
2015 and in prior years) the data of hospitals with average hourly 
wages that are unusually and uncharacteristically low for their 
respective CBSAs because we believe that the wage data of those 
hospitals also do not accurately reflect the economic conditions in 
their labor market area. We included the hospital's data in the wage 
index in previous years because the hospital's average hourly wage was 
lower and more reasonable relative to its labor market area in the 
prior years and, thus, we did not remove the hospital's wage data from 
the prior years' wage index.
    Questions have been raised recently regarding the reporting of 
contract housekeeping and dietary services on Worksheet S-3, Part II, 
lines 33 and 35 of the Medicare cost report. CMS finalized its proposal 
to begin collecting contract labor costs and hours for housekeeping, 
and dietary (along with management services and the overhead services 
of administrative and general) in the FY 2003 IPPS final rule (67 FR 
50022 through 50023). At that time, we stated, ``We continue to 
consider whether to expand our contract labor definition to include 
more types of contract services in the wage index. In particular, we 
have examined whether to include the costs for acquired dietary and 
housekeeping services, as many hospitals now provide these services 
through contracts. Costs for these services tend to be below the 
average wages for all hospital employees. Therefore, excluding the 
costs and hours for these services if they are provided under contract, 
while including them if the services are provided directly by the 
hospital, creates an incentive for hospitals to contract for these 
services in order to increase their average hourly wage for wage index 
purposes'' (67 FR 50022). In the FY 2003 IPPS proposed rule, we 
explained that we selected the three overhead services of 
administrative and general, housekeeping, and dietary because they are 
provided at all hospitals, either directly or through contracts, and 
together they comprise about 60 percent of a hospital's overhead hours 
(67 FR 31433). In the FY 2003 IPPS final rule, we stated that we ``will 
monitor the hospital industry for information regarding the hospitals' 
ability to provide the data. Further, we will work with hospitals and 
intermediaries [MACs] to develop acceptable methods for tracking the 
costs and hours. Finally, before including these additional costs in 
the wage index, we will provide a detailed analysis of the impact of 
including these additional costs in the wage index values in the 
Federal Register and provide for public comment. Our final decision on 
whether to include contract indirect patient care labor costs in our 
calculation of the wage index will depend on the outcome of our 
analyses and public comments'' (67 FR 50023).
    Subsequent to the issuance of the FY 2003 IPPS final rule, we 
revised Worksheet S-3, Part II of the Medicare cost report (CMS Form 
2552-96) to add four lines for the reporting of contract labor 
salaries, wages, and hours. The lines added for contract housekeeping 
and dietary services were lines 26.01 and 27.01, respectively. (Line 
9.03 for contract management and line 22.01 for contract administrative 
and general (A&G) services were also added at that time). These lines 
were effective with cost reporting periods beginning on or after 
October 1, 2003 (that is, FY 2004). Because the cost report data used 
for the wage index are on a 4-year lag, data from these new contract 
labor lines would first be available for the FY 2008 wage index.
    In the FY 2008 rulemaking process, we provided an analysis of the 
effect on the inclusion in the wage index of the wages and hours 
related to the new contract labor lines. At that time, 56 hospitals 
(1.6 percent) failed edits for contract housekeeping line 26.01; and 99 
hospitals (2.8 percent) failed edits for contract dietary line 27.01 
(72 FR 24680 and 24782). We also noted that ``many of these edit 
failures are for wage data that are not to be included in the wage 
index and will be excluded through the wage index calculation. . . . In 
addition, some of the aberrant data will be resolved by the final rule 
through the correction process'' (72 FR 24680 and 24782). The small 
percentage of hospitals that failed edits for these contract labor 
lines indicates that the vast majority of hospitals completing these 
contract labor lines were able to obtain and report reasonable 
salaries, wages, and hours associated with contract housekeeping and 
dietary services. In the FY 2008 IPPS final rule, we stated that we 
believe that ``the impact of this policy is generally very minor, and 
we do not believe the additional complexity of a transition wage index 
is warranted for an impact this small. Further, we continue to believe 
it is prudent policy to include in the wage index the costs for these 
contract indirect patient care services'' (72 FR 47316). Therefore, we 
adopted the policy to include the new contract labor lines in the wage 
index, beginning with the FY 2008 wage index.
    The questions that have recently come to our attention involve 
hospitals that consistently do not provide documentable salaries, 
wages, and hours for their contracted housekeeping and/or dietary 
services. (On the Medicare cost report (CMS Form 2552-10), contract 
housekeeping is on Worksheet S-3, Part II, line 33 and contract dietary 
is on line 35). When this situation occurs, CMS has instructed the MACs 
to use reasonable estimates, such as regional average hourly rates, as 
a substitute for actual wages and hours, and to report the estimates on 
the hospital's Worksheet S-3, Part II, line 33 or line 35, 
respectively. Our policy has been to use reasonable estimates for these 
housekeeping and dietary lines, rather than report zeroes for wages and 
hours, because, as discussed above and as stated in the FY 2003 IPPS 
final rule, ``{c{time} osts for these services tend to be below the 
average wages for all hospital employees. Therefore, excluding the 
costs and hours for these services if they

[[Page 49966]]

are provided under contract, while including them if the services are 
provided directly by the hospital, creates an incentive for hospitals 
to contract for these services in order to increase their average 
hourly wage for wage index purposes'' (57 FR 50022). We understand that 
the reason many hospitals provide for failing to report such contract 
wages and hours is that their contracts do not clearly specify this 
information, often because they use a single vendor to provide several 
different contract labor services. We believe that allowing hospitals 
to routinely use contracts that do not clearly break out the salaries, 
wages, and hours associated with these services as a reason for not 
being able to report proper salaries, wages, and hours for these cost 
report lines undermines the purpose of instituting these lines in the 
first place. Furthermore, because every hospital must provide 
housekeeping and dietary services, and because the wage index is a 
relative measure of the value of the labor provided to a hospital in a 
particular labor market area, to report zeroes for salaries, wages, and 
hours for housekeeping and dietary services is not only unrealistic (in 
that every hospital provides for these services), but also 
misrepresents the labor costs in that area and undermines our policy. 
Consequently, CMS has instructed the MACs not to zero out these line 
items when a hospital cannot document the housekeeping or dietary 
salaries, wages, and hours, but instead to use a reasonable estimation 
of these wages and hours.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28065 through 
28066) rule, we reiterated our requirement that all hospitals must 
document salaries, wages, and hours for the purpose of reporting this 
information on Worksheet S-3, Part II, lines 32, 33, 34, and/or 35 (for 
either directly employed housekeeping and dietary employees on lines 32 
and 34, and contract labor on lines 33 and 35). It is not acceptable 
for a hospital to request that the MACs zero out these line items if 
the hospital's contract does not specifically break out the actual 
wages and hours. As indicated above, and stated in the FY 2008 IPPS 
proposed rule (72 FR 24680 and 24782), a small percentage of hospitals 
failed edits associated with the contract housekeeping and dietary 
lines, showing that the vast majority of hospitals reporting data on 
these lines were able to obtain and report reasonable salaries, wages, 
and hours associated with contract housekeeping and dietary services. 
We encourage hospitals to ensure that their contracts clearly specify 
the salaries, wages, and hours related to all of their contract labor. 
Because these line items have been included in the cost report since FY 
2004, we believe that hospitals have had adequate notice and time to 
structure their contracts so that the wages and hours of contract 
employees can be determined and included in the cost reports. We expect 
hospitals to provide accurate data on their cost reports.
    We understand that there may be rare situations where a hospital 
would not have documentable salaries, wages, and hours for contract 
housekeeping and dietary services. In these situations, we believe that 
it is appropriate and necessary to use reasonable estimates for these 
numbers in order to determinate the best, most realistic, wage index 
that we can. As discussed previously, housekeeping and dietary services 
are unique in that the costs for housekeeping and dietary services tend 
to be below the average wages for all hospital employees. Thus, an 
incentive is created for hospitals to avoid reporting these contract 
labor salaries, wages, and hours on the cost report in order to 
increase their average hourly wage for wage index purposes. To deter 
hospitals from not reporting this information and to ensure that the 
wage index more accurately reflects the labor costs in an area, we 
believe that it is both necessary and appropriate for the MACs to 
estimate such salaries, wages, and hours in the rare instance where a 
hospital cannot provide such information. Therefore, in the absence of 
documentable wages and hours for contract housekeeping and dietary 
services, MACs would continue to use reasonable estimates for these 
services. Examples of reasonable estimates are regional average hourly 
rates, including an average of the wages and hours for dietary and 
housekeeping services of other hospitals in the same CBSA as the 
hospital in question. Hospitals also may conduct time studies to 
determine hours worked. If, for whatever reason, regional averages or 
time studies cannot be used, MACs may use data from the Bureau of Labor 
Statistics to obtain average wages and hours for housekeeping and 
dietary services. Commenters may also suggest alternatives for imputing 
reasonable estimates for possible consideration by CMS. In all cases, 
MACs must determine that the data used are reasonable.
    Comment: One commenter encouraged CMS to instruct the MACs to be 
consistent across their entire jurisdiction in how the MACs estimate 
wages and hours for contract dietary and housekeeping services, in the 
instances where there is a lack of documentable wages and hours for 
these services. Another commenter noted that CMS stated that commenters 
may suggest alternatives for imputing reasonable estimates for possible 
consideration by CMS. This commenter asked that CMS consider 
eliminating entirely all wages and hours associated with dietary and 
housekeeping services, both for hospital employees and contract labor, 
based on the belief that these services represent an ``immaterial'' 
3.27 percent of total Worksheet S-3, Part II, line 1 wages, and their 
removal from the wage index would remove a time-consuming burden for 
both providers and MACs. The commenter asserted that if all wages and 
hours associated with dietary and housekeeping services were eliminated 
from the wage index, the ``comparison among hospitals would remain 
meaningful and would remove any disparity among hospitals related to 
the issue.''
    Response: We agree with the first commenter that it is important 
for CMS' policies and instructions to be implemented uniformly by the 
MACs across all jurisdictions. We provide updated and uniform 
instructions to the MACs each year prior to the start of the annual 
wage index desk review process, and also communicate with the MACs 
through various media throughout each annual wage index cycle, 
including instructions on how to estimate wages and hours for contract 
dietary and housekeeping services in the absence of documentable wages 
and hours for these categories. We do not agree with the second 
commenter's request that CMS eliminate entirely all wages and hours 
associated with dietary and housekeeping services, both for hospital 
employees and contract labor. The IPPS wage index is a relative measure 
of the value of all types of labor provided to a typical hospital in a 
particular labor market area, not just the labor with high average 
hourly wages. We believe it would be inappropriate to agree to 
selectively include, or exclude, certain categories of labor from the 
wage index because doing so would result in a less accurate measure of 
labor costs and would undermine the relativity of the wage index as 
whole. We believe that hospitals have had adequate notice and time to 
structure their contracts so that the wages and hours of contract 
employees can be determined and included in the cost reports. We expect 
hospitals to provide accurate data on their cost reports, and the 
accuracy of the wages and hours of contract labor

[[Page 49967]]

will continue to be reviewed by the MACs as part of the annual desk 
review process. As we stated in the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28065 through 28066), to deter hospitals from not reporting this 
information and to ensure that the wage index more accurately reflects 
the labor costs in an area, we believe that it is both necessary and 
appropriate for MACs to estimate such salaries, wages, and hours in the 
rare instance where a hospital cannot provide such information for its 
dietary and housekeeping services under contract. We will continue to 
instruct the MACs to use reasonable estimates for these services, in 
the absence of documentable wages and hours for contract housekeeping 
and dietary services.

E. Method for Computing the FY 2015 Unadjusted Wage Index

    The method used to compute the FY 2015 wage index without an 
occupational mix adjustment follows the same methodology that we used 
to compute the FY 2012, FY 2013, and FY 2014 final wage indexes without 
an occupational mix adjustment (76 FR 51591 through 51593, 77 FR 53366 
through 53367, and 78 FR 50587 through 50588, respectively).
    As discussed in the FY 2012 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, 2010, through April 15, 2012, 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 did not propose any changes to the usage for FY 2015 (79 
FR 28066). 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
------------------------------------------------------------------------
         After                    Before             Adjustment factor
------------------------------------------------------------------------
      10/14/2010               11/15/2010                 1.02230
      11/14/2010               12/15/2010                 1.02078
      12/14/2010               01/15/2011                 1.01929
      01/14/2011               02/15/2011                 1.01782
      02/14/2011               03/15/2011                 1.01637
      03/14/2011               04/15/2011                 1.01494
      04/14/2011               05/15/2011                 1.01355
      05/14/2011               06/15/2011                 1.01219
      06/14/2011               07/15/2011                 1.01084
      07/14/2011               08/15/2011                 1.00948
      08/14/2011               09/15/2011                 1.00811
      09/14/2011               10/15/2011                 1.00674
      10/14/2011               11/15/2011                 1.00538
      11/14/2011               12/15/2011                 1.00403
      12/14/2011               01/15/2012                 1.00269
      01/14/2012               02/15/2012                 1.00134
      02/14/2012               03/15/2012                 1.00000
      03/14/2012               04/15/2012                 0.99866
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 2011, and ending December 31, 2011, is June 30, 2011. An 
adjustment factor of 1.01084 would be applied to the wages of a 
hospital with such a cost reporting period.
    Using the data as described above and in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50587 through 50588), the FY 2015 national average 
hourly wage (unadjusted for occupational mix) is $39.2971. The FY 2015 
Puerto Rico overall average hourly wage (unadjusted for occupational 
mix) is $16.9893.

F. Occupational Mix Adjustment to the FY 2015 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, in order to construct an occupational mix adjustment 
to the wage index, for application beginning October 1, 2004 (the FY 
2005 wage index). The purpose of the occupational mix adjustment is to 
control for the effect of hospitals' employment choices on the wage 
index. For example, hospitals may choose to employ different 
combinations of registered nurses, licensed practical nurses, nursing 
aides, and medical assistants for the purpose of providing nursing care 
to their patients. The varying labor costs associated with these 
choices reflect hospital management decisions rather than geographic 
differences in the costs of labor.
1. Development of Data for the FY 2015 Occupational Mix Adjustment 
Based on the 2010 Occupational Mix Survey
    As provided for under section 1886(d)(3)(E) of the Act, we collect 
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
    As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50588), 
the occupational mix adjustment to the FY 2014 wage index was based on 
data collected on the 2010 Medicare Wage Index Occupational Mix Survey 
(Form CMS-10079 (2010)). For the FY 2015 wage index, we proposed to use 
the occupational mix data collected on the 2010 survey to compute the 
occupational mix adjustment for FY 2015. We did not receive any public 
comments on this proposal; therefore, we are finalizing our policy to 
use the occupational mix data collected on the 2010 survey to compute 
the occupational mix adjustment for FY 2015. We are including data for 
3,183 hospitals that also have wage data included in the FY 2015 wage 
index.
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
    As stated earlier, section 304(c) of Public Law 106-554 amended 
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3 
years on the occupational mix of employees for each short-term, acute 
care hospital participating in the Medicare program. We used 
occupational mix data collected on the 2010 survey to compute the 
occupational mix adjustment for FY 2013, FY 2014, and the FY 2015 wage 
index associated with this final rule. Therefore, a new measurement of 
occupational mix is required for FY 2016.
    On December 7, 2012, we published in the Federal Register a notice 
soliciting comments on the proposed 2013 Medicare Wage Index 
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013 
survey, which will be applied to the FY 2016 wage index, includes the 
same data elements and definitions as the 2010 survey and provides 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). The comment period for 
the notice ended on February 5, 2013. After considering the public 
comments that we received on the December 2012 notice, we made a few 
minor editorial changes and published the 2013 survey in the Federal 
Register on February 28, 2013 (78 FR 13679). This survey was approved 
by OMB on May 14, 2013, and is available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/WAGE-INDEX-OCCUPATIONAL-MIX-SURVEY2013.pdf.
    The 2013 Occupational Mix Survey Hospital Reporting Form CMS-10079

[[Page 49968]]

for the Wage Index Beginning FY 2016 (in excel format) is available on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html?DLPage=1&DLSort=1&DLSortDir=descending. Hospitals were 
required to submit their completed 2013 surveys to their MACs by July 
1, 2014. The preliminary, unaudited 2013 survey data was posted on the 
CMS Web site afterward, on July 11, 2014. The FY 2012 Worksheet S-3 
wage data for the FY 2016 wage index review and correction process was 
posted on the CMS Web site in May 2014. Both the preliminary FY 2016 
wage data and occupational mix survey data can be found on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html?DLPage=1&DLSort=1&DLSortDir=descending.
3. Calculation of the Occupational Mix Adjustment for FY 2015
    For FY 2015, we proposed to calculate the occupational mix 
adjustment factor using the same methodology that we used for the FY 
2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77 
FR 53367 through 53368, and 78 FR 50588 through 50589, respectively). 
As a result of applying this methodology, the proposed FY 2015 
occupational mix adjusted national average hourly wage (based on the 
proposed new OMB labor market area delineations) was $39.1177. The 
proposed FY 2015 occupational mix adjusted Puerto Rico-specific average 
hourly wage (based on the proposed new OMB labor market area 
delineations) was $17.0526.
    Because the occupational mix adjustment is required by statute, 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 2015 wage 
index. For the proposed FY 2015 wage index, because we are using the 
Worksheet S-3, Parts II and III wage data of 3,400 hospitals, and we 
are using the occupational mix surveys of 3,165 hospitals for which we 
also have Worksheet S-3 wage data, that represents a ``response'' rate 
of 93.1 percent (3,165/3,400). In the proposed FY 2015 wage index 
established in the FY 2015 IPPS/LTCH PPS proposed rule, we applied 
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).
    In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR 
23943 and 75 FR 50167, respectively), we stated that, in order to gain 
a better understanding of why some hospitals are not submitting the 
occupational mix data, we will require hospitals that do not submit 
occupational mix data to provide an explanation for not complying. This 
requirement was effective beginning with the 2010 occupational mix 
survey. We instructed MACs to continue gathering this information as 
part of the FY 2014 and FY 2015 wage index desk review process. We 
stated that we would review these data for future analysis and 
consideration of potential penalties for noncompliant hospitals.
    Comment: One commenter stated that all hospitals should be 
obligated to submit the occupational mix survey because failure to 
complete the survey jeopardizes the accuracy of the wage index. The 
commenter added that a penalty should be instituted for nonsubmitters. 
The commenter also stated that pending CMS' analysis of the Commuting 
Based Wage Index and the Institute of Medicine's study on geographic 
variation in hospital wage costs, CMS should eliminate the occupational 
mix survey and the significant reporting burden it creates.
    Response: We appreciate the commenter's concern for the accuracy of 
the wage index, and we have continually exhorted all hospitals to 
complete and submit the occupational mix surveys. We did not propose a 
particular penalty for hospitals that do not submit the CY 2013 
occupational mix survey, but we are continuing to consider for future 
rulemaking various options for ensuring full compliance. Examples 
include applying a hospital's occupational mix survey data from a 
previous survey period to the current wage index of a given fiscal 
year; including the occupational mix survey as part of the cost report, 
and if not completed, the cost report would be rejected by the MAC; or 
application of a State-specific minimum or reduced occupational mix 
adjustment. Regarding the commenter's request that CMS should eliminate 
the survey due to the burden it creates, section 1886(d)(3)(E) of the 
Act requires us to measure the earnings and paid hours of employment by 
occupational category. As long as the requirement to apply an 
occupational mix adjustment to the wage index remains in place in the 
statute, there may be some amount of administrative burden involved in 
reporting that data.
    After consideration of the public comments we received, for FY 
2015, we are finalizing our proposal to calculate the occupational mix 
adjustment factor using the same methodology that we used for the FY 
2012, FY 2013, and FY 2014 wage indexes (76 FR 51582 through 51586, 77 
FR 53367 through 53368, and 78 FR 50588 through 50589, respectively). 
As a result of applying this methodology, the FY 2015 occupational mix 
adjusted national average hourly wage (based on the new OMB labor 
market area delineations) is $39.2591. The FY 2015 occupational mix 
adjusted Puerto Rico-specific average hourly wage (based on the new OMB 
labor market area delineations) is $17.0410. For the FY 2015 wage 
index, because we are using the Worksheet S-3, Parts II and III wage 
data of 3,416 hospitals, and we are using the occupational mix surveys 
of 3,183 hospitals for which we also have Worksheet S-3 wage data, that 
represents a ``response'' rate of 93.2 percent (3,183/3,416).

