[Federal Register Volume 82, Number 155 (Monday, August 14, 2017)]
[Rules and Regulations]
[Pages 37990-38589]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-16434]



[[Page 37989]]

Vol. 82

Monday,

No. 155

August 14, 2017

Part II

Book 2 of 2 Books

Pages 37989-38590





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 405, 412, 413, et al.



Medicare Program; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Policy Changes and Fiscal Year 2018 Rates; Quality 
Reporting Requirements for Specific Providers; Medicare and Medicaid 
Electronic Health Record (EHR) Incentive Program Requirements for 
Eligible Hospitals, Critical Access Hospitals, and Eligible 
Professionals; Provider-Based Status of Indian Health Service and 
Tribal Facilities and Organizations; Costs Reporting and Provider 
Requirements; Agreement Termination Notices; Final Rule

Federal Register / Vol. 82 , No. 155 / Monday, August 14, 2017 / 
Rules and Regulations

[[Page 37990]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 412, 413, 414, 416, 486, 488, 489, and 495

[CMS-1677-F]
RIN 0938-AS98


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System and Policy Changes and Fiscal Year 2018 Rates; Quality 
Reporting Requirements for Specific Providers; Medicare and Medicaid 
Electronic Health Record (EHR) Incentive Program Requirements for 
Eligible Hospitals, Critical Access Hospitals, and Eligible 
Professionals; Provider-Based Status of Indian Health Service and 
Tribal Facilities and Organizations; Costs Reporting and Provider 
Requirements; Agreement Termination Notices

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

ACTION: 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 for FY 2018. Some of these changes 
implement certain statutory provisions contained in the Pathway for 
Sustainable Growth Rate (SGR) Reform Act of 2013, the Improving 
Medicare Post-Acute Care Transformation Act of 2014, the Medicare 
Access and CHIP Reauthorization Act of 2015, the 21st Century Cures 
Act, and other legislation. We also are making changes relating to the 
provider-based status of Indian Health Service (IHS) and Tribal 
facilities and organizations and to the low-volume hospital payment 
adjustment for hospitals operated by the IHS or a Tribe. In addition, 
we are providing the market basket update that will apply to the rate-
of-increase limits for certain hospitals excluded from the IPPS that 
are paid on a reasonable cost basis subject to these limits for FY 
2018. We are 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) for FY 
2018.
    In addition, we are establishing new requirements or revising 
existing requirements for quality reporting by specific Medicare 
providers (acute care hospitals, PPS-exempt cancer hospitals, LTCHs, 
and inpatient psychiatric facilities). We also are establishing new 
requirements or revising existing requirements for eligible 
professionals (EPs), eligible hospitals, and critical access hospitals 
(CAHs) participating in the Medicare and Medicaid Electronic Health 
Record (EHR) Incentive Programs. We are updating policies relating to 
the Hospital Value-Based Purchasing (VBP) Program, the Hospital 
Readmissions Reduction Program, and the Hospital-Acquired Condition 
(HAC) Reduction Program.
    We also are making changes relating to transparency of accrediting 
organization survey reports and plans of correction of providers and 
suppliers; electronic signature and electronic submission of the 
Certification and Settlement Summary page of the Medicare cost reports; 
and clarification of provider disposal of assets.

DATES: This final rule is effective on October 1, 2017.

FOR FURTHER INFORMATION CONTACT: 
    Donald Thompson, (410) 786-4487, and Michele Hudson, (410) 786-
4487, Operating Prospective Payment, MS-DRGs, Wage Index, New Medical 
Service and Technology Add-On Payments, Hospital Geographic 
Reclassifications, Graduate Medical Education, Capital Prospective 
Payment, Excluded Hospitals, Sole Community Hospitals, Medicare 
Disproportionate Share Hospital (DSH) Payment Adjustment, Medicare-
Dependent Small Rural Hospital (MDH) Program, and Low-Volume Hospital 
Payment Adjustment Issues.
    Michele Hudson, (410) 786-4487, Mark Luxton, (410) 786-4530, and 
Emily Lipkin, (410) 786-3633, Long-Term Care Hospital Prospective 
Payment System and MS-LTC-DRG Relative Weights Issues.
    Mollie Knight, (410) 786-7948, and Bridget Dickensheets, (410) 786-
8670, Rebasing and Revising the Hospital Market Basket Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
    Jeris Smith, (410) 786-0110, Frontier Community Health Integration 
Project Demonstration Issues.
    Lein Han, (617) 879-0129, Hospital Readmissions Reduction Program--
Readmission Measures for Hospitals Issues.
    James Poyer, (410) 786-2261, Hospital Readmissions Reduction 
Program--Administration Issues.
    Elizabeth Bainger, (410) 786-0529, Hospital-Acquired Condition 
Reduction Program Issues.
    Joseph Clift, (410) 786-4165, Hospital-Acquired Condition Reduction 
Program--Measures Issues.
    Grace Im, (410) 786-0700, and James Poyer, (410) 786-2261, Hospital 
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Program Administration, Validation, and Reconsideration Issues.
    Reena Duseja, (410) 786-1999, and Cindy Tourison, (410) 786-1093, 
Hospital Inpatient Quality Reporting--Measures Issues Except Hospital 
Consumer Assessment of Healthcare Providers and Systems Issues; and 
Readmission Measures for Hospitals Issues.
    Kim Spaulding Bush, (410) 786-3232, Hospital Value-Based Purchasing 
Efficiency Measures Issues.
    Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality 
Reporting--Hospital Consumer Assessment of Healthcare Providers and 
Systems Measures Issues.
    James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality 
Reporting Issues.
    Mary Pratt, (410) 786-6867, Long-Term Care Hospital Quality Data 
Reporting Issues.
    Jeffrey Buck, (410) 786-0407, and Cindy, Tourison (410) 786-1093, 
Inpatient Psychiatric Facilities Quality Data Reporting Issues.
    Lisa Marie Gomez, (410) 786-1175, EHR Incentive Program Clinical 
Quality Measure Related Issues.
    Kathleen Johnson, (410) 786-3295, and Steven Johnson (410) 786-
3332, EHR Incentive Program Nonclinical Quality Measure Related Issues.
    Caecilia Blondiaux, (410), 786-2190, and Ariadne Saklas, (410) 786-
3322, Changes in Notice of Termination of Medicare Providers and 
Suppliers Issues.
    Monda Shaver, (410) 786-3410, and Patricia Chmielewski, (410) 786-
6899, Accrediting Organizations Survey Reporting Transparency Issues.
    Kellie Shannon, (410) 786-0416, Medicare Cost Reporting and 
Valuation of Assets Issues.

SUPPLEMENTARY INFORMATION: 

Electronic Access

    This Federal Register document is available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the Internet at: http://www.gpo.gov/fdsys.

[[Page 37991]]

Tables Available Only Through the Internet on the CMS Web Site

    In the past, a majority of the tables referred to throughout this 
preamble and in the Addendum to the proposed rule and the final rule 
were published in the Federal Register as part of the annual proposed 
and final rules. However, beginning in FY 2012, some of the IPPS tables 
and LTCH PPS tables are no longer published in the Federal Register. 
Instead, these tables generally will be available only through the 
Internet. The IPPS tables for this final rule are available through the 
Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on 
the link on the left side of the screen titled, ``FY 2018 IPPS Final 
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH 
PPS tables for this FY 2018 final rule are available through the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the 
list item for Regulation Number CMS-1677-F. For further details on the 
contents 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
AO Accrediting Organizations
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public 
Law 107-105
ASITN American Society of Interventional and Therapeutic 
Neuroradiology
ASPE Assistant Secretary for Planning and Evaluation (DHHS)
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Benefits Improvement and Protection Act of 2000, 
Public Law 106-554
BLS Bureau of Labor Statistics
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation 
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Centers for Disease Control and Prevention
CEHRT Certified electronic health record technology
CERT Comprehensive error rate testing
CDI Clostridium difficile [C. difficile] infection
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
COPD Chronic obstructive pulmonary disease
CPI Consumer price index
CQL Clinical quality language
CQM Clinical quality measure
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External beam radiotherapy
ECE Extraordinary circumstances exemption
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCP Healthcare personnel
HCRIS Hospital Cost Report Information System
HF Heart failure
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center
HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
HwH Hospital-within-hospital
HWR Hospital-wide readmission
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision, 
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision, 
Procedure Coding System
ICR Information collection requirement
ICU Intensive care unit
IGI IHS Global, Inc.
IHS Indian Health Service
IME Indirect medical education
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 
2014, Public Law 113-185
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR [Hospital] Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LDS Limited Data Set
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group

[[Page 37992]]

LTCH Long-term care hospital
LTCH QRP Long-Term Care Hospital Quality Reporting Program
MA Medicare Advantage
MAC Medicare Administrative Contractor
MACRA Medicare Access and CHIP Reauthorization Act of 2015, Public 
Law 114-10
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of 
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MOON Medicare Outpatient Observation Notice
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
MU Meaningful Use [EHR Incentive Program]
MUC Measure under consideration
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NOP Notice of Participation
NOTICE Act Notice of Observation Treatment and Implication for Care 
Eligibility Act, Public Law 114-42
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991, 
Public Law 104-113
NUBC National Uniform Billing Code
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAC Post-acute care
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPR Potentially Preventable Readmissions
PPS Prospective payment system
PRA Paperwork Reduction Act
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
PUF Public use file
QDM Quality data model
QIES ASAP Quality Improvement Evaluation System Assessment 
Submission and Processing
QIG Quality Improvement Group [CMS]
QIO Quality Improvement Organization
QM Quality measure
QPP Quality Payment Program
QRDA Quality Reporting Document Architecture
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RIM Reference information model
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standard mortality rate
RSP Risk-standardized payment
RSSR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCHIP State Child Health Insurance Program
SCIP Surgical Care Improvement Project
SFY State fiscal year
SGR Sustainable Growth Rate
SIC Standard Industrial Classification
SIR Standardized infection ratio
SNF Skilled nursing facility
SNF QRP Skilled Nursing Facility Quality Reporting Program
SNF VBP Skilled Nursing Facility Value-Based Purchasing
SOCs Standard occupational classifications
SOM State Operations Manual
SRR Standardized risk ratio
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 
97-248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and 
QI [Qualifying Individuals] Programs Extension Act of 2007, Public 
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UR Utilization review
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    1. Purpose and Legal Authority
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Summary
    1. Acute Care Hospital Inpatient Prospective Payment System 
(IPPS)
    2. Hospitals and Hospital Units Excluded from the IPPS
    3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    4. Critical Access Hospitals (CAHs)
    5. Payments for Graduate Medical Education (GME)
    C. Summary of Provisions of Recent Legislation Implemented in 
This Final Rule
    1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-
240), the Medicare Access and CHIP Reauthorization Act of 2015 
(MACRA) (Pub. L. 114-10), and the 21st Century Cures Act (Pub. L. 
114-255)
    2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
    3. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185)
    4. The Medicare Access and CHIP Reauthorization Act of 2015 
(MACRA) (Pub. L. 114-10)
    5. The 21st Century Cures Act (Pub. L. 114-255)
    D. Issuance of Notice of Proposed Rulemaking
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 2018 MS-DRG Documentation and Coding Adjustment

[[Page 37993]]

    1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
    2. Recoupment or Repayment Adjustment Authorized by Section 631 
of the American Taxpayer Relief Act of 2012 (ATRA)
    3. Adjustment for FY 2018 Required Under Section 414 of Public 
Law 114-10 (MACRA) and Section 15005 of Public Law 114-255
    E. Refinement of the MS-DRG Relative Weight Calculation
    1. Background
    2. Discussion of Policy for FY 2018
    F. Changes to Specific MS-DRG Classifications
    1. Discussion of Changes to Coding System and Basis for FY 2018 
MS-DRG Updates
    a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    b. Basis for FY 2018 MS-DRG Updates
    2. MDC 1 (Diseases and Disorders of the Nervous System)
    a. Functional Quadriplegia
    b. Responsive Neurostimulator (RNS(copyright)) System
    c. Precerebral Occlusion or Transient Ischemic Attack With 
Thrombolytic
    3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye 
Drops (Tetrahydrozoline))
    4. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Percutaneous Cardiovascular Procedures and Insertion of a 
Radioactive Element
    b. Modification of the Titles for MS-DRG 246 (Percutaneous 
Cardiovascular Procedures With Drug-Eluting Stent With MCC or 4+ 
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular 
Procedures With Non-Drug-Eluting Stent With MCC or 4+ Vessels or 
Stents)
    c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial 
Appendage Closure (LAAC)
    d. Percutaneous Mitral Valve Replacement Procedures
    e. Percutaneous Tricuspid Valve Repair
    5. MDC 8 (Diseases and Disorders of the Musculoskeletal System 
and Connective Tissue)
    a. Total Ankle Replacement (TAR) Procedures
    b. Revision of Total Ankle Replacement (TAR) Procedures
    c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
    d. Combined Anterior/Posterior Spinal Fusion
    6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
    a. Vaginal Delivery and Complicating Diagnoses
    b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis)
    c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical 
Complications)
    d. Shock During or Following Labor and Delivery
    7. MDC 15 (Newborns and Other Neonates with Conditions 
Originating in Perinatal Period): Observation and Evaluation of 
Newborn
    8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): 
Complication Codes
    9. MDC 23 (Factors Influencing Health Status and Other Contacts 
With Health Services): Updates to MS-DRGs 945 and 946 
(Rehabilitation With CC/MCC and Without CC/MCC, Respectively)
    10. Changes to the Medicare Code Editor (MCE)
    a. Age Conflict Edit
    b. Sex Conflict Edit
    c. Non-Covered Procedure Edit
    d. Unacceptable Principal Diagnosis Edit
    e. Future Enhancement
    11. Changes to Surgical Hierarchies
    12. Changes to the MS-DRG Diagnosis Codes for FY 2018
    a. Background of the CC List and the CC Exclusions List
    b. Additions and Deletions to the Diagnosis Code Severity Levels 
for FY 2018
    c. Principal Diagnosis Is Its Own CC or MCC
    d. CC Exclusions List for FY 2018
    13. Comprehensive Review of CC List for FY 2019
    14. Review of Procedure Codes in MS DRGs 981 Through 983; 984 
Through 986; and 987 Through 989
    a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
    b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    15. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    16. Replaced Devices Offered Without Cost or With a Credit
    a. Background
    b. Changes for FY 2018
    17. Other Policy Changes: Other Operating Room (O.R.) and Non-
O.R. Issues
    a. O.R. Procedures to Non-O.R. Procedures
    b. Revision of Neurostimulator Generator
    c. External Repair of Hymen
    d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases 
and Disorders Poorly Differentiated Neoplasms)
    G. Recalibration of the FY 2018 MS-DRG Relative Weights
    1. Data Sources for Developing the Relative Weights
    2. Methodology for Calculation of the Relative Weights
    3. Development of National Average CCRs
    H. Add-On Payments for New Services and Technologies for FY 2018
    1. Background
    2. Public Input Before Publication of a Notice of Proposed 
Rulemaking on Add-On Payments
    3. ICD-10-PCS Section ``X'' Codes for Certain New Medical 
Services and Technologies
    4. Revision of Reference to an ICD-9-CM Code in Sec.  
412.87(b)(2) of the Regulations
    5. FY 2018 Status of Technologies Approved for FY 2017 Add-On 
Payments
    a. CardioMEMSTM HF (Heart Failure) Monitoring System
    b. Defitelio[supreg] (Defibrotide)
    c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis 
(IBE)
    d. Idarucizumab
    e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and 
In.PACTTM AdmiralTM Paclitaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
    f. MAGEC[supreg] Spinal Bracing and Distraction System 
(MAGEC[supreg] Spine)
    g. VistogardTM (Uridine Triacetate)
    h. Blinatumomab (BLINCYTOTM Trade Brand)
    6. FY 2018 Applications for New Technology Add-On Payments
    a. Bezlotoxumab (ZINPLAVATM)
    b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and 
Liva Nova Perceval Valve (Perceval)
    c. Ustekinumab (Stelara[supreg])
III. Changes to the Hospital Wage Index for Acute Care Hospitals
    A. Background
    1. Legislative Authority
    2. Core-Based Statistical Areas (CBSAs) for the FY 2018 Hospital 
Wage Index
    3. Codes for Constituent Counties in CBSAs
    B. Worksheet S-3 Wage Data for the FY 2018 Wage Index
    1. Included Categories of Costs
    2. Excluded Categories of Costs
    3. Use of Wage Index Data by Suppliers and Providers Other Than 
Acute Care Hospitals Under the IPPS
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the FY 2018 Unadjusted Wage Index
    1. Methodology for FY 2018
    2. Clarification of Other Wage Related Costs in the Wage Index
    E. Occupational Mix Adjustment to the FY 2018 Wage Index
    1. Use of 2013 Occupational Mix Survey for the FY 2018 Wage 
Index
    2. Use of the 2016 Medicare Wage Index Occupational Mix Survey 
for the FY 2019 Wage Index
    3. Calculation of the Occupational Mix Adjustment for FY 2018
    F. Analysis and Implementation of the Occupational Mix 
Adjustment and the FY 2018 Occupational Mix Adjusted Wage Index
    G. Application of the Rural, Imputed, and Frontier Floors
    1. Rural Floor
    2. Expiration of the Imputed Floor Policy
    3. State Frontier Floor for FY 2018
    H. FY 2018 Wage Index Tables
    I. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    1. General Policies and Effects of Reclassification and 
Redesignation
2. MGCRB Reclassification and Redesignation Issues for FY 2018
    a. FY 2018 Reclassification Requirements and Approvals
    b. Extension of PRA Information Collection Requirement Approval 
for MGCRB Applications
    c. Deadline for Submittal of Documentation of Sole Community 
Hospital (SCH) and Rural Referral Center (RRC) Classification Status 
to the MGCRB

[[Page 37994]]

    d. Clarification of Special Rules for SCHs and RRCs 
Reclassifying to Geographic Home Area
    3. Redesignations Under Section 1886(d)(8)(B) of the Act
    4. Changes to the 45-Day Notification Rules
    J. Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees
    K. Reclassification From Urban to Rural Under Section 
1886(d)(8)(E) of the Act Implemented at 42 CFR 412.103
    L. Clarification of Application Deadline for Rural Referral 
Center (RRC) Classification
    M. Process for Requests for Wage Index Data Corrections
    1. Process for Hospitals to Accept Wage Index Data Corrections
    2. Process for Wage Index Data Corrections by CMS After the 
January Public Use File (PUF)
    N. Labor Market Share for the FY 2018 Wage Index
IV. Rebasing and Revising of the Hospital Market Baskets for Acute 
Care Hospitals
    A. Background
    B. Rebasing and Revising the IPPS Market Basket
    1. Development of Cost Categories and Weights
    a. Use of Medicare Cost Report Data
    b. Final Major Cost Category Computation
    c. Derivation of the Detailed Cost Weights
    2. Selection of Price Proxies
    3. Labor-Related Share
    C. Market Basket for Certain Hospitals Presently Excluded From 
the IPPS
    D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Changes to the IPPS for Operating Costs
    A. Changes to MS-DRGs Subject to Postacute Care Transfer and MS-
DRG Special Payment Policies
    B. Changes in the Inpatient Hospital Updates for FY 2018 (Sec.  
412.64(d))
    1. FY 2018 Inpatient Hospital Update
    2. FY 2018 Puerto Rico Hospital Update
    C. Change to Volume Decrease Adjustment for Sole Community 
Hospitals (SCHs) and Medicare-Dependent, Small Rural Hospitals 
(MDHs) (Sec.  412.92)
    1. Background
    2. Changes to the Volume Decrease Adjustment Calculation 
Methodology for SCHs
    D. Rural Referral Centers (RRCs): Annual Updates to Case-Mix 
Index (CMI) and Discharge Criteria (Sec.  412.96)
    1. Case-Mix Index (CMI)
    2. Discharges
    E. Payment Adjustment for Low-Volume Hospitals (Sec.  412.101)
    1. Expiration of Temporary Changes to Low-Volume Hospital 
Payment Policy
    2. Background
    3. Payment Adjustment for FY 2018 and Subsequent Fiscal Years
    4. Parallel Low-Volume Hospital Payment Adjustment Regarding 
Hospitals Operated by the Indian Health Service (IHS) or a Tribe
    F. Indirect Medical Education (IME) Payment Adjustment (Sec.  
412.105)
    G. Payment Adjustment for Medicare Disproportionate Share 
Hospitals (DSHs) for FY 2018 (Sec.  412.106)
    1. General Discussion
    2. Eligibility for Empirically Justified Medicare DSH Payments 
and Uncompensated Care Payments
    3. Empirically Justified Medicare DSH Payments
    4. Uncompensated Care Payments
    a. Calculation of Factor 1 for FY 2018
    b. Calculation of Factor 2 for FY 2018
    (1) Background
    (2) Methodology for Calculation of Factor 2 for FY 2018
    c. Calculation of Factor 3 for FY 2018
    (1) Background
    (2) Data Source for FY 2018
    (3) Time Period for Calculating Factor 3 for FY 2018, Including 
Methodology for Incorporating Worksheet S-10 Data
    (4) Methodological Considerations for Calculating Factor 3
    (5) Methodological Considerations for Incorporating Worksheet S-
10 Data
    H. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.  
412.108)
    1. Background for the MDH Program
    a. Expiration of the MDH Program
    I. Hospital Readmissions Reduction Program: Updates and Changes 
(Sec. Sec.  412.150 Through 412.154)
    1. Statutory Basis for the Hospital Readmissions Reduction 
Program
    2. Regulatory Background
    3. Maintenance of Technical Specifications for Quality Measures
    4. Policies for the Hospital Readmissions Reduction Program
    5. Applicable Period for FY 2018
    6. Calculation of Aggregate Payments for Excess Readmissions for 
FY 2018
    7. Background and Current Payment Adjustment Methodology
    a. Background
    b. Current Payment Adjustment Methodology
    8. Provisions for the Payment Adjustment Methodology for FY 
2019: Methodology for Calculating the Proportion of Dual-Eligible 
Patients
    a. Background
    b. Data Sources Used To Determine Dual Eligibility
    c. Data Period Used To Define Dual Eligibility
    9. Provisions for the Payment Adjustment Methodology for FY 
2019: Methodology for Assigning Hospitals to Peer Groups
    10. Provisions for the Payment Adjustment Methodology for FY 
2019: Payment Adjustment Formula Calculation Methodology
    a. Background
    b. Proposals
    c. Analysis
    11. Accounting for Social Risk Factors in the Hospital 
Readmissions Reduction Program
    12. Extraordinary Circumstances Exceptions (ECE) Policy
    13. Timeline for Public Reporting of Excess Readmission Ratios 
on Hospital Compare for the FY 2018 Payment Determination
    J. Hospital Value-Based Purchasing (VBP) Program: Policy Changes
    1. Background
    a. Statutory Background and Overview of Past Program Years
    b. FY 2018 Program Year Payment Details
    2. Accounting for Social Risk Factors in the Hospital VBP 
Program
    3. Retention and Removal of Quality Measures for the FY 2019 
Program Year
    a. Retention of Previously Adopted Hospital VBP Program Measures
    b. Removal of the PSI 90 Measure
    c. Summary of Previously Adopted Measures and Measure for 
Removal for the FY 2019 and FY 2020 Program Years
    4. New Measures for the FY 2022 Program Year, FY 2023 Program 
Year, and Subsequent Years
    a. New Measure for the FY 2022 Program Year and Subsequent 
Years: Hospital-Level, Risk-Standardized Payment Associated with a 
30-Day Episode-of-Care for Pneumonia (PN Payment)
    b. New Measure for the FY 2023 Program Year and Subsequent 
Years: Patient Safety and Adverse Events (Composite) (NQF #0531)
    5. Previously Adopted and Baseline and Performance Periods
    a. Background
    b. Person and Community Engagement Domain
    c. Efficiency and Cost Reduction Domain
    d. Safety Domain
    e. Clinical Care Domain
    f. Summary of Previously Adopted and Newly Finalized Baseline 
and Performance Periods for the FY 2019 Through FY 2023 Program 
Years
    6. Performance Standards for the Hospital VBP Program
    a. Background
    b. Previously Adopted and Newly Finalized Performance Standards 
for the FY 2020 Program Year
    c. Previously Adopted Performance Standards for Certain Measures 
for the FY 2021 Program Year
    d. Previously Adopted and Newly Finalized Performance Standards 
for Certain Measures for the FY 2022 Program Year
    e. Performance Standards for Certain Measures for the FY 2023 
Program Year
    7. Scoring Methodology and Data Requirements for the FY 2019 
Program Year and Subsequent Years
    a. Domain Weighting for the FY 2020 Program Year and Subsequent 
Years for Hospitals That Receive a Score on All Domains
    b. Domain Weighting for the FY 2019 Program Year and Subsequent 
Years for Hospitals Receiving Scores on Fewer than Four Domains
    c. Minimum Numbers of Cases for Hospital VBP Program Measures 
for the FY 2019 Program Year and Subsequent Years
    d. Weighting Measures Within the Efficiency and Cost Reduction 
Domain
    K. Changes to the Hospital-Acquired Condition (HAC) Reduction 
Program
    1. Background
    2. Implementation of the HAC Reduction Program for FY 2018
    3. Data Collection Time Periods for the FY 2020 HAC Reduction 
Program