G. Analysis and Implementation of the Occupational Mix Adjustment and 
the FY 2015 Occupational Mix Adjusted Wage Index

1. Analysis of the Occupational Mix Adjustment and the Occupational Mix 
Adjusted Wage Index
    As discussed in section III.F. of the preamble of this final rule, 
for FY 2015, we apply the occupational mix adjustment to 100 percent of 
the FY 2015 wage index. We calculated the occupational mix adjustment 
using data from the 2010 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 2015 wage index 
results in a national average hourly wage (based on the new OMB labor 
market area delineations) of $39.2591 and a Puerto-Rico specific 
average hourly wage of $17.0410. After excluding data of hospitals that 
either submitted aberrant data that failed critical edits, or that do 
not have FY 2011 Worksheet S-3, Parts II and III, cost report data for 
use in calculating the FY 2015 wage index, we calculated the FY 2015 
wage index using the occupational mix survey data from 3,183 hospitals. 
For the FY 2015 wage index, because we are using the Worksheet S-3, 
Parts II and III wage data of 3,416 hospitals, and we are using the 
occupational mix survey data of

[[Page 49969]]

3,183 hospitals for which we also have Worksheet S-3 wage data, those 
data represent a ``response'' rate of 93.2 percent (3,183/3,416). The 
FY 2015 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.............................................    37.420970136
National LPN and Surgical Technician....................     21.78229118
National Nurse Aide, Orderly, and Attendant.............     15.31107725
National Medical Assistant..............................    17.251053917
National Nurse Category.................................    31.769556957
------------------------------------------------------------------------

    The national average hourly wage for the entire nurse category as 
computed in Step 5 of the occupational mix calculation is 
$31.769556957. 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 2010 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 43.46 
percent, and the national percentage of hospital employees in the all 
other occupations category is 56.54 percent. At the CBSA level, using 
the new OMB delineations for FY 2015, the percentage of hospital 
employees in the nurse category ranged from a low of 21.88 percent in 
one CBSA to a high of 62.04 percent in another CBSA.
    We compared the FY 2015 occupational mix adjusted wage indexes for 
each CBSA to the unadjusted wage indexes for each CBSA. We used the FY 
2015 new OMB delineations for this analysis. As a result of applying 
the occupational mix adjustment to the wage data, the wage index values 
for 219 (53.8 percent) urban areas and 29 (61.7 percent) rural areas 
increased. One hundred and nineteen (29.2 percent) urban areas will 
increase by 1 percent but less than 5 percent, and 4 (1.0 percent) 
urban areas will increase by 5 percent or more. Fourteen (29.8 percent) 
rural areas will increase by 1 percent but less than 5 percent, and no 
rural areas will increase by 5 percent or more. However, the wage index 
values for 186 (45.7 percent) urban areas and 18 (38.3 percent) rural 
areas decreased. Seventy nine (19.4 percent) urban areas will decrease 
by 1 percent but less than 5 percent, and 1 (0.2 percent) urban area 
will decrease by 5 percent or more. Seven (14.9 percent) rural areas 
will decrease by 1 percent and less than 5 percent, and no rural areas 
will decrease by 5 percent or more. The largest positive impacts will 
be 6.58 percent for an urban area and 3.36 percent for a rural area. 
The largest negative impacts will be 5.32 percent for an urban area and 
1.73 percent for a rural area. Two urban areas' wage indexes, but no 
rural area wage indexes, will remain unchanged by application of the 
occupational mix adjustment. These results indicate that a larger 
percentage of rural areas (61.7 percent) will benefit from the 
occupational mix adjustment than will urban areas (53.8 percent). 
However, approximately one-third (38.3 percent) of rural CBSAs will 
still experience a decrease in their wage indexes as a result of the 
occupational mix adjustment.
2. Application of the Rural, Imputed, and Frontier Floors
a. 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. In 
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28068), based on the 
proposed FY 2015 wage index associated with the proposed rule and based 
on the proposed implementation of the new OMB delineations discussed in 
section III.B. of the preamble of the proposed rule, we estimated that 
441 hospitals would receive an increase in their FY 2015 proposed wage 
index due to the application of the rural floor.
    Based on the final FY 2015 wage index associated with this final 
rule and available on the CMS Web site and based on the implementation 
of the new OMB delineations, 422 hospitals are receiving an increase in 
their FY 2015 wage index due to application of the rural floor.
    We received some public comments concerning the application of the 
rural floor. We respond to these public comments in Appendix A of this 
final rule.
b. Imputed Floor for FY 2015
    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 four times, 
the last of which was adopted in the FY 2014 IPPS/LTCH PPS final rule 
and is set to expire on September 30, 2014. (We refer readers to 
further discussion of the imputed floor in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50589 through 50590) and to our regulations at 42 CFR 
412.64(h)(4).) Currently, there are two all-urban States, New Jersey 
and Rhode Island, that have 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.H. of the preamble 
of the proposed rule and this final rule). However, as we explain 
below, the method as of FY 2012 for computing the imputed floor (the 
original methodology) benefitted only New Jersey, and not Rhode Island.
    In computing the imputed floor for an all-urban State under the 
original methodology, 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. Under the current OMB labor market 
area delineations that we used for the FY 2014 wage index, Rhode Island 
has only one CBSA (Providence-New Bedford-Fall River, RI-MA) and New 
Jersey has 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

[[Page 49970]]

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 on the CMS Web site) included the CBSAs receiving a 
State's rural floor wage index.) The lowest post-reclassified 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 
from the methodology in existing Sec.  412.64(h)(4).
    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 proposed rule (79 FR 28068 through 
28069), for FY 2015, we proposed to continue the extension of the 
imputed floor policy (both the original methodology and alternative 
methodology) for another year, through September 30, 2015, as we 
continue to explore potential wage index reforms. As discussed in 
section III.B. of the preamble of the proposed rule, we proposed to 
adopt the new OMB labor market area delineations beginning in FY 2015. 
Under OMB's new labor market area delineations based on Census 2010 
data, Delaware would become an all-urban State, along with New Jersey 
and Rhode Island. Under the new OMB delineations, Delaware would have 
three CBSAs, New Jersey would have seven CBSAs, and Rhode Island would 
continue to have only one CBSA (Providence-Warwick, RI-MA). We referred 
readers to a detailed discussion of our proposal to adopt the new OMB 
labor market area delineations in section III.B. of the preamble of the 
proposed rule. We proposed to revise the regulations at Sec.  
412.64(h)(4) and (h)(4)(vi) to reflect the proposed 1-year extension of 
the imputed floor. We invited public comments on our proposal regarding 
the 1-year extension of the imputed floor.
    Comment: Several commenters supported the CMS proposal to extend 
the imputed floor for 1 year, stating that it establishes an approach 
to remedy the competitive disadvantage suffered by all-urban States in 
the absence of an imputed wage index floor; and that the imputed wage 
index floor policy creates a climate of symmetry, equity and 
consistency in the Medicare reimbursement process. One commenter 
suggested that the industry have an opportunity to provide input to CMS 
prior to finalizing any decisions regarding the imputed floor policy. 
The commenter also suggested that if CMS decides to finalize a policy 
that would result in the expiration of the imputed floor, CMS afford 
hospitals a multiyear phase-out in order to offset their lost revenue.
    One commenter stated that CMS should reconsider the extension of 
the imputed floor policy, and questioned what statutory authority CMS 
has to extend the imputed floor policy and declare new States eligible. 
Another commenter objected to the proposal and stated that it does not 
support the policy behind the imputed floor. The commenter recommended 
that CMS not finalize the proposal to extend the imputed floor, and 
stated it agreed with the rationale that CMS previously provided in the 
FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25878 through 25879) for not 
proposing to extend the imputed floor policy, and urged CMS to let the 
policy expire.
    Response: We appreciate the commenters' support for our proposal to 
extend the imputed floor for 1 year and are finalizing this proposal. 
In response to the commenters who objected to the proposed policy and 
made other recommendations, we will give further consideration to those 
comments as we continue to explore potential wage index reforms. As we 
have done every year since the proposal of the imputed floor, we 
provide and will continue to provide the industry with the opportunity 
to provide input on our proposals prior to finalizing any decisions 
regarding the imputed floor policy. We will take the commenters' 
recommendation to afford hospitals a multiyear phase-out into 
consideration should we propose not to extend the imputed floor policy 
in future years.
    In response to the commenter who questioned what statutory 
authority CMS has to extend the imputed floor policy and declare new 
States eligible, as we stated in the FY 2005 IPPS final rule (69 FR 
49110), we note that the Secretary has broad authority under section 
1886(d)(3)(E) of the Act 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) . . .'' Therefore, we believe 
that we do have the discretion to adopt a policy that would adjust area 
wage indexes in the stated manner. We adopted the imputed floor policy 
and subsequently extended it through notice-and-comment rulemaking to 
address concerns from hospitals in all-urban states. Under the new OMB 
delineations discussed in section III.B. of the preamble of this final 
rule, Delaware becomes an all-urban State and, therefore, is subject to 
an imputed floor as well.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification to extend the imputed 
floor policy under both the original methodology and the alternative 
methodology for an additional year, through September 30, 2015, while 
we continue to explore potential wage index reform. We also are 
adopting as final the proposed revisions to Sec.  412.64(h)(4) and 
(h)(4)(vi) to reflect the 1-year extension of the imputed floor.
    The wage index and impact tables associated with this FY 2015 IPPS/
LTCH PPS final rule that are available on the CMS Web site reflect the 
continued application of the imputed floor policy at Sec.  412.64(h)(4) 
and a national budget neutrality adjustment for the imputed floor for 
FY 2015. There are 15 providers in New Jersey, and no providers in 
Delaware that will receive an increase in their FY 2015 wage index due 
to the continued application of the imputed floor policy under the 
original methodology. The wage index and impact tables for this FY 2015 
final rule also reflect the application of the alternative methodology 
for computing

[[Page 49971]]

the imputed floor, which will benefit four hospitals in Rhode Island.
c. State Frontier Floor
    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 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)). Based on the implementation of the 
new OMB delineations discussed in section III.B. of the preamble of 
this final rule, 46 hospitals will receive the frontier floor value of 
1.0000 for their FY 2015 wage index in this final rule. These hospitals 
are located in Montana, North Dakota, South Dakota, and Wyoming. 
Although Nevada also is defined as a frontier State, its FY 2015 rural 
floor value of 1.1373 is greater than 1.0000, and therefore, no Nevada 
hospitals will receive a frontier floor value for their FY 2015 wage 
index.
    We did not propose any changes to the frontier floor policy for FY 
2015, and we did not receive any public comments on the issue.
    The areas affected by the rural, imputed, and frontier floor 
policies for the FY 2015 wage index are identified in Table 4D 
associated with this final rule, which is available via the Internet on 
the CMS Web site.
3. FY 2015 Wage Index Tables
    The wage index values for FY 2015 (except those for hospitals 
receiving wage index adjustments under section 1886(d)(13) of the Act), 
included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site, 
include the occupational mix adjustment, geographic reclassification or 
redesignation as discussed in section III.H. of the preamble of this 
final rule, and the application of the rural, imputed, and frontier 
State floors as discussed in section III.G.2. of the preamble of this 
final rule. We note that because we are adopting the new OMB labor 
market area delineations for FY 2015, these tables have additional 
tabulations to account for wage index calculations computed under the 
previous and the new OMB delineations.
    Tables 3A and 3B, available on the CMS Web site, list the 3-year 
average hourly wage for each labor market area before the redesignation 
or reclassification of hospitals based on FYs 2009, 2010, and 2011 cost 
reporting periods. Table 3A lists these data for urban areas, and Table 
3B lists these data for rural areas. In addition, Table 2, which is 
available on the CMS Web site, includes the adjusted average hourly 
wage for each hospital from the FY 2009 and FY 2010 cost reporting 
periods, as well as the FY 2011 period used to calculate the FY 2015 
wage index. The 3-year averages are calculated by dividing the sum of 
the dollars (adjusted to a common reporting period using the method 
described in Step 5 in section III.G. of the preamble of this final 
rule) across all 3 years, by the sum of the hours. If a hospital is 
missing data for any of the previous years, its average hourly wage for 
the 3-year period is calculated based on the data available during that 
period. The average hourly wages in Tables 2, 3A, and 3B, which are 
available on the CMS Web site, include the occupational mix adjustment. 
The wage index values in Tables 4A, 4B, 4C, and 4D also include the 
national rural floor budget neutrality adjustment (which includes the 
imputed floor). The wage index values in Table 2 also include the out-
migration adjustment for eligible hospitals. As stated above, because 
we are adopting the new OMB labor market area delineations for FY 2015, 
these tables have additional tabulations to account for wage index 
calculations computed under the current labor market area definitions 
and the new OMB labor market area delineations. In addition, for 
certain applicable hospitals, the wage index values included in Table 2 
are computed to reflect the transitional wage index or the 50/50 
blended wage index discussed in detail in section III.B.2.e. of the 
preamble of this final rule.

H. 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 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 (generally by September 1). 
Generally, hospitals must be proximate to the labor market area to 
which they are seeking reclassification and must demonstrate 
characteristics similar to hospitals located in that area. The MGCRB 
issues its decisions by the end of February for reclassifications that 
become effective for the following fiscal year (beginning October 1). 
The regulations applicable to reclassifications by the MGCRB are 
located in 42 CFR 412.230 through 412.280. (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 that we proposed for FY 2015, and the policies for the 
effects of hospitals' reclassifications and redesignations on the wage 
index, are the same as those discussed in the FY 2012 IPPS/LTCH PPS 
final rule for the FY 2012 final wage index (76 FR 51595 and 51596). 
Also, 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. 
While our general policies on geographic reclassification, 
redesignations under section 1886(d)(8)(B) of the Act, and urban 
hospitals reclassifying to rural under 42 CFR 412.103 will remain 
unchanged for FY 2015, we note that, due to our adoption of the new OMB 
labor market area delineations for FY 2015, there are numerous unique 
classification considerations for FY 2015 that are discussed in more 
detail in section III.H. of the preamble of this final rule. For a 
discussion of the new CBSA changes based on the new OMB labor market 
area delineations and our implementation of those changes, we refer 
readers to sections III.B. and VI.C. of the preamble of this final 
rule.
    Comment: One commenter stated that because the new OMB labor market 
area delineations will be effective October 1, 2014, for FY 2015, 
hospitals should have been given an opportunity to apply for 
reclassification to these new labor market areas a year ago. The 
commenter suggested that CMS provide a one-time expedited MGCRB 
application and approval process to be effective October 1, 2014.
    Similarly, another commenter stated that a hospital would not have 
had an adequate opportunity to assess reclassification options for FY 
2015 because CMS did not publish 3-year average hourly wage data based 
on the new OMB labor market area delineations with the FY 2014 IPPS/
LTCH PPS final rule. The commenter therefore suggested that either the 
effective date of the implementation of the new OMB labor market areas 
delineations be postponed until FY 2016, or a new period be opened to 
allow hospitals to reclassify for FY 2015.