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    4. Request for Comments on Additional Measures for Potential 
Future Adoption
    5. Accounting for Social Risk Factors in the HAC Reduction 
Program
    6. Request for Comments on Inclusion on Disability and Medical 
Complexity for CDC NHSN Measures
    7. Extraordinary Circumstances Exceptions (ECE) Policy for the 
HAC Reduction Program
    8. Maintenance of Technical Specifications for Quality Measures
    L. Rural Community Hospital Demonstration Program
    1. Introduction
    2. Background
    3. Provisions of the 21st Century Cures Act (Pub. L. 114-255) 
and Finalized Policies for Implementation
    a. Statutory Provisions
    b. Terms of Continuation for Previously Participating Hospitals
    c. Solicitation for Additional Participants
    4. Budget Neutrality
    a. Statutory Budget Neutrality Requirement
    b. Methodology Used in Previous Final Rules
    c. Budget Neutrality Methodology for Extension Period Authorized 
by the 21st Century Cures Act (Pub. L. 114-255)
    d. Finalized Budget Neutrality Approach
    e. Reconciling Actual and Estimated Costs of the Demonstration 
for Previous Years (2011, 2012, and 2013)
    M. Adjustment to IPPS Rates Resulting From the 2-Midnight Policy 
for FY 2018
    N. Provider-Based Status of Indian Health Service and Tribal 
Facilities and Organizations
VI. Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    1. Exception Payments
    2. New Hospitals
    3. Payments for Hospitals Located in Puerto Rico
    C. Annual Update for FY 2018
VII. Changes for Hospitals Excluded From the IPPS
    A. Rate-of-Increase in Payments to Excluded Hospitals for FY 
2018
    B. Revisions to Hospital-Within-Hospital Regulations
    C. Report of Adjustment (Exceptions) Payments
    D. Critical Access Hospitals (CAHs)
    1. Background
    2. Frontier Community Health Integration Project (FCHIP) 
Demonstration
    3. Physician Certification Requirement for Payment of Inpatient 
CAH Services Under Medicare Part A
    a. Background
    b. Notice Regarding Changes to Instructions for the Review of 
the CAH 96-Hour Certification Requirement
VIII. Changes to the Long-Term Care Hospital Prospective Payment 
System (LTCH PPS) for FY 2018
    A. Background of the LTCH PPS
    1. Legislative and Regulatory Authority
    2. Criteria for Classification as an LTCH
    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 2018
    1. Background
    2. Patient Classifications Into MS-LTC-DRGs
    a. Background
    b. Changes to the MS-LTC-DRGs for FY 2018
    3. Development of the FY 2018 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 2018
    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 2018 MS-LTC-DRG Relative Weights
    C. Changes to the LTCH PPS Payment Rates and Other Changes to 
the LTCH PPS for FY 2018
    1. Overview of Development of the LTCH PPS Standard Federal 
Payment Rates
    2. FY 2018 LTCH PPS Standard Federal Payment Rate Annual Market 
Basket Update
    a. Overview
    b. Annual Update to the LTCH PPS Standard Federal Payment Rate 
for FY 2018
    c. Adjustment to the LTCH PPS Standard Federal Payment Rate 
under the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    d. Annual Update under the LTCH PPS for FY 2018
    D. Changes to the Short-Stay Outlier Adjustment Policy (Sec.  
412.529)
    E. Temporary Exception to the Site Neutral Payment Rate for 
Certain Spinal Cord Specialty Hospitals
    F. Temporary Exception to the Site Neutral Payment Rate for 
Certain Discharges With Severe Wounds From Certain LTCHs
    G. Moratorium and Regulatory Delay of the Full Implementation of 
the ``25-Percent'' Threshold Policy'' Adjustment (Sec.  412.538)
    H. Revision to Moratorium on Increasing Beds in Existing LTCH or 
LTCH Satellite Locations Under the 21st Century Cures Act (Pub. L. 
114-255) (Sec.  412.23)
    I. Changes to the Average Length of Stay Criterion Under the 
21st Century Cures Act (Pub. L. 114-255)
    J. Change in Medicare Classification for Certain Hospitals 
(Sec.  412.23)
IX. Quality Data Reporting Requirements for Specific Providers and 
Suppliers
    A. Hospital Inpatient Quality Reporting (IQR) Program
    1. Background
    a. History of the Hospital IQR Program
    b. Maintenance of Technical Specifications for Quality Measures
    c. Public Display of Quality Measures
    d. Accounting for Social Risk Factors in the Hospital IQR 
Program
    2. Retention of Previously Adopted Hospital IQR Program Measures 
for Subsequent Payment Determinations
    3. Removal and Suspension of Previously Adopted Hospital IQR 
Program Measures
    4. Previously Adopted Hospital IQR Program Measures for the FY 
2019 Payment Determination and Subsequent Years
    5. Considerations in Expanding and Updating of Quality Measures
    6. Refinements to Existing Measures in the Hospital IQR Program 
for the FY 2020 Payment Determination and Subsequent Years
    a. Refining Hospital Consumer Assessment of Healthcare Providers 
and Systems (HCAHPS) Survey (NQF #0166) for the FY 2020 Payment 
Determination and Subsequent Years
    b. Refinement of the Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) following Acute Ischemic Stroke 
Hospitalization Measure for the FY 2023 Payment Determination and 
Subsequent Years
    c. Summary of Previously Adopted Hospital IQR Program Measures 
for the FY 2020 Payment Determination and Subsequent Years
    7. Voluntary Hybrid Hospital-Wide Readmission Measure With 
Claims and Electronic Health Record Data (NQF #2879)
    a. Background
    b. Voluntary Reporting of Electronic Health Record Data for the 
Hybrid HWR Measure (NQF #2879)
    c. Data Sources
    d. Outcome
    e. Cohort
    f. Inclusion and Exclusion Criteria
    g. Risk-Adjustment
    h. Calculating the Risk-Standardized Readmission Rate (RSRR)
    i. Data Submission and Reporting Requirements
    j. Confidential Hospital-Specific Reports
    8. Changes to Policies on Reporting of eCQMs
    a. Background
    b. Modifications to the eCQM Reporting Requirements for the 
Hospital IQR Program for the CY 2017 Reporting Period/FY 2019 
Payment Determination
    c. Modifications to the eCQM Reporting Requirements for the 
Hospital IQR Program for the CY 2018 Reporting Period/FY 2020 
Payment Determination
    9. Possible New Quality Measures and Measure Topics for Future 
Years
    a. Potential Inclusion of the Quality of Informed Consent 
Documents for Hospital-Performed, Elective Procedures Measure
    b. Potential Inclusion of Four End-of-Life (EOL) Measures for 
Cancer Patients
    c. Potential Inclusion of Two Nurse Staffing Measures
    d. Potential Inclusion of Additional Electronic Clinical Quality 
Measures (eCQMs) in the Hospital IQR and Medicare and Medicaid EHR 
Incentive Programs

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    10. Form, Manner, and Timing of Quality Data Submission
    a. Background
    b. Procedural Requirements for the FY 2020 Payment Determination 
and Subsequent Years
    c. Data Submission Requirements for Chart-Abstracted Measures
    d. Changes to the Reporting and Submission Requirements for 
eCQMs
    e. Submission Form and Method for the Voluntary Hybrid Hospital-
Wide Readmission Measure with Claims and Electronic Health Record 
Data (NQF #2879)
    f. Sampling and Case Thresholds for the FY 2020 Payment 
Determination and Subsequent Years
    g. HCAHPS Administration and Submission Requirements for the FY 
2020 Payment Determination and Subsequent Years
    h. Data Submission Requirements for Structural Measures for the 
FY 2020 Payment Determination and Subsequent Years
    i. Data Submission and Reporting Requirements for HAI Measures 
Reported via NHSN
    11. Modifications to the Validation of Hospital IQR Program Data
    a. Background
    b. Changes to the Existing Processes for Validation of Hospital 
IQR Program eCQM Data for the FY 2020 Payment Determination and 
Subsequent Years
    c. Modifications to the Educational Review Process for Chart-
Abstracted Measures Validation
    12. Data Accuracy and Completeness Acknowledgement (DACA) 
Requirements for the FY 2020 Payment Determination and Subsequent 
Years
    13. Public Display Requirements for the FY 2020 Payment 
Determination and Subsequent Years
    a. Background
    b. Potential Options for Confidential and Public Reporting of 
Hospital IQR Measures Stratified by Patient Dual-Eligibility Status
    14. Reconsideration and Appeal Procedures for the FY 2020 
Payment Determination and Subsequent Years
    15. Change to the Hospital IQR Program Extraordinary 
Circumstances Exceptions (ECE) Policy
    a. Background
    b. Alignment of the Hospital IQR Program ECE Policy With Other 
CMS Quality Programs
    B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    1. Background
    2. Criteria for Removal and Retention of PCHQR Program Measures
    3. Retention and Removal of Previously Finalized Quality 
Measures for PCHs Beginning With the FY 2020 Program Year
    a. Background
    b. Removal of Measures from the PCHQR Program Beginning With the 
FY 2020 Program Year
    4. New Quality Measures Beginning With the FY 2020 Program Year
    a. Considerations in the Selection of Quality Measures
    b. New Quality Measures Beginning With the FY 2020 Program Year
    c. Summary of Previously Finalized and Newly Finalized PCHQR 
Program Measures for the FY 2020 Program Year and Subsequent Years
    5. Accounting for Social Risk Factors in the PCHQR Program
    6. Possible New Quality Measure Topics for Future Years
    a. Background
    b. Localized Prostate Cancer: Vitality; Localized Prostate 
Cancer: Urinary Incontinence; Localized Prostate Cancer: Urinary 
Frequency, Obstruction, and/or Irritation; Localized Prostate 
Cancer: Sexual Function; and Localized Prostate Cancer: Bowel 
Function
    c. 30-Day Unplanned Readmission for Cancer Patients
    7. Maintenance of Technical Specifications for Quality Measures
    8. Public Display Requirements
    a. Background
    b. Deferment of Public Display of Two Measures
    9. Form, Manner, and Timing of Data Submission
    a. Background
    b. Reporting Requirements for New Measures
    10. Extraordinary Circumstances Exceptions (ECE) Policy Under 
the PCHQR Program
    a. Background
    b. Modifications to the ECE Policy
    C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    1. Background and Statutory Authority
    2. General Considerations Used for Selection of Quality Measures 
for the LTCH QRP
    a. Background
    b. Accounting for Social Risk Factors in the LTCH QRP
    3. Collection of Standardized Patient Assessment Data Under the 
LTCH QRP
    a. Definition of Standardized Patient Assessment Data
    b. General Considerations Used for the Selection of Standardized 
Patient Assessment Data
    4. Policy for Retaining LTCH QRP Measures and Policy To Apply 
That Retention Policy to Standardized Patient Assessment Data
    5. Policy for Adopting Changes to LTCH QRP Measures and Policy 
To Apply That Policy for Adopting Changes to Standardized Patient 
Assessment Data
    6. Quality Measures Currently Adopted for the LTCH QRP
    7. LTCH QRP Quality Measures Beginning With the FY 2020 LTCH QRP
    a. Finalized Proposal To Replace the Current Pressure Ulcer 
Quality Measure, Percent of Residents or Patients With Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), With a 
Modified Pressure Ulcer Measure, Changes in Skin Integrity Post-
Acute Care: Pressure Ulcer/Injury
    b. Mechanical Ventilation Process Quality Measure: Compliance 
With Spontaneous Breathing Trial (SBT) by Day 2 of the LTCH Stay
    c. Mechanical Ventilation Outcome Quality Measure: Ventilator 
Liberation Rate
    8. Removal of the All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge From LTCHS From the LTCH QRP
    9. LTCH QRP Quality Measures Under Consideration for Future 
Years
    a. LTCH QRP Quality Measures Under Consideration for Future 
Years
    b. IMPACT Act Measure--Possible Future Update to Measure 
Specifications
    c. IMPACT Act Implementation Update
    10. Standardized Patient Assessment Data Reporting for the LTCH 
QRP
    a. Standardized Patient Assessment Data Reporting for the FY 
2019 LTCH QRP
    b. Standardized Patient Assessment Data Reporting Beginning With 
the FY 2020 LTCH QRP
    11. Form, Manner, and Timing of Data Submission Under the LTCH 
QRP
    a. Start Date for Standardized Patient Assessment Data Reporting 
by New LTCHs
    b. Mechanism for Reporting Standardized Patient Assessment Data 
Beginning With the FY 2019 LTCH QRP
    c. Schedule for Reporting Standardized Patient Assessment Data 
Beginning With the FY 2019 LTCH QRP
    d. Schedule for Reporting the Newly Finalized Quality Measures 
Beginning With the FY 2020 LTCH QRP
    e. Removal of Interrupted Stay Items From the LTCH CARE Data Set
    12. Changes to Previously Codified Participation Requirements 
Under the LTCH QRP
    13. Changes to Previously Codified Data Submission Requirements 
Under the LTCH QRP
    14. Changes to Previously Codified Exception and Extension 
Requirements Under the LTCH QRP
    15. Changes to Previously Codified Reconsiderations Requirements 
Under the LTCH QRP
    16. Application of the LTCH QRP Data Completion Thresholds to 
the Submission of Standardized Patient Assessment Data Beginning 
With the FY 2019 LTCH QRP
    17. Policies Regarding Public Display of Measure Data for the 
LTCH QRP
    18. Mechanism for Providing Feedback Reports to LTCHs
    D. Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program
    1. Background
    a. Statutory Authority
    b. Covered Entities
    c. Considerations in Selecting Quality Measures
    2. Factors for Removal or Retention of IPFQR Program Measures
    a. Background
    b. Considerations in Removing or Retaining Measures
    3. Proposal for New Quality Measure for the FY 2020 Payment 
Determination and Subsequent Years--Medication Continuation 
following Inpatient Psychiatric Discharge

[[Page 37997]]

    a. Background
    b. Appropriateness for the IPFQR Program
    c. Measure Calculation
    d. Data Sources
    e. Public Comment
    4. Summary of Previously Finalized Measures for the FY 2020 
Payment Determinations and Subsequent Years
    5. Possible IPFQR Program Measures and Topics for Future 
Consideration
    6. Public Display and Review Requirements
    7. Form, Manner, and Timing of Quality Data Submission for the 
FY 2019 Payment Determination and Subsequent Years
    a. Procedural Requirements for FY 2019 Payment Determination and 
Subsequent Years
    b. Data Submission Requirements for the FY 2019 Payment 
Determination and Subsequent Years
    c. Reporting Requirements for the FY 2019 Payment Determination 
and Subsequent Years
    d. Population and Sampling
    e. Data Accuracy and Completeness Acknowledgement (DACA) 
Requirements
    8. Reconsideration and Appeals Procedures
    9. Extraordinary Circumstances Exceptions (ECE) for the IPFQR 
Program
    a. Background
    b. ECE Policy Modifications
    E. Clinical Quality Measurement for Eligible Hospitals and 
Critical Access Hospitals (CAHs) Participating in the EHR Incentive 
Programs
    1. Background
    2. Modifications to the CQM Reporting Requirements for the 
Medicare and Medicaid EHR Incentive Programs for CY 2017
    a. Background
    b. Changes to Policies Regarding Electronic Reporting of CQMs 
for CY 2017
    3. CQM Reporting for the Medicare and Medicaid EHR Incentive 
Programs in 2018
    a. Background
    b. CQM Reporting Period for the Medicare and Medicaid EHR 
Incentive Programs in CY 2018
    c. CQM Reporting Form and Method for the Medicare EHR Incentive 
Program in 2018
    F. Clinical Quality Measurement for Eligible Professionals (EPs) 
Participating in the Medicaid EHR Incentive Program in 2017
    1. Modifications to the CQM Reporting Period for EPs in 2017
    2. Modifications to CQM Reporting Requirements for Medicaid EPs 
Under the Medicaid EHR Incentive Program
    G. Changes to the Medicare and Medicaid EHR Incentive Programs
    1. Revisions to the EHR Reporting Period in 2018
    2. Significant Hardship Exception for Decertified Certified EHR 
Technology (CEHRT) for EPs, Eligible Hospitals, and CAHs Seeking To 
Avoid the Medicare Payment Adjustment
    3. Ambulatory Surgical Center (ASC)-Based Eligible Professionals 
(EPs)
    4. Certification Requirements for 2018
X. Revisions of Medicare Cost Reporting and Provider Requirements
    A. Electronic Signature and Submission of the Certification and 
Settlement Summary Page of the Medicare Cost Report
    1. Background
    2. Changes Relating to Electronic Signature on the Certification 
and Settlement Summary Page of the Medicare Cost Report
    3. Changes Relating to Electronic Submission of the 
Certification and Settlement Summary Page of the Medicare Cost 
Report
    4. Clarifications Relating to the Items Required to be Submitted 
by Providers with the Medicare Cost Report
    a. Settlement Summary and Certification Statement
    b. Removal of the Transition Period Language
    5. Revisions to 42 CFR 413.24(f)(4)(iv)
    B. Clarification of Limitations on the Valuation of Depreciable 
Assets Disposed of on or after December 1, 1997
XI. Changes Relating to Survey and Certification Requirements
    A. Revisions to the Application and Re-Application Procedures 
for National Accrediting Organizations (AOs), Provider and Supplier 
Conditions, and Posting of Survey Reports and Acceptable Plans of 
Corrections (PoCs)
    B. Changes to Termination Public Notice Requirements for Certain 
Providers and Suppliers
    1. Background
    2. Basis for Changes
    3. Changes to Regulations
XII. MedPAC Recommendations
XIII. Other Required Information
    A. Publicly Available Data
    B. Collection of Information Requirements
    1. Statutory Requirement for Solicitation of Comments
    2. ICRs for Temporary Exception to the LTCH PPS Site Neutral 
Payment Rate for Certain Spinal Cord Specialty Hospitals
    3. ICRs for the Hospital Inpatient Quality Reporting (IQR) 
Program
    4. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    5. ICRs for Hospital Value-Based Purchasing (VBP) Program
    6. ICRs for the Long-Term Care Hospital Quality Reporting 
Program (LTCH QRP)
    7. ICRs for the Inpatient Psychiatric Facility Quality Reporting 
(IPFQR) Program
    8. ICRs for the Electronic Health Record (EHR) Incentive 
Programs and Meaningful Use
    9. ICRs Relating to Electronic Signature and Electronic 
Submission of the Certification and Settlement Summary Page of 
Medicare Cost Reports
    10. ICRs Relating to Changes in Public Notices of Terminations
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, 2017 and Payment Rates for LTCHs 
Effective with Discharges Occurring on or after October 1, 2017
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient 
Operating Costs for Acute Care Hospitals for FY 2018
    A. Calculation of the Adjusted Standardized Amount
    B. Adjustments for Area Wage Levels and Cost-of-Living
    C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient 
Capital-Related Costs for FY 2018
    A. Determination of Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update
    B. Calculation of the Inpatient Capital-Related Prospective 
Payments for FY 2018
    C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2018
V. Updates to the Payment Rates for the LTCH PPS for FY 2018
    A. LTCH PPS Standard Federal Payment Rate for FY 2018
    B. Adjustment for Area Wage Levels Under the LTCH PPS for FY 
2018
    1. Background
    2. Geographic Classifications (Labor Market Areas) for the LTCH 
PPS Standard Federal Payment Rate
    3. Labor-Related Share for the LTCH PPS Standard Federal Payment 
Rate
    4. Wage Index for FY 2018 for the LTCH PPS Standard Federal 
Payment Rate
    5. Budget Neutrality Adjustment for Changes to the LTCH PPS 
Standard Federal Payment Rate 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
    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 2018
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

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    1. Effects of Policy Relating to New Medical Service and 
Technology Add-On Payments
    2. Effects of Changes to MS-DRGs Subject to the Postacute Care 
Transfer Policy and the MS-DRG Special Payment Policy
    3. Effects of the Changes to the Volume Decrease Adjustment for 
Sole Community Hospitals (SCHs)
    4. Effects of Changes to Low-Volume Hospital Payment Adjustment 
Policy
    5. Effects of the Changes to Medicare DSH and Uncompensated Care 
Payments for FY 2018
    6. Effects of Reduction Under the Hospital Readmissions 
Reduction Program
    7. Effects of Changes Under the FY 2018 Hospital Value-Based 
Purchasing (VBP) Program
    8. Effects of Changes to the HAC Reduction Program for FY 2018
    9. Effects of Implementation of the Additional 5-Year Expansion 
of the Rural Community Hospital Demonstration Program
    10. Effects of the Changes Relating to Provider-Based Status of 
Indian Health Service and Tribal Facilities and Organizations
    11. Effects of the Changes Relating to Hospital-Within-Hospital 
Policy
    12. Effects of Continued Implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration
    I. Effects of Changes in the Capital IPPS
    1. General Considerations
    2. Results
    J. 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
    K. Effects of Requirements for Hospital Inpatient Quality 
Reporting (IQR) Program
    L. Effects of Requirements for the PPS-Exempt Cancer Hospital 
Quality Reporting (PCHQR) Program
    M. Effects of Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP)
    N. Effects of Updates to the Inpatient Psychiatric Facility 
Quality Reporting (IPFQR) Program
    O. Effects of Requirements Regarding the Electronic Health 
Record (EHR) Incentive Programs and Meaningful Use
    P. Effects of Electronic Signature and Electronic Submission of 
the Certification and Settlement Summary Page of Medicare Cost 
Reports
    Q. Effects of Changes Relating to Survey and Certification 
Requirements
    R. Effects of Clarification of Limitations on the Valuation of 
Depreciable Assets Disposed of on or after December 1, 1997
    S. Alternatives Considered
    T. Reducing Regulation and Controlling Regulatory Costs
    U. Overall Conclusion
    1. Acute Care Hospitals
    2. LTCHs
    V. Regulatory Review Costs
II. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
III. Regulatory Flexibility Act (RFA) Analysis
IV. Impact on Small Rural Hospitals
V. Unfunded Mandate Reform Act (UMRA) Analysis
VI. Executive Order 13175
VII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost 
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2018
    A. FY 2018 Inpatient Hospital Update
    B. Update for SCHs for FY 2018
    C. FY 2018 Puerto Rico Hospital Update
    D. Update for Hospitals Excluded from the IPPS
    E. Update for LTCHs for FY 2018
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and 
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This 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. We also are making changes 
relating to the provider-based status of Indian Health Service (IHS) 
and Tribal facilities and organizations and to the IPPS low-volume 
hospital payment adjustment for hospitals operated by the IHS or a 
Tribe. In addition, it 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.
    We are establishing new requirements or revising requirements for 
quality reporting by specific providers (acute care hospitals, PPS-
exempt hospitals, LTCHs, and inpatient psychiatric facilities) that are 
participating in Medicare. We also are establishing new requirements or 
revising existing requirements for eligible professionals (EPs), 
eligible hospitals, and CAHs participating in the Medicare and Medicaid 
EHR Incentive Programs. 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. We also are making changes related to the 
transparency of accrediting organization survey reports and plans of 
correction; to allow electronic signature and electronic submission of 
the Certification and Settlement Summary page of the Medicare cost 
reports; and to clarify provider reimbursement regulations relative to 
the sale or scrapping of depreciable assets on or after December 1, 
1997.
    Under various statutory authorities, we are making changes to the 
Medicare IPPS, to the LTCH PPS, and to other related payment 
methodologies and programs for FY 2018 and subsequent fiscal years. 
These statutory authorities include, but are not limited to, the 
following:
     Section 1886(d) of the Social Security Act (the Act), 
which sets forth a system of payment for the operating costs of acute 
care hospital inpatient stays under Medicare Part A (Hospital 
Insurance) based on prospectively set rates. Section 1886(g) of the Act 
requires that, instead of paying for capital-related costs of inpatient 
hospital services on a reasonable cost basis, the Secretary use a 
prospective payment system (PPS).
     Section 1886(d)(1)(B) of the Act, which specifies that 
certain hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; LTCHs; 
psychiatric hospitals and units; children's hospitals; cancer 
hospitals; extended neoplastic disease care hospitals (previously 
referred to as ``long-term care neoplastic disease hospitals'' and 
renamed in this final rule), and hospitals located outside the 50 
States, the District of Columbia, and Puerto Rico (that is, hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa). Religious nonmedical health care institutions 
(RNHCIs) are also excluded from the IPPS.
     Sections 123(a) and (c) of the BBRA (Pub. L. 106-113) and 
section 307(b)(1) of the BIPA (Pub. L. 106-554) (as codified under 
section 1886(m)(1) of the Act), which provide for the development and 
implementation of a prospective payment system for payment for 
inpatient hospital services of LTCHs described in section 
1886(d)(1)(B)(iv) of the Act.
     Sections 1814(l), 1820, and 1834(g) of the Act, which 
specify that payments are made to critical access hospitals (CAHs) 
(that is, rural hospitals or facilities that meet certain statutory 
requirements) for inpatient and outpatient services and that these 
payments are generally based on 101 percent of reasonable cost.

[[Page 37999]]

     Section 1866(k) of the Act, as added by section 3005 of 
the Affordable Care Act, which establishes a quality reporting program 
for hospitals described in section 1886(d)(1)(B)(v) of the Act, 
referred to as ``PPS-exempt cancer hospitals.''
     Section 1886(a)(4) of the Act, which specifies that costs 
of approved educational activities are excluded from the operating 
costs of inpatient hospital services. Hospitals with approved graduate 
medical education (GME) programs are paid for the direct costs of GME 
in accordance with section 1886(h) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase that would 
otherwise apply to the standardized amount applicable to a subsection 
(d) hospital for discharges occurring in a fiscal year if the hospital 
does not submit data on measures in a form and manner, and at a time, 
specified by the Secretary.
     Section 1886(o) of the Act, which requires the Secretary 
to establish a Hospital Value-Based Purchasing (VBP) Program under 
which value-based incentive payments are made in a fiscal year to 
hospitals meeting performance standards established for a performance 
period for such fiscal year.
     Section 1886(p) of the Act, as added by section 3008 of 
the Affordable Care Act, which establishes a Hospital-Acquired 
Condition (HAC) Reduction Program, under which payments to applicable 
hospitals are adjusted to provide an incentive to reduce hospital-
acquired conditions.
     Section 1886(q) of the Act, as added by section 3025 of 
the Affordable Care Act and amended by section 10309 of the Affordable 
Care Act and section 15002 of the 21st Century Cures Act, which 
establishes the ``Hospital Readmissions Reduction Program.'' Under the 
program, payments for discharges from an ``applicable hospital'' under 
section 1886(d) of the Act will be reduced to account for certain 
excess readmissions. Section 15002 of the 21st Century Cures Act 
requires the Secretary to compare cohorts of hospitals to each other in 
determining the extent of excess readmissions.
     Section 1886(r) of the Act, as added by section 3133 of 
the Affordable Care Act, which provides for a reduction to 
disproportionate share hospital (DSH) payments under section 
1886(d)(5)(F) of the Act and for a new uncompensated care payment to 
eligible hospitals. Specifically, section 1886(r) of the Act requires 
that, for fiscal year 2014 and each subsequent fiscal year, subsection 
(d) hospitals that would otherwise receive a DSH payment made under 
section 1886(d)(5)(F) of the Act will receive two separate payments: 
(1) 25 percent of the amount they previously would have received under 
section 1886(d)(5)(F) of the Act for DSH (``the empirically justified 
amount''), and (2) an additional payment for the DSH hospital's 
proportion of uncompensated care, determined as the product of three 
factors. These three factors are: (1) 75 percent of the payments that 
would otherwise be made under section 1886(d)(5)(F) of the Act; (2) 1 
minus the percent change in the percent of individuals who are 
uninsured (minus 0.2 percentage point for FY 2018 through FY 2019); and 
(3) a hospital's uncompensated care amount relative to the 
uncompensated care amount of all DSH hospitals expressed as a 
percentage.
     Section 1886(m)(6) of the Act, as added by section 1206(c) 
of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 
(Pub. L. 113-67), which provided for the establishment of site neutral 
payment rate criteria under the LTCH PPS with implementation beginning 
in FY 2016.
     Section 1886(m)(6) of the Act, as amended by section 15009 
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a 
temporary exception to the application of the site neutral payment rate 
under the LTCH PPS for certain spinal cord specialty hospitals for 
discharges in cost reporting periods beginning during FYs 2018 and 
2019.
     Section 1886(m)(6) of the Act, as amended by section 15010 
of the 21st Century Cures Act (Pub. L. 114-255), which provides for a 
temporary exception to the application of the site neutral payment rate 
under the LTCH PPS for certain LTCHs with certain discharges with 
severe wounds occurring in cost reporting periods beginning during FY 
2018.
     Section 1886(m)(5)(D)(iv) of the Act, as added by section 
1206(c) of the Pathway for Sustainable Growth Rate (SGR) Reform Act of 
2013 (Pub. L. 113-67), which provides for the establishment of a 
functional status quality measure under the LTCH QRP for change in 
mobility among inpatients requiring ventilator support.
     Section 1899B of the Act, as added by section 2(a) of the 
Improving Medicare Post-Acute Care Transformation Act of 2014 (the 
IMPACT Act, Pub. L. 113-185), which provides for the establishment of 
data reporting for certain post-acute care providers, including LTCHs.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
    Section 631 of the American Taxpayer Relief Act of 2012 (ATRA, Pub. 
L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to require 
the Secretary to make a recoupment adjustment to the standardized 
amount of Medicare payments to acute care hospitals to account for 
changes in MS-DRG documentation and coding that do not reflect real 
changes in case-mix, totaling $11 billion over a 4-year period of FYs 
2014, 2015, 2016, and 2017. The FY 2014 through FY 2017 adjustments 
represented the amount of the increase in aggregate payments as a 
result of not completing the prospective adjustment authorized under 
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. Prior to the 
ATRA, this amount could not have been recovered under Public Law 110-
90. Section 414 of the Medicare Access and CHIP Reauthorization Act of 
2015 (MACRA) (Pub. L. 114-10) replaced the single positive adjustment 
we intended to make in FY 2018 with a 0.5 percent positive adjustment 
to the standardized amount of Medicare payments to acute care hospitals 
for FYs 2018 through 2023. The FY 2018 adjustment was subsequently 
adjusted to 0.4588 percent by section 15005 of the 21st Century Cures 
Act.
    For FY 2018, we are making the 0.4588 percent positive adjustment 
to the standardized amount as required by section 414 of Public Law 
114-10, as amended by section 15005 of the 21st Century Cures Act.
b. Adjustment to IPPS Rates Resulting From 2-Midnight Policy
    In FY 2017, we made a permanent adjustment to the standardized 
amount, the hospital-specific payment rates, and the national capital 
Federal rate to prospectively remove the 0.2 percent reduction to the 
rates put in place in FY 2014 to offset the estimated increase in IPPS 
expenditures as a result of the 2-midnight policy. In addition, we made 
a temporary one-time prospective increase to the FY 2017 standardized 
amount, the hospital-specific payment rates, and the national capital 
Federal rate of 0.6 percent by including a temporary one-time factor of 
1.006 in the calculation of the standardized amount, the hospital-
specific payment rates, and the national capital Federal rate to 
address the effects of the 0.2 percent reduction to the rate for the 2-
midnight policy in effect for FYs 2014, 2015, and 2016.
    For FY 2018, we are including a factor of (1/1.006) in the 
calculation of the FY

[[Page 38000]]

2018 standardized amount, the hospital-specific payment rates, and the 
national capital Federal rate to remove the temporary one-time factor 
of 1.006, as established in the FY 2017 IPPS/LTCH PPS final rule.
c. Reduction of Hospital Payments for Excess Readmissions
    We are making changes to policies for the Hospital Readmissions 
Reduction Program, which is established under section 1886(q) of the 
Act, as added by section 3025 of the Affordable Care Act, as amended by 
section 10309 of the Affordable Care Act. The Hospital Readmissions 
Reduction Program requires a reduction to a hospital's base operating 
DRG payment to account for excess readmissions of selected applicable 
conditions. For FY 2018 and subsequent years, the reduction is based on 
a hospital's risk-adjusted readmission rate during a 3-year period for 
acute myocardial infarction (AMI), heart failure (HF), pneumonia, 
chronic obstructive pulmonary disease (COPD), total hip arthroplasty/
total knee arthroplasty (THA/TKA), and coronary artery bypass graft 
(CABG). In this final rule, we are establishing the following policies: 
(1) Specify applicable time period for FY 2018; (2) specifying the 
calculation of aggregate payments for excess readmissions for FY 2018; 
(3) making changes to the payment adjustment factor in accordance with 
the 21st Century Cures Act for FY 2019; and (4) updating the 
Extraordinary Circumstances Exceptions policy.
d. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year. In 
this final rule, we are removing one previously adopted measure, the 
PSI 90: Patient Safety for Selected Indicators measure, from the 
Hospital VBP Program beginning with the FY 2019 program year. We also 
are adopting one new measure, Hospital-Level, Risk-Standardized Payment 
Associated with a 30-Day Episode of Care for Pneumonia, beginning with 
the FY 2022 program year, and adopting a modified version of a 
previously adopted measure, Patient Safety and Adverse Events Composite 
(NQF #0531), beginning with the FY 2023 program year. In addition, we 
are making two modifications to our domain scoring policies beginning 
with the FY 2019 program year, and further establishing a new weighting 
methodology for the measures within the Efficiency and Cost Reduction 
domain. We also are addressing public comment submitted in response to 
our comment solicitation on whether and how to account for social risk 
factors in the Hospital VBP Program.
e. Hospital-Acquired Condition (HAC) Reduction Program
    Section 1886(p) of the Act, as added under section 3008(a) of the 
Affordable Care Act, establishes an incentive to hospitals to reduce 
the incidence of hospital-acquired conditions by requiring the 
Secretary to make an adjustment to payments to applicable hospitals 
effective for discharges beginning on October 1, 2014. This 1-percent 
payment reduction applies to a hospital whose ranking is in the top 
quartile (25 percent) of all applicable hospitals, relative to the 
national average, of conditions acquired during the applicable period 
and on all of the hospital's discharges for the specified fiscal year. 
In this final rule, we are establishing the following policies: (1) 
Specifying the data collection time periods for the FY 2020 HAC 
Reduction Program; and (2) updating the Extraordinary Circumstances 
Exception policy for the HAC Reduction Program. In this final rule, we 
also are responding to comments received regarding: (1) Additional 
measures and potential future adoption; (2) accounting for social risk 
factors; and (3) the inclusion of disability and medical complexity for 
the CDC NHSN measures.
f. DSH Payment Adjustment and Additional Payment for Uncompensated Care
    Section 3133 of the Affordable Care Act modified the Medicare 
disproportionate share hospital (DSH) payment methodology beginning in 
FY 2014. Under section 1886(r) of the Act, which was added by section 
3133 of the Affordable Care Act, starting in FY 2014, DSHs receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of 
the Act. The remaining amount, equal to 75 percent of the amount that 
otherwise would have been paid as Medicare DSH payments, is paid as 
additional payments after the amount is reduced for changes in the 
percentage of individuals that are uninsured. Each Medicare DSH will 
receive an additional payment based on its share of the total amount of 
uncompensated care for all Medicare DSHs for a given time period.
    In this final rule, we are updating our estimates of the three 
factors used to determine uncompensated care payments for FY 2018. The 
statute permits the use of a data source other than the CBO estimates 
to determine the percent change in the rate of uninsurance as part of 
the calculation of Factor 2 beginning in FY 2018. We are using 
uninsured estimates produced by CMS' Office of the Actuary (OACT) as 
part of the development of the National Health Expenditure Accounts 
(NHEA) in the calculation of Factor 2. We also are beginning to 
incorporate data from Worksheet S-10 in the calculation of hospitals' 
share of uncompensated care by combining data on uncompensated care 
costs from the Worksheet S-10 for FY 2014 with proxy data regarding a 
hospital's share of low-income insured days for FYs 2012 and 2013 to 
determine Factor 3 for FY 2018. We will continue to use data from three 
cost reporting periods to calculate Factor 3, which will gradually 
incorporate uncompensated care data from Worksheet S-10 into the 
calculation of Factor 3. As part of this policy, we are including a 
definition of uncompensated care costs consisting of the sum of charity 
care and bad debt and a trim methodology to address aberrant cost-to-
charge ratios (CCRs) as well as potentially aberrant uncompensated care 
costs that exceed a threshold of 50 percent of total operating costs. 
We also are providing that, for Puerto Rico hospitals, Indian Health 
Service and Tribal hospitals, and all-inclusive rate providers, we will 
substitute data regarding low-income insured days for FY 2013 for the 
Worksheet S-10 data from FY 2014 cost reports.
    We are continuing the policies that were finalized in FY 2015 to 
address several specific issues concerning the process and data to be 
employed in determining hospitals' share of uncompensated care in the 
case of hospital mergers. We also are continuing the policies finalized 
in FY 2017 concerning the methodology for calculating each hospital's 
relative share of uncompensated care, such as combining data from 
multiple cost reports beginning in the same fiscal year and averaging 
the sum of three individual Factor 3s by the number of cost reporting 
periods with data. In addition, we are annualizing hospital cost 
reports that do not span 12 months. We also are applying a scaling 
factor to each hospital's uncompensated care amount so that total 
uncompensated care payments will be consistent with the estimated 
amount available to make