[[Page 49972]]

    Response: We do not agree with these comments. We did not propose 
to adopt the new OMB labor market area delineations in the FY 2014 
IPPS/LTCH PPS proposed rule and, therefore, did not finalize the new 
OMB delineations in the FY 2014 IPPS/LTCH PPS final rule. Instead, we 
notified hospitals of our intention to propose changes to the wage 
index based on the new OMB delineations in the FY 2015 IPPS/LTCH 
proposed and final rules (78 FR 27552 through 27553; 78 FR 50586). 
Therefore, hospitals could not apply for reclassification on the basis 
of the new OMB labor market area delineations a year ago because they 
had not yet been implemented. Because we had not implemented the new 
OMB delineations, we were unable to release data, including average 
hourly wage data, based on these new delineations last year.
    Section 1886(d)(10)(C) of the Act mandates that 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 
(generally by September 1), and the MGCRB must issue its decision 
within 180 days after the first day of the 13-month period preceding 
the fiscal year for which a hospital has filed its application. 
Therefore, we believe we have balanced our obligation to implement the 
reclassification decisions of the MGCRB with our responsibility to 
implement the most accurate labor market areas through the new OMB 
delineations in as uniform a manner as possible.
    However, we recognized that the new OMB delineations could affect 
reclassification decisions. Therefore, in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28073), we stated that hospitals that wished to be 
reassigned to an alternate CBSA (other than the CBSA to which their 
reclassification would be reassigned in this proposed rule) for which 
they meet the applicable proximity criteria could request reassignment 
within 45 days from the publication of the proposed rule. We also 
stated that if, for whatever reason, a hospital still finds itself 
assigned to a labor market area that would provide a wage index for FY 
2015 that is lower than the wage index the hospital would have received 
under the FY 2014 CBSA delineations, we proposed a 50/50 blended wage 
index adjustment in FY 2015 for all hospitals that would experience a 
decrease in their FY 2015 wage index value due to the implementation of 
the new OMB delineations and are finalizing this transition adjustment 
in this rule. This transitional adjustment will mitigate negative 
payment impacts for FY 2015, while providing hospitals additional time 
to fully assess any additional reclassification options available to 
them under the new OMB delineations for FY 2016. Therefore, we do not 
believe it is necessary to implement a one-time expedited MGCRB 
application and approval process, postpone the effective date of the 
implementation of the new OMB delineations until FY 2016, or open a new 
period to allow hospitals to reclassify for FY 2015.
    Comment: A few commenters stated that, in cases where a countywide 
(group) reclassification had been previously approved by the MGCRB, a 
new hospital is not able to obtain the same reclassified wage index 
until the first year that individual hospital's wage index data match 
one of the 3 years' data used by the MGCRB and a new 3-year countywide 
reclassification is requested by the county's hospitals (which can be a 
4-year delay). The commenters stated that the hospital will have a wage 
index lower than the hospitals with which it competes for skilled 
labor. The commenter suggested that CMS change its policy to allow for 
a timelier competitive wage index for new hospitals.
    Two commenters suggested that the proximity rule for countywide 
reclassifications for hospitals in an urban county be modified to 
permit adjacent county reclassifications, regardless of whether they 
are in the same CSA or CBSA, or at a minimum, create an exception that 
would allow this in the event that half of the hospitals in the county 
are seeking to reclassify.
    Another commenter suggested that a county be permitted to apply for 
designation as a ``core county'' if its 3-year average hourly wage is 
at least 108 percent of the 3-year average hourly wage of its CBSA, 
excluding the core county. The commenter also suggested that other 
counties within the same CBSA that are either adjacent to or within the 
same city as the core county, and whose 3-year average hourly wage is 
at least 85 percent of the core county's average hourly wage, be 
permitted to join the core county to form a ``core area'' if the 
resulting wage index is beneficial to all hospitals in the core area.
    Response: We thank the commenters for their comments. We already 
have established criteria and processes for MGCRB reclassification, 
which are specified in 42 CFR 412.230 et. seq, and we did not propose 
any changes to these provisions for FY 2015. Consequently, we are not 
making any changes to address the commenter's concerns at this time. We 
refer the commenters to these regulations for complete details on wage 
index reclassifications.
2. FY 2015 MGCRB Reclassifications
a. FY 2015 Reclassification Requirements and Approvals
    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the IPPS. The specific procedures and rules that apply 
to the geographic reclassification process are outlined in regulations 
under 42 CFR 412.230 through 412.280.
    At the time this final rule was constructed, the MGCRB had 
completed its review of FY 2015 reclassification requests. Based on 
such reviews, there were 309 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2015 that did not 
withdraw or terminate their reclassifications within 45 days of the 
publication of the proposed rule. Because MGCRB wage index 
reclassifications are effective for 3 years, for FY 2015, hospitals 
reclassified beginning during FY 2013 or FY 2014 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 155 hospitals approved for wage index reclassifications in 
FY 2013 that continue for FY 2015, and 270 hospitals approved for wage 
index reclassifications in FY 2014 that continue for FY 2015. Of all 
the hospitals approved for reclassification for FY 2013, FY 2014, and 
FY 2015, based upon the review at the time of this final rule, 734 
hospitals are in a reclassification status for FY 2015.
    Under the regulations at 42 CFR 412.273, hospitals that have been 
reclassified by the MGCRB are permitted to withdraw their applications 
within 45 days of the publication of a proposed rule. 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 42 CFR 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

[[Page 49973]]

index corrections, appeals, and the Administrator's review process for 
FY 2015 are incorporated into the wage index values published in this 
FY 2015 IPPS/LTCH PPS final rule. These changes affect not only the 
wage index value for specific geographic areas, but also the wage index 
value redesignated/reclassified hospitals receive; that is, whether 
they receive the wage index that includes the data for both the 
hospitals already in the area and the redesignated/reclassified 
hospitals. Further, the wage index value for the area from which the 
hospitals are redesignated/reclassified may be affected.
    Comment: One commenter stated that CMS' policy that hospitals must 
request to withdraw or terminate MGCRB reclassifications within 45 days 
of the proposed rule is problematic because a hospital could terminate 
a reclassification based on information in the proposed rule, and with 
the publication of the final rule, discover that its original 
reclassified status was more desirable. The commenter stated that 
hospitals cannot make informed decisions concerning their 
reclassification status based on values in a proposed rule that are 
likely to change and, therefore, recommended that CMS revise its 
existing policy to permit hospitals to withdraw or terminate their 
reclassification status within 45 days of the publication of the final 
rule. Similarly, another commenter stated that the requirement for 
withdrawal of an existing reclassification is unnecessary and unfair 
because it requires that a hospital give up the certain benefit of the 
existing reclassification for the uncertain benefit of a proposal. The 
commenter stated that it is possible that CMS could modify the 
reclassification rules, and suggested that hospitals be allowed 30 days 
after the publication of the final rule to withdraw their 
reclassification requests or to reverse a withdrawal that was made 
based on the proposed rule in situations where data corrections could 
result in the hospital no longer benefiting by the alternative they 
selected.
    Response: We did not make any proposals to change any of the 
reclassification processes or criteria for FY 2015. Any changes to the 
reclassification processes or criteria would first need to be proposed 
in a separate rulemaking. Consequently, we are not making any changes 
to address the commenters' concerns at this time. We maintain that 
information provided in the proposed rule constitutes the best 
available data to assist hospitals in making reclassification 
decisions. The values published in the final rule represent the final 
wage index values reflective of reclassification decisions.
b. Effects of Implementation of New OMB Labor Market Area Delineations 
on Reclassified Hospitals
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28070 through 
28074), we indicated that because hospitals that have been reclassified 
beginning in FY 2013, 2014, or 2015 were reclassified based on the 
current labor market delineations, if we adopted the new OMB labor 
market area delineations beginning in FY 2015, the areas to which they 
have been reclassified, or the areas where they are located, may 
change. Under the new OMB delineations, we stated that many existing 
CBSAs would be reconfigured. We encouraged hospitals with current 
reclassifications to verify area wage indexes on Tables 4A-2 and 4B-2 
associated with the proposed rule (which are available via the Internet 
on the CMS Web site), and confirm that the areas to which they have 
been reclassified for FY 2015 would continue to provide a higher wage 
index than their geographic area wage index. We stated that hospitals 
may withdraw their FY 2015 reclassifications by contacting the MGCRB 
within 45 days from the publication of the proposed rule.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28070), we stated 
that, in some cases, adopting the new OMB delineations would result in 
counties splitting apart from CBSAs to form new CBSAs, or counties 
shifting from one CBSA designation to another CBSA. Reclassifications 
granted under section 1886(d)(10) of the Act are effective for 3 fiscal 
years so that a hospital or county group of hospitals would be assigned 
a wage index based upon the wage data of hospitals in a nearby labor 
market area for a 3-year period. If CBSAs are split apart, or if 
counties shift from one CBSA to another under the new OMB delineations, 
it raises the question of how to continue a hospital's reclassification 
for the remainder of its 3-year reclassification period, if that area 
to which the hospital reclassified no longer exists, in whole or in 
part. We dealt with this question in FY 2005 as well when CMS adopted 
the current OMB labor market area definitions. In the FY 2015 IPPS/LTCH 
PPS proposed rule (79 FR 28071), we indicated that, consistent with the 
policy CMS implemented in the FY 2005 IPPS final rule (69 FR 49054 
through 49056), if a CBSA would be reconfigured due to the new OMB 
delineations and it would not be possible for the reclassification to 
continue seamlessly to the reconfigured CBSA, we believe it is 
appropriate for us to determine the best alternative location to 
reassign current reclassifications for the remaining 3 years. 
Therefore, to maintain the integrity of a hospital's 3-year 
reclassification period, we proposed a policy to assure that current 
geographic reclassifications (applications approved for FY 2013, FY 
2014, or FY 2015) that would be affected by CBSAs that are split apart 
or counties that shift to another CBSA under the new OMB delineations, 
would ultimately be assigned to a CBSA under the new OMB delineations 
that contains at least one county from the reclassified CBSA under the 
current FY 2014 OMB definitions, and would be generally consistent with 
rules that govern geographic reclassification. That is, consistent with 
the policy finalized in FY 2005 (69 FR 49054 and 49055), we proposed a 
general policy that affected reclassified hospitals would be assigned 
to a CBSA that (1) would contain the most proximate county that is 
located outside of the hospital's proposed FY 2015 geographic labor 
market area, and (2) is part of the original FY 2014 CBSA to which the 
hospital is reclassified. We stated our belief that by assigning 
reclassifications to the CBSA that contains the nearest eligible county 
(as described above) satisfies the statutory requirement at section 
1886(d)(10)(v) of the Act by maintaining reclassification status for a 
period of 3 fiscal years, while generally respecting the longstanding 
principle of geographic proximity in the labor market reclassification 
process. The hospitals that we proposed to reassign to a different CBSA 
based on our proposed policy above were listed in a special Table 9A-2 
for the proposed rule, which is available via the Internet on the CMS 
Web site. In addition, we proposed to allow a hospital, or county group 
of hospitals, to request reassignment to another CBSA that would 
contain a county that is part of the current FY 2014 CBSA to which they 
are reclassified, if the hospital or county group of hospitals can 
demonstrate compliance with applicable reclassification proximity 
rules, as described later in this section.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28071), we stated 
that we recognize that this proposed reclassification reassignment 
described for hospitals that are reclassified to CBSAs that would split 
apart or to counties that would shift to another CBSA under the new OMB 
delineations may result in the reassignment of the

[[Page 49974]]

hospital for the remainder of its 3-year reclassification period to a 
CBSA having a lower wage index than the wage index that would have been 
assigned for the reclassified hospital in the absence of the proposed 
adoption of the new OMB delineations. Therefore, as discussed in 
section III.B.2.e.(4) of the preamble of the proposed rule, we proposed 
(and are finalizing in this final rule) that all hospitals that would 
experience a decrease in their FY 2015 wage index value due to the 
proposed implementation of the new OMB delineations would receive a 50/
50 blended wage index adjustment in FY 2015. For FY 2015, we proposed 
to calculate a wage index value based on the current FY 2014 OMB 
definitions, and a wage index value based upon the proposed new OMB 
delineations (including reclassification assignments discussed in this 
section). If the wage index under the proposed new OMB delineations 
would be lower than the wage index calculated with the current (FY 
2014) OMB definitions, we proposed that the hospital would be assigned 
a blended wage index (50 percent of the current; 50 percent of the 
proposed). We stated our belief that this proposed transitional 
adjustment would mitigate negative payment impacts for FY 2015, and 
would afford hospitals additional time to fully assess any additional 
reclassification options available to them under the new OMB 
delineations.
    We are including the following descriptions of specific situations 
where we have determined that reassignment of reclassification areas is 
appropriate.
(1) Reclassifications to CBSAs That Are Subsumed by Other CBSAs
    For the proposed rule (79 FR 28070), we identified 66 counties that 
are currently located in CBSAs that would be subsumed by another CBSA 
under the new OMB labor market area delineations. As a result, 
hospitals reclassifying to those CBSAs would now find that their 
reclassifications are to a CBSA that no longer exists. For these 
hospitals, we proposed to reassign reclassifications to the newly 
configured CBSA to which all of the original constituent counties in 
the FY 2014 CBSA are transferred. For example, CBSA 11300 (Anderson, 
IN) would no longer exist under the proposed FY 2015 delineations. The 
only constituent county in CBSA 11300, Madison County, IN, would be 
moving to CBSA 26900 (Indianapolis-Carmel-Anderson, IN). Because the 
original Anderson, IN labor market area no longer exists, we proposed 
to reassign reclassifications from the original Anderson, IN labor 
market area to a newly configured CBSA where the original constituent 
county or counties are transferred, which is Indianapolis-Carmel-
Anderson, IN. For hospitals reclassified to a CBSA that would be 
subsumed by another CBSA, we included a table in the proposed rule that 
reflected the hospitals' current reclassified CBSA, and the CBSA to 
which we proposed to assign them for FY 2015 (79 FR 28071).
    We did not receive any public comments regarding this proposal to 
reassign hospitals reclassified to CBSAs that were subsumed by another 
CBSA. Therefore, we are finalizing this provision as proposed. For any 
hospital that is reclassified to a CBSA that no longer exists, and all 
of the CBSA's constituent counties moved to another CBSA under the new 
OMB delineations, we assigned that hospital's reclassification to the 
subsuming CBSA to which all of the original constituent counties in the 
FY 2014 CBSA are transferred.
    The following table lists 63 hospitals that are currently located 
in CBSAs that will be subsumed by another CBSA under the new OMB labor 
market area delineations and reflects the hospitals' current 
reclassified CBSA and the CBSA to which we are assigning them for FY 
2015. We note that three hospitals have terminated their 
reclassification since publication of the proposed rule and have been 
omitted.

 Hospital Reclassification Reassignments for Hospitals Reclassified to a
                  CBSA That Is Subsumed by Another CBSA
------------------------------------------------------------------------
CMS Certification Number   Current  reclassified
          (CCN)                     CBSA                  New CBSA
------------------------------------------------------------------------
          050022                     42044                   11244
          050054                     42044                   11244
          050102                     42044                   11244
          050243                     42044                   11244
          050292                     42044                   11244
          050329                     42044                   11244
          050390                     42044                   11244
          050423                     42044                   11244
          050534                     42044                   11244
          050573                     42044                   11244
          050684                     42044                   11244
          050686                     42044                   11244
          050701                     42044                   11244
          050765                     42044                   11244
          050770                     42044                   11244
          140067                     14060                   14010
          150089                     11300                   26900
          220001                     14484                   14454
          220002                     14484                   14454
          220008                     14484                   14454
          220011                     14484                   14454
          220019                     14484                   14454
          220020                     14484                   14454
          220049                     14484                   14454
          220058                     14484                   14454
          220062                     14484                   14454
          220063                     14484                   14454
          220070                     14484                   14454
          220073                     14484                   14454
          220074                     14484                   14454
          220082                     14484                   14454
          220084                     14484                   14454
          220090                     14484                   14454
          220095                     14484                   14454
          220098                     14484                   14454
          220101                     14484                   14454
          220105                     14484                   14454
          220163                     14484                   14454
          220171                     14484                   14454
          220175                     14484                   14454
          220176                     14484                   14454
          230002                     47644                   47664
          230020                     47644                   47664
          230024                     47644                   47664
          230053                     47644                   47664
          230089                     47644                   47664
          230104                     47644                   47664
          230142                     47644                   47664
          230146                     47644                   47664
          230165                     47644                   47664
          230176                     47644                   47664
          230244                     47644                   47664
          230270                     47644                   47664
          230273                     47644                   47664
          230297                     47644                   47664
          390151                     13644                   43524
          410001                     14484                   14454
          410004                     14484                   14454
          410005                     14484                   14454
          410007                     14484                   14454
          410010                     14484                   14454
          410011                     14484                   14454
          410012                     14484                   14454
------------------------------------------------------------------------

(2) Reclassification to CBSAs Where the CBSA Number or Name Changed or 
to CBSAs Containing Counties That Moved to Another CBSA
    For the proposed rule (79 FR 28072), we identified six CBSAs with 
current reclassifications that would maintain the same constituent 
counties, but the CBSA number or name would change if we adopted the 
new OMB delineations. For example, CBSA 29140 (Lafayette, IN) currently 
contains three counties (Benton, Carroll, and Tippecanoe Counties). The 
CBSA name and number for these counties would change to CBSA 29200 
(Lafayette-West Lafayette, IN) under the new OMB delineations. Because 
the constituent counties in these CBSAs would not change under the new 
delineations, we would consider these CBSAs to be unchanged, and we did 
not propose any

[[Page 49975]]

reassignment for hospitals reclassified to those labor market areas.
    In the proposed rule, we identified eight CBSAs with current 
reclassifications that have one or more counties that would split off 
and move to a new CBSA or to a different existing CBSA under the new 
OMB delineations. These CBSAs are shown in the following table.

------------------------------------------------------------------------
       Current FY 2014 CBSA              Current FY 2014 CBSA name
------------------------------------------------------------------------
16620............................  Charleston, WV.
16974............................  Chicago-Joliet-Naperville, IL.
20764............................  Edison-New Brunswick, NJ.
31140............................  Louisville/Jefferson County, KY-IN.
35644............................  New York-White Plains-Wayne, NY-NJ.
37964............................  Philadelphia, PA.
39100............................  Poughkeepsie-Newburgh-Middletown, NY.
48900............................  Wilmington, NC.
------------------------------------------------------------------------

    In the proposed rule, we determined that 69 hospitals had current 
reclassifications to one of these CBSAs. Similar to the methodology 
finalized in the FY 2005 IPPS final rule (69 FR 49054 through 49055), 
we proposed to follow the general policy discussed in section 
III.H.2.b. of the preamble of the proposed rule. Specifically, we 
proposed that affected reclassified hospitals would be assigned to a 
CBSA (under the new OMB delineations) that would contain the most 
proximate county that is (1) located outside of the hospital's proposed 
FY 2015 geographic labor market area; and (2) is included in the 
current CBSA to which they are reclassified. For each of the 69 
hospitals, we conducted a mapping analysis and determined driving 
distances from their geographic location to the borders of each county 
that is in the reclassified CBSA under the FY 2014 delineations and is 
also included in a CBSA under the new OMB delineations, excluding any 
counties that would be located in the hospital's proposed FY 2015 
geographic labor market area. Following the general reassignment 
principle that we proposed, we proposed to reassign those reclassified 
hospitals to the CBSA which contains the geographically closest county. 
For example, there are hospitals that currently are reclassified to 
CBSA 39100 (Poughkeepsie-Newburgh-Middletown, NY) under the FY 2014 
delineations, which is comprised of Dutchess County and Orange County, 
NY. Under the new OMB delineations, Dutchess County would become part 
of new CBSA 20524 (Dutchess County-Putnam County, NY), while Orange 
County would join CBSA 35614 (New York-Jersey City-White Plains, NY-NJ 
Metropolitan Division). Therefore, we mapped the distances from one 
reclassified hospital to the border of Dutchess County and Orange 
County, NY (the two counties that were part of CBSA 39100 under the FY 
2014 delineations). Our analysis showed that the hospital is 2.2 miles 
from Dutchess County, and 25.9 miles from Orange County. Therefore, we 
proposed to reassign this hospital's reclassification from the FY 2014 
CBSA 39100 to the new CBSA 20524.
    For the proposed rule, we also identified affected county group 
reclassifications. For these reclassifications, we proposed that we 
would follow our proposed policy discussed above, except that, for 
county group reclassifications, we proposed to reassign hospitals in a 
county group reclassification to the CBSA under the new OMB 
delineations to which the majority of hospitals in the group 
reclassification are geographically closest. Because hospitals in a 
county group applied as a group, we believe the reassignment should 
also be applied to the whole group. For example, the hospitals of 
Fairfield County, CT are reclassified as a group to CBSA 35644 under 
the FY 2014 delineations. Under the new OMB delineations, CBSA 35644 
would no longer exist and would be split into the following two new 
CBSAs: 20524 (Dutchess County-Putnam County, NY) and 35614 (New York-
Jersey City-White Plains, NY-NJ). Of the six hospitals in the group 
reclassification, all but one would be closer to an eligible county 
(Westchester, NY) in CBSA 35614 than to an eligible county (Putnam, NY) 
in CBSA 20524. Because these hospitals in Fairfield, CT applied as a 
group, we believe the reassignment should also be applied to the whole 
group. Therefore, we proposed to assign the hospitals in this group 
reclassification to CBSA 35614, the reconfigured CBSA to which the 
majority of the hospitals in the group reclassification are 
geographically closest.
    To summarize, of the 69 hospitals identified in the proposed rule 
as reclassified to 1 of the 8 CBSAs in the preceding table that have 
counties that would split off and move to a new CBSA or a different 
existing CBSA under the new OMB delineations, there are 27 hospitals 
that would maintain the same reclassified CBSA number under our 
proposals. Another 28 hospitals would be reassigned to a reconfigured 
CBSA that would contain a similar number of counties from their current 
reclassified CBSA. For the remaining 14 reclassified hospitals, we 
proposed to assign them to a CBSA (under the new OMB delineations) that 
would have a different CBSA number from the labor market area to which 
they are currently reclassified (under the current FY 2014 
delineations). This is because if the original CBSA to which the 
hospitals are reclassified is losing counties to another urban CBSA, it 
may be that the original reclassification determination would not be 
reflective of the new delineations. In addition, because proximity to a 
CBSA is a requirement of reclassifications approved under section 
1886(d)(10) of the Act, we stated our belief that it is appropriate to 
propose to reassign reclassification status to an urban CBSA that 
contains the county (from the hospital's current CBSA reclassification) 
that is closest to the hospital. We stated our belief that this would 
more accurately reflect the geographic labor market area of the 
reclassified hospital.
    Consistent with refinements implemented in the FY 2005 IPPS final 
rule (69 FR 49055), we proposed to allow hospitals that reclassified 
under section 1886(d)(10) of the Act to one of the eight CBSAs that 
split (that is, current FY 2014 CBSAs 16620, 16974, 20764, 31140, 
35644, 37964, 39100, 48900) to be reclassified to any CBSA containing a 
county from their original reclassification labor market area, provided 
that the hospital demonstrates that it meets the applicable proximity 
requirements under 42 CFR 412.230(b) and (c) (for individual 
hospitals), 42 CFR 412.232(a)(1) (for a rural group), and 42 CFR 
412.234(a)(2) and (a)(3) (for an urban group) to that CBSA. We stated 
that hospitals that wished to be reassigned to an alternate CBSA (other 
than the CBSA to which their reclassification would be reassigned in 
this proposed rule) for which they meet the applicable proximity 
criteria could request reassignment within 45 days from the publication 
of the proposed rule. Hospitals had to send a request to 
[email protected] and provide documentation certifying that they 
meet the requisite proximity criteria for reassignment to an alternate 
CBSA, as described above. We stated our belief that this option of 
allowing hospitals to submit a request to CMS would provide hospitals 
with greater flexibility with respect to their reclassification 
reassignment, while ensuring that the proximity requirements are met. 
We believe that where the proximity requirements are met, the 
reclassified wage index would be consistent with the labor market area 
to which the hospitals were originally approved for reclassification. 
Under this proposed

[[Page 49976]]

policy, a hospital could request to be assigned a reclassification to 
any CBSA that contains any county from the CBSA to which it is 
currently reclassified. However, to be reassigned to an area that is 
not the most proximate to the hospital (or the majority of hospitals in 
a county group), we believe it is necessary that the hospital 
demonstrates that it complies with the applicable proximity criteria. 
If a hospital cannot demonstrate proximity to an alternate CBSA, the 
hospital would not be considered for reclassification to that labor 
market area, and reassignment would remain with the closest eligible 
(new) CBSA.
    In the proposed rule (79 FR 28073), we included a table showing 
proposed hospital reclassification assignments for hospitals 
reclassified to CBSAs from which counties would be split off and moved 
to a different CBSA under the new OMB delineations. The table showed 
the current reclassified CBSA and the CBSA to which CMS proposed 
reassignment.
    We proposed that hospitals that disagreed with our determination of 
the most proximate county had to provide an alternative method for 
determining proximity to CMS within 45 days from the publication of the 
proposed rule. We stated that changes to a hospital's CBSA assignment 
on the basis of a hospital's disagreement with our determination of 
closest county, or on the basis of being granted a reassignment due to 
meeting applicable proximity criteria to an eligible CBSA would be 
announced in this FY 2015 IPPS/LTCH PPS final rule.
    Comment: Commenters were generally supportive of our proposal to 
adopt the new OMB delineations. Commenters did not specifically address 
the proposed assignment of reclassification status for hospitals that 
are reclassified to labor market areas where the CBSA number or name 
changed or to CBSAs containing counties that moved to another CBSA.
    Response: We thank the commenters for their support of our proposal 
to implement the new OMB delineations for the hospital wage index.
    After consideration of the public comments we received, we are 
finalizing the reassignment methodology as proposed. Hospitals that 
were reclassified to a CBSA that had one or more counties that split 
off and moved to another CBSA under the new OMB delineations are 
reclassified to a CBSA that will contain the most proximate county that 
(1) is located outside of the hospital's FY 2015 geographic labor 
market area; and (2) is included in the current CBSA to which they are 
reclassified. Group reclassifications are assigned to the CBSA under 
the new OMB delineations to which the majority of hospitals in that 
group reclassification are geographically closest and that (1) is 
located outside of the hospital's FY 2015 geographic labor market area; 
and (2) is included in the current CBSA to which they are reclassified.
    We also allowed hospitals that reclassified under section 
1886(d)(10) of the Act to one of the eight CBSAs that split (that is, 
current FY 2014 CBSAs 16620, 16974, 20764, 31140, 35644, 37964, 39100, 
48900) to be reclassified to any CBSA containing a county from their 
original reclassification labor market area, provided that the hospital 
demonstrates that it meets the applicable proximity requirements under 
42 CFR 412.230(b) and (c) (for individual hospitals), 42 CFR 
412.232(a)(1) (for a rural group), and 42 CFR 412.234(a)(2) and (a)(3) 
(for an urban group) to that CBSA. Hospitals that wished to be 
reassigned to an alternate CBSA (other than the CBSA to which their 
reclassification would be reassigned in this proposed rule) for which 
they meet the applicable proximity criteria needed to request 
reassignment within 45 days from the publication of the proposed rule. 
We received one request in the [email protected] mailbox to request 
reassignment to another eligible labor market area. A rural hospital in 
North Carolina was originally reclassified to CBSA 48900 (Wilmington, 
NC). This CBSA had more than one county that was split off and moved to 
another CBSA under the new OMB delineations. Thus, under our proposed 
policy (which we are finalizing in this final rule), we reclassified 
this hospital to a CBSA that contained the most proximate county that 
is located outside of the hospital's FY 2015 geographic labor market 
area and is included in the current CBSA to which it is reclassified. 
Of all the former constituent counties of CBSA 48900, the hospital is 
geographically closest to Brunswick County, NC, which is outside of the 
hospital's FY 2015 geographic labor market area and is included in the 
current CBSA to which the hospital is reclassified. However, under the 
new OMB delineations, Brunswick County is moved from CBSA 48900 to CBSA 
34820 (Myrtle Beach-Conway-North Myrtle Beach, SC-NC). Therefore, we 
assigned this hospital's reclassification to CBSA 34820 in the proposed 
rule. The hospital provided adequate evidence to demonstrate that it is 
located within 35-miles from Pender County, NC, which remains part of 
CBSA 48900. Because the proximity criteria limit for MGCRB 
reclassification of an individual rural hospital is 35 miles (Sec.  
412.230(b)(1)), we are approving the hospital's request for 
reassignment back to CBSA 48900. The change is reflected in the 
proceeding table.
    The following table shows hospital reclassification assignments for 
hospitals reclassified to CBSAs from which counties were split off and 
moved to a different CBSA under the new OMB delineations. The following 
table shows the current reclassified CBSA and the CBSA to which CMS is 
making reassignments. We note that 23 hospitals terminated their 
reclassification status since the proposed rule was published and have 
been omitted.

     Hospital Reclassification Reassignments for Hospitals That Are
 Reclassified to CBSAs From Which Counties Are Split Off and Moved to a
                             Different CBSA
------------------------------------------------------------------------
CMS Certification Number   Current  reclassified    FY 2015  reassigned
          (CCN)                     CBSA                    CBSA
------------------------------------------------------------------------
          140012                     16974                   20994
          140110                     16974                   16974
          140155                     16974                   16974
          140161                     16974                   16974
          140186                     16974                   16974
          150002                     16974                   16974
          150004                     16974                   16974
          150008                     16974                   16974
          150034                     16974                   16974
          150090                     16974                   16974
          150125                     16974                   16974
          150126                     16974                   16974
          150165                     16974                   16974
          150166                     16974                   16974
          180012                     31140                   31140
          180048                     31140                   31140
          310002                     35644                   35614
          310009                     35644                   35614
          310014                     37964                   37964
          310015                     35644                   35614
          310017                     35644                   35614
          310031                     20764                   35614
          310050                     35644                   35614
          310054                     35644                   35614
          310076                     35644                   35614
          310083                     35644                   35614
          310096                     35644                   35614
          310119                     35644                   35614
          330027                     35644                   35614
          330106                     35644                   35614
          330167                     35644                   35614
          330181                     35644                   35614
          330182                     35644                   35614
          330198                     35644                   35614
          330224                     39100                   20524
          330225                     35644                   35614
          330259                     35644                   35614
          330331                     35644                   35614
          330332                     35644                   35614
          330372                     35644                   35614
          340042                     48900                   48900

[[Page 49977]]

 
          340068                     48900                   48900
          390044                     37964                   33874
          390096                     37964                   33874
          390316                     37964                   33874
          420085                     48900                   48900
------------------------------------------------------------------------

    Table 9A-2 for this final rule (which is available via the Internet 
on the CMS Web site) reflects all reassignments of hospital 
reclassifications for FY 2015.
(3) Reclassifications to CBSAs That Contain Hospital's Geographic 
County
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28074), we 
identified 14 reclassified hospitals that would be geographically 
located in their reclassified labor market area under the new OMB 
delineations. For example, hospital 34-0015 is located in Rowan County, 
NC. Rowan County is currently a Micropolitan Statistical Area in NC, 
and treated as rural. The hospital is reclassified to CBSA 16740 
(Charlotte-Concord-Rock Hill, NC-SC). Under the new OMB delineations, 
CBSA 16740 (Charlotte-Concord-Gastonia, NC-SC) would include Rowan 
County. Therefore, the current reclassification would become redundant. 
CBSA 16740 did not lose any counties to another labor market area; 
therefore, assignment to another alternate CBSA would not be an option 
under our proposed methodology. Because, by definition, a hospital 
would not be ``reclassified'' to its own geographic labor market area, 
and maintaining that ``reclassified'' status to its own geographic 
labor market area would serve no beneficial purpose for a hospital, we 
expected that all such affected hospitals would wish to terminate their 
reclassification status. Therefore, we assumed, for purposes of the 
proposed rule, that the affected hospitals would be terminating their 
reclassification status for the remaining years of their 3-year 
reclassification period, and for FY 2015, we proposed to assign them 
the wage index of the CBSA in which they are geographically located. We 
stated that affected hospitals should inform CMS if they wish to retain 
their current reclassification by sending notice to CMS within 45 days 
from the publication of the proposed rule. If an affected hospital did 
not inform us that they wished to retain their current 
reclassification, we assumed that the hospital had elected to terminate 
the reclassification. For purposes of the proposed rule, we presented 
tables under the presumption that all 14 hospitals would opt to cancel 
their reclassification status. We proposed to assign these hospitals 
the wage index value of their home area from Table 4A-2 for the 
proposed rule (which is available via the Internet on the CMS Web 
site), and not include them as reclassified hospitals in Table 9A-2 for 
the proposed rule (which is available via the Internet on the CMS Web 
site).
    We did not receive any public comments on this proposal, nor did 
any hospital contact CMS through the [email protected] mailbox. 
Therefore, we are finalizing the proposal without any modifications. 
The following hospitals' reclassifications are terminated, and they are 
assigned the wage index of the CBSA to which they are geographically 
located under the new OMB delineations.

            Hospitals Reclassified to Home Labor Market Area
------------------------------------------------------------------------
CMS Certification Number   Current  geographic   Reclassified geographic
          (CCN)                    CBSA                    CBSA
------------------------------------------------------------------------
          340015                       34                   16740
          340129                       34                   16740
          340144                       34                   16740
          420036                       42                   16740
          450596                       45                   23104
          420027                    11340                   24860
          150088                    11300                   26900
          150113                    11300                   26900
          190003                       19                   29180
          440073                       44                   34980
          460017                       46                   36260
          460039                       46                   36260
          190144                       19                   43340
          490019                       49                   47894
------------------------------------------------------------------------

c. Applications for Reclassifications for FY 2016
    Applications for FY 2016 reclassifications are due to the MGCRB by 
September 2, 2014 (the first working day of September 2014). We note 
that this is also the deadline for canceling a previous wage index 
reclassification withdrawal or termination under 42 CFR 412.273(d). As 
discussed in section III.B. of the preamble of this final rule, we are 
adopting the new OMB labor market area delineations announced on 
February 28, 2013. Therefore, hospitals should apply for 
reclassifications based on the new OMB delineations we are using for FY 
2015. Applications and other information about MGCRB reclassifications 
may be obtained via the Internet on the CMS Web site at: http://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-
2670.3.
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28074, 28075, and 
28304), we proposed changes to the regulations at Sec.  412.232(b)(2) 
and Sec.  412.234(a)(3)(iv) to include reference to the most recent OMB 
standards for delineating statistical areas (using the most recent 
Census Bureau data and estimates) that were adopted by CMS. For rural 
groups, the group of hospitals must demonstrate that the county in 
which the hospitals are located meets the standards for redesignation 
to an MSA as an ``outlying county.'' For urban groups, hospitals 
located in counties that are in the same combined statistical area or 
CBSA as the urban area to which they seek redesignation qualify as 
meeting the proximity requirements for reclassification to the urban 
area to which they seek redesignation. We did not propose any changes 
to the reclassification policy, but included language in the 
regulations to reflect use of the most recent OMB standards for 
delineating statistical areas (using the most recent Census Bureau data 
and estimates) that are adopted by CMS in consideration of group 
reclassification applications submitted for review in FY 2015 (that is 
submitted by September 2, 2014 (this date was erroneously stated in the 
proposed rule as September 30, 2014), reviewed by the MGCRB in FY 2015, 
to be effective in FY 2016) and future years.
    We did not receive any public comments on our proposed changes to 
the regulations at Sec.  412.232(b)(2) and Sec.  412.234(a)(3)(iv) to 
include a reference to the most recent OMB standards for delineating 
statistical areas (using the most recent Census Bureau data and 
estimates) that are adopted by CMS. Therefore, we are adopting as final 
the proposed changes to Sec.  412.232(b)(2) and Sec.  
412.234(a)(3)(iv).
3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act
    Section 1886(d)(8)(B)(i) of the Act requires the Secretary to 
``treat a hospital located in a rural county adjacent to one or more 
urban areas as being located in the urban metropolitan statistical area 
to which the greatest number of workers in the county commute'' if 
certain adjacency and commuting criteria are met. The criteria utilize 
standards for designating Metropolitan Statistical Areas published in 
the Federal Register by the Director