[[Page 38001]]

uncompensated care payments for FY 2018.
g. Changes to the LTCH PPS
    In this final rule, we set forth changes to the LTCH PPS Federal 
payment rates, factors, and other payment rate policies under the LTCH 
PPS for FY 2018; changes to the payment methodology under the short-
stay outlier (SSO) policy; implementation of several provisions of the 
21st Century Cures Act; and the adoption of a 1-year regulatory delay 
on the full implementation of the 25-percent threshold policy for 
discharges occurring in FY 2018 (that is, for the fiscal year after 
expiration of the current statutory moratoria under the 21st Century 
Cures Act, which is set to expire September 30, 2017).
h. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, subsection (d) 
hospitals are required to report data on measures selected by the 
Secretary for a fiscal year in order to receive the full annual 
percentage increase that would otherwise apply to the standardized 
amount applicable to discharges occurring in that fiscal year. In past 
years, we have established measures on which hospitals must report data 
and the process for submittal and validation of the data.
    In this final rule, we are finalizing several changes. First, we 
are refining two previously adopted measures. Specifically, we are 
finalizing an update to the Hospital Consumer Assessment of Healthcare 
Providers and Systems (HCAHPS) survey measure by replacing the three 
existing questions about Pain Management with three new questions that 
address Communication About Pain During the Hospital Stay, beginning 
with the FY 2020 payment determination with modification that public 
reporting would be delayed. In addition, we are finalizing an update to 
the stroke mortality measure to include the use of NIH Stroke Scale 
claims data for risk adjustment, beginning with the FY 2023 payment 
determination. We also are adopting the Hospital-Wide All-Cause 
Unplanned Readmission Hybrid Measure as a voluntary measure for the CY 
2018 reporting period.
    In addition, we are finalizing a modified, reduced policy for eCQM 
reporting as compared to our proposals. For both the CY 2017 reporting 
period/FY 2019 payment determination and CY 2018 reporting period/FY 
2020 payment determination, we are finalizing that hospitals will be 
required to select and submit four of the available eCQMs included in 
the Hospital IQR Program measure set and provide one self-selected, 
calendar year quarter of data. We are also modifying our eCQM 
certification requirements such that for the CY 2018 reporting period 
hospitals will be able to use: (1) The 2014 Edition of CERHT, (2) the 
2015 Edition of CEHRT, or (3) a combination of both the 2014 and 2015 
Editions of CEHRT. In addition, we are finalizing the following 
policies: (1) For the CY 2017 reporting period/FY 2019 payment 
determination and the CY 2018 reporting period/FY 2020 payment 
determination, a hospital using EHR technology certified to the 2014 or 
2015 Edition, but for which such EHR technology is not certified to all 
15 available eCQMs available to report, will be required to have its 
EHR technology certified to all 15 eCQMs that are available to report 
in the Hospital IQR Program; (2) for the CY 2017 reporting period/FY 
2019 payment determination, hospitals will be required to use the most 
recent version of the eCQM electronic specifications (namely, the 
Spring 2016 version of the eCQM specifications and any applicable 
addenda); (3) for the CY 2018 reporting period/FY 2020 payment 
determination, hospitals will be required to use the most recent 
version of the eCQM electronic specifications (namely, the Spring 2017 
version of the eCQM specifications and any applicable addenda); and (5) 
hospitals' EHR technology certified to all 15 eCQMs would not need to 
be recertified each time it is updated to a more recent version of the 
eCQMs. These policies are being made in alignment with the CQM 
electronic reporting policies for the Medicare and Medicaid EHR 
Incentive Programs, and will decrease the required number of eCQMs and 
quarters of reporting as compared with the previously finalized 
requirements in the FY 2017 IPPS/LTCH PPS final rule.
    Furthermore, we are finalizing our policies for the eCQM data 
validation process, whereby we will select eight cases per quarter (the 
number of quarters required will vary by specific FY payment 
determination) to complete eCQM validation for the FY 2020 payment 
determination and subsequent years. In addition, for the FY 2020 
payment determination and subsequent years, we are establishing 
policies related to the exclusion criteria for hospital and case 
selection, and the data submission requirements for participating 
hospitals. For the FY 2021 payment determination and subsequent years, 
we are finalizing our proposal to extend our previously finalized 
medical record submission policy for eCQM validation requiring 
submission of at least 75 percent of sampled eCQM measure medical 
records in a timely and complete manner. Also, we are: (1) Formalizing 
our educational review process for chart-abstracted measures for the FY 
2020 payment determination and subsequent years, and (2) finalizing 
that we will use this process to correct quarterly scores for any of 
the first 3 quarters of validation in order to compute the final 
confidence interval.
    Moreover, we are establishing policies related to our Hospital IQR 
Program Extraordinary Circumstances Extension or Exemptions policy, 
including a change to the name of the policy to Extraordinary 
Circumstances Exceptions (ECE) policy and updates to 42 CFR 
412.140(c)(2) to reflect our ECE policy. Finally, we responded to our 
solicitation of public comment on accounting for social risk factors in 
the Hospital IQR Program, the confidential and potential future public 
reporting of clinical quality measure data stratified by patients' 
dual-eligible status, and the following clinical quality measures that 
we are considering for future inclusion in the Hospital IQR Program: 
(1) Quality of Informed Consent Documents for Hospital-Performed, 
Elective Procedures measure; (2) four End-of-Life process and outcome 
measures for cancer patients; (3) two nurse staffing measures; and (4) 
11 newly specified electronic clinical quality measures (eCQMs).
i. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    Section 1886(m)(5) of the Act requires LTCHs to report certain 
quality data to CMS in order to receive their full annual update under 
the LTCH PPS. In this final rule, we are adopting one new outcome 
measure related to pressure ulcers and two new measures (one process 
and one outcome) related to ventilator weaning. We also are defining 
the certain standardized patient assessment data that LTCHs must report 
to comply with section 1886(m)(5)(F)(ii) of the Act, as well as the 
requirements for the reporting of these data. Finally, we will publicly 
report data on four assessment-based measures and three claims-based 
measures.
j. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program
    For the Inpatient Psychiatric Facility Quality Reporting (IPFQR) 
Program, we are making several policy changes. First, beginning with 
the FY 2019 payment determination (that is, for extraordinary 
circumstances occurring during CY 2018), we are updating the IPFQR 
Program's extraordinary circumstances

[[Page 38002]]

exceptions (ECE) policy by: (1) Allowing designated personnel to 
provide their contact information and sign the ECE request in lieu of 
the requesting IPF's Chief Executive Officer (CEO); (2) allowing up to 
90 days after the extraordinary circumstance to submit the request; and 
(3) stating that we will strive to respond to ECE requests within 90 
days of receiving them. Second, we are changing the annual data 
submission period from a specific date range to a 45-day period that 
begins at least 30 days following the end of the collection period. 
Third, we are aligning our deadlines for submission of a Notice of 
Participation (NOP) or program withdrawal with this data submission 
timeframe. Finally, we are establishing factors by which we will 
evaluate measures for removal from or retention under the IPFQR 
Program. These factors align with those in use in other quality 
reporting programs.
    We are not finalizing our proposal to adopt the Medication 
Continuation following Inpatient Psychiatric Discharge measure for FY 
2020 payment determination and subsequent years.
3. Summary of Costs and Benefits
     Adjustment for MS-DRG Documentation and Coding Changes. 
Section 414 of the MACRA replaced the single positive adjustment we 
intended to make in FY 2018 once the recoupment required by section 631 
of the ATRA was complete with a 0.5 percent positive adjustment to the 
standardized amount of Medicare payments to acute care hospitals for 
FYs 2018 through 2023. The FY 2018 adjustment was subsequently adjusted 
to 0.4588 percent by section 15005 of the 21st Century Cures Act (Pub. 
L. 114-255). For FY 2018, we are making the 0.4588 percent positive 
adjustment to the standardized amount as required by these provisions.
     Adjustment to IPPS Payment Rates as a Result of the 2-
Midnight Policy. The removal of the adjustment to IPPS rates resulting 
from the 2-midnight policy will decrease IPPS payment rates by (1/
1.006) for FY 2018. The (1/1.006) is a one-time factor that will be 
applied to the standardized amount, the hospital-specific rates, and 
the national capital Federal rate for FY 2018 only.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. Under section 1886(r) of the Act (as added by 
section 3133 of the Affordable Care Act), DSH payments to hospitals 
under section 1886(d)(5)(F) of the Act are reduced and an additional 
payment for uncompensated care is made to eligible hospitals beginning 
in FY 2014. Hospitals that receive Medicare DSH payments receive 25 
percent of the amount they previously would have received under the 
statutory formula for Medicare DSH payments in section 1886(d)(5)(F) of 
the Act. The remainder, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, is the basis 
for determining the additional payments for uncompensated care after 
the amount is reduced for changes in the percentage of individuals that 
are uninsured and additional statutory adjustments. Each hospital that 
receives Medicare DSH payments will receive an additional payment for 
uncompensated care based on its share of the total uncompensated care 
amount reported by Medicare DSHs. The reduction to Medicare DSH 
payments is not budget neutral.
    For FY 2018, we are providing that the 75 percent of what otherwise 
would have been paid for Medicare DSH will be adjusted to approximately 
58.01 percent of the amount to reflect changes in the percentage of 
individuals that are uninsured and additional statutory adjustments. In 
other words, approximately 43.51 percent (the product of 75 percent and 
58.01 percent) of our estimate of Medicare DSH payments, prior to the 
application of section 3133 of the Affordable Care Act, will be 
available to make additional payments to hospitals for their relative 
share of the total amount of uncompensated care.
    We project that estimated Medicare DSH payments, and additional 
payments for uncompensated care made for FY 2018, will increase 
payments overall by approximately 0.6 percent as compared to the 
estimate of overall payments, including Medicare DSH payments and 
uncompensated care payments that will be distributed in FY 2017. The 
additional payments have redistributive effects based on a hospital's 
uncompensated care amount relative to the uncompensated care amount for 
all hospitals that are estimated to receive Medicare DSH payments, and 
the calculated payment amount is not directly tied to a hospital's 
number of discharges.
     Changes to the Hospital Readmissions Reduction Program. 
For FY 2018 and subsequent years, the reduction is based on a 
hospital's risk-adjusted readmission rate during a 3-year period for 
acute myocardial infarction (AMI), heart failure (HF), pneumonia, 
chronic obstructive pulmonary disease (COPD), total hip arthroplasty/
total knee arthroplasty (THA/TKA), and coronary artery bypass graft 
(CABG). Overall, in this final rule, we estimate that 2,591 hospitals 
will have their base operating DRG payments reduced by their determined 
proxy FY 2018 hospital-specific readmission adjustment. As a result, we 
estimate that the Hospital Readmissions Reduction Program will save 
approximately $564 million in FY 2018, an increase of approximately $27 
million over the estimated FY 2017 savings.
     Value-Based Incentive Payments Under the Hospital VBP 
Program. We estimate that there will be no net financial impact to the 
Hospital VBP Program for the FY 2018 program year in the aggregate 
because, by law, the amount available for value-based incentive 
payments under the program in a given year must be equal to the total 
amount of base operating MS-DRG payment amount reductions for that 
year, as estimated by the Secretary. The estimated amount of base 
operating MS-DRG payment amount reductions for the FY 2018 program year 
and, therefore, the estimated amount available for value-based 
incentive payments for FY 2018 discharges is approximately $1.9 
billion.
     Changes to the HAC Reduction Program. A hospital's Total 
HAC score and its ranking in comparison to other hospitals in any given 
year depends on several different factors. Any significant impact due 
to the HAC Reduction Program changes for FY 2018, including which 
hospitals will receive the adjustment, will depend on actual 
experience.
     Update to the LTCH PPS Payment Rates and Other Payment 
Factors. Based on the best available data for the 415 LTCHs in our 
database, we estimate that the changes to the payment rates and factors 
that we are presenting in the preamble and Addendum of this final rule, 
which reflects the rolling end to the transition of the statutory 
application of the site neutral payment rate required by section 
1886(m)(6)(A) of the Act, the update to the LTCH PPS standard Federal 
payment rate for FY 2018, and estimated changes to the site neutral 
payment rate and high-cost outlier (HCO) payments will result in an 
estimated decrease in payments from FY 2017 of approximately $195 
million.
     Changes to the 25-Percent Threshold Policy. In this final 
rule, we estimate our adoption of a 1-year regulatory delay of the full 
implementation of the 25-percent threshold policy for discharges 
occurring in FY 2018 will increase payments to LTCHs in FY 2018 by $70 
million.
     Changes to the Hospital Inpatient Quality Reporting (IQR) 
Program. Across 3,300 IPPS hospitals, we

[[Page 38003]]

estimate that our finalized requirements for the Hospital IQR Program 
will result in the following changes to costs and benefits in this 
program compared to previously finalized requirements: (1) A cost 
reduction of $613,864 for the FY 2019 payment determination due to the 
updates to the eCQM reporting requirements; (2) a total net cost 
reduction of $866,277 for the FY 2020 payment determination due to the 
updates to the eCQM reporting requirements, the updates to the eCQM 
validation procedures, and the voluntary reporting of the new Hybrid 
Hospital-Wide Readmission measure; and (3) a total cost reduction of 
$255,104 for the FY 2021 payment determination due to the updates to 
the eCQM validation procedures.
     Changes Related to the LTCH QRP. In this final rule, we 
are adopting one outcome measure related to pressure ulcers and two new 
measures (one process and one outcome) related to ventilator weaning. 
We also are specifying the use of certain standardized patient 
assessment data as required under section 1899B(b)(1)(B) of the Act and 
policies regarding public display of measure data. Overall, the cost 
associated with the changes to the LTCH QRP is estimated at a reduction 
of $893.14 per LTCH annually or $380,480 for all LTCHs.
     Changes to the IPFQR Program. In this final rule, we are 
not adopting the one claims-based measure we proposed. However, we are 
updating our ECE process; changing the specification of the data 
submission period; aligning the timeframe for submission of the NOP or 
program withdrawal with the data submission period; and establishing 
factors to evaluate measures for retention or removal. We do not 
believe that these policies will have any impact on the IPFQR program 
burden.

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the Social Security Act (the Act) sets forth a 
system of payment for the operating costs of acute care hospital 
inpatient stays under Medicare Part A (Hospital Insurance) based on 
prospectively set rates. Section 1886(g) of the Act requires the 
Secretary to use a prospective payment system (PPS) to pay for the 
capital-related costs of inpatient hospital services for these 
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for 
hospital inpatient operating and capital-related costs is made at 
predetermined, specific rates for each hospital discharge. Discharges 
are classified according to a list of diagnosis-related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the 
DRG relative weight.
    If the hospital treats a high percentage of certain low-income 
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the 
disproportionate share hospital (DSH) adjustment, provides for a 
percentage increase in Medicare payments to hospitals that qualify 
under either of two statutory formulas designed to identify hospitals 
that serve a disproportionate share of low-income patients. For 
qualifying hospitals, the amount of this adjustment varies based on the 
outcome of the statutory calculations. The Affordable Care Act revised 
the Medicare DSH payment methodology and provides for a new additional 
Medicare payment that considers the amount of uncompensated care 
beginning on October 1, 2013.
    If the hospital is training residents in an approved residency 
program(s), it receives a percentage add-on payment for each case paid 
under the IPPS, known as the indirect medical education (IME) 
adjustment. This percentage varies, depending on the ratio of residents 
to beds.
    Additional payments may be made for cases that involve new 
technologies or medical services that have been approved for special 
add-on payments. To qualify, a new technology or medical service must 
demonstrate that it is a substantial clinical improvement over 
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG 
payment.
    The costs incurred by the hospital for a case are evaluated to 
determine whether the hospital is eligible for an additional payment as 
an outlier case. This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
Any eligible outlier payment is added to the DRG-adjusted base payment 
rate, plus any DSH, IME, and new technology or medical service add-on 
adjustments.
    Although payments to most hospitals under the IPPS are made on the 
basis of the standardized amounts, some categories of hospitals are 
paid in whole or in part based on their hospital-specific rate, which 
is determined from their costs in a base year. For example, sole 
community hospitals (SCHs) receive the higher of a hospital-specific 
rate based on their costs in a base year (the highest of FY 1982, FY 
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the 
standardized amount. SCHs are the sole source of care in their areas. 
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a 
hospital that is located more than 35 road miles from another hospital 
or that, by reason of factors such as isolated location, weather 
conditions, travel conditions, or absence of other like hospitals (as 
determined by the Secretary), is the sole source of hospital inpatient 
services reasonably available to Medicare beneficiaries. In addition, 
certain rural hospitals previously designated by the Secretary as 
essential access community hospitals are considered SCHs.
    Under current law, the Medicare-dependent, small rural hospital 
(MDH) program is effective through FY 2017. Through and including FY 
2006, an MDH received the higher of the Federal rate or the Federal 
rate plus 50 percent of the amount by which the Federal rate was 
exceeded by the higher of its FY 1982 or FY 1987 hospital-specific 
rate. For discharges occurring on or after October 1, 2007, but before 
October 1, 2017, an MDH receives the higher of the Federal rate or the 
Federal rate plus 75 percent of the amount by which the Federal rate is 
exceeded by the highest of its FY 1982, FY 1987, or FY 2002 hospital-
specific rate. MDHs are a major source of care for Medicare 
beneficiaries in their areas. Section 1886(d)(5)(G)(iv) of the Act 
defines an MDH as a hospital that is located in a rural area, has not 
more than 100 beds, is not an SCH, and has a high percentage of 
Medicare discharges (not less than 60 percent of its inpatient days or 
discharges in its cost reporting year beginning in FY 1987 or in two of 
its three most recently settled Medicare cost reporting years).
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services in accordance with 
a prospective payment system established by the Secretary. The basic 
methodology for determining capital prospective payments is set forth 
in our regulations at 42 CFR 412.308 and 412.312. Under the capital 
IPPS, payments are adjusted by the same DRG for the case as they are 
under the operating IPPS. Capital IPPS payments are also adjusted for 
IME and DSH, similar to the adjustments made under the operating IPPS. 
In addition, hospitals may receive outlier payments

[[Page 38004]]

for those cases that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Inpatient rehabilitation facility (IRF) 
hospitals and units; long-term care hospitals (LTCHs); psychiatric 
hospitals and units; children's hospitals; cancer hospitals; extended 
neoplastic disease care hospitals (referred to as ``long-term care 
neoplastic disease hospitals'' in the proposed rule and renamed for 
this final rule, which were formerly LTCHs classified under section 
1886(d)(1)(B)(iv)(II) of the Act and redesignated by section 15008 of 
Pub. L 114-255) and hospitals located outside the 50 States, the 
District of Columbia, and Puerto Rico (that is, hospitals located in 
the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and 
American Samoa). Religious nonmedical health care institutions (RNHCIs) 
are also excluded from the IPPS. Various sections of the Balanced 
Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, Medicaid and 
SCHIP [State Children's Health Insurance Program] Balanced Budget 
Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA, Pub. L. 106-554) provide for the implementation of PPSs for IRF 
hospitals and units, LTCHs, and psychiatric hospitals and units 
(referred to as inpatient psychiatric facilities (IPFs)). (We note that 
the annual updates to the LTCH PPS are included along with the IPPS 
annual update in this document. Updates to the IRF PPS and IPF PPS are 
issued as separate documents.) Children's hospitals, cancer hospitals, 
hospitals located outside the 50 States, the District of Columbia, and 
Puerto Rico (that is, hospitals located in the U.S. Virgin Islands, 
Guam, the Northern Mariana Islands, and American Samoa), and RNHCIs 
continue to be paid solely under a reasonable cost-based system subject 
to a rate-of-increase ceiling on inpatient operating costs.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of sections 123 of the 
BBRA and section 307(b) of the BIPA (as codified under section 
1886(m)(1) of the Act). During the 5-year (optional) transition period, 
a LTCH's payment under the PPS was based on an increasing proportion of 
the LTCH Federal rate with a corresponding decreasing proportion based 
on reasonable cost principles. Effective for cost reporting periods 
beginning on or after October 1, 2006, all LTCHs are paid 100 percent 
of the Federal rate. Section 1206(a) of the Pathway for SGR Reform Act 
of 2013 (Pub. L. 113-67) established the site neutral payment rate 
under the LTCH PPS, which made the LTCH PPS a dual rate payment system 
beginning in FY 2016. Under this statute, based on a rolling effective 
date that is linked to the date on which a given LTCH's Federal FY 2016 
cost reporting period begins, LTCHs are paid for discharges at the site 
neutral payment rate unless the discharge meets the patient criteria 
for payment at the LTCH PPS standard Federal payment rate. The existing 
regulations governing payment under the LTCH PPS are located in 42 CFR 
part 412, subpart O. Beginning October 1, 2009, we issue the annual 
updates to the LTCH PPS in the same documents that update the IPPS (73 
FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing payments to the various 
types of hospitals are located in 42 CFR part 413.

C. Summary of Provisions of Recent Legislation Implemented in This 
Final Rule

1. The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), 
the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. 
L. 114-10), and the 21st Century Cures Act (Pub. L. 114-255)
    Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) 
(Pub. L. 112-240) amended section 7(b)(1)(B) of Public Law 110-90 to 
require CMS to make a recoupment adjustment to the standardized amounts 
under section 1886(d) of the Act based upon the Secretary's estimates 
for discharges occurring from FYs 2014 through FY 2017 to fully offset 
$11 billion. Once the recoupment required under section 631 of the ATRA 
was completed, CMS had anticipated making a single positive adjustment 
in FY 2018 to offset the reductions required to recoup the $11 billion 
under section 631 of the ATRA. However, section 414 of the MACRA 
replaced the single positive adjustment CMS intended to make in FY 2018 
with a 0.5 percent positive adjustment for each of FYs 2018 through 
2023. Section 15005 of the 21st Century Cures Act (Pub. L. 114-255, 
enacted December 13, 2016) further amended Public Law 110-90 to reduce 
the adjustment for FY 2018 from 0.5 percent point to 0.4588 percentage 
point.
2. Pathway for SGR Reform Act of 2013 (Pub. L. 113-67)
    The Pathway for SGR Reform Act of 2013 (Pub. L. 113-67) introduced 
new payment rules in the LTCH PPS. Under section 1206 of this law, 
discharges in cost reporting periods beginning on or after October 1, 
2015 under the LTCH PPS will receive payment under a site neutral rate 
unless the discharge meets certain patient-specific criteria. In this 
final rule, we are continuing to update certain policies that 
implemented provisions under section 1206 of the Pathway for SGR Reform 
Act.
3. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act) (Pub. L. 113-185)
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act (Pub. L. 113-185), enacted on October 6, 2014, made a 
number of changes that affect the Long-Term Care

[[Page 38005]]