[[Page 49978]]

of the Office of Management and Budget (OMB) based on the most recently 
available decennial population data. Effective beginning FY 2005, we 
used OMB's CBSA standards based on the 2000 Census and the 2000 Census 
data to identify counties in which hospitals qualify under section 
1886(d)(8)(B) of the Act to receive the wage index of the urban area. 
Hospitals located in these counties have been known as ``Lugar'' 
hospitals and the counties themselves are often referred to as 
``Lugar'' counties.
    As discussed in section III.B. of the preamble to the proposed 
rule, we proposed to implement OMB's revised labor market area 
delineations based on the Census 2010 data for purposes of determining 
applicable wage indexes for acute care hospitals beginning in FY 2015. 
As we have done in the past, in the FY 2015 IPPS/LTCH PPS proposed rule 
(79 FR 28075 through 28078), we also proposed to use the new OMB 
delineations to identify rural counties that would qualify as ``Lugar'' 
under section 1886(d)(8)(B) of the Act and, therefore, would be 
redesignated to urban areas for FY 2015. We proposed to revise the 
regulations at Sec.  412.64(b)(3)(i) to reflect the most recent OMB 
standards for delineating statistical areas adopted by CMS. In the FY 
2015 IPPS/LTCH PPS proposed rule, we stated that, by applying the new 
OMB delineations, the number of qualifying counties would increase from 
98 in FY 2014 to 127 in FY 2015, as reflected in a chart published in 
the proposed rule. Since publication of the proposed rule, we have 
discovered a mistake where we inadvertently did not account for 
Davidson County, NC (which was a Lugar county in FY 2014 but is in a 
rural county no longer qualifying to be Lugar under the new OMB 
delineations, as discussed in section III.H.3.c. of the preamble of 
this final rule). Therefore, the number of qualifying counties 
increases from 99 in FY 2014 to 127 in FY 2015, and we are correcting 
this oversight in the preamble of this final rule. After evaluating and 
analyzing the 2010 Census commuting data, we proposed that, effective 
for discharges on or after October 1, 2014, in accordance with section 
1886(d)(8)(B) of the Act, hospitals located in the rural counties 
listed in the first column of the table in the proposed rule would be 
designated as part of the urban area listed in the second column based 
on the criteria discussed above.
    Comment: One commenter suggested that Lugar hospitals be considered 
rural for all Medicare IPPS purposes other than receiving the urban 
wage index.
    Response: Lugar status is a deemed status, and there are only two 
provisions under the Medicare statute that would allow a Lugar hospital 
to be treated as a rural provider: (1) if the hospital is eligible for 
an out-migration adjustment under section 1886(d)(13) of the Act; or 
(2) if the hospital applies for an urban to rural reclassification 
under section 1886(d)(8)(E) of the Act. In either case, the hospital 
would be treated as rural for all IPPS purposes, which includes the 
wage index.
    We did not receive any other specific comments with regard to our 
proposal to use the new OMB delineations to identify rural counties 
that would qualify as ``Lugar'' under section 1886(d)(8)(B) of the Act. 
Therefore, we are finalizing the policy as proposed. We also are 
finalizing our proposed revision of the regulations at Sec.  
412.64(b)(3)(i) to reflect the most recent OMB standards for 
delineating statistical areas adopted by CMS.
    In addition, since publication of the proposed rule we discovered 
that, in the FY 2015 IPPS/LTCH proposed rule, for five of the Lugar 
counties, we had erroneously printed the names and codes of the entire 
Metropolitan Statistical Areas rather than the Metropolitan Division 
names and codes. Because we recognize Metropolitan Divisions as CBSAs, 
we should have printed the division names and codes for the following 
counties: Starke County, IN; Fannin County, TX; Hill County, TX; Van 
Zandt County, TX; and Island County, WA. The table below contains the 
corrected listing of the rural counties designated as urban under 
section 1886(d)(8)(B) of the Act. We note that this error was made only 
in the chart; that is, the wage index tables and data associated the FY 
2015 IPPS/LTCH PPS proposed rule (available via the Internet on the CMS 
Web site) properly captured the Metropolitan Divisions for hospitals in 
these five counties. We are finalizing that, effective for discharges 
on or after October 1, 2014, in accordance with section 1886(d)(8)(B) 
of the Act, hospitals located in the rural counties listed in the first 
column of the chart below will be designated as part of the urban area 
listed in the second column based on the finalized criteria discussed 
above.
    We note that rural counties that no longer meet the qualifying 
criteria to be Lugar are discussed in section III.H.3.c. of the 
preamble of this final rule.

        Rural Counties Containing Hospitals Redesignated as Urban Under Section 1886(d)(8)(B) of the Act
                              [Based on new OMB delineations and census 2010 data]
----------------------------------------------------------------------------------------------------------------
                      Rural county                               Lugar designated CBSA
-----------------------------------------------------------------------------------------------        NEW
             County name                     State         CBSA             CBSA name
----------------------------------------------------------------------------------------------------------------
Chambers County......................  AL                  12220  Auburn-Opelika, AL..........  New.
Cherokee County......................  AL                  40660  Rome, GA....................  ................
Cleburne County......................  AL                  11500  Anniston-Oxford-              New.
                                                                   Jacksonville, AL.
Macon County.........................  AL                  12220  Auburn-Opelika, AL..........  ................
Talladega County.....................  AL                  11500  Anniston-Oxford-              ................
                                                                   Jacksonville, AL.
Denali Borough.......................  AK                  21820  Fairbanks, AK...............  New.
Hot Spring County....................  AR                  26300  Hot Springs, AR.............  ................
Litchfield County....................  CT                  35300  New Haven-Milford, CT.......  ................
Bradford County......................  FL                  27260  Jacksonville, FL............  ................
Levy County..........................  FL                  23540  Gainesville, FL.............  ................
Washington County....................  FL                  37460  Panama City, FL.............  New.
Chattooga County.....................  GA                  40660  Rome, GA....................  ................
Jackson County.......................  GA                  12060  Atlanta-Sandy Springs-        ................
                                                                   Roswell, GA.
Lumpkin County.......................  GA                  12060  Atlanta-Sandy Springs-        ................
                                                                   Roswell, GA.
Polk County..........................  GA                  40660  Rome, GA....................  ................
Talbot County........................  GA                  17980  Columbus, GA-AL.............  ................
Oneida County........................  ID                  36260  Ogden-Clearfield, UT........  New.
Christian County.....................  IL                  44100  Springfield, IL.............  ................
Iroquois County......................  IL                  28100  Kankakee, IL................  ................

[[Page 49979]]

 
Logan County.........................  IL                  44100  Springfield, IL.............  ................
Mason County.........................  IL                  37900  Peoria, IL..................  ................
Ogle County..........................  IL                  40420  Rockford, IL................  ................
Union County.........................  IL                  16060  Carbondale-Marion, IL.......  ................
Clinton County.......................  IN                  29200  Lafayette-West Lafayette, IN  ................
Greene County........................  IN                  14020  Bloomington, IN.............  New.
Henry County.........................  IN                  26900  Indianapolis-Carmel-          ................
                                                                   Anderson, IN.
Marshall County......................  IN                  43780  South Bend-Mishawaka, IN-MI.  New.
Parke County.........................  IN                  45460  Terre Haute, IN.............  New.
Spencer County.......................  IN                  21780  Evansville, IN-KY...........  ................
Starke County........................  IN                  23844  Gary, IN....................  ................
Tipton County........................  IN                  26900  Indianapolis-Carmel-          New.
                                                                   Anderson, IN.
Warren County........................  IN                  29200  Lafayette-West Lafayette, IN  ................
Boone County.........................  IA                  11180  Ames, IA....................  ................
Buchanan County......................  IA                  47940  Waterloo-Cedar Falls, IA....  ................
Cedar County.........................  IA                  26980  Iowa City, IA...............  ................
Delaware County......................  IA                  20220  Dubuque, IA.................  New.
Iowa County..........................  IA                  26980  Iowa City, IA...............  New.
Jasper County........................  IA                  19780  Des Moines-West Des Moines,   New.
                                                                   IA.
Franklin County......................  KS                  28140  Kansas City, MO-KS..........  New.
Nelson County........................  KY                  31140  Louisville/Jefferson County,  New.
                                                                   KY-IN.
Assumption Parish....................  LA                  12940  Baton Rouge, LA.............  ................
Jefferson Davis Parish...............  LA                  29340  Lake Charles, LA............  New.
St. Landry Parish....................  LA                  29180  Lafayette, LA...............  New.
Oxford County........................  ME                  30340  Lewiston-Auburn, ME.........  New.
Caroline County......................  MD                  12580  Baltimore-Columbia-Towson,    New.
                                                                   MD.
Franklin County......................  MA                  44140  Springfield, MA.............  New.
Allegan County.......................  MI                  24340  Grand Rapids-Wyoming, MI....  ................
Ionia County.........................  MI                  24340  Grand Rapids-Wyoming, MI....  New.
Lenawee County.......................  MI                  11460  Ann Arbor, MI...............  New.
New.aygo County......................  MI                  24340  Grand Rapids-Wyoming, MI....  New.
Shiawassee County....................  MI                  29620  Lansing-East Lansing, MI....  ................
Tuscola County.......................  MI                  40980  Saginaw, MI.................  ................
Goodhue County.......................  MN                  33460  Minneapolis-St. Paul-         New.
                                                                   Bloomington, MN-WI.
Meeker County........................  MN                  33460  Minneapolis-St. Paul-         New.
                                                                   Bloomington, MN-WI.
Rice County..........................  MN                  33460  Minneapolis-St. Paul-         New.
                                                                   Bloomington, MN-WI.
Pearl River County...................  MS                  25060  Gulfport-Biloxi-Pascagoula,   ................
                                                                   MS.
Stone County.........................  MS                  25060  Gulfport-Biloxi-Pascagoula,   New.
                                                                   MS.
Dade County..........................  MO                  44180  Springfield, MO.............  ................
Otoe County..........................  NE                  30700  Lincoln, NE.................  New.
Douglas County.......................  NV                  16180  Carson City, NV.............  New.
Lyon County..........................  NV                  16180  Carson City, NV.............  ................
Los Alamos County....................  NM                  42140  Santa Fe, NM................  ................
Cayuga County........................  NY                  45060  Syracuse, NY................  ................
Cortland County......................  NY                  27060  Ithaca, NY..................  New.
Genesee County.......................  NY                  40380  Rochester, NY...............  ................
Greene County........................  NY                  10580  Albany-Schenectady-Troy, NY.  ................
Lewis County.........................  NY                  48060  Watertown-Fort Drum, NY.....  New.
Montgomery County....................  NY                  10580  Albany-Schenectady-Troy, NY.  New.
Schuyler County......................  NY                  27060  Ithaca, NY..................  ................
Seneca County........................  NY                  40380  Rochester, NY...............  New.
Camden County........................  NC                  47260  Virginia Beach-Norfolk-       New.
                                                                   Newport News, VA-NC.
Caswell County.......................  NC                  15500  Burlington, NC..............  ................
Granville County.....................  NC                  20500  Durham-Chapel Hill, NC......  ................
Greene County........................  NC                  24780  Greenville, NC..............  New.
Harnett County.......................  NC                  39580  Raleigh, NC.................  ................
Polk County..........................  NC                  43900  Spartanburg, SC.............  ................
Wilson County........................  NC                  40580  Rocky Mount, NC.............  New.
Traill County........................  ND                  24220  Grand Forks, ND-MN..........  New.
Ashtabula County.....................  OH                  17460  Cleveland-Elyria, OH........  ................
Champaign County.....................  OH                  44220  Springfield, OH.............  ................
Columbiana County....................  OH                  49660  Youngstown-Warren-Boardman,   ................
                                                                   OH-PA.
Harrison County......................  OH                  48260  Weirton-Steubenville, WV-OH.  New.
Preble County........................  OH                  19380  Dayton, OH..................  New.
Clinton County.......................  PA                  48700  Williamsport, PA............  ................
Fulton County........................  PA                  25180  Hagerstown-Martinsburg, MD-   New.
                                                                   WV.
Greene County........................  PA                  38300  Pittsburgh, PA..............  ................
Lawrence County......................  PA                  38300  Pittsburgh, PA..............  New.

[[Page 49980]]

 
Schuylkill County....................  PA                  39740  Reading, PA.................  ................
Susquehanna County...................  PA                  13780  Binghamton, NY..............  ................
Adjuntas Municipio...................  PR                  38660  Ponce, PR...................  New.
Coamo Municipio......................  PR                  41980  San Juan-Carolina-Caguas, PR  New.
Las Mar[iacute]as Municipio..........  PR                  32420  Mayag[uuml]ez, PR...........  New.
Maricao Municipio....................  PR                  32420  Mayag[uuml]ez, PR...........  New.
Salinas Municipio....................  PR                  25020  Guayama, PR.................  New.
Clarendon County.....................  SC                  44940  Sumter, SC..................  ................
Colleton County......................  SC                  16700  Charleston-North Charleston,  New.
                                                                   SC.
Lee County...........................  SC                  44940  Sumter, SC..................  ................
Marion County........................  SC                  22500  Florence, SC................  New.
New berry County.....................  SC                  17900  Columbia, SC................  New.
Meigs County.........................  TN                  17420  Cleveland, TN...............  ................
Blanco County........................  TX                  12420  Austin-Round Rock, TX.......  New.
Bosque County........................  TX                  47380  Waco, TX....................  ................
Calhoun County.......................  TX                  47020  Victoria, TX................  New.
Fannin County........................  TX                  19124  Dallas-Plano-Irving, TX.....  ................
Grimes County........................  TX                  17780  College Station-Bryan, TX...  ................
Harrison County......................  TX                  30980  Longview, TX................  ................
Henderson County.....................  TX                  46340  Tyler, TX...................  ................
Hill County..........................  TX                  23104  Fort Worth-Arlington, TX....  New.
Milam County.........................  TX                  12420  Austin-Round Rock, TX.......  ................
Van Zandt County.....................  TX                  19124  Dallas-Plano-Irving, TX.....  ................
Willacy County.......................  TX                  15180  Brownsville-Harlingen, TX...  ................
King and Queen County................  VA                  40060  Richmond, VA................  New.
Louisa County........................  VA                  40060  Richmond, VA................  New.
Madison County.......................  VA                  16820  Charlottesville, VA.........  New.
Orange County........................  VA                  47900  Washington-Arlington-         New.
                                                                   Alexandria, DC-VA-MD-WV.
Page County..........................  VA                  25500  Harrisonburg, VA............  ................
Shenandoah County....................  VA                  49020  Winchester, VA-WV...........  ................
Southampton County...................  VA                  47260  Virginia Beach-Norfolk-       New.
                                                                   Newport News, VA-NC.
Surry County.........................  VA                  47260  Virginia Beach-Norfolk-       New.
                                                                   Newport News, VA-NC.
Island County........................  WA                  42644  Seattle-Bellevue-Everett, WA  ................
Mason County.........................  WA                  36500  Olympia-Tumwater, WA........  ................
Jackson County.......................  WV                  16620  Charleston, WV..............  ................
Morgan County........................  WV                  25180  Hagerstown-Martinsburg, MD-   New.
                                                                   WV.
Roane County.........................  WV                  16620  Charleston, WV..............  ................
Green Lake County....................  WI                  22540  Fond du Lac, WI.............  ................
Jefferson County.....................  WI                  33340  Milwaukee-Waukesha-West       ................
                                                                   Allis, WI.
Walworth County......................  WI                  33340  Milwaukee-Waukesha-West       ................
                                                                   Allis, WI.
----------------------------------------------------------------------------------------------------------------

a. New Lugar Areas for FY 2015
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077), we stated 
that of the 127 qualifying counties identified as Lugar counties based 
on the new OMB delineations, 58 counties would be newly designated as 
Lugar for FY 2015 if we finalize our proposed adoption of the new OMB 
delineations. Hospitals in these counties, with at least 25 percent of 
their workers commuting to a higher wage area, effective October 1, 
2014, would be deemed to be located in the CBSA to which the highest 
number of their workers commute (which is identified in the column 
titled ``Lugar Designated CBSA'' in the table above). Hospitals in 
these counties would receive the reclassified urban wage index of the 
corresponding Lugar Designated CBSA, unless they choose to waive their 
Lugar status, as discussed later in this section.
    In the proposed rule (79 FR 28077), we stated that some areas that 
are currently urban counties would be geographically rural if we 
adopted the new OMB delineations and would meet the requirements for 
redesignation as Lugar areas. As described in section III.B.2.e.(2) of 
the preamble of the proposed rule, we proposed a 3-year hold harmless 
transitional wage index adjustment for hospitals located in urban 
counties that become rural under the new OMB delineations. Because 
Lugar status is a form of redesignation, hospitals that currently are 
located in urban counties that would become rural under the new OMB 
delineations and are also considered Lugar areas under the new OMB 
delineations would not be eligible for the 3-year transition wage index 
adjustment unless they chose to waive Lugar status for FY 2015 (as 
discussed later in this section) and sought no other form of wage index 
reclassification.
    As discussed above, we did not receive any public comments with 
regard to our proposal to use the new OMB delineations to identify 
rural counties that would qualify as ``Lugar'' under section 
1886(d)(8)(B) of the Act, and we are finalizing the policy as proposed. 
We refer readers to the summary of public comments and our responses 
regarding the proposed transition policies for the wage index as a 
result of adoption of the OMB delineations for FY 2015 in section 
III.B.2.e. of the preamble of this final rule.