Quality Reporting Program (LTCH QRP). In this final rule, we are 
continuing to implement portions of section 1899B of the Act, as added 
by section 2(a) of the IMPACT Act, which, in part, requires LTCHs, 
among other postacute care providers, to report standardized patient 
assessment data, data on quality measures, and data on resource use and 
other measures.
4. The Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 
114-10)
    Section 411(g) of the Medicare Access and CHIP Reauthorization Act 
of 2015 (MACRA, Pub. L. 114-10) sets the annual update under the LTCH 
PPS to 1.0 percent for FY 2018. In this final rule, consistent with 
this requirement, we are updating the LTCH standard Federal payment 
rate by 1.0 percent for FY 2018.
    The MACRA also extended the MDH program and temporary changes to 
the payment adjustment for low-volume hospitals through FY 2017. In 
this final rule, we discuss the expiration of the MDH program and the 
expiration of the temporary changes to the low-volume hospital payment 
adjustment under current law.
5. The 21st Century Cures Act (Pub. L. 114-255)
    The 21st Century Cures Act (Pub. L. 114-255), enacted on December 
13, 2016, contains a number of provisions affecting payments under the 
LTCH PPS, the Hospital Readmissions Reduction Program and the Medicare 
EHR Incentive Program, which we are implementing in this final rule:
     Section 4002(b)(1)(A) amended section 1848(a)(7)(B) of the 
Act to provide that the Secretary shall exempt an eligible professional 
from the application of the payment adjustment under section 
1848(a)(7)(A) of the Act with respect to a year, subject to annual 
renewal, if the Secretary determines that compliance with the 
requirement for being a meaningful EHR user is not possible because the 
certified EHR technology used by such eligible professional has been 
decertified under the Office of the National Coordinator for Health 
Information Technology's (ONC) Health IT Certification Program.
     Section 4002(b)(2) amended section 1886(b)(3)(B)(ix)(II) 
of the Act to provide that the Secretary shall exempt a hospital from 
the application of the payment adjustment under section 
1886(b)(3)(B)(ix)(I) with respect to a fiscal year, subject to annual 
renewal, if the Secretary determines that compliance with the 
requirement for being a meaningful EHR user is not possible because the 
certified EHR technology used by the hospital is decertified under 
ONC's Health IT Certification Program.
     Section 15002, which amended section 1886(q)(3) of the Act 
by adding subparagraphs (D) and (E), which requires the Secretary to 
develop a methodology for the calculating the excess readmissions 
adjustment factor for the Hospital Readmissions Reduction Program based 
on cohorts defined by the percentage of dual eligible patients (that 
is, patients who are eligible for both Medicare and full-benefit 
Medicaid coverage) cared for by a hospital. In this final rule, we are 
implementing changes to the payment adjustment factor to assess 
penalties based on a hospital's performance relative to other hospitals 
treating a similar proportion of dual-eligible patients.
     Section 15004(a), which further amended section 114(d)(7) 
of the MMSEA (as amended) by striking ``The moratorium under paragraph 
(1)(A)'' and inserting ``[a]ny moratorium under paragraph (1)'' and 
specified that such amendment shall take effect as if included in the 
enactment of section 112 of the PAMA. We are implementing the 
exceptions to the current statutory moratorium, which is in effect 
through September 30, 2017, on increasing beds in an existing LTCH or 
an existing LTCH satellite as provided by Section 15004(a).
     Section 15004(b), which modifies high cost outlier 
payments to LTCH standard Federal rate cases beginning in FY 2018.
     Section 15006, which further amended section 114(c)(1)(A) 
of the MMSEA (as amended) by extending the moratorium on the full 
implementation of the 25-percent threshold policy through June 30, 
2016, and for discharges occurring on or after October 1, 2016 and 
before October 1, 2017. In this final rule, we are implementing the 
moratorium on the full implementation of the 25-percent threshold 
policy for discharges occurring on or after October 1, 2016, through 
September 30, 2017, as provided by section 15006.
     Section 15007, which amended section 1206(a)(3) of the 
Pathway for SGR Reform Act by extending the exclusion for of Medicare 
Advantage plans' and site neutral payment rate discharges from the 
calculation of the average length-of-stay to all LTCHs, for discharges 
occurring in cost reporting periods beginning on or after October 1, 
2015.
     Section 15008, which provided for a change in Medicare 
classification for ``subclause (II)'' LTCHs by redesignating such 
hospitals from section 1886(d)(1)(B)(iv)(II) to section 
1886(d)(1)(B)(vi) of the Act. In this final rule, we are implementing 
the reclassification of hospitals which had previously been classified 
as ``subclause (II)'' LTCHs as their own category of IPPS-excluded 
hospitals as provided by the provisions of section 15008.
     Section 15009 of Public Law 114-255, which added new 
subparagraph (F) to section 1886(m)(6) of the Act, providing for a 
temporary exception to the site neutral payment rate for certain spinal 
cord specialty hospitals for all discharges occurring during such 
LTCH's cost reporting periods that begin during FYs 2018 and 2019.
     Section 15010, which added a new subparagraph (G) to 
section 1886(m)(6) of the Act, to create a temporary exception to the 
site neutral payment rate for certain severe wound discharges from 
certain LTCHs during such LTCH's cost reporting period beginning during 
FY 2018.
     Section 16003 amended section 1848(a)(7)(D) of the Act to 
provide that no payment adjustment may be made under section 
1848(a)(7)(A) of the Act for 2017 and 2018 in the case of an eligible 
professional who furnishes substantially all of his or her covered 
professional services in an ambulatory surgical center (ASC). Section 
1848(a)(7)(D)(iii) of the Act provides that determinations of whether 
an eligible professional is ASC-based may be made based on the site of 
service as defined by the Secretary or an attestation, but shall be 
made without regard to any employment or billing arrangement between 
the eligible professional and any other supplier or provider of 
services. Section 1848(a)(7)(D)(iv) of the Act provides that the ASC-
based exception shall no longer apply as of the first year that begins 
more than 3 years after the date on which the Secretary determines, 
through notice-and-comment rulemaking, that certified EHR technology 
applicable to the ASC setting is available.

D. Issuance of a Notice of Proposed Rulemaking

    In the proposed rule that appeared in the Federal Register on April 
28, 2017 (82 FR 19796), we set forth proposed payment and policy 
changes to the Medicare IPPS for FY 2018 operating costs and for 
capital-related costs of acute care hospitals and certain hospitals and 
hospital units that are excluded from IPPS. In addition, we set forth 
proposed changes to the payment rates, factors, and other payment and 
policy-related changes to programs

[[Page 38006]]

associated with payment rate policies under the LTCH PPS for FY 2018.
    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 for FY 2018.
     Proposed adjustment to the standardized amounts under 
section 1886(d) of the Act for FY 2018 in accordance with the 
amendments made to section 7(b)(1)(B) of Public Law 110-90 by section 
414 of the MACRA and section 15005 of the 21st Century Cures Act.
     Proposed recalibration of the MS-DRG relative weights.
     A discussion of the FY 2018 status of new technologies 
approved for add-on payments for FY 2017 and a presentation of our 
evaluation and analysis of the FY 2018 applicants for add-on payments 
for high-cost new medical services and technologies (including public 
input, as directed by Pub. L. 108-173, obtained in a town hall 
meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble to the proposed rule, we proposed 
to make revisions to the wage index for acute care hospitals and the 
annual update of the wage data. Specific issues addressed include, but 
are not limited to, the following:
     The proposed FY 2018 wage index update using wage data 
from cost reporting periods beginning in FY 2014.
     Clarification of other wage-related costs in the wage 
index.
     Calculation of the proposed occupational mix adjustment 
for FY 2018 based on the 2013 Occupational Mix Survey.
     Analysis and implementation of the proposed FY 2018 
occupational mix adjustment to the wage index for acute care hospitals.
     Proposed application of the rural floor and the frontier 
State floor and the proposed expiration of the imputed floor.
     Proposed revisions to the wage index for acute care 
hospitals based on hospital redesignations and reclassifications under 
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
     Proposal to require documentation of SCH and RRC 
classification status approvals to be submitted to the MGCRB by the 
first business day after January 1.
     Clarification of special rules for SCHs and RRCs 
reclassifying to geographic home areas.
     Proposed changes to the 45-day notification rule.
     The proposed adjustment to the wage index for acute care 
hospitals for FY 2018 based on commuting patterns of hospital employees 
who reside in a county and work in a different area with a higher wage 
index.
     Determination of the labor-related share for the proposed 
FY 2018 wage index.
3. Proposed Rebasing and Revising of Hospital Market Basket
    In section IV. of the proposed rule, we proposed to revise and 
rebase the hospital market baskets for acute care hospitals and update 
the labor-related share.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
    In section V. of the preamble of 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 to MS-DRGs subject to the postacute care 
transfer policy.
     Proposed changes to the inpatient hospital update for FY 
2018.
     Proposed changes to the volume decrease adjustment for 
SCHs.
     Proposed updated national and regional case-mix values and 
discharges for purposes of determining RRC status.
     Expiration of the temporary changes to the payment 
adjustment for low-volume hospitals at the end of FY 2017.
     Proposed parallel low-volume hospital payment adjustment 
concerning hospitals operated by the Indian Health Service (IHS) or a 
Tribe.
     The statutorily required IME adjustment factor for FY 
2018.
     Proposed changes to the methodologies for determining 
Medicare DSH payments and the additional payments for uncompensated 
care.
     Discussion of expiration of the MDH program at the end of 
FY 2017 and our policy to allow MDHs to apply for SCH status in advance 
of the expiration of the MDH program and be paid as such under certain 
conditions.
     Proposed changes to the rules for payment adjustments 
under the Hospital Readmissions Reduction Program based on hospital 
readmission measures and the process for hospital review and correction 
of those rates for FY 2018.
     Proposed changes to the requirements and provision of 
value-based incentive payments under the Hospital Value-Based 
Purchasing Program.
     Proposed requirements for payment adjustments to hospitals 
under the HAC Reduction Program for FY 2018.
     Discussion of and proposals relating to the additional 5-
year extension of the Rural Community Hospital Demonstration Program.
     Proposals related to the provider-based status of IHS and 
Tribal facilities and organizations that would remove the regulatory 
date limitation that restricted the grandfathering provision to IHS or 
Tribal facilities and organizations furnishing services on or before 
April 7, 2000. We also proposed to make a technical change to make the 
regulation text more consistent with our current rules that require 
these facilities to comply with all applicable Medicare conditions of 
participation that apply to the main provider.
5. Proposed FY 2018 Policy Governing the IPPS for Capital-Related Costs
    In section VI. of the preamble to the proposed rule, we discussed 
the proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2018.
6. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VII. of the preamble of the proposed rule, we 
discussed--
     Proposed changes to payments to certain excluded hospitals 
for FY 2018.
     Proposed policy changes relating to payments to hospitals-
within-hospitals.
     Proposed continued implementation of the Frontier 
Community Health Integration Project (FCHIP) Demonstration.
7. Proposed Changes to the LTCH PPS
    In section VIII. of the preamble of the proposed rule, we set 
forth--
     Proposed changes to the LTCH PPS Federal payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2018.
     Proposed changes to the short-stay outlier (SSO) policy.
     Proposed 1-year regulatory delay of the full 
implementation of the 25-percent threshold policy for discharges 
occurring in FY 2018.
     Proposed changes to implement the temporary exception to 
the site neutral payment rate for certain spinal cord specialty 
hospitals and for certain discharges with severe wounds from certain 
LTCHs, as provided under sections 15009 and 15010 of Public Law 114-
255, respectively.

[[Page 38007]]

     Proposed change to the average length of stay criterion to 
implement section 15007 of Public Law 114-255.
     Proposed change in Medicare classification for certain 
hospitals to implement section 15008 of Public Law 114-255.
8. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section IX. of the preamble of the proposed rule, we addressed--
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program.
     Proposed changes to the requirements for the quality 
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
     Proposed changes to the requirements under the LTCH 
Quality Reporting Program (LTCH QRP).
     Proposed changes to the requirements under the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program.
     Proposed changes to requirements pertaining to the 
clinical quality measurement of eligible hospitals and CAHs as well as 
EPs participating in the Medicare and Medicaid Electronic Health Record 
(EHR) Incentive Programs.
9. Proposed Changes Relating to Medicare Cost Reporting and Provider 
Requirements
    In section X. of the preamble of the proposed rule, we presented 
our proposals to revise the regulations to allow providers to use an 
electronic signature to sign the Certification and Settlement Summary 
page of the Medicare cost report and submit this page electronically, 
and clarify the rules relating to the sale or scrapping of depreciable 
assets disposed of on or after December 1, 1997.
10. Proposed Changes Relating to Survey and Certification Requirements
    In section XI. of the preamble of the proposed rule, we present our 
proposals for allowing transparency in accrediting organization survey 
reports and plans of correction and for changing the requirement for 
providers to publish self-termination notices in newspapers.
11. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In section V. of the Addendum to the proposed rule, we set forth 
proposed changes to the amounts and factors for determining the 
proposed FY 2018 prospective payment rates for operating costs and 
capital-related costs for acute care hospitals. We proposed to 
establish the threshold amounts for outlier cases. In addition, we 
addressed the update factors for determining the rate-of-increase 
limits for cost reporting periods beginning in FY 2018 for certain 
hospitals excluded from the IPPS.
12. Determining Prospective Payment Rates for LTCHs
    In the Addendum to the proposed rule, we set forth proposed changes 
to the amounts and factors for determining the proposed FY 2018 LTCH 
PPS standard Federal payment rate and other factors used to determine 
LTCH PPS payments under both the LTCH PPS standard Federal payment rate 
and the site neutral payment rate in FY 2018. We proposed to establish 
the adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the applicable 
fixed-loss amounts and the LTCH cost-to-charge ratios (CCRs) for both 
payment rates.
13. Impact Analysis
    In Appendix A of the proposed rule, we set forth an analysis of the 
impact that the proposed changes would have on affected acute care 
hospitals, CAHs, LTCHs, PCHs, and IPFs.
14. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of 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 2018 for the following:
     A single average standardized amount for all areas for 
hospital inpatient services paid under the IPPS for operating costs of 
acute care hospitals (and hospital-specific rates applicable to SCHs).
     Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by certain hospitals 
excluded from the IPPS.
     The LTCH PPS standard Federal payment rate and the site 
neutral payment rate for hospital inpatient services provided for LTCH 
PPS discharges.
15. Discussion of Medicare Payment Advisory Commission Recommendations
    Under section 1805(b) of the Act, MedPAC is required to submit a 
report to Congress, no later than March 15 of each year, in which 
MedPAC reviews and makes recommendations on Medicare payment policies. 
MedPAC's March 2017 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We addressed these recommendations in Appendix B of the proposed rule. 
For further information relating specifically to the MedPAC March 2017 
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.

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

A. Background

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

B. MS-DRG Reclassifications

    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43764 through 43766) and the FYs 2011 through 2017 IPPS/LTCH PPS final 
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR 
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; and 81 FR 56787 through 
56872, respectively).

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

[[Page 38008]]

with comment period (72 FR 47140 through 47189).

D. FY 2018 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
    In the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189), we adopted the MS-DRG patient classification system for 
the IPPS, effective October 1, 2007, to better recognize severity of 
illness in Medicare payment rates for acute care hospitals. The 
adoption of the MS-DRG system resulted in the expansion of the number 
of DRGs from 538 in FY 2007 to 745 in FY 2008. By increasing the number 
of MS-DRGs and more fully taking into account patient severity of 
illness in Medicare payment rates for acute care hospitals, MS-DRGs 
encourage hospitals to improve their documentation and coding of 
patient diagnoses.
    In the FY 2008 IPPS final rule with comment period (72 FR 47175 
through 47186), we indicated that the adoption of the MS-DRGs had the 
potential to lead to increases in aggregate payments without a 
corresponding increase in actual patient severity of illness due to the 
incentives for additional documentation and coding. In that final rule 
with comment period, we exercised our authority under section 
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget 
neutrality by adjusting the national standardized amount, to eliminate 
the estimated effect of changes in coding or classification that do not 
reflect real changes in case-mix. Our actuaries estimated that 
maintaining budget neutrality required an adjustment of -4.8 percentage 
points to the national standardized amount. We provided for phasing in 
this -4.8 percentage point adjustment over 3 years. Specifically, we 
established prospective documentation and coding adjustments of -1.2 
percentage points for FY 2008, -1.8 percentage points for FY 2009, and 
-1.8 percentage points for FY 2010.
    On September 29, 2007, Congress enacted the TMA [Transitional 
Medical Assistance], Abstinence Education, and QI [Qualifying 
Individuals] Programs Extension Act of 2007 (Public Law 110-90). 
Section 7(a) of Public Law 110-90 reduced the documentation and coding 
adjustment made as a result of the MS-DRG system that we adopted in the 
FY 2008 IPPS final rule with comment period to -0.6 percentage point 
for FY 2008 and -0.9 percentage point for FY 2009.
    As discussed in prior year rulemaking, and most recently in the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56780 through 56782), we 
implemented a series of adjustments required under sections 7(b)(1)(A) 
and 7(b)(1)(B) of Public Law 110-90, based on a retrospective review of 
FY 2008 and FY 2009 claims data. We completed these adjustments in FY 
2013, but indicated in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53274 through 53275) that delaying full implementation of the 
adjustment required under section 7(b)(1)(A) of Public Law 110-90 until 
FY 2013 resulted in payments in FY 2010 through FY 2012 being 
overstated, and that these overpayments could not be recovered.
2. Recoupment or Repayment Adjustment Authorized by Section 631 of the 
American Taxpayer Relief Act of 2012 (ATRA)
    Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 
110-90 to require the Secretary to make a recoupment adjustment or 
adjustments totaling $11 billion by FY 2017. This adjustment 
represented the amount of the increase in aggregate payments as a 
result of not completing the prospective adjustment authorized under 
section 7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed 
earlier, this delay in implementation resulted in overstated payment 
rates in FYs 2010, 2011, and 2012. The resulting overpayments could not 
have been recovered under Public Law 110-90.
    Similar to the adjustments authorized under section 7(b)(1)(B) of 
Public Law 110-90, the adjustment required under section 631 of the 
ATRA was a one-time recoupment of a prior overpayment, not a permanent 
reduction to payment rates. Therefore, we anticipated that any 
adjustment made to reduce payment rates in one year would eventually be 
offset by a positive adjustment in 2018, once the necessary amount of 
overpayment was recovered. However, section 414 of the Medicare Access 
and CHIP Reauthorization Act (MACRA) of 2015, Public Law 114-10, 
enacted on April 16, 2015, replaced the single positive adjustment we 
intended to make in FY 2018 with a 0.5 percentage point positive 
adjustment for each of FYs 2018 through 2023. We stated in the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49345) that we would address this MACRA 
provision in future rulemaking. However, section 15005 of the 21st 
Century Cures Act (Pub. L. 114-255), enacted on December 13, 2016, 
reduced the adjustment for FY 2018 from 0.5 percentage points to 0.4588 
percentage points. We are addressing these provisions of MACRA and the 
21st Century Cures Act in section II.D.3. of the preamble of this final 
rule.
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 
through 50517), our actuaries estimated that a -9.3 percentage point 
adjustment to the standardized amount would be necessary if CMS were to 
fully recover the $11 billion recoupment required by section 631 of the 
ATRA in FY 2014. It is often our practice to phase in payment rate 
adjustments over more than one year, in order to moderate the effect on 
payment rates in any one year. Therefore, consistent with the policies 
that we have adopted in many similar cases, and after consideration of 
the public comments we received, in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50515 through 50517), we implemented a -0.8 percentage 
point recoupment adjustment to the standardized amount in FY 2014. We 
estimated that if adjustments of approximately -0.8 percentage point 
were implemented in FYs 2014, 2015, 2016, and 2017, using standard 
inflation factors, the entire $11 billion would be accounted for by the 
end of the statutory 4-year timeline. As estimates of any future 
adjustments are subject to variations in total savings, we did not 
provide for specific adjustments for FYs 2015, 2016, or 2017 at that 
time.
    Consistent with the approach discussed in the FY 2014 rulemaking 
for recouping the $11 billion required by section 631 of the ATRA, in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49874) and the FY 2016 
IPPS/LTCH PPS final rule (80 FR 49345), we implemented additional -0.8 
percentage point recoupment adjustments to the standardized amount in 
FY 2015 and FY 2016, respectively. We estimated that these adjustments, 
combined with leaving the prior -0.8 percentage point adjustments in 
place, would recover up to $2 billion in FY 2015 and another $3 billion 
in FY 2016. When combined with the approximately $1 billion adjustment 
made in FY 2014, we estimated that approximately $5 to $6 billion would 
be left to recover under section 631 of the ATRA by the end of FY 2016.
    As indicated in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 
24966), due to lower than previously estimated inpatient spending, we 
determined that an adjustment of -0.8 percentage point in FY 2017 would 
not recoup the $11 billion under section 631 of the ATRA. For the FY 
2017 IPPS/LTCH PPS final rule (81 FR 56785), based on the Midsession 
Review of the President's FY 2017 Budget, our actuaries estimated