[[Page 49981]]

b. Hospitals Redesignated Under Section 1886(d)(8)(B) of the Act 
Seeking Reclassification by the MGCRB
    As in the past, hospitals redesignated under section 1886(d)(8)(B) 
of the Act are also eligible to be reclassified to a different area by 
the MGCRB. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077), we 
stated that by using Table 4C associated with the proposed rule (which 
is available via the Internet on the CMS Web site), affected hospitals 
could compare the reclassified wage index for the labor market area 
into which they would be reclassified by the MGCRB to the reclassified 
wage index for the area to which they are redesignated under section 
1886(d)(8)(B) of the Act. We stated that hospitals may withdraw from an 
MGCRB reclassification within 45 days of the publication of the FY 2015 
proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51598 through 51599) for the procedural rules and 
requirements for a hospital that is redesignated under section 
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB, 
as well as our policy of measuring the urban area, exclusive of the 
Lugar County, for purposes of meeting proximity requirements.)
    We treat New England deemed counties in a manner consistent with 
how we treat Lugar counties. (We refer readers to the FY 2008 IPPS 
final rule with comment period (72 FR 47337 through 47338) for a 
discussion of this policy.)
    Since publication of the proposed rule, we discovered that there 
are four hospitals in rural counties that are newly deemed Lugar areas 
for FY 2015 that also have MGCRB reclassifications to the same CBSAs to 
which they are redesignated as Lugar. Lugar hospitals are treated like 
reclassified hospitals for purposes of determining their applicable 
wage index and receive the reclassified wage index for the urban area 
to which they have been redesignated. Because the Lugar redesignated 
CBSA is now the same as the MGCRB reclassified CBSA, the MGCRB 
reclassification becomes redundant. We note that hospitals with Lugar 
redesignations and hospitals with MGCRB reclassifications receive the 
wage index for hospitals that are reclassified as provided in Table 4C-
2 associated with this final rule (which is available via the Internet 
on the CMS Web site). Table 9A-2 associated with this final rule (which 
is available via the Internet on the CMS Web site) reflects the 
reclassified and redesignated hospitals. Hospitals that are 
redesignated as Lugar are indicated as such when the ``Lugar'' column 
is populated. Although we did indicate in the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28077) that hospitals redesignated as Lugar that 
also had an MGCRB reclassification may compare the reclassified wage 
index for the labor market area into which they would be reclassified 
by the MGCRB to the reclassified wage index for the area to which they 
are redesignated under section 1886(d)(8)(B) of the Act, and terminate 
or withdraw from an MGCRB reclassification within 45 days of the 
publication of the proposed rule, we acknowledge that we did not 
highlight these four hospitals that also are Lugar that would have 
redundant reclassifications. We also note that these hospitals did not 
send requests to the MGCRB to terminate their reclassifications. 
Because the new Lugar status would deem these hospitals redesignated to 
the same area to which they have an approved MGCRB reclassification, 
the reclassified wage index would be the same for these four hospitals 
in either scenario. We realize that, for this reason, the hospitals may 
not have seen a need to withdraw the MGCRB reclassification. Because we 
did not state in the proposed rule that we would expect that these 
affected hospitals would be terminating the remaining years of their 3-
year reclassification period, for FY 2015 we are not updating the Lugar 
column on Table 9A-2 for this final rule. However, we have indicated in 
a footnote that, under the new OMB delineations, these providers are 
now redesignated as Lugar to the same area to which they have an 
existing MGCRB reclassification that they did not terminate. We 
emphasize that the effect on the wage index of these four hospitals is 
immaterial because hospitals redesignated as Lugar as well as hospitals 
with approved MGCRB reclassifications both receive the reclassified 
wage index for the urban area to which they have been redesignated or 
reclassified.

    Hospitals Redesignated as Lugar to an Area Where They Have an Approved MGCRB Reclassification for FY 2015
----------------------------------------------------------------------------------------------------------------
                                                                                                      MGCRB
        CMS Certification No. (CCN)                 Rural county name            Lugar CBSA     reclassification
                                                                                                      CBSA
----------------------------------------------------------------------------------------------------------------
150076.....................................  Marshall County, IN............             43780             43780
190017.....................................  St. Landry Parish, LA..........             29180             29180
390016.....................................  Lawrence County, PA............             38300             38300
420030.....................................  Colleton County, SC............             16700             16700
----------------------------------------------------------------------------------------------------------------

c. Rural Counties No Longer Meeting the Criteria To Be Redesignated as 
Lugar
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28077 through 
28078), we discussed that if we adopted the new OMB delineations, 29 
rural counties would no longer meet the qualifying criteria to be 
redesignated as Lugar effective October 1, 2014, either because they 
would be geographically located in an urban area, or they would fail to 
meet the 25 percent cumulative out-migration threshold with application 
of the new 2010 Census commuting data. Since the publication of the 
proposed rule, we have discovered a mistake where we inadvertently did 
not account for Davidson County, NC. Therefore, the number of rural 
counties that will no longer meet the qualifying criteria to be 
redesignated as Lugar effective October 1, 2014, as indicated above, is 
30 as opposed to 29. We are correcting this oversight in the preamble 
of this final rule.
    Counties that were deemed urban under section 1886(d)(8)(B) of the 
Act in FY 2014, but would be geographically located in an urban area 
under the new OMB delineations for FY 2015 are:

Windham County, CT
Flagler County, FL
Walton County, FL
Morgan County, GA
Peach County, GA
De Witt County, IL
Allen County, KY
St. James Parrish, LA
Montcalm County, MI
Fillmore County, MN
Davidson County, NC
Lincoln County, NC

[[Page 49982]]

Cotton County, OK
Linn County, OR
Adams County, PA
Monroe County, PA
Falls County, TX
Buckingham County, VA
Floyd County, VA
Green County, WI

    Counties that would fail to meet the 25-percent threshold in FY 
2015 are:

Banks County, GA
Hendry County, FL
Bingham County, ID
Oceana County, MI
Columbia County, NY
Sullivan County, NY
Wyoming County, NY
Oconee County, SC
Middlesex County, VA
Wahkiakum County, WA

    In section III.B.2.e.(2) of the preamble of the proposed rule, to 
help ease dramatic negative impacts in payment for hospitals designated 
as urban under the current FY 2014 OMB delineations, but would be 
classified as rural under the new OMB delineations, for FYs 2015, 2016, 
and 2017, assuming no other form of wage index reclassification or 
redesignation is granted, we proposed to assign these hospitals the FY 
2015 area wage index value of the urban CBSA to which they 
geographically belonged in FY 2014 (with the rural and imputed floors 
applied and with the rural floor budget neutrality adjustment applied 
to the area wage index). (For purposes of the wage index computation, 
the wage data of these hospitals would remain assigned to the statewide 
rural area in which they are located.) Similarly, we proposed that the 
same 3-year transition apply to hospitals located in those counties 
that would lose their deemed urban designation under section 
1886(d)(8)(B) of the Act and would become rural if we adopt the new OMB 
delineations. Because these hospitals would, in fact, lose their 
designated urban status, we proposed to extend the 3-year hold harmless 
transitional wage index adjustment to these hospitals located in 
counties formerly designated as urban under section 1886(d)(8)(B) of 
the Act. That is, for FYs 2015, 2016, and 2017, assuming no other form 
of wage index reclassification or redesignation is granted, we proposed 
to assign these hospitals the FY 2015 area wage index value of the 
urban CBSA to which they were designated as urban in FY 2014 (with the 
rural and imputed floors applied and with the rural floor budget 
neutrality adjustment applied). We proposed to use the wage data from 
these hospitals as part of computing the rural wage index. In addition, 
during this 3-year transition period, these hospitals would be eligible 
to apply for reclassification by the MGCRB. As discussed in section 
III.B.2.e.(3) of the preamble of the proposed rule, we proposed that if 
a hospital is currently located in an urban county that would become 
rural for FY 2015 under the new OMB delineations, and such hospital 
seeks and is granted any reclassification or redesignation during FYs 
2015, 2016, or 2017, the hospital would permanently lose its 3-year 
transitional assigned wage index, and would not be able to reinstate 
it. Similarly, we proposed that this policy also apply to hospitals 
located in those counties that would lose their deemed urban 
designation under section 1886(d)(8)(B) of the Act and would become 
rural if we adopt the new OMB delineations. In FY 2018, we proposed 
that these hospitals would receive their statewide rural wage index.
    As indicated earlier, we did not receive any public comments with 
regard to our proposal to use the new OMB delineations to identify 
rural counties that would qualify as ``Lugar'' under section 
1886(d)(8)(B) of the Act. Therefore, we are finalizing the policy and 
designations as proposed. As discussed previously, for FYs 2015, 2016, 
and 2017, assuming no other form of wage index reclassification or 
redesignation is granted, we are assigning hospitals that are in urban 
counties that will become rural under the new OMB delineations to the 
FY 2015 area wage index value of the urban CBSA to which they 
geographically belonged in FY 2014 (with the rural and imputed floors 
applied and with the rural floor budget neutrality adjustment applied 
to the area wage index). (For purposes of the wage index computation, 
the wage data of these hospitals will remain assigned to the statewide 
rural area in which they are located.) Similarly, the same 3-year 
transition will apply to hospitals located in those counties that will 
lose their deemed urban designation under section 1886(d)(8)(B) of the 
Act and will become rural under the new OMB delineations. We will use 
the wage data from these hospitals as part of computing the rural wage 
index. In FY 2018, these hospitals will receive their statewide rural 
wage index. Furthermore, if any such hospital seeks and is granted any 
reclassification or redesignation during FYs 2015, 2016, or 2017, the 
hospital will permanently lose its 3-year transitional assigned wage 
index and will not be able to reinstate it. We refer readers to 
summaries of public comments and our responses regarding proposed 
transition policies for the wage index in section III.B.2.e. of the 
preamble of this final rule.
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
    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, including being 
considered rural for the DSH payment adjustment, effective for the 
fiscal year in which the hospital receives the out-migration 
adjustment. (We refer readers to a discussion of DSH payment adjustment 
under section IV.F. of the preamble of this final rule.)
    In addition, we adopted a minor procedural change in that rule 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. 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. Therefore, under the procedural change, a Lugar hospital 
that requests to waive its urban status in order to receive the rural 
wage index in addition to the out-migration adjustment would be deemed 
to have accepted the out-migration adjustment and agrees to be treated 
as rural for the duration of its 3-year eligibility period, unless, 
prior to its second or third year of eligibility, the hospital 
explicitly notifies CMS in writing, within the required period 
(generally 45 days from the publication of the proposed rule), that it 
instead elects to return to its deemed urban status and no longer 
wishes to accept the out-migration adjustment. If the hospital does 
notify CMS that it is electing to return to its deemed urban status, it 
would again be treated as urban for all IPPS payment purposes.
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51599 through 51600) for a detailed discussion of the policy and 
process for waiving Lugar status for the out-migration adjustment.
    Comment: One commenter sought clarification about whether a 
hospital can waive Lugar status in other

[[Page 49983]]

instances, such as to retain a special rural status such as CAH, SCH, 
or MDH, and not just when a hospital is eligible for the out-migration 
adjustment.
    Response: As stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51599 through 51600, the statute provides two methods for a Lugar 
hospital to be treated as rural for Medicare payment purposes: (1) If 
the hospital is eligible for an out-migration adjustment under section 
1886(d)(13) of the Act; or (2) if the hospital applies for an urban to 
rural reclassification under section 1886(d)(8)(E) of the Act. There 
are no other provisions under the Medicare statute that would allow a 
Lugar hospital to be treated as a rural provider.
5. Update of Application of Urban to Rural Reclassification Criteria
    Section 401(a) of the Medicare, Medicaid, and SCHIP Balanced Budget 
Refinement Act of 1999 (Pub. L. 106-113), which amended section 
1886(d)(8) of the Act by adding a new paragraph (E), directed the 
Secretary to treat any subsection (d) hospital located in an urban area 
as being located in the rural area of the State in which the hospital 
is located, providing that the hospital applied for reclassification in 
a manner determined by the Secretary and met certain criteria. As 
discussed in the FY 2001 interim final rule (65 FR 47029 through 
47031), we codified in regulation at Sec.  412.103 the application 
process and the qualifying criteria for any hospital seeking rural 
reclassification.
    In order to be approved for a rural reclassification, a hospital 
that is located in an urban area must meet one of the following four 
criteria under section 1886(d)(8)(E)(ii) of the Act (codified at Sec.  
412.103): (1) The hospital is located in a rural census tract of an 
MSA, as determined under the most recent version of the Goldsmith 
Modification, the Rural-Urban Commuting Area (RUCA) codes; (2) the 
hospital is located in an area designated by any law or regulation of 
such State as a rural area or is designated by such State as a rural 
hospital; (3) the hospital would qualify as a RRC or SCH if the 
hospital were located in an urban area; and (4) the hospital meets such 
other criteria as the Secretary may specify.
    On February 28, 2013, OMB issued OMB Bulletin No. 13-01, which 
established revised delineations for Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas, and 
provided guidance on the use of the delineations of these statistical 
areas. These delineations are based on 2010 decennial Census data. 
Several modifications of RUCA codes were necessary to take into account 
updated commuting data and revised OMB delineations. We refer readers 
to the U.S. Department of Agriculture's Economic Research Service Web 
site for a detailed listing of updated RUCA codes found at: http://www.ers.usda.gov/data-products/rural-urban-commuting-area-codes.aspx. 
The updated RUCA code definitions were introduced in late 2013.
    As discussed at Sec.  412.103(f), the duration of an approved rural 
reclassification remains in effect without need for reapproval unless 
there is a change in the circumstances under which the classification 
was approved. If a hospital located in an urban area was approved for a 
rural reclassification under Sec.  412.103(a)(1), that reclassification 
would no longer be valid if the hospital is no longer located within a 
rural census tract of an MSA defined as an RUCA. Therefore, in the FY 
2015 IPPS/LTCH PPS proposed rule (79 FR 28078), we encouraged all 
hospitals with active rural reclassifications under section 
1886(d)(8)(E) of the Act to review their original reclassification 
application and determine whether the reclassification status would 
still apply. As discussed in section VI.C.2. of the preamble of the 
proposed rule, we proposed a 2-year grace period allowing affected CAHs 
additional time to seek a new rural reclassification without the threat 
of losing its CAH status. As discussed in section VI.C.2. of the 
preamble of the proposed rule, we did not propose a grace period for 
other types of hospitals to seek a new rural reclassification. We noted 
that rural reclassification status under Sec.  412.103 is effective as 
of the filing date of the application. Therefore, if the change in RUCA 
codes invalidates any hospital's rural reclassification status, we 
believe hospitals will have adequate time to apply for a new 
reclassification using an alternative qualification criterion specified 
at either Sec.  412.103(a)(2) or Sec.  412.103(a)(3). A rural referral 
center (RRC) or a sole community hospital (SCH) that continues to meet 
the appropriate qualification criteria would, in itself, qualify for a 
rural reclassification. If a complete application is received before 
October 1, 2014, and is approved by the CMS Regional Office, the 
hospital would experience no interruption in its rural status.
    Comment: Several commenters requested that additional provider 
types (SCHs and MDHs) be afforded the 2-year transition period of 
deemed rural status that was granted to CAHs. Commenters stated the 
critical role these hospitals serve in their communities, and cited the 
administrative burden that would be required to obtain rural status in 
order to maintain their provider type. Commenters asserted that 
hospitals that obtain an urban to rural reclassification are not 
entitled to receive an outmigration adjustment and would require 
additional time to assess their appropriate options.
    Response: We thank commenters for sharing their concerns. However, 
we do not believe that extending a 2-year transition period of deemed 
rural status is necessary for additional provider types. While it is 
true that there are potential payment consequences for a CAH, SCH, or 
MDH currently located in a rural area that becomes urban under the new 
OMB delineations, the payment consequences for CAHs are generally 
greater, because, unlike SCHs and MDHs, CAHs are entirely excluded from 
the IPPS and would face an end to payments based on 101 percent of 
their reasonable costs. In addition, given the different Conditions of 
Participation (CoPs) for CAHs, and that it would be generally more 
difficult for a CAH to have to meet the hospital CoPs instead of the 
CAH CoPs, only a CAH also faces the potential loss of its ability to 
continue to participate in the Medicare and Medicaid programs. 
Specifically, to avoid termination not only of its CAH status (and 
associated cost-based reimbursement), but of its Medicare agreement in 
its entirety, the CAH would have to convert back to a hospital, 
including demonstrating via a survey that it complies with the hospital 
CoPs, which are generally more stringent than those for CAHs. We 
believe that the combination of the generally greater payment 
consequences for CAHs relative to other provider types combined with 
the unique consequences for CAHs with respect to the CoPs make it 
appropriate for CAHs to be afforded a 2-year transition period in which 
to reclassify not afforded to other provider types.
    SCHs and MDHs that were located in rural areas that became urban 
under the new OMB delineations could have known of the upcoming change 
since February 2013 (when OMB published the new delineations); thus, 
these hospitals have had adequate time to assess options. SCHs and MDHs 
still can seek approval for rural reclassification for FY 2015 under 
Sec.  412.103 if they meet the requirements of this section, provided 
that they apply before the beginning of FY 2015. This approval of rural 
status would be effective as of the date of the application. If any 
hospital's wage index is negatively affected due to the adoption of the 
new OMB

[[Page 49984]]

delineations, the hospital will receive a 50/50 blended wage index for 
FY 2015 (as discussed previously).
    With respect to the out-migration adjustment, commenters noted 
correctly that hospitals reclassified rural under section 412.103 are 
not eligible to receive an out-migration adjustment. Section 
1886(d)(13)(G) of the Act specifies that a hospital is not eligible to 
receive an out-migration adjustment if it is granted any form of wage 
index reclassification, including urban to rural reclassification. We 
believe that a hospital that chooses to reclassify to a particular 
labor market area should not also receive an additional payment benefit 
to reflect commuting patterns within its home area.
    After consideration of the public comments we received, we are not 
implementing any additional changes to grant other provider types a 
transition period during which to reclassify as rural similar to that 
being adopted for CAHs. We refer readers to section VI.C.2. of the 
preamble of this final rule for a discussion of the CAH transition 
period policy.