[[Page 38009]]

that, to the nearest tenth of a percentage point, the FY 2017 
documentation and coding adjustment factor that will recoup as closely 
as possible $11 billion from FY 2014 through FY 2017 without exceeding 
this amount is -1.5 percentage points. Based on those updated estimates 
by the Office of the Actuary using the Midsession Review of the 
President's FY 2017 Budget, we made a -1.5 percentage point adjustment 
for FY 2017 as the final adjustment required under section 631 of the 
ATRA. The estimates by our actuaries related to this finalized 
adjustment were included in a memorandum that we made publicly 
available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-OACT.html.
3. Adjustment for FY 2018 Required Under Section 414 of Public Law 114-
10 (MACRA) and Section 15005 of Public Law 114-255
    As stated in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785), 
once the recoupment required under section 631 of the ATRA was 
complete, we had anticipated making a single positive adjustment in FY 
2018 to offset the reductions required to recoup the $11 billion under 
section 631 of the ATRA. However, section 414 of the MACRA (which was 
enacted on April 16, 2015) replaced the single positive adjustment we 
intended to make in FY 2018 with a 0.5 percentage point positive 
adjustment for each of FYs 2018 through 2023. In the FY 2017 
rulemaking, we indicated that we would address the adjustments for FY 
2018 and later fiscal years in future rulemaking. As noted previously, 
section 15005 of the 21st Century Cures Act (Pub. L. 114-255), which 
was enacted on December 13, 2016, amended section 7(b)(1)(B) of the 
TMA, as amended by section 631 of the ATRA and section 414 of the 
MACRA, to reduce the adjustment for FY 2018 from a 0.5 percentage point 
to a 0.4588 percentage point. We believe the directive under section 
15005 of Public Law 114-255 is clear. Therefore, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19816) for FY 2018, we proposed to 
implement the required +0.4588 percentage point adjustment to the 
standardized amount. This is a permanent adjustment to payment rates. 
While we did not propose future adjustments required under section 414 
of the MACRA and section 15005 of Public Law 114-255 at that time, we 
stated in the proposed rule that we expect to propose positive 0.5 
percentage point adjustments to the standardized amounts for FYs 2019 
through 2023.
    Comment: Several commenters reiterated their disagreement with the 
-1.5 percentage point adjustment that CMS made for FY 2017 under 
section 631 of the ATRA, which exceeded the estimated adjustment of 
approximately -0.8 percentage point described in the FY 2014 IPPS/LTCH 
PPS rulemaking. Commenters contended that, as a result, hospitals would 
be left with a larger permanent cut than Congress intended following 
the enactment of MACRA. They asserted that CMS' proposal to apply a 
0.4588 percent positive adjustment for FY 2018 misinterprets the 
relevant statutory authority, and urged CMS to align with their view of 
Congress' intent by restoring an additional +0.7 percentage point 
adjustment to the standardized amount in FY 2018; that is, the 
difference between the -1.5 percentage point adjustment made in FY 2017 
and the initial estimate of -0.8 percentage point discussed in the FY 
2014 IPPS/LTCH PPS rulemaking. Commenters also urged CMS to use its 
discretion under section 1886(d)(5)(I) of the Act to increase the FY 
2018 adjustment by 0.7 percentage point. Other commenters requested 
that, despite current law, CMS ensure that adjustments totaling the 
full 3.9 percentage points withheld under section 631 of the ATRA be 
returned.
    Response: As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56783 through 56785), CMS completed the $11 billion recoupment 
required under section 631 of the ATRA. We continue to disagree that 
section 414 of the MACRA was intended to augment or limit our separate 
obligation under the ATRA to fully offset $11 billion by FY 2017, as we 
discussed in response to comments in the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56784). Moreover, as we discussed in the FY 2018 IPPS/LTCH 
PPS proposed rule, we believe the directive regarding the applicable 
adjustment for FY 2018 is clear. While we had anticipated making a 
positive adjustment in FY 2018 to offset the reductions required to 
recoup the $11 billion under section 631 of the ATRA, section 414 of 
the MACRA requires that we not make the single positive adjustment we 
intended to make in FY 2018 but instead make a 0.5 percentage point 
positive adjustment for each of FYs 2018 through 2023. As noted by the 
commenters, and discussed in the FY 2017 IPPS/LTCH PPS final rule, by 
phasing in a total positive adjustment of only 3.0 percentage points, 
section 414 of the MACRA would not fully restore even the 3.2 
percentage point adjustment originally estimated by CMS in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50515). Finally, Public Law 114-255, 
which further reduced the positive adjustment required for FY 2018 from 
0.5 percentage point to 0.4588 percentage point, was enacted on 
December 13, 2016, after CMS proposed and finalized the -1.5 percentage 
point adjustment as the final adjustment required under section 631 of 
the ATRA in the FY 2017 rulemaking.
    After consideration of the public comments we received, we are 
finalizing the +0.4588 percentage point adjustment to the standardized 
amount for FY 2018, as required under section 15005 of Public Law 114-
255.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
    Beginning in FY 2007, we implemented relative weights for DRGs 
based on cost report data instead of charge information. We refer 
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed 
discussion of our final policy for calculating the cost-based DRG 
relative weights and to the FY 2008 IPPS final rule with comment period 
(72 FR 47199) for information on how we blended relative weights based 
on the CMS DRGs and MS-DRGs. We also refer readers to the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56785 through 56787) for a detailed 
discussion of the history of changes to the number of cost centers used 
in calculating the DRG relative weights. Since FY 2014, we calculate 
the IPPS MS-DRG relative weights using 19 CCRs, which now include 
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac 
catheterization.
2. Discussion of Policy for FY 2018
    Consistent with our established policy, we calculated the final MS-
DRG relative weights for FY 2018 using two data sources: The MedPAR 
file as the claims data source and the HCRIS as the cost report data 
source. We adjusted the charges from the claims to costs by applying 
the 19 national average CCRs developed from the cost reports. The 
description of the calculation of the 19 CCRs and the MS-DRG relative 
weights for FY 2018 is included in section II.G. of the preamble to 
this FY 2018 IPPS/LTCH PPS final rule. As we did with the FY 2018 IPPS/
LTCH PPS proposed rule, we are providing the version of the HCRIS from 
which we calculated these 19 CCRs on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the

[[Page 38010]]

left side of the screen titled, ``FY 2018 IPPS Final Rule Home Page'' 
or ``Acute Inpatient Files for Download.''
    Comment: One commenter recommended that CMS work with stakeholders 
to update cost reporting instructions and improve the accuracy and 
validity of the national average CCRs. The commenter expressed concern 
that the differences between hospitals' use of nonstandard cost center 
codes and CMS' procedures for mapping and rolling up nonstandard codes 
to the standard cost centers will continue to result in invalid CCRs 
and inaccurate payments. The commenter stressed the need for 
flexibility in cost reporting, to accommodate any new or unique 
services that certain hospitals may provide, which may not be easily 
captured through the cost reporting software. Finally, the commenter 
again recommended, as it had done in response to prior IPPS rules, that 
CMS pay particular attention to data used for CT scan and MRI cost 
centers; the commenter believed that the hospital payment rates 
established by CMS from the CT scan and MRI CCRs simply do not 
correlate with resources used for these capital-intensive services.
    Response: We received a similar public comment last year and 
responded to it in the FY 2017 IPPS/LTCH PPS final rule. We refer 
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56787) for our 
response to these issues. We note that we will continue to explore ways 
in which we can improve the accuracy of the cost report data and 
calculated CCRs used in the cost estimation process.
    Comment: One commenter requested that CMS use a single diagnostic 
radiology CCR to set weights, rather than using the separate CT and MRI 
cost centers. The commenter requested that if CMS maintains the 
separate CT and MRI cost centers, CMS should not include cost reports 
from hospitals that use the ``square foot'' allocation methodology. The 
commenter provided an analysis to support its assertion that the CCRs 
for CT and MRI are incorrect and are inappropriately reducing payments 
under the IPPS. The commenter indicated that the charge-compression 
hypothesis has been shown to be false with the use of the separate CT 
and MRI cost centers. The commenter discussed problems with cost 
allocation to the CT and MRI cost centers. The commenter referenced 
discussions in prior IPPS/LTCH PPS rules about this issue. The 
commenter acknowledged that CMS did not include a specific proposal in 
the FY 2018 proposed rule regarding this issue.
    Response: As the commenter noted, we did not make any proposals for 
FY 2018 relating to the number of cost centers used to calculate the 
relative weights. As noted previously and discussed in detail in prior 
rulemaking, we have calculated the IPPS MS-DRG relative weights using 
19 CCRs, including distinct CCRs for MRIs and CT scans, since FY 2014. 
We refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56785) 
for a detailed discussion of the basis for establishing these 19 CCRs. 
We further note that in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50518 through 50523), we presented data analyses using distinct CCRs 
for implantable devices, MRIs, CT scans, and cardiac catheterization. 
As we noted, we will continue to explore ways in which we can improve 
the accuracy of the cost report data and calculated CCRs used in the 
cost estimation process.

F. Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for FY 2018 MS-DRG 
Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    As of October 1, 2015, providers use the International 
Classification of Diseases, 10th Revision (ICD-10) coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system instead of the ICD-9-CM coding system, 
which was used through September 30, 2015. The ICD-10 coding system 
includes the International Classification of Diseases, 10th Revision, 
Clinical Modification (ICD-10-CM) for diagnosis coding and the 
International Classification of Diseases, 10th Revision, Procedure 
Coding System (ICD-10-PCS) for inpatient hospital procedure coding, as 
well as the Official ICD-10-CM and ICD-10-PCS Guidelines for Coding and 
Reporting. For a detailed discussion of the conversion of the MS-DRGs 
to ICD-10, we refer readers to the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56787 through 56789).
b. Basis for FY 2018 MS-DRG Updates
    CMS has previously encouraged input from our stakeholders 
concerning the annual IPPS updates when that input is made available to 
us by December 7 of the year prior to the next annual proposed rule 
update. For example, to be considered for any updates or changes in FY 
2018, comments and suggestions should have been submitted by December 
7, 2016. The comments that were submitted in a timely manner for FY 
2018 are discussed in this section of the preamble of this final rule. 
As CMS works with the public to examine the ICD-10 claims data used for 
updates to the ICD-10 MS-DRGs, we would like to examine areas where the 
MS-DRGs can be improved. This will require additional time for us to 
review requests from the public to make specific updates, analyze 
claims data, and consider any proposed updates. As discussed in the 
proposed rule, given the need for more time to carefully evaluate 
requests and propose updates, we are changing the deadline to request 
updates to MS-DRGs to November 1 of each year. This will provide an 
additional 5 weeks for the data analysis and review process. Interested 
parties should submit any comments and suggestions for FY 2019 by 
November 1, 2017, via the CMS MS-DRG Classification Change Requests 
Mailbox located at: [email protected].
    Following are the changes that we proposed to the MS-DRGs for FY 
2018 in the FY 2018 IPPS/LTCH PPS proposed rule. We invited public 
comments on each of the MS-DRG classification proposed changes as well 
as our proposals to maintain certain existing MS-DRG classifications 
discussed in the proposed rule. 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 2018 proposed rule, 
our MS-DRG analysis was based on ICD-10 claims data from the December 
2016 update of the FY 2016 MedPAR file, which contains hospital bills 
received through September 30, 2016, for discharges occurring through 
September 30, 2016. In our discussion of the proposed MS-DRG 
reclassification changes, we referred to our analysis of claims data 
from the ``December 2016 update of the FY 2016 MedPAR file''.
    In this FY 2018 IPPS/LTCH PPS final rule, we summarize the public 
comments we received on our proposals, present our responses, and state 
our final policies. For this FY 2018 final rule, we performed limited 
additional MS-DRG analysis of claims data. Therefore, all of the data 
analysis is based on claims data from the December 2016 update of the 
FY 2016 MedPAR file, which contains hospital bills received through 
September 30, 2016, for discharges occurring through September 30, 
2016, except where specifically noted that it is based on the

[[Page 38011]]

March 2017 update of the FY 2016 MedPAR file, which contains hospital 
bills received through March 31, 2017, for discharges occurring through 
September 30, 2016.
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modification to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients represented in the MS-DRG. We evaluate patient care 
costs using average costs and lengths of stay and rely on the judgment 
of our clinical advisors to determine whether patients are clinically 
distinct or similar to other patients represented in the MS-DRG. In 
evaluating resource costs, we consider both the absolute and percentage 
differences in average costs between the cases we select for review and 
the remainder of cases in the MS-DRG. We also consider variation in 
costs within these groups; that is, whether observed average 
differences are consistent across patients or attributable to cases 
that are extreme in terms of costs or length of stay, or both. Further, 
we consider the number of patients who will have a given set of 
characteristics and generally prefer not to create a new MS-DRG unless 
it would include a substantial number of cases.
    In our examination of the claims data, we apply the following 
criteria established in FY 2008 (72 FR 47169) to determine if the 
creation of a new complication or comorbidity (CC) or major 
complication or comorbidity (MCC) subgroup within a base MS-DRG is 
warranted:
     A reduction in variance of costs of at least 3 percent.
     At least 5 percent of the patients in the MS-DRG fall 
within the CC or MCC subgroup.
     At least 500 cases are in the CC or MCC subgroup.
     There is at least a 20-percent difference in average costs 
between subgroups.
     There is a $2,000 difference in average costs between 
subgroups.
    In order to warrant creation of a CC or MCC subgroup within a base 
MS-DRG, the subgroup must meet all five of the criteria.
    Comment: Several commenters expressed concern regarding the use of 
ICD-10 claims data for proposed updates to the FY 2018 ICD-10 MS-DRGs 
Version 35 and in recalibrating the proposed FY 2018 MS-DRG relative 
weights. Commenters reported that the proposed relative weights for 
certain MS-DRGs had large reductions when compared to the current FY 
2017 ICD-10 MS-DRG Version 34 relative weights. Specifically, 
commenters noted that MS-DRG 215 (Other Heart Assist System Implant) 
appeared to have the largest decrease by approximately 35% although it 
was not the subject of a new proposal in the FY 2018 IPPS/LTCH PPS 
proposed rule. According to the commenters, the proposed reductions for 
certain relative weights are a direct result of the transition from 
ICD-9 to ICD-10 coded claims data that was utilized in setting the 
proposed FY 2018 MS-DRG relative weights. The commenters stated that, 
if finalized as proposed, these reductions could limit access to the 
necessary services for Medicare beneficiaries and urged CMS to consider 
phasing in these significant fluctuations that they asserted cause 
instability of the weights and hinder providers in their ability to 
project anticipated payment rates. Many commenters also recommended 
that CMS limit the percentage by which an MS-DRG's relative weight can 
be reduced.
    Commenters also believed that the fluctuations in the proposed 
relative weights do not appear to be consistent with the deliberate 
approach CMS has taken to ensure a smooth transition from ICD-9 to ICD-
10. The commenters noted that, in the past, CMS has appropriately 
recognized and made efforts to maintain stability within the IPPS 
during the transition, such as providing several versions of the ICD-10 
MS-DRG Grouper for review, contracting for studies to evaluate the 
impact of converting the MS-DRGs to ICD-10 and assembling various 
public meetings. The commenters also noted that CMS has observed 
broader principles in prior rulemaking with regard to payment stability 
such as during the transition from charge-based weights to cost-based 
weights in FY 2007 and the conversion of the CMS DRGs to MS-DRGs in FY 
2008. Consistent with those past policy refinements and the steps taken 
to mitigate fluctuations potentially affecting IPPS payment, commenters 
requested that CMS once again exercise its authority to do so. We refer 
readers to section II.G. of the preamble of this FY 2018 IPPS/LTCH PPS 
final rule for further discussion regarding recalibration of the FY 
2018 MS-DRG relative weights, including our response to comments 
requesting a transition period for substantial reductions in relative 
weights in order to facilitate payment stability.
    As stated above, commenters noted that MS-DRG 215 (Other Heart 
Assist System Implant) appeared to have the largest decrease by 
approximately 35% although it was not the subject of a new proposal in 
the FY 2018 IPPS/LTCH PPS proposed rule. We received multiple comments 
stating that the American Hospital Association published Coding Clinic 
advice that changed coding guidance for external heart assist devices 
and that this will result in higher-cost patients with more ICU days 
and increased lengths of stay that are assigned to MS-DRG 215 in FY 
2018. The commenters noted there will be a substantial difference in 
coding for this patient population that is not reflected in the current 
cost data used to set the FY 2018 payment rates and a commenter urged 
CMS to revise the structure of MS-DRG 215 as an alternative option to 
address the decrease in the FY 2018 proposed relative weight for this 
MS-DRG. According to the commenter, restructuring this MS-DRG would 
more accurately reflect the resources required for cases that will be 
assigned to this MS-DRG in FY 2018 and is consistent with the agency's 
continuing efforts to ensure accurate replication between the ICD-9 and 
ICD-10 based MS-DRGs.
    The commenter noted that currently, patients who receive heart 
assist devices may be assigned to the Pre-MDC MS-DRGs 001 and 002 
(Heart Transplant or Implant of Heart Assist System) or MS-DRG 215 
(Other Heart Assist System Implant). The commenter asserted that the 
transition from using ICD-9 codes to ICD-10 codes as the basis for MS-
DRG assignment has been impacted by the significant increase in the 
number of codes relevant to the assignment of a MS-DRG because ICD-10 
is more granular. This commenter recommended that CMS revise the 
assignments for the ICD-10 procedure codes grouping to MS-DRG 215 to 
accurately replicate the logic used to assign ICD-9 procedure codes to 
MS-DRG 215.
    An example of how the MS-DRG assignment has been impacted by the 
transition to ICD-10 was provided by the commenter who noted that under 
the ICD-9 based MS-DRGs, procedure code 37.62 (Insertion of temporary 
non-implantable extracorporeal circulatory assist device) was reported 
for both the insertion and removal of an external heart assist device 
and was assigned to MS-DRG 215. However, under ICD-10, two codes are 
required, one for the insertion and one for the removal of the device 
where the logic for the combination of those two codes results in 
assignment to Pre-MDC MS-DRGs 001 and 002 (Heart transplant or Implant 
of Heart Assist System).

[[Page 38012]]

Another example offered by the commenter included ICD-9 procedure code 
37.63 (Repair of heart assist system) where, under ICD-10, these cases 
could be reported with a code describing revision of an external heart 
assist device or these cases could be reported with a combination of 
codes, one for the removal and one for the revision of an external 
heart assist device. The commenter suggested that the combinations of 
insertion and removal codes and the combinations of removal and 
revision codes be reassigned from the Pre-MDC MS-DRGs 001 and 002 to 
MS-DRG 215 to accurately replicate the logic that was used in the ICD-9 
based MS-DRGs.
    The commenter performed its own analysis of MS-DRG 215 using the FY 
2016 MedPAR data and noted that its findings indicated there was a 
decrease in the volume of procedures involving a repair or revision of 
a heart assist system device and an increase in the number of insertion 
or implantation of heart assist system devices when compared to the FY 
2015 MedPAR data. The commenter's findings also indicated that there 
was a decrease in the average total standardized charges, as well as a 
decrease in the severity of illness of the patients grouping to this 
MS-DRG in FY 2016 compared to FY 2015. For example, the commenter noted 
that its analysis showed approximately 95 percent of insertion or 
implant of heart assist system cases also reported a secondary 
diagnosis of an MCC in FY 2015; however, this number dropped to 84 
percent in FY 2016. Additionally, the commenter reported that 
approximately 73 percent of the revision of heart assist system cases 
also reported a secondary diagnosis of an MCC in FY 2015; however, this 
number dropped to 67 percent in FY 2016. The commenter stated that the 
clinical and usage changes for these devices do not account for this 
dramatic 1-year reversal.
    Response: We agree with the commenter that under the ICD-9 based 
MS-DRGs, procedure code 37.62 (Insertion of temporary non-implantable 
extracorporeal circulatory assist device) was reported for both the 
insertion and removal of an external heart assist device and was 
assigned to MS-DRG 215. We also agree with the commenter that, under 
ICD-10, two codes are currently required to describe this same 
procedure, one for the insertion and one for the removal of the device 
where the logic for the combination of those two codes results in 
assignment to Pre-MDC MS-DRGs 001 and 002 (Heart transplant or Implant 
of Heart Assist System). Lastly, we agree with the example offered by 
the commenter that included ICD-9 procedure code 37.63 (Repair of heart 
assist system) where under ICD-10, these cases could be reported with a 
code describing revision of a heart assist device or these cases could 
be reported with a combination of codes, one for the removal and one 
for the revision of a heart assist device.
    We also are aware that the American Hospital Association published 
Coding Clinic advice that clarified coding and reporting for certain 
external heart assist devices due to the technology being approved for 
new indications. We point out that coding advice is issued 
independently from payment policy. That is, in our annual IPPS 
rulemaking, in considering updates to the MS-DRGs, it is typically not 
our process to analyze changes in published coding advice. We generally 
do not make proposals for MS-DRG reclassification changes in the 
absence of data and clinical input from our clinical advisors.
    In response to the commenters' request to ensure accurate 
replication between the ICD-9 and ICD-10 based MS-DRGs for external 
heart assist devices in conjunction with the public comments requesting 
that we maintain stability in the MS-DRG relative payment weights, we 
note that, for FY 2018 and beyond, we are no longer replicating the 
ICD-9 MS-DRGs. As stated in the FY 2018 IPPS/LTCH PPS proposed rule and 
this final rule, we are using ICD-10 coded claims data for the first 
time to propose changes to the ICD-10 MS-DRG classifications and to 
compute the relative weights. Therefore, our proposals and final 
policies for FY 2018 are based only on the ICD-10 claims data from the 
FY 2016 MedPAR file. However, similar to our efforts in identifying 
areas where improvements could be made to better account for severity 
of illness and resource utilization during the transition from the CMS 
DRGs to the MS-DRGs, we are making concerted efforts to continue 
refining the ICD-10 MS-DRGs after transitioning from the ICD-9 MS-DRGs.
    We appreciate the commenters' acknowledgement of our efforts to 
maintain stability within the IPPS during the transition period to ICD-
10 as noted above. We also acknowledge and appreciate the analysis that 
was conducted by the commenter for MS-DRG 215. We believe it is 
important to be able to fully evaluate the effects and the impact of 
restructuring any MS-DRGs for which all heart assist system procedures 
are currently assigned under ICD-10. As part of this evaluation, we 
believe it would be advantageous to consider additional ICD-10 coded 
claims data as well as changes in a hospital's case-mix (for example, 
patient characteristics) to determine if the patients undergoing a 
heart assist system procedure or a combination of heart assist system 
procedures demonstrate a greater severity of illness and/or increased 
treatment difficulty as a result of the surgical approach that is used 
(for example, open, percutaneous, percutaneous endoscopic, among 
others). Finally, consultation with our clinical advisors is also 
important to properly analyze the appropriateness of any modifications 
to the MS-DRGs where a heart assist device is currently assigned.
    Therefore, in response to the public comments received, we are 
planning to review for FY 2019 the current ICD-10 logic for Pre-MDC MS-
DRGs 001 and 002 (Heart Transplant or Implant of Heart Assist System 
with and without MCC, respectively), MS-DRG 215 (Other Heart Assist 
System Implant) and MS-DRGs 268 and 269 (Aortic and Heart Assist 
Procedures Except Pulsation Balloon with and without MCC, respectively) 
where procedures involving the heart assist devices are currently 
assigned. We refer the reader to the ICD-10 MS-DRG Definitions Manual 
version 34, which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for 
complete documentation of the GROUPER logic for Pre-MDC MS-DRGs 001 and 
002, MS-DRG 215, and MS-DRGs 268 and 269. We also encourage the public 
to submit any comments on restructuring the MS-DRGs for heart assist 
system procedures to the CMS MS-DRG Classification Change Request 
Mailbox located at: [email protected] by November 
1, 2017.
    As previously stated, we are making concerted efforts to continue 
refining the ICD-10 MS-DRGs after transitioning from the ICD-9 MS-DRGs. 
We believe that it is important to include the Pre-MDC MS-DRGs and the 
other MS-DRGs comprised of heart assist system procedures as part of 
our comprehensive review of each MDC and the corresponding MS-DRGs 
assigned to them. After consideration of the public comments we 
received, we are maintaining the current structure of MS-DRG 215 for FY 
2018, under the ICD-10 MS-DRGs Version 35.
    We are making the FY 2018 ICD-10 MS-DRG GROUPER and Medicare Code 
Editor (MCE) Software Version 35 available to the public on our CMS Web

[[Page 38013]]

site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2018 IPPS Final Rule Home 
Page.
2. MDC 1 (Diseases and Disorders of the Nervous System)
a. Functional Quadriplegia
    We received a request to reassign cases identified by diagnosis 
code R53.2 (Functional quadriplegia) from MS-DRGs 052 and 053 (Spinal 
Disorders and Injuries with and without CC/MCC, respectively). The 
requestor stated that because functional quadriplegia does not involve 
any spinal injury or pathology, cases identified by the diagnosis code 
should not be assigned to MS-DRGs 052 and 053. However, the requestor 
did not suggest an alternative MS-DRG assignment.
    Section I.C.18.f. of the FY 2017 ICD-10-CM Official Coding 
Guidelines addresses the coding for the diagnosis of functional 
quadriplegia. Section I.C.18.f. states that functional quadriplegia 
(described by diagnosis code R53.2) is the lack of ability to use one's 
limbs or to ambulate due to extreme debility. The condition is not 
associated with neurologic deficit or injury, and diagnosis code R53.2 
should not be used to identify cases of neurologic quadriplegia. In 
addition, the Guidelines state that the diagnosis code should only be 
assigned if functional quadriplegia is specifically documented by a 
physician in the medical record, and the diagnosis of functional 
quadriplegia is not associated with a neurologic deficit or injury. A 
physician may document the diagnosis of functional quadriplegia as 
occurring with a variety of conditions.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19817 through 19818), we examined claims data from the December 2016 
update of the FY 2016 MedPAR file on cases reporting diagnosis code 
R53.2 in MS-DRGs 052 and 053. Our findings are shown in the table 
below.