I. FY 2015 Wage Index Adjustment Based on Commuting Patterns of 
Hospital Employees

    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
    When this provision was implemented for the FY 2005 wage index, we 
analyzed commuting data compiled by the U.S. Census Bureau which was 
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 it contained questions on 
where residents in each county worked (69 FR 49062). However, the 2010 
Census was ``short form'' only; therefore, this information was not 
collected as part of the 2010 Census. The Census Bureau is working with 
CMS to provide an alternative dataset based on the latest available 
data that is expected to meet our needs for developing a new out-
migration adjustment. We believe we will have the necessary time to 
obtain, review and analyze the data in order to propose new out-
migration adjustments based on new commuting patterns developed from 
the 2010 Census data beginning with FY 2016. 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. The data used for 
the FY 2014 out-migration adjustment are the most recent data that have 
been analyzed, and we believe that these data are appropriate to 
establish the qualifying counties. Therefore, in the FY 2015 IPPS/LTCH 
PPS proposed rule (79 FR 28079 through 28080), we proposed that the FY 
2015 out-migration adjustments continue to be based on the 2000 Census 
data. We also proposed that the FY 2015 out-migration adjustments 
continue to be based on the policies, procedures, and computation that 
were used for the FY 2014 out-migration adjustment.
    We did not receive any public comments with regard to the out-
migration adjustment for FY 2015. Therefore, for FY 2015, we are 
finalizing our proposal that the FY 2015 out-migration adjustment 
continue to be based on the 2000 Census data used for the FY 2014 out-
migration adjustment. We also are finalizing our proposal that the out-
migration adjustment be based on the policies, procedures, and 
computation that were used for the FY 2014 out-migration adjustment. 
(We refer readers to a full discussion of the 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 4J, which is available via the Internet on the 
CMS Web site, lists the out-migration adjustments for the FY 2015 wage 
index.
    Section 1886(d)(13)(F) of the Act states that ``[a] wage index 
increase under this paragraph shall be effective for a period of 3 
fiscal years, except that the Secretary shall establish procedures 
under which a subsection (d) hospital may elect to waive the 
application of such wage index increase.'' Therefore, for FY 2015, 
because we are continuing to use the out-migration adjustment data used 
for FY 2014, consistent with the statute, we also proposed to allow 
hospitals that qualified in FY 2013 or FY 2014 to receive the out-
migration adjustment based on the commuting data and the CBSA 
delineations used for FY 2014 to continue to receive the same out-
migration adjustment for the remainder of their 3-year qualification 
period. Similarly, if a hospital qualifies for and opts to receive the 
out-migration adjustment for the first time in FY 2015, we also 
proposed to allow that hospital to receive the out-migration adjustment 
based on the data used for FY 2014 for FYs 2015, 2016, and 2017. 
Accordingly, even if we propose to adopt new out-migration adjustment 
data for FY 2016, as we believe we will be able to do, hospitals that 
are already receiving an out-migration adjustment beginning with a 
fiscal year prior to FY 2016 would still receive their out-migration 
adjustment based on the data used for FY 2014 for the years that remain 
of their 3-year qualification period in FY 2016 and after.
    We did not receive any public comments with regard to our 
proposals. Therefore, we are finalizing our proposal that hospitals 
that qualified in FY 2013 or FY 2014 to receive the out-migration 
adjustment based on the commuting data and the CBSA delineations used 
for FY 2014 will continue to receive the same out-migration adjustment 
for the remainder of their 3-year qualification period. If a hospital 
qualifies for and opts to receive the out-migration adjustment for the 
first time in FY 2015, we will allow that hospital to receive the out-
migration adjustment based on the data used for FY 2014 for FYs 2015, 
2016, and 2017.
    We intend to address application of the FY 2016 out-migration 
adjustment in greater detail in the FY 2016 proposed rule. However, in 
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28079), we solicited 
public comments on how to implement the new out-migration adjustment 
data for FY 2016, given the statutory requirement at section 
1886(d)(13)(F) of the Act that an out-migration adjustment be effective 
for 3 fiscal years. We did not receive any public comments on how to 
implement the new out-migration adjustment data for FY 2016.
    As discussed in section III.B. of the preamble of this final rule, 
we are using OMB's new labor market area delineations based on the 2010 
Census data to identify counties qualifying as Lugar counties for FY 
2015. In section III.H.3 of the preamble of this final rule, we discuss 
hospitals located in rural counties that are deemed to be urban under 
section 1886(d)(8)(B) of the Act. These rural counties are known as 
``Lugar'' counties. Under the new OMB delineations, there are counties 
newly qualifying as Lugar as well as counties that were previously 
Lugar counties that will no longer meet the criteria to be redesignated 
as Lugar. As discussed in

[[Page 49985]]

section III.H.4. of the preamble of this final rule, if a Lugar 
hospital qualifies for and accepts the out-migration adjustment, it 
must waive its deemed urban status and can do so for the 3-year period 
for which the out-migration adjustment is effective. Therefore, 
hospitals located in counties newly designated as Lugar due to the new 
OMB delineations will have the choice to either maintain their Lugar 
status or waive it in order to receive the out-migration adjustment in 
FY 2015 based on the out-migration adjustment data used for FY 2014.
    On the other hand, there are hospitals in counties deemed to be 
Lugar under the current OMB delineations that waived their Lugar status 
for the out-migration adjustment, but are not Lugar under the new OMB 
delineations. These hospitals will continue to receive the out-
migration adjustment for the 3-year eligibility period through FY 2015 
or FY 2016. However, these hospitals that are located in urban counties 
under the new OMB delineations, and wish to continue to maintain their 
rural status effective October 1, 2014, must do so by reclassifying 
from urban to rural under Sec.  412.103. Section 1886(d)(13)(G) of the 
Act states that a hospital cannot simultaneously receive the out-
migration adjustment and be subject to a reclassification under section 
1886(d)(8) or 1886(d)(10) of the Act. Therefore, if such hospital is 
not located in a geographically rural area under the new OMB 
delineations, and reclassifies under Sec.  412.103 of the regulations 
in order to be treated as rural for IPPS purposes, the hospital is 
ineligible to receive an out-migration adjustment, even if the 3-year 
eligibility period has not expired.
    As discussed in section III.B.5. of the preamble of this final 
rule, we are finalizing our proposal to apply a 1-year blended wage 
index for any provider that experiences a decrease in wage index value 
due to the implementation of the new OMB labor market area 
delineations. This policy creates a wage index that is 50 percent of 
the wage index derived using the current FY 2014 OMB delineations, and 
50 percent of the wage index based on the new OMB delineations. As 
discussed in section III.B.2.e.(4) of the preamble of this final rule, 
as we proposed, we are applying this blended wage index value to any 
affected hospital in a budget neutral manner. However, we proposed that 
hospitals receiving the out-migration adjustment would have it added to 
the result of the 50/50 blended wage index, after budget neutrality is 
applied. We established the blended wage index transition adjustment 
specifically to address any negative impact that may be caused by the 
adoption of the new OMB delineations in FY 2015. To specifically 
identify and address any such negative payment impact, we proposed to 
apply the out-migration adjustment independent of the blended wage 
index and other wage index adjustments (for example, the rural floor) 
and related budget neutrality adjustments. This is consistent with our 
current policy to apply the out-migration adjustment after all other 
wage index adjustments and related budget neutrality adjustments have 
been applied. Therefore, we believe the out-migration adjustment would 
be properly applied as a supplemental addition to a hospital's final 
wage index value, similar to our treatment of hospitals receiving the 
frontier State floor value of 1.00, as described under 42 CFR 
412.64(m), that also qualify for an out-migration adjustment and would 
receive that adjustment.
    One group of commenters suggested CMS made an error in calculating 
the rural wage index for Connecticut under the old OMB delineations (as 
discussed in section III.B.2.e.(4) of the preamble of this final rule) 
for the purpose of applying the proposed transition blend. We respond 
to this comment in section III.B.2.e.(4) of the preamble of this final 
rule, and we refer readers to this section for further discussion.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification that we will add the out-
migration adjustment for hospitals receiving such adjustment to the 
result of the 50/50 blended wage index, after budget neutrality is 
applied. Therefore, we will apply the out-migration adjustment 
independent of the blended wage index and other wage index adjustments 
(for example, the rural floor) and related budget neutrality 
adjustments.

J. Process for Requests for Wage Index Data Corrections

    The preliminary, unaudited Worksheet S-3 wage data and occupational 
mix survey data files for the proposed FY 2015 wage index were made 
available on September 13, 2013, through the Internet on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html.
    In the interest of meeting the data needs of the public, beginning 
with the proposed FY 2009 wage index, we post an additional public use 
file on our Web site that reflects the actual data that are used in 
computing the proposed wage index. The release of this 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 the scheduling 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 September 16, 2013, we instructed all MACs to 
inform the IPPS hospitals they service of the availability of the wage 
index data files and the process and timeframe for requesting revisions 
(including the specific deadlines listed below). We also instructed the 
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 September 13, 2013 wage and occupational mix data files, the 
hospital was to submit corrections along with complete, detailed 
supporting documentation to its MAC by November 21, 2013. 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 September 16, 2013 memorandum referenced above.
    In the September 16, 2013 memorandum, we also specified that a 
hospital requesting revisions to its occupational mix survey data was 
to copy its record(s) from the CY 2010 occupational mix preliminary 
files posted to the CMS Web site in September, highlight the revised 
cells on its spreadsheet, and submit its spreadsheet(s) and complete 
documentation to its MAC no later than November 21, 2013.
    The MACs notified the hospitals by early-February 2014 of any 
changes to the wage index data as a result of the desk reviews and the 
resolution of the hospitals' late-November revision requests. The MACs 
also submitted the revised data to CMS by late January 2014. CMS 
published the proposed wage index public use files that included 
hospitals' revised wage index data on February 20, 2014. Hospitals had 
until March 3, 2014, 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

[[Page 49986]]

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 April 9, 2014. The deadline for 
a hospital to request CMS intervention in cases where the hospital 
disagreed with the MAC's policy interpretations was April 16, 2014. We 
note that, beginning with the FY 2015 wage index, in accordance with 
the FY 2015 wage index timeline posted on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, the April appeals 
had to be sent via mail and email. We refer readers to the wage index 
timeline for complete details.
    Hospitals were given the opportunity to examine Table 2, which was 
listed in section VI. of the Addendum to the proposed rule and 
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html. Table 2 contained each 
hospital's proposed adjusted average hourly wage used to construct the 
wage index values for the past 3 years, including the FY 2011 data used 
to construct the proposed FY 2015 wage index. We noted that the 
proposed hospital average hourly wages shown in Table 2 only reflected 
changes made to a hospital's data that were transmitted to CMS by 
February 26, 2014.
    The final wage index data public use files were posted on May 2, 
2014 on the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2015-Wage-Index-Home-Page.html. The May 2014 public use files 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 described above (revisions 
submitted to CMS by the MACs by April 9, 2014).
    After the release of the May 2014 wage index data files, changes to 
the wage and occupational mix data could 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 April 9, 2014.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the February 20, 
2014 wage index public use files.
     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 May 2014 final public use files, a hospital 
believed that its wage or occupational mix data were incorrect due to a 
MAC or CMS error in the entry or tabulation of the final data, the 
hospital was 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 was required to send its 
request to CMS and to the MAC no later than June 2, 2014. Similar to 
the April appeals, beginning with the FY 2015 wage index, in accordance 
with the FY 2015 wage index timeline posted on the CMS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, the June appeals 
were required to be sent via mail and email to CMS and the MACs. We 
refer readers to the wage index timeline for complete details. (We 
refer readers to section II.K. of the preamble to this final rule where 
we are making revisions to the wage index timetable.)
    Verified corrections to the wage index data received timely by CMS 
and the MACs (that is, by June 2, 2014) were incorporated into the 
final wage index in this FY 2015 IPPS/LTCH PPS final rule, which will 
be effective October 1, 2014.
    We created the processes described above to resolve all substantive 
wage index data correction disputes before we finalize the wage and 
occupational mix data for the FY 2015 payment rates. Accordingly, 
hospitals that did not meet the procedural deadlines set forth above 
will not be afforded a later opportunity to submit wage index data 
corrections or to dispute the MAC's decision with respect to requested 
changes. Specifically, our policy is that hospitals that do not meet 
the procedural deadlines set forth above will not be permitted to 
challenge later, before the 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 
above provides hospitals with sufficient opportunity to bring errors in 
their wage and occupational mix data to the MAC's attention. Moreover, 
because hospitals had access to the final wage index data by early May 
2014, they had 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 2015 wage index by August 2014, and the implementation of 
the FY 2015 wage index on October 1, 2014. 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 June 2, 2014, we retain the right to make midyear 
changes to the wage index under very limited circumstances.
    Specifically, in accordance with 42 CFR 412.64(k)(1) of our 
existing regulations, we make midyear corrections to the wage index for 
an area only if a hospital can show that: (1) the MAC or CMS made an 
error in tabulating its data; and (2) the requesting hospital could not 
have known about the error or did not have an opportunity to correct 
the error, before the beginning of the fiscal year. For purposes of 
this provision, ``before the beginning of the fiscal year'' means by 
the June deadline for making corrections to the wage data for the 
following fiscal year's wage index (for example, June 2, 2014, for the 
FY 2015 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

[[Page 49987]]

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 June 2, 2014 
deadline for the FY 2015 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 June 2, 2014 deadline for the FY 2015 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.

K. Notice of Change to Wage Index Development Timetable

    As explained in section III.J. of the preamble of this final rule, 
the preliminary, unaudited Worksheet S-3 wage data and occupational mix 
survey data files for the proposed FY 2015 wage index were made 
available on September 13, 2013, through the Internet on the CMS Web 
site. The posting of these preliminary files initiates what is 
virtually a year-long cycle for developing the wage index associated 
with the following IPPS fiscal year. This lengthy, almost year-long 
cycle is unique to the development of the IPPS wage index, and occurs 
independently from the development of the IPPS proposed and final 
rules, which typically are published in the spring and summer each 
year. In addition, the wage index, which is based on hospitals' wage 
data reported on Worksheets S-3, Parts II and III of Form CMS-2552-10 
of the Medicare cost report and occupational mix data, is the only 
portion of the IPPS that historically has been subject to its own 
annual review process, first by the MACs, and then by CMS, followed by 
distinct opportunities for hospitals to appeal decisions made by the 
MACs or CMS. This process is separate and independent from the standard 
cost report settlement and appeals processes established under the 
regulations at 42 CFR 405.1800 through 405.1889.
    Although this unique wage index development timetable has been in 
place since the early days of the IPPS, the current timetable is rooted 
in changes adopted in the FY 1998 IPPS final rule with comment period 
(62 FR 45990 through 45993). However, with numerous legislative and 
regulatory changes made to the IPPS since FY 1998, the demands on 
hospitals, MACs, and CMS have increased substantially. As a result, it 
has become increasingly challenging for wage index stakeholders to 
manage the wage index timetable with competing priorities. For the FY 
2015 wage index, CMS made slight changes to the wage index development 
timetable, by posting the preliminary public use file (PUF) in 
September 2013 rather than in October 2013, which, in turn, moved back 
the deadline for hospitals to request revisions to the data displayed 
in that preliminary PUF to November 2013, instead of December 2013. In 
addition, the date for the MACs to complete desk reviews on that data 
was similarly moved to a slightly earlier deadline in early CY 2014. 
The FY 2015 Wage Index Development Timetable, which is posted on the 
CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2015-WI-Timeline.pdf, shows that 
hospitals have a little more than 2 months to request revisions to 
their data displayed in the September 13, 2013 preliminary PUF, until 
the commencement of the desk review process by the MACs on November 21, 
2013. The MACs also have a little more than 2 months to complete the 
desk reviews and submit revised cost report data to CMS by January 29, 
2014. Less than a month later, on February 20, 2014, the revised FY 
2015 wage index and occupational mix PUFs were posted on the CMS Web 
site. Ensuring the accuracy of the February PUF is extremely important 
and beneficial to hospitals because, as the timetable shows, it is the 
basis for hospitals to appeal data that are incorrect, with March 3, 
2014 being the last date that hospitals can request revisions to errors 
in the February 20, 2014 PUF.
    Therefore, we want to take steps to improve the accuracy of the 
February PUF, most importantly by proposing changes to the wage index 
timetables for future IPPS fiscal years that are much more significant 
and fundamental than the slight revisions to the timetable implemented 
for FY 2015. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28082), 
we stated that we believe that the changes we proposed in that proposed 
rule would not only improve the accuracy of the February PUF, but also 
would reduce the number of hospital appeals based on the February PUF. 
For example, as specified below, instead of the current timetable which 
only provides CMS with less than a month to review the MACs' desk 
reviews and prepare the February PUF, we proposed approximately 3 
months between the date that the MACs' desk reviews would end and the 
date that CMS would post the subsequent PUF. To allow hospitals and 
MACs adequate time to prepare for the changes to the wage index 
development timetable, we proposed to make significant changes 
beginning with the FY 2017 wage index cycle. We listed the proposed 
changes for FY 2017 in a table in the FY 2015 IPPS/LTCH PPS proposed 
rule (79 FR 28082) shown below side by side with the existing timetable 
so that commenters could read the proposed changes in the context of 
the existing timetable. Under the proposed changes for FY 2017, 
although we did not provide exact dates for the FY 2017 wage index 
timetable, we noted that, with every change listed, we intend to 
provide hospitals and MACs with the same or somewhat more time than 
under the current timetable to complete reviews and request revisions. 
We stated that the proposed revisions would not reduce the amount of 
time that either hospitals or MACs have to review wage data. Therefore, 
the proposed changes would not result in additional work on the part of 
the hospitals or MACs; in fact, in shifting the various dates, we 
expect that more time would be provided to hospitals, MACs, and CMS

[[Page 49988]]

to ensure an even more accurate wage index.

----------------------------------------------------------------------------------------------------------------
                Deadlines                     FY 2015 timetable               Proposed FY 2017 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web     September 13, 2013.......  Mid-May 2015.
 site.
Deadline for Hospitals to Request         November 21, 2013........  Early August 2015.
 Revisions to Preliminary PUF.
Deadline for MACs to Complete Desk        January 29, 2014.........  Mid-October 2015.
 Reviews.
Posting of February PUF on CMS Web site.  February 20, 2014........  Late January 2016.
Deadline Following Posting of February    March 3, 2014............  Mid-February 2016.
 PUF for Hospitals to Request Revisions.
Completion of Appeals by MACs and         April 9, 2014............  Mid- to Late March 2016.
 Transmission of Final Wage Data to CMS.
Deadline for Hospitals to Appeal in       April 16, 2014...........  Early April 2016.
 April.
Posting of Final Rule PUF...............  May 2, 2014..............  Late April 2016.
Deadline for Hospitals to Appeal in June  June 2, 2014.............  Late May 2016.
Expected Issuance of IPPS final rule....  August 1, 2014...........  August 1, 2016.
----------------------------------------------------------------------------------------------------------------

    With regard to the FY 2016 wage index cycle, we believe it can 
serve as a transition to the more significant changes we proposed for 
the FY 2017 wage index cycle. We believe that there are steps we can 
take to improve the accuracy of the February 2016 PUF by building in 
more time to the FY 2016 wage index review process as well. 
Specifically, in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28083), 
we stated that we were notifying hospitals of changes to the deadlines 
only in the beginning of the FY 2016 wage index timetable, as a 
transition to the more significant proposed changes for the entire FY 
2017 wage index timetable. That is, for FY 2016, we were only changing 
the following four dates: The posting of the preliminary wage index 
PUF; the posting of the CY 2013 occupational mix survey data 
preliminary PUF; the deadline for hospitals to request revisions to the 
wage data and occupational mix data preliminary PUFs; and the deadline 
for MACs to complete the desk reviews. We stated that we were not 
changing the remainder of the FY 2016 timetable at this time. We stated 
that we expect that making these changes for the FY 2016 timetable will 
improve the accuracy of the February 2016 PUF, and also mitigate the 
number of hospital appeals based on the February 2016 PUF. In addition, 
we believe these changes will help hospitals, MACs, and CMS adjust to 
the more significant timeline changes proposed for FY 2017. We listed 
only the changes for FY 2016 in the table shown below side by side with 
the existing FY 2015 timetable so that commenters could read the FY 
2016 changes in the context of the existing timetable. We stated that 
we were not listing dates that would remain unchanged for FY 2016.