                         Cases Reporting Functional Quadriplegia in MS-DRGs 052 and 053
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                  Number of      length  of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 052--All cases...........................................             865             5.4         $10,247
MS-DRG 052--Cases reporting diagnosis code R53.2................              63             4.9           6,420
MS-DRG 053--All cases...........................................             239             3.3           6,326
MS-DRG 053-- Cases reporting diagnosis code R53.2...............              16             3.3           2,318
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 052, there were a total of 
865 cases with an average length of stay of 5.4 days and average costs 
of $10,247. Of the 865 cases in MS-DRG 052, there were 63 cases that 
reported a principal diagnosis of functional quadriplegia, with an 
average length of stay of 4.9 days and average costs of $6,420. For MS-
DRG 053, there were a total of 239 cases, with an average length of 
stay of 3.3 days and average costs of $6,326. Of the 239 cases in MS-
DRG 053, there were 16 cases that reported a principal diagnosis of 
functional quadriplegia, with an average length of stay of 3.3 days and 
average costs of $2,318.
    To address the request to reassign cases reporting a diagnosis of 
functional quadriplegia to a different MS-DRG, we reviewed the data for 
a total of 79 cases (63 cases in MS-DRG 052 and 16 cases in MS-DRG 053) 
that reported a principal diagnosis of functional quadriplegia in MS-
DRGs 052 and 053. As shown in the table above, our data analysis 
demonstrates that the average costs for these 79 cases are lower than 
the average costs of all cases in MS-DRGs 052 and 053 ($6,420 compared 
to $10,247 for all cases in MS-DRG 052, and $2,318 compared to $6,326 
for all cases in MS-DRG 053), and the average lengths of stay are 
shorter for cases reporting a diagnosis of functional quadriplegia in 
MS-DRG 052 (4.9 days compared to 5.4 days for all cases in MS-DRG 052), 
but equal for cases in MS-DRG 053 (3.3 days for cases reporting a 
diagnosis of functional quadriplegia and for all cases).
    As we discussed in the proposed rule, our clinical advisors 
reviewed this issue and agreed that a diagnosis of functional 
quadriplegia does not involve a spinal disorder or injury, and may be 
associated with, or the result of, a variety of underlying conditions. 
Our clinical advisors also agreed that it is not clinically appropriate 
to include cases reporting a diagnosis of functional quadriplegia 
within MS-DRGs 052 and 053 because these cases do not involve a spinal 
disorder or injury. Therefore, given the fact that functional 
quadriplegia can be the result of a variety of other conditions, we 
reviewed the MS-DRGs in order to identify a more appropriate placement 
for cases reporting this diagnosis. Our clinical advisors recommended 
assigning cases representing a diagnosis of functional quadriplegia 
from MS-DRGs 052 and 053 to MS-DRGs 091, 092, and 093 (Other Disorders 
of Nervous System with MCC, with CC, and without CC/MCC, respectively). 
Within each MDC, there are MS-DRGs that describe a variety of other 
conditions that do not have the clinical characteristics of the more 
specific MS-DRGs. In this case, MS-DRGs 091, 092, and 093 describe a 
variety of other disorders of the nervous system that are not 
clinically similar in characteristics to the disorders described by MS-
DRGs 052 and 053. We stated in the proposed rule that our clinical 
advisors believe that MS-DRGs 091, 092, and 093 are more appropriate 
MS-DRG assignments for cases representing a diagnosis of functional 
quadriplegia.
    We examined claims data from the December 2016 update of the FY 
2016 MedPAR file on cases in MS-DRGs 091, 092, and 093. Our findings 
are shown in the table below.

                                       Cases in MS-DRGs 091, 092, and 093
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                  Number of      length  of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 091--All cases...........................................          12,607             5.6         $10,815
MS-DRG 092--All cases...........................................          19,392             3.9           6,706

[[Page 38014]]

 
MS-DRG 093--All cases...........................................           8,120             2.7           5,253
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 091, there were a total of 
12,607 cases, with an average length of stay of 5.6 days and average 
costs of $10,815. For MS-DRG 092, there were a total of 19,392 cases, 
with an average length of stay of 3.9 days and average costs of $6,706. 
For MS-DRG 093, there were a total of 8,120 cases, with an average 
length of stay of 2.7 days and average costs of $5,253. As stated 
earlier, of the 865 total cases in MS-DRG 052, there were 63 cases that 
reported a principal diagnosis of functional quadriplegia, with an 
average length of stay of 4.9 days and average costs of $6,420. Of the 
239 total cases in MS-DRG 053, there were 16 cases that reported a 
principal diagnosis of functional quadriplegia, with an average length 
of stay of 3.3 days and average costs of $2,318. The average lengths of 
stay for cases reporting a diagnosis of functional quadriplegia in MS-
DRGs 052 and 053 are similar to the average lengths of stay for cases 
found in MS-DRGs 091, 092 and 093 (4.9 days and 3.3 days for cases in 
MS-DRGs 052 and 053, respectively, compared to 5.6 days, 3.9 days, and 
2.7 days, respectively, for cases in MS-DRGs 091, 092, and 093). The 
average costs for cases reporting a diagnosis of functional 
quadriplegia in MS-DRGs 052 and 053 are $6,420 and $2,318, 
respectively, compared to $10,815, $6,706, and $5,253 for all cases in 
MS-DRGs 091, 092, and 093. The average costs for cases reporting a 
diagnosis of functional quadriplegia in MS-DRG 053 are lower than the 
average costs for all cases in MS-DRG 093 without a CC or MCC ($2,318 
compared to $5,253, respectively). The average costs for cases 
reporting a diagnosis of functional quadriplegia in MS-DRG 052 are 
$6,420, which is lower than the average costs of $10,815 for all cases 
in MS-DRG 091, but close to the average costs of $6,706 for all cases 
in MS-DRG 092. We stated in the proposed rule that while we acknowledge 
that the average costs for cases reporting a diagnosis of functional 
quadriplegia are lower than those cases within MS-DRGs 091, 092, and 
093, as stated earlier, the average costs of cases reporting a 
diagnosis of functional quadriplegia also are lower than the average 
costs of all cases in MS-DRGs 052 and 053 where these cases are 
currently assigned.
    Our clinical advisors reviewed the clinical issues as well as the 
claims data for MS-DRGs 052, 053, 091, 092, and 093. As a result of 
this review, they recommended that cases reporting a diagnosis of 
functional quadriplegia be reassigned from MS-DRGs 052 and 053 to MS-
DRGs 091, 092, and 093 because the current MS-DRG assignment is not 
clinically appropriate. We stated in the proposed rule that our 
clinical advisors stated that reassigning these cases to MS-DRGs 091, 
092, and 093 is more appropriate because this set of MS-DRGs includes a 
variety of nervous system disorders that are not appropriately 
classified to more specific MS-DRGs within MDC 1. Therefore, in the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19817 through 19818), we 
proposed to reassign cases identified by diagnosis code R53.2 from MS-
DRGs 052 and 053 to MS-DRGs 091, 092, and 093 for FY 2018.
    We invited public comments on our proposal.
    Comment: Several commenters supported CMS' statement that diagnosis 
code R53.2 does not belong in MS-DRGs 052 and 053 because this 
condition does not involve a spinal disorder or injury. The commenters 
supported reassigning the code from MS-DRGs 052 and 053. However, one 
commenter suggested that instead of assigning diagnosis code R53.2 to 
MS DRGs 091, 092, and 093 (Other Disorders of Nervous System with MCC, 
with CC, and without CC/MCC, respectively) for FY 2018, CMS instead 
reassign it to MS-DRGs 947 and 948 (Signs and Symptoms with MCC and 
without MCC, respectively). The commenter stated that the ICD-10-CM 
code for functional quadriplegia, R53.2, is located in Chapter 18, 
Symptoms, Signs and Abnormal Findings because it can be the result of a 
variety of underlying conditions. Therefore, the commenter believed it 
was not appropriate to classify this diagnosis as a nervous system 
disorder. The commenter pointed out that other codes in ICD-10-CM 
category R53 are assigned to MS-DRGs 947 and 948. Therefore, the 
commenter believed that it was appropriate to reassign code R53.2 from 
MS-DRGs 052 and 053 to MS-DRGs 947 and 948.
    Response: We agree with the commenter that diagnosis code R53.2 is 
located in Chapter 18, Symptoms, Signs and Abnormal Findings because it 
can be the result of a variety of underlying conditions. We also agree 
that this code cannot be labeled as a nervous system disorder. 
Therefore, we agree that there is merit in reassigning diagnosis code 
R53.2 where other codes in category R53 are assigned in MS-DRGs 947 and 
948. We examined claims data from the December 2016 update of the FY 
2016 MedPAR file on cases in MS-DRGs 947 and 948. Our findings are 
shown in the table below.

                                          Cases in MS-DRGs 947 and 948
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of      length  of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 947-All cases............................................          10,799             4.7          $8,225
MS-DRG 948-All cases............................................          36,123             3.3           5,494
----------------------------------------------------------------------------------------------------------------

    As stated earlier, of the 865 total cases in MS-DRG 052, there were 
63 cases that reported a principal diagnosis of functional 
quadriplegia, with an average length of stay of 4.9 days and average 
costs of $6,420. This compares to all cases in MS-DRG 947 which had an 
average length of stay of 4.7 days and average costs of $8,225. 
Therefore, the average length of stay for functional quadriprlegia 
cases in MS-DRG 052 was 0.2 days longer and the average costs

[[Page 38015]]

were $1,805 lower than all cases in MS-DRG 947. Of the 239 total cases 
in MS-DRG 053, there were 16 cases that reported a principal diagnosis 
of functional quadriplegia, with an average length of stay of 3.3 days 
and average costs of $2,318. This compares to all cases in MS-DRG 948 
which had an average length of stay of 3.3 days and average costs of 
$5,494. Therefore, the average length of stay for functional 
quadriprlegia cases in MS-DRG 053 is the same as all cases in MS-DRG 
948 and the average costs are $3,176 lower than all cases in MS-DRG 
948. The average costs of functional quadriplegia cases are lower than 
all cases in MS-DRGs 091, 092, and 093 as well as in MS-DRGs 947 and 
948. The average length of stay of functional quadriplegia cases are 
similar to those in MS-DRGs 947 and 948. We agree with the commenter 
that the more appropriate MS-DRG assignment would be MS-DRGs 947 and 
948 because these MS-DRGs capture similar symptom codes.
    Our clinical advisors reviewed this clinical issue along with the 
claims data for MS-DRGs 947 and 948. Our clinical advisors agree that 
because diagnosis code R53.2 is a symptom code that could be the result 
of a variety of underlying conditions, it would not be appropriate to 
assign it to nervous system MS-DRGs such as MS DRGs 091, 092, and 093 
as we proposed. Our clinical advisors agreed with the commenter that 
this symptom code should be assigned to MS-DRGs 947 and 948 where other 
symptom codes are assigned.
    After consideration of the public comments that we received and the 
advice of our clinical advisors, we are finalizing the assignment of 
code R53.2 (Functional quadriplegia) to MS-DRGs 947 and 948 (Signs and 
Symptoms with MCC and without MCC, respectively).
b. Responsive Neurostimulator (RNS(copyright)) System
    We received a request to modify the MS-DRG assignment for cases 
involving the use of the RNS(copyright) neurostimulator, a 
cranially implanted neurostimulator that is a treatment option for 
persons diagnosed with medically intractable epilepsy. Cases involving 
the use of the RNS(copyright) neurostimulator are assigned 
to MS-DRG 023 (Craniotomy with Major Device Implant or Acute Complex 
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or 
Chemo Implant) and MS-DRG 024 (Craniotomy with Major Device Implant or 
Acute Complex Central Nervous System (CNS) Principal Diagnosis (PDX) 
without MCC).
    Cases involving the use of the RNS(copyright) 
neurostimulator generator and leads are captured within the 
descriptions of four ICD-10-PCS codes. ICD-10-PCS code 0NH00NZ 
(Insertion of neurostimulator generator into skull, open approach) 
captures the use of the neurostimulator generator, and the other three 
ICD-10-PCS codes, 00H00MZ (Insertion of neurostimulator lead into 
brain, open approach), 00H03MZ (Insertion of neurostimulator lead into 
brain, percutaneous approach), and 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach) 
describe the insertions of the leads, depending on the approach used. 
The combination of an ICD-10-PCS code capturing the use of the 
generator and another ICD-10-PCS code describing the specific approach 
used to insert the leads would capture the performance of the entire 
procedure.
    The requestor stated that the RNS(copyright) 
neurostimulator received FDA pre-market approval on November 14, 2013. 
The RNS(copyright) neurostimulator includes a cranially 
implanted programmable neurostimulator connected to one or two depth 
and/or subdural cortical strip leads that are surgically placed in or 
on the brain at the seizure focus. The neurostimulator and leads are 
typically implanted during a single acute inpatient hospital procedure 
at a Comprehensive Epilepsy Center (CEC). The implanted neurostimulator 
continuously monitors brain electrical activity and is programmed by a 
physician to detect abnormal patterns of electrical activity that the 
physician believes may lead to seizures (epileptiform activity). In 
response to the detection of epileptiform activity, the device delivers 
brief, mild electrical pulses (responsive stimulation) to one or two 
epileptic foci. Detection and stimulation parameters are adjusted 
noninvasively by the physician to optimize control of epileptic 
seizures for each patient.
    As the neurostimulator monitors brain activity, electrocorticograms 
(ECoGs) recorded immediately before and after certain events are stored 
for later review by the physician. The physician reviews the stored 
recordings to see the detections and the effects of stimulation. The 
physician can reprogram the neurostimulator at an in-person office 
appointment to change detection and stimulation settings based on this 
information, as well as review the patient's seizures.
    The RNS(copyright) neurostimulator was approved for new 
technology add-on payments for FY 2015 and FY 2016, and new technology 
add-on payments were discontinued for FY 2017. The new technology add-
on payment application was discussed in the FY 2015 IPPS/LTCH PPS 
proposed and final rules (79 FR 28051 through 28054 and 79 FR 49946 
through 49950, respectively), the FY 2016 IPPS/LTCH PPS proposed and 
final rules (80 FR 24427 through 24448 and 80 FR 49442 through 49443, 
respectively), and the FY 2017 IPPS/LTCH PPS proposed and final rules 
(81 FR 25036 through 25037 and 81 FR 56882 through 56884, 
respectively).
    The requestor suggested the following three options for MS-DRG 
assignment updates for cases involving the RNS(copyright) 
neurostimulator:
     Create new MS-DRGs for cases involving the use of the 
RNS(copyright) neurostimulator. The requestor suggested MS-
DRG XXX (Cranially Implanted Neurostimulators with MCC) and MS-DRG XXX 
(Cranially Implanted Neurostimulators without MCC) as possible MS-DRG 
titles. The requestor acknowledged that the number of cases assigned to 
this MS-DRG would be low, but anticipated that the number of cases 
would increase in the future.
     Reassign cases involving the use of the 
RNS(copyright) neurostimulator to MS-DRGs 020 and 021 
(Intracranial Vascular Procedures with Principal Diagnosis of 
Hemorrhage with MCC, with CC, respectively) and update the MS-DRG logic 
and titles. The requestor asked CMS to reassign all cases involving the 
use of the RNS(copyright) neurostimulator that currently map 
to MS-DRG 023 (Craniotomy with Major Device Implant/Acute Complex CNS 
Principal Diagnosis with MCC or Chemo Implant) to MS-DRG 20, and change 
the title of MS-DRG 20 to ``Intracranial Vascular Procedures with 
Principal Diagnosis of Hemorrhage or Cranially Implanted 
Neurostimulator with MCC.'' In addition, the requestor asked CMS to 
reassign all cases involving the use of the RNS(copyright) 
neurostimulator that currently map to MS-DRG 024 (Craniotomy with Major 
Device Implant/Acute Complex CNS Principal Diagnosis without MCC) to 
MS-DRG 021, and change the title of MS-DRG 021 to ``Intracranial 
Vascular Procedures with Principal Diagnosis of Hemorrhage with CC or 
Cranially Implanted Neurostimulator without MCC''. The requestor 
believed that the majority of cases involving the use of the 
RNS(copyright) neurostimulator that map to MS-DRG 024 do not 
include a secondary diagnosis that is classified as a CC, and the 
average cost of cases involving the use of the 
RNS(copyright) neurostimulator without a CC is significantly 
higher than the average cost of all cases in MS-DRG 022 (Intracranial 
Vascular Procedures with Principal Diagnosis of Hemorrhage

[[Page 38016]]

without CC/MCC). Therefore, the requestor stated that it would not be 
adequate to assign cases involving the use of the 
RNS(copyright) neurostimulator without a CC to MS-DRG 022.
     Reassign cases involving the use of the 
RNS(copyright) neurostimulator to other higher paying MS-
DRGs that would provide adequate payment.
    The requestor stated that it had analyzed data from two sources, 
which demonstrated that the average cost of cases involving the use of 
the RNS(copyright) neurostimulator was higher than the 
average cost of all cases in MS-DRGs 023 and 024 (the current MS-DRGs 
for cases involving the use of the RNS(copyright) 
neurostimulator). The requestor indicated that the data used for its 
analysis was obtained from hospitals performing the procedure, as well 
as from the FY 2015 MedPAR file.
    The requestor also asked that CMS examine the cases representing 
cranially implanted neurostimulators and leads that were inserted for 
the treatment of epilepsy. The requestor pointed out that 
neurostimulators also are used in the treatment of movement disorders 
such as Parkinson's disease, essential tremor, or dystonia. The 
requestor asked that CMS identify those cases with a principal 
diagnosis of epilepsy, and identified the following ICD-10-CM codes 
that it believed were representative of potential epilepsy cases.

 
------------------------------------------------------------------------
      ICD-10-CM  code                   ICD-10-CM code title
------------------------------------------------------------------------
G40.001...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset, not
                             intractable, with status epilepticus.
G40.009...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset, not
                             intractable, without status epilepticus.
G40.011...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset,
                             intractable, with status epilepticus.
G40.019...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset,
                             intractable, without status epilepticus.
G40.101...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with simple partial seizures, not
                             intractable, with status epilepticus.
G40.119...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with simple partial seizures,
                             intractable, without status epilepticus.
G40.201...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             not intractable, with status epilepticus.
G40.209...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             not intractable, without status
                             epilepticus.
G40.211...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             intractable, with status epilepticus.
G40.219...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             intractable, without status epilepticus.
G40.301...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, not intractable, with
                             status epilepticus.
G40.309...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, not intractable,
                             without status epilepticus.
G40.311...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, intractable, with
                             status epilepticus.
G40.319...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, intractable, without
                             status epilepticus.
G40.401...................  Other generalized epilepsy and epileptic
                             syndromes, not intractable, with status
                             epilepticus.
G40.409...................  Other generalized epilepsy and epileptic
                             syndromes, not intractable, without status
                             epilepticus.
G40.411...................  Other generalized epilepsy and epileptic
                             syndromes, intractable, with status
                             epilepticus.
G40.419...................  Other generalized epilepsy and epileptic
                             syndromes, intractable, without status
                             epilepticus.
G40.501...................  Epileptic seizures related to external
                             causes, not intractable, with status
                             epilepticus.
G40.509...................  Epileptic seizures related to external
                             causes, not intractable, without status
                             epilepticus.
G40.801...................  Other epilepsy, not intractable, with status
                             epilepticus.
G40.802...................  Other epilepsy, not intractable, without
                             status epilepticus.
G40.803...................  Other epilepsy, intractable, with status
                             epilepticus.
G40.804...................  Other epilepsy, intractable, without status
                             epilepticus.
G40.811...................  Lennox-Gastaut syndrome, not intractable,
                             with status epilepticus.
G40.812...................  Lennox-Gastaut syndrome, not intractable,
                             without status epilepticus.
G40.813...................  Lennox-Gastaut syndrome, intractable, with
                             status epilepticus.
G40.814...................  Lennox-Gastaut syndrome, intractable,
                             without status epilepticus.
G40.821...................  Epileptic spasms, not intractable, with
                             status epilepticus.
G40.822...................  Epileptic spasms, not intractable, without
                             status epilepticus.
G40.823...................  Epileptic spasms, intractable, with status
                             epilepticus.
G40.824...................  Epileptic spasms, intractable, without
                             status epilepticus.
G40.89....................  Other seizures.
G40.901...................  Epilepsy, unspecified, not intractable, with
                             status epilepticus.
G40.909...................  Epilepsy, unspecified, not intractable,
                             without status epilepticus.
G40.911...................  Epilepsy, unspecified, intractable, with
                             status epilepticus.
G40.919...................  Epilepsy, unspecified, intractable, without
                             status epilepticus.
------------------------------------------------------------------------

    MS-DRGs 023 and 024 contain a number of cases representing 
neurostimulator generator and lead code combinations that are captured 
under a list referred to as ``Major Device Implant.'' The 
neurostimulator generators on this list are inserted into the skull, as 
well as into the subcutaneous areas of the chest, back, or abdomen. The 
leads are all inserted into the brain. The RNS(copyright) 
neurostimulator generators are inserted into the skull and the leads 
are inserted into the brain. The following three ICD-10-PCS code 
combinations capture the use of the

[[Page 38017]]

RNS(copyright) neurostimulator and leads that would 
determine an assignment of a case to MS-DRGs 023 and 024, as shown in 
the ``Major Device Implant'' list:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach);
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach); and
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19818 through 19822), we examined claims data from the December 2016 
update of the FY 2016 MedPAR file for all cases representing the use of 
a neurostimulator in MS-DRGs 023 and 024 listed under the ``Major 
Device Implant'' list. As requested, we also examined the cases 
represented by the three neurostimulator code combinations, which 
capture the use of the RNS(copyright) neurostimulator that 
are a subset of the cases listed on the ``Major Device Implant'' list 
using the code combinations listed above, and that had a principal 
diagnosis of epilepsy from the list supplied by the requestor. The 
following tables show our findings for those cases in MS-DRGs 023 and 
024 as well as findings for cases in MS-DRGs 020 and 021.

                                               MS-DRGs 023 and 024
                                             [Neurostimulator Cases]
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases...........................................           6,723            10.9         $39,014
MS-DRG 023--Cases with neurostimulators (Major Device Implant                 21             6.7          48,821
 list cases)....................................................
MS-DRG 023--Cases with neurostimulator generators inserted into                7             8.0          63,365
 skull (includes cases involving the use of the RNS(copyright)
 neurostimulator) and cases with a principal diagnosis of
 epilepsy.......................................................
MS-DRG 024--All cases...........................................           2,275             5.5          27,574
MS-DRG 024--Cases with neurostimulators (Major Device Implant                394             2.1          31,669
 list cases)....................................................
MS-DRG 024--Cases with neurostimulator generators inserted into               54             4.3          51,041
 skull (includes cases involving the use of the RNS(copyright)
 neurostimulator) and cases with a principal diagnosis of
 epilepsy.......................................................
----------------------------------------------------------------------------------------------------------------


                                          Cases in MS-DRGs 020 and 021
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 020-All cases............................................           1,372            16.7         $72,926
MS-DRG 021-All cases............................................             336            13.5          54,385
----------------------------------------------------------------------------------------------------------------

    As shown by the table above, for MS-DRG 023, we identified a total 
of 6,723 cases, with an average length of stay of 10.9 days and average 
costs of $39,014. Of the 6,723 cases in MS-DRG 023, there were 21 cases 
representing the implantation of any type of neurostimulator generator 
with an average length of stay of 6.7 days, and average costs of 
$48,821. Of the 21 neurostimulator generator cases, there were 7 cases 
with the neurostimulator generators inserted into skull (including 
cases involving the use of the RNS(copyright) 
neurostimulator) and a principal diagnosis of epilepsy with an average 
length of stay of 8.0 days and average costs of $63,365. For MS-DRG 
024, we identified a total of 2,275 cases, with an average length of 
stay of 5.5 days and average costs of $27,574. Of the 2,275 cases in 
MS-DRG 024, there were 394 cases representing the implantation of any 
type of neurostimulator generator with an average length of stay of 2.1 
days and average costs of $31,669. Of the 394 neurostimulator generator 
cases, there were 54 cases with the neurostimulator generators inserted 
into skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy with an average length of stay of 4.3 days and average costs 
of $51,041.
    There were only 61 cases involving the use of the 
RNS(copyright) neurostimulator with a principal diagnosis of 
epilepsy in MS-DRGs 023 and 024 (7 and 54, respectively). As we stated 
in the proposed rule, our clinical advisors reviewed this issue, and 
agreed that this number of cases is too small on which to base a 
rationale for creating a new MS-DRG. Basing a new MS-DRG on such a 
small number of cases (61) could lead to distortion in the relative 
payment weights for the MS-DRG because several expensive cases could 
impact the overall relative payment weight. Having larger clinical 
cohesive groups within an MS-DRG provides greater stability for annual 
updates to the relative payment weights.
    We also examined the possibility of reassigning cases involving the 
use of the RNS(copyright) neurostimulator to MS-DRGs 020 and 
021. As the table above shows, for MS-DRG 020, there were a total of 
1,372 cases with an average length of stay of 16.7 days and average 
costs of $72,926. For MS-DRG 021, there were a total of 336 cases with 
an average length of stay of 13.5 days and average costs of $54,385. 
The cases in MS-DRG 023 with neurostimulator generators inserted into 
skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy have average costs that are $9,561 lower than that for all 
cases in MS-DRG 020 ($63,365 compared to $72,926), and the average 
length of stay is 8.7 days shorter (8.0 days compared to 16.7 days). We 
stated in the proposed rule that we do not believe these data support 
reassigning the cases in MS-DRG 023 with neurostimulator generators 
inserted into the skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal

[[Page 38018]]

diagnosis of epilepsy to MS-DRG 020. While the cases in MS-DRG 024 with 
neurostimulator generators inserted into the skull (including cases 
involving the use of the RNS(copyright) neurostimulator) and 
a principal diagnosis of epilepsy have average costs that are similar 
to the average costs of cases in MS-DRG 021 ($51,041 compared to 
$54,385), they have an average length of stay that is 9.2 days shorter 
(4.3 days compared to 13.5 days). Our clinical advisors reviewed the 
clinical issues and the claims data and, as we discussed in the 
proposed rule, did not support reassigning the cases with 
neurostimulator generators inserted into skull (including cases 
involving the use of the RNS(copyright) neurostimulator) and 
a principal diagnosis of epilepsy from MS-DRGs 023 and 024 to MS-DRGs 
020 and 021. Our clinical advisors pointed out that the cases in MS-
DRGs 020 and 021 have a principal diagnosis of a hemorrhage. The 
RNS(copyright) neurostimulator generators are not used to 
treat patients with diagnosis of a hemorrhage. Therefore, our clinical 
advisors stated that it was inappropriate to reassign cases 
representing a principal diagnosis of epilepsy to an MS-DRG that 
contains cases that represent the treatment of intracranial hemorrhage. 
They also stated that the differences in average length of stay and 
average costs support this recommendation.
    We then explored alternative MS-DRG assignments, as was requested. 
We noted that the 7 cases with the neurostimulator generators inserted 
into the skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy had an average length of stay of 8.0 days and average costs of 
$63,365, as compared to the 6,723 cases in MS-DRG 023 that had an 
average length of stay of 10.9 days and average costs of $39,014. While 
these neurostimulator cases had average costs that were $24,351 higher 
than the average costs of all cases in MS-DRG 023, there were only a 
total of 7 cases. There may have been other factors contributing to the 
higher costs. We noted that the 54 cases with the neurostimulator 
generators inserted into skull (including cases involving the use of 
the RNS(copyright) neurostimulator) and a principal 
diagnosis of epilepsy in MS-DRG 024 had average costs of $51,041 and an 
average length of stay of 4.3 days, compared to average costs of 
$27,574 and average length of stay of 5.5 days for all cases in MS-DRG 
024. By reassigning all cases with the neurostimulator generators 
inserted into the skull (including cases involving the use of the 
RNS(copyright) neurostimulator) and a principal diagnosis of 
epilepsy to MS DRG 023, even if there is not a MCC present, the cases 
would receive higher payment. The average costs of MS-DRG 023 were 
$39,014, compared to the average costs of $51,041 for the cases with 
the neurostimulator generators inserted into skull (including cases 
involving the use of the RNS(copyright) neurostimulator) and 
a principal diagnosis of epilepsy in MS-DRG 024. Our clinical advisors 
reviewed the clinical issues and the claims data, and supported the 
recommendation to reassign the cases with the neurostimulator 
generators inserted into skull (including cases involving the use of 
the RNS(copyright) neurostimulator) and a principal 
diagnosis of epilepsy to MS-DRG 023, even if there is not a MCC 
reported. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19818 through 19822), we proposed to reassign all cases with a 
principal diagnosis of epilepsy from the epilepsy diagnosis list 
provided earlier, and one of the following ICD-10-PCS code combinations 
capturing cases with the neurostimulator generators inserted into the 
skull (including cases involving the use of the 
RNS(copyright) neurostimulator), to MS-DRG 023, even if 
there is no MCC reported:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach);
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach); and
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We also proposed to change the title of MS-DRG 023 from 
``Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemo Implant'' to 
``Craniotomy with Major Device Implant or Acute Complex Central Nervous 
System (CNS) Principal Diagnosis (PDX) with MCC or Chemotherapy Implant 
or Epilepsy with Neurostimulator'' to reflect the proposed 
modifications to MS-DRG assignments.
    We invited public comments on our proposals.
    Comment: Commenters supported CMS' proposal to reassign cases with 
insertion of a neurostimulator generator and a principal diagnosis of 
epilepsy to MS-DRG 023. The commenters also agreed with the proposed 
change in the title of MS-DRG 023. The commenters stated that the 
updates were necessary for Comprehensive Epilepsy Centers to be able to 
offer the RNS(copyright) neurostimulator. One commenter who 
supported this MS-DRG update recommended that codes in subcategories 
G40.A and G40.B be included in the list of epilepsy diagnosis codes 
classified to MS-DRG 023 because these subcategory codes are also 
epilepsy codes.
    Response: We appreciate the commenters' support for our 
recommendations. We identified the following list of epilepsy codes 
that are included under categories G40.A and G40.B.

 G40.A01 Absence epileptic syndrome, not intractable, with 
status epilepticus
 G40.A09 Absence epileptic syndrome, not intractable, without 
status epilepticus
 G40.A11 Absence epileptic syndrome, intractable, with status 
epilepticus
 G40.A19 Absence epileptic syndrome, intractable, without 
status epilepticus
 G40.B01 Juvenile myoclonic epilepsy, not intractable, with 
status epilepticus
 G40.B09 Juvenile myoclonic epilepsy, not intractable, without 
status epilepticus
 G40.B11 Juvenile myoclonic epilepsy, intractable, with status 
epilepticus
 G40.B19 Juvenile myoclonic epilepsy, intractable, without 
status epilepticus

    We agree that the codes listed above are also epilepsy codes and 
should be added to the list of epilepsy codes assigned to MS-DRG 023 
because they also capture a type of epilepsy. Our clinical advisors 
reviewed this issue and agree with adding the additional epilepsy 
codes.
    For FY 2018, the complete list of epilepsy codes assigned to MS-DRG 
023 under our finalized policy is as follows:

------------------------------------------------------------------------
      ICD-10-CM code                    ICD-10-CM code title
------------------------------------------------------------------------
G40.001...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset, not
                             intractable, with status epilepticus.

[[Page 38019]]

 
G40.009...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset, not
                             intractable, without status epilepticus.
G40.011...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset,
                             intractable, with status epilepticus.
G40.019...................  Localization-related (focal) (partial)
                             idiopathic epilepsy and epileptic syndromes
                             with seizures of localized onset,
                             intractable, without status epilepticus.
G40.101...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with simple partial seizures, not
                             intractable, with status epilepticus.
G40.119...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with simple partial seizures,
                             intractable, without status epilepticus.
G40.201...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             not intractable, with status epilepticus.
G40.209...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             not intractable, without status
                             epilepticus.
G40.211...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             intractable, with status epilepticus.
G40.219...................  Localization-related (focal) (partial)
                             symptomatic epilepsy and epileptic
                             syndromes with complex partial seizures,
                             intractable, without status epilepticus.
G40.301...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, not intractable, with
                             status epilepticus.
G40.309...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, not intractable,
                             without status epilepticus.
G40.311...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, intractable, with
                             status epilepticus.
G40.319...................  Generalized idiopathic epilepsy and
                             epileptic syndromes, intractable, without
                             status epilepticus.
G40.A01...................  Absence epileptic syndrome, not intractable,
                             with status epilepticus.
G40.A09...................  Absence epileptic syndrome, not intractable,
                             without status epilepticus.
G40.A11...................  Absence epileptic syndrome, intractable,
                             with status epilepticus.
G40.A19...................  Absence epileptic syndrome, intractable,
                             without status epilepticus.
G40.B01...................  Juvenile myoclonic epilepsy, not
                             intractable, with status epilepticus.
G40.B09...................  Juvenile myoclonic epilepsy, not
                             intractable, without status epilepticus.
G40.B11...................  Juvenile myoclonic epilepsy, intractable,
                             with status epilepticus.
G40.B19...................  Juvenile myoclonic epilepsy, intractable,
                             without status epilepticus.
G40.401...................  Other generalized epilepsy and epileptic
                             syndromes, not intractable, with status
                             epilepticus.
G40.409...................  Other generalized epilepsy and epileptic
                             syndromes, not intractable, without status
                             epilepticus.
G40.411...................  Other generalized epilepsy and epileptic
                             syndromes, intractable, with status
                             epilepticus.
G40.419...................  Other generalized epilepsy and epileptic
                             syndromes, intractable, without status
                             epilepticus.
G40.501...................  Epileptic seizures related to external
                             causes, not intractable, with status
                             epilepticus.
G40.509...................  Epileptic seizures related to external
                             causes, not intractable, without status
                             epilepticus.
G40.801...................  Other epilepsy, not intractable, with status
                             epilepticus.
G40.802...................  Other epilepsy, not intractable, without
                             status epilepticus.
G40.803...................  Other epilepsy, intractable, with status
                             epilepticus.
G40.804...................  Other epilepsy, intractable, without status
                             epilepticus.
G40.811...................  Lennox-Gastaut syndrome, not intractable,
                             with status epilepticus.
G40.812...................  Lennox-Gastaut syndrome, not intractable,
                             without status epilepticus.
G40.813...................  Lennox-Gastaut syndrome, intractable, with
                             status epilepticus.
G40.814...................  Lennox-Gastaut syndrome, intractable,
                             without status epilepticus.
G40.821...................  Epileptic spasms, not intractable, with
                             status epilepticus.
G40.822...................  Epileptic spasms, not intractable, without
                             status epilepticus.
G40.823...................  Epileptic spasms, intractable, with status
                             epilepticus.
G40.824...................  Epileptic spasms, intractable, without
                             status epilepticus.
G40.89....................  Other seizures.
G40.901...................  Epilepsy, unspecified, not intractable, with
                             status epilepticus.
G40.909...................  Epilepsy, unspecified, not intractable,
                             without status epilepticus.
G40.911...................  Epilepsy, unspecified, intractable, with
                             status epilepticus.
G40.919...................  Epilepsy, unspecified, intractable, without
                             status epilepticus.
------------------------------------------------------------------------

    After consideration of the public comments that we received, we are 
finalizing our proposal to reassign all cases with a principal 
diagnosis of epilepsy from the epilepsy diagnosis list provided above, 
and one of the following ICD-10-PCS code combinations capturing cases 
with the neurostimulator generators inserted into the skull (including 
cases involving the use of the RNS(copyright) 
neurostimulator), to MS-DRG 023, even if there is no MCC reported:
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H00MZ (Insertion of 
neurostimulator lead into brain, open approach);
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H03MZ (Insertion of 
neurostimulator lead into brain, percutaneous approach); and
     0NH00NZ (Insertion of neurostimulator generator into 
skull, open approach), in combination with 00H04MZ (Insertion of 
neurostimulator lead into brain, percutaneous endoscopic approach).
    We also finalizing our proposed change to the title of MS-DRG 023 
from ``Craniotomy with Major Device Implant or Acute Complex Central 
Nervous System (CNS) Principal Diagnosis (PDX) with MCC or Chemo 
Implant'' to ``Craniotomy with Major Device Implant or Acute Complex 
Central Nervous System (CNS) Principal Diagnosis (PDX) with MCC or 
Chemotherapy Implant or Epilepsy with Neurostimulator'' to reflect the 
modifications to MS-DRG assignments.
c. Precerebral Occlusion or Transient Ischemic Attack with Thrombolytic
    We received a request to add the ICD-10-CM diagnosis codes 
currently

[[Page 38020]]

assigned to MS-DRGs 067 and 068 (Nonspecific CVA and Precerebral 
Occlusion without Infarction with MCC and without MCC, respectively) 
and the ICD-10-CM diagnosis codes currently assigned to MS-DRG 069 
(Transient Ischemia) to the GROUPER logic for MS-DRGs 061, 062, and 063 
(Acute Ischemic Stroke with Use of Thrombolytic Agent with MCC, with 
CC, and without CC/MCC, respectively) when those conditions are 
sequenced as the principal diagnosis and reported with an ICD-10-PCS 
procedure code describing use of a thrombolytic agent (for example, 
tPA).
    The ICD-10-CM diagnosis codes displayed in the table below identify 
the conditions that are assigned to MS-DRGs 067 and 068 when reported 
as a principal diagnosis.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
I65.01....................  Occlusion and stenosis of right vertebral
                             artery.
I65.02....................  Occlusion and stenosis of left vertebral
                             artery.
I65.03....................  Occlusion and stenosis of bilateral
                             vertebral arteries.
I65.09....................  Occlusion and stenosis of unspecified
                             vertebral artery.
I65.1.....................  Occlusion and stenosis of basilar artery.
I65.21....................  Occlusion and stenosis of right carotid
                             artery.
I65.22....................  Occlusion and stenosis of left carotid
                             artery.
I65.23....................  Occlusion and stenosis of bilateral carotid
                             arteries.
I65.29....................  Occlusion and stenosis of unspecified
                             carotid artery.
I65.8.....................  Occlusion and stenosis of other precerebral
                             arteries.
I65.9.....................  Occlusion and stenosis of unspecified
                             precerebral artery.
I66.01....................  Occlusion and stenosis of right middle
                             cerebral artery.
I66.02....................  Occlusion and stenosis of left middle
                             cerebral artery.
I66.03....................  Occlusion and stenosis of bilateral middle
                             cerebral arteries.
I66.09....................  Occlusion and stenosis of unspecified middle
                             cerebral artery.
I66.11....................  Occlusion and stenosis of right anterior
                             cerebral artery.
I66.12....................  Occlusion and stenosis of left anterior
                             cerebral artery.
I66.13....................  Occlusion and stenosis of bilateral anterior
                             cerebral arteries.
I66.19....................  Occlusion and stenosis of unspecified
                             anterior cerebral artery.
I66.21....................  Occlusion and stenosis of right posterior
                             cerebral artery.
I66.22....................  Occlusion and stenosis of left posterior
                             cerebral artery.
I66.23....................  Occlusion and stenosis of bilateral
                             posterior cerebral arteries.
I66.29....................  Occlusion and stenosis of unspecified
                             posterior cerebral artery.
I66.3.....................  Occlusion and stenosis of cerebellar
                             arteries.
I66.8.....................  Occlusion and stenosis of other cerebral
                             arteries.
I66.9.....................  Occlusion and stenosis of unspecified
                             cerebral artery.
------------------------------------------------------------------------

    The ICD-10-CM diagnosis codes displayed in the table below identify 
the conditions that are assigned to MS-DRG 069 when reported as a 
principal diagnosis.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
G45.0.....................  Vertebro-basilar artery syndrome.
G45.1.....................  Carotid artery syndrome (hemispheric).
G45.2.....................  Multiple and bilateral precerebral artery
                             syndromes.
G45.8.....................  Other transient cerebral ischemic attacks
                             and related syndromes.
G45.9.....................  Transient cerebral ischemic attack,
                             unspecified.
G46.0.....................  Middle cerebral artery syndrome.
G46.1.....................  Anterior cerebral artery syndrome.
G46.2.....................  Posterior cerebral artery syndrome.
I67.81....................  Acute cerebrovascular insufficiency.
I67.82....................  Cerebral ischemia.
I67.841...................  Reversible cerebrovascular vasoconstriction
                             syndrome.
I67.848...................  Other cerebrovascular vasospasm and
                             vasoconstriction.
I67.89....................  Other cerebrovascular disease.
------------------------------------------------------------------------

    The ICD-10-PCS procedure codes displayed in the table below 
describe use of a thrombolytic agent. These procedure codes are 
designated as non-O.R. procedure codes affecting the MS-DRG assignment 
for MS-DRGs 061, 062, and 063.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
3E03017...................  Introduction of other thrombolytic into
                             peripheral vein, open approach.
3E03317...................  Introduction of other thrombolytic into
                             peripheral vein, percutaneous approach.
3E04017...................  Introduction of other thrombolytic into
                             central vein, open approach.
3E04317...................  Introduction of other thrombolytic into
                             central vein, percutaneous approach.
3E05017...................  Introduction of other thrombolytic into
                             peripheral artery, open approach.
3E05317...................  Introduction of other thrombolytic into
                             peripheral artery, percutaneous approach.
3E06017...................  Introduction of other thrombolytic into
                             central artery, open approach.
3E06317...................  Introduction of other thrombolytic into
                             central artery, percutaneous approach.

[[Page 38021]]

 
3E08017...................  Introduction of other thrombolytic into
                             heart, open approach.
3E08317...................  Introduction of other thrombolytic into
                             heart, percutaneous approach.
------------------------------------------------------------------------

    At the onset of stroke symptoms, tPA must be given within 3 hours 
(or up to 4.5 hours for certain eligible patients) in an attempt to 
dissolve a clot and improve blood flow to the specific area affected in 
the brain. If