----------------------------------------------------------------------------------------------------------------
               Deadlines                          FY 2015 timetable               Adjusted FY 2016 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary Wage Data PUF on  September 13, 2013.................  Late May 2014
 CMS Web site.
Posting of Preliminary CY 2013           September 13, 2013.................  Early to Mid-July 2014
 Occupational Mix Data PUF on CMS Web
 site.
Deadline for Hospitals to Request        November 21, 2013..................  Early October 2014
 Revisions to Preliminary PUF.
Deadline for MACs to Complete Desk       January 29, 2014...................  Mid-December 2014
 Reviews.
----------------------------------------------------------------------------------------------------------------

    Typically, the preliminary PUF initiating the start of an IPPS wage 
index fiscal year contains one spreadsheet with the Worksheet S-3 wage 
data for the applicable fiscal year on one tab, and another tab with 
the preliminary occupational mix data for that fiscal year. For the FY 
2016 wage index, new occupational mix survey data will be available for 
use, based on the CY 2013 occupational mix survey. Hospitals were 
required to submit their CY 2013 occupational mix surveys to their MACs 
no later than July 1, 2014. Therefore, we did not have the preliminary 
CY 2013 occupational mix survey data in time to post it simultaneously 
in late May 2014 with the preliminary FY 2016 wage data. Accordingly, 
as the table above indicates, we posted the preliminary FY 2016 wage 
data by itself first in late May 2014, followed by a separate posting 
of the preliminary CY 2013 occupational mix survey data when the data 
became available, in mid-July 2014.
    We invited public comments on our proposals set forth above to make 
revisions to the wage index timetables for FY 2017.
    Comment: Numerous commenters were supportive of the general concept 
of changing the wage index timeline, and that the overall accuracy of 
the wage index could be improved by altering the timing of the process. 
Commenters generally agreed with CMS' adjusted FY 2016 timetable, which 
specified that the preliminary PUF would be posted in May 2014, and 
hospitals would request revisions to the preliminary PUF by early 
October, 2014. Commenters believed the extra time between the posting 
of the preliminary PUF and the desk review program would allow 
hospitals more time to ``scrub'' their data. However, commenters also 
asked that CMS work with its MACs to ensure that the MACs also are 
meeting their respective deadlines, as some hospitals have noticed that 
their MACs missed deadlines to submit revisions to CMS.
    With respect to the adjustments to the FY 2017 timetable, the 
commenters believed that an early August 2015 deadline for hospitals to 
request revisions to the May 2015 preliminary PUFs was too ambitious 
because it would not provide sufficient time for hospitals to review 
their data, particularly when key personnel may be on vacation during 
the summer months. The commenters added that an August deadline would 
leave less time to compare the preliminary wage index information to 
the prior year's wage index data, given that the prior year's data are 
not even finalized and available to the public before August 1. Some 
commenters recommended an early October deadline, while others stated 
that an early September, mid-September, or a late September deadline 
would be feasible. One commenter believed that a December deadline 
would be best for hospitals with June 30

[[Page 49989]]

fiscal year ends, while another commenter stated that a late September 
or early October deadline would be acceptable for such hospitals. One 
commenter stated that the proposed FY 2017 deadline does not provide 
enough time for hospitals to incorporate their pension data into the 
desk review process because the Internal Revenue Service (IRS) Form 
5500 (used as the basis for reporting pension contributions for defined 
benefit plans) is due 7 months after the end of the plan year (July 
31), with possible extensions through mid-September. The commenter 
recommended that CMS either move the proposed deadline to October, or 
allow hospitals to submit their revisions for pension data during the 
MAC desk review process.
    Response: We appreciate the commenters' general support for our 
proposed revisions to the wage index timetable. We listed general 
timeframes in the FY 2016 timetable but will communicate the exact 
dates for the FY 2016 timetable to hospitals through their MACs after 
issuance of this FY 2015 final rule. Regarding the FY 2017 Wage Index 
Timetable, we understand the commenters' concerns that an August 
deadline for hospitals to submit revisions to their preliminary wage 
data may be too challenging to meet. However, while almost all of the 
commenters believed that an August deadline was too ambitious, there 
was no consensus from the commenters regarding when the deadline should 
be, with recommendations ranging from early September to December. We 
also partially agree with the commenter who raised the point that 
hospitals may not be able to provide their pension data until October, 
as further discussed below. In addition, we noted that commenters 
requested that CMS work with the MACs to ensure that the MACs are 
meeting their respective deadlines. We understand that the MACs have 
also faced pressure to accurately complete desk reviews and submit to 
CMS the appropriate revisions on behalf of hospitals in a timely 
fashion. The longer the time that hospitals have to submit revisions to 
their preliminary wage data, the less time the MACs have to conduct 
their desk reviews. Therefore, we believe that it is important to 
accommodate both the hospitals' and MACs' need for more time to 
adequately review the wage and occupational mix data. Because the 
earliest deadline that commenters stated would be feasible is early 
September, we are finalizing a date within the first week of September 
2015 (rather than early August) as the deadline for hospitals to 
request revisions to their FY 2017 preliminary wage and occupational 
mix data. A deadline in early September would be manageable for 
hospitals, yet also provide the MACs with the most amount of time 
possible to complete their desk reviews. In addition to a general 
deadline of early September, we are providing a limited exception for 
submission of a certain hospital's pension data. Specifically, we are 
only providing an extension for hospitals that have a fiscal year begin 
date on or after August 15 of a year to submit their pension data by 
mid-October because hospitals with fiscal year begin dates prior to 
August 15 would have already made their 3-year pension contributions by 
the end of September. We believe that the majority of hospitals, which 
do have fiscal year begin dates prior to August 15 of a year, would be 
able to submit their pension data, along with the remainder of their 
wage index documentation, to their MACs by the beginning of September 
each year. In this final rule, we are changing our wage index timetable 
for FY 2016 and after so that hospitals with fiscal years that begin on 
or after August 15 may submit their pension data to their MACs by mid-
October. However, in future rulemaking, we may consider revisions to 
the 3-year average pension policy, which would allow all hospitals to 
submit their pension data at the same time. For FY 2017, the MACs would 
work on the desk reviews until mid-November 2015 (instead of mid 
October, as proposed). Following are the revised FY 2016 and FY 2017 
Wage Index Timetables that we are finalizing:

                                          FY 2016 Wage Index Timetable
----------------------------------------------------------------------------------------------------------------
               Deadlines                          FY 2015 timetable               Adjusted FY 2016 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary Wage Data PUF on  September 13, 2013.................  May 23, 2014.
 CMS Web site.
Posting of Preliminary CY 2013           September 13, 2013.................  July 11, 2014.
 Occupational Mix Data PUF on CMS Web
 site.
Deadline for Hospitals to Request        November 21, 2013..................  Early October 2014.
 Revisions to Preliminary PUF.
Deadline for Hospitals with FYBs on or   November 21, 2013..................  Mid October 2014.
 after August 15 to Submit Pension Data
 to MACs.
Deadline for MACs to Complete Desk       January 29, 2014...................  Mid-December 2014.
 Reviews.
----------------------------------------------------------------------------------------------------------------


                                          FY 2017 Wage Index Timetable
----------------------------------------------------------------------------------------------------------------
               Deadlines                          FY 2015 timetable                    FY 2017 timetable
----------------------------------------------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web    September 13, 2013.................  Mid-May 2015.
 site.
Deadline for Hospitals to Request        November 21, 2013..................  First week of September 2015.
 Revisions to Preliminary PUF.
Deadline for Hospitals with FYBs on or   November 21, 2013..................  Mid-October 2015.
 after August 15 to Submit Pension Data
 to MACs.
Deadline for MACs to Complete Desk       January 29, 2014...................  Mid-November 2015.
 Reviews.
Posting of February PUF on CMS Web site  February 20, 2014..................  Late January 2016
Deadline Following Posting of February   March 3, 2014......................  Mid-February 2016.
 PUF for Hospitals to Request Revisions.
Completion of Appeals by MACs and        April 9, 2014......................  Mid- to Late March 2016.
 Transmission of Final Wage Data to CMS.
Deadline for Hospitals to Appeal in      April 16, 2014.....................  Early April 2016.
 April.
Posting of Final Rule PUF..............  May 2, 2014........................  Late April 2016.
Deadline for Hospitals to Appeal in      June 2, 2014.......................  Late May 2016.
 June.
Expected Issuance of IPPS final rule...  August 1, 2014.....................  August 1, 2016.
----------------------------------------------------------------------------------------------------------------

    Comment: Commenters asked that CMS instruct MACs to notify State 
hospital associations of aberrant data, in addition to the current 
practice of notifying State hospital associations about hospitals that 
do not respond to

[[Page 49990]]

requests for data. In addition, commenters recommended that CMS provide 
more instructions to MACs and hospitals regarding how to correct errors 
and the timeframe for correcting errors. They believed that this action 
is necessary because the notification to hospital associations would be 
after the deadline for hospitals to request data adjustments. Another 
commenter suggested that accuracy and consistency in wage index 
verification would be improved if CMS would assign a single MAC to 
review all wage index data.
    Response: We will take these comments into consideration as we 
develop the details of the Wage Index Timetables and the desk review 
instructions that we provide to the MACs.

L. Labor-Related Share for the FY 2015 Wage Index

    Section 1886(d)(3)(E) of the Act directs the Secretary to adjust 
the proportion of the national prospective payment system base payment 
rates that are attributable to wages and wage-related costs by a factor 
that reflects the relative differences in labor costs among geographic 
areas. It also directs the Secretary to estimate from time to time the 
proportion of hospital costs that are labor-related: ``The Secretary 
shall adjust the proportion (as estimated by the Secretary from time to 
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates. . . .'' We refer to 
the portion of hospital costs attributable to wages and wage-related 
costs as the labor-related share. The labor-related share of the 
prospective payment rate is adjusted by an index of relative labor 
costs, which is referred to as the wage index.
    Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of 
the Act to provide that the Secretary must employ 62 percent as the 
labor-related share unless this ``would result in lower payments to a 
hospital than would otherwise be made.'' However, this provision of 
Public Law 108-173 did not change the legal requirement that the 
Secretary estimate ``from time to time'' the proportion of hospitals' 
costs that are ``attributable to wages and wage-related costs.'' 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 of 69.6 percent. In addition, we 
implemented 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. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28083), for 
FY 2015, we did not propose to not make any further changes to the 
national average proportion of operating costs that are attributable to 
wages and salaries, employee benefits, contract labor, the labor-
related portion of professional fees, administrative and facilities 
support services, and all other labor-related services. Therefore, for 
FY 2015, we proposed to continue to use a labor-related share of 69.6 
percent for discharges occurring on or after October 1, 2014.
    Tables 1A and 1B, which were published in section VI. of the 
Addendum to the FY 2015 IPPS/LTCH PPS proposed rule and available via 
the Internet on the CMS Web site, reflected this proposed labor-related 
share. For FY 2015, for all IPPS hospitals whose wage indexes are less 
than or equal to 1.0000, we proposed to apply the wage index to a 
labor-related share of 62 percent of the national standardized amount. 
For all IPPS hospitals whose wage indexes are greater than 1.0000, for 
FY 2015, we proposed to apply the wage index to a proposed labor-
related share of 69.6 percent of the national standardized amount. We 
note that, for Puerto Rico hospitals, the national labor-related share 
is 62 percent because the national wage index for all Puerto Rico 
hospitals is less than 1.0000.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through 
50603), we also rebased and revised the labor-related share for the 
Puerto Rico-specific standardized amounts using FY 2010 as a base year. 
We finalized a labor-related share for the Puerto Rico-specific 
standardized amounts for FY 2014 of 63.2 percent. In the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28084), for FY 2015, we did not propose 
to make any further changes to the Puerto Rico specific average 
proportion of operating costs that are attributable to wages and 
salaries, employee benefits, contract labor, the labor-related portion 
of professional fees, administrative and facilities support services, 
and all other labor-related services. For FY 2015, we proposed to 
continue to use a labor-related share for the Puerto Rico-specific 
standardized amounts of 63.2 percent for discharges occurring on or 
after October 1, 2014. Puerto Rico hospitals are paid based on 75 
percent of the national standardized amounts and 25 percent of the 
Puerto Rico-specific standardized amounts. For FY 2015, we proposed 
that the labor-related share of a hospital's Puerto Rico-specific rate 
would be either the Puerto Rico-specific labor-related share of 63.2 
percent or 62 percent, depending on which results in higher payments to 
the hospital. If the hospital has a Puerto Rico-specific wage index 
greater than 1.000 for FY 2015, we proposed to set the hospital's rates 
using a labor-related share of 63.2 percent for the 25 percent portion 
of the hospital's payment determined by the Puerto Rico standardized 
amounts because this amount would result in higher payments. 
Conversely, a hospital with a Puerto Rico-specific wage index of less 
than or equal to 1.000 for FY 2015 would be paid using the Puerto Rico-
specific labor-related share of 62 percent of the Puerto Rico-specific 
rates because the lower labor-related share would result in higher 
payments. The proposed Puerto Rico labor-related share of 63.2 percent 
for FY 2015 is reflected in Table 1C, which was published in section 
VI. of the Addendum to the FY 2015 IPPS/LTCH PPS proposed rule and 
available via the Internet on the CMS Web site.
    Comment: One commenter believed that CMS has provided incentives 
for hospitals to reduce costs through a declining wage index. The 
commenter stated that CMS has not kept pace by adjusting the labor-
related share of 62 percent for hospitals with a wage index below 
1.0000. The commenter noted that current law requires a labor-related 
share of 62 percent for hospitals with a wage index less than or equal 
to 1.0000. However, the commenter requested that, despite current law, 
in consideration of its comments, CMS lower the labor-related share 
from 62 percent to 42 percent for hospitals with a wage index below 
1.0000.
    One commenter recommended that CMS compute an alternative labor and 
nonlabor-related share percentage under the national standardized 
amount for hospitals in Puerto Rico. The

[[Page 49991]]

commenter explained that the current labor-related share percentage of 
62 percent under the national standardized amounts meets the statutory 
definition in section 1886(d)(3)(E) of the Act, resulting in lower 
payments for providers in Puerto Rico. Therefore, the commenter 
believed that CMS should calculate an alternative national labor-
related share percentage for hospitals in Puerto Rico that is lower 
than 62 percent.
    Response: As mentioned by the commenter, current law requires that 
the labor-related share be set at 62 percent for hospitals with a wage 
index less than or equal to 1.0000. Specifically, as discussed above, 
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.'' Therefore, we are unable to 
change the labor-related share of 62 percent. In addition, the 
commenters did not provide any empirical data to demonstrate why a 
lower labor-related share percentage is justified. Therefore, we are 
unable to verify the commenters' statement.
    After consideration of public comments received, we are finalizing 
our proposals without modification. For FY 2015, we are continuing to 
use a labor-related share of 69.6 percent for discharges occurring on 
or after October 1, 2014. Tables 1A and 1B, which are published in 
section VI. of the Addendum to this final rule and available via the 
Internet on the CMS Web site, reflect this labor-related share. For FY 
2015, for all IPPS hospitals whose wage indexes are less than or equal 
to 1.0000, we are applying the wage index to a labor-related share of 
62 percent of the national standardized amount. For all IPPS hospitals 
whose wage indexes are greater than 1.0000, for FY 2015, we are 
applying the wage index to a labor-related share of 69.6 percent of the 
national standardized amount. For Puerto Rico hospitals, the national 
labor-related share is 62 percent because the national wage index for 
all Puerto Rico hospitals is less than 1.0000. For FY 2015, we also are 
continuing to use a labor-related share for the Puerto Rico-specific 
standardized amounts of 63.2 percent for discharges occurring on or 
after October 1, 2014. Puerto Rico hospitals are paid based on 75 
percent of the national standardized amounts and 25 percent of the 
Puerto Rico-specific standardized amounts. For FY 2015, the labor-
related share of a hospital's Puerto Rico-specific rate will be either 
the Puerto Rico-specific labor-related share of 63.2 percent or 62 
percent, depending on which results in higher payments to the hospital. 
If the hospital has a Puerto Rico-specific wage index greater than 
1.000 for FY 2015, we will set the hospital's rates using a labor-
related share of 63.2 percent for the 25-percent portion of the 
hospital's payment determined by the Puerto Rico standardized amounts 
because this amount will result in higher payments. The Puerto Rico 
labor-related share of 63.2 percent for FY 2015 is reflected in Table 
1C, which is published in section VI. of the Addendum to this final 
rule and available via the Internet on the CMS Web site.

IV. Other Decisions and Changes to the IPPS for Operating Costs and 
Graduate Medical Education (GME) Costs

A. Changes to MS-DRGs Subject to the Postacute Care Transfer Policy 
(Sec.  412.4)

1. Background
    Existing regulations at Sec.  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 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 are also 
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 one 
day.
    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. In the preamble to the FY 2006 IPPS 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 DRG.''
    To account for MS-DRGs subject to the postacute care transfer 
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 group will qualify under the DRG special payment policy if 
any one of the MS-DRGs that share that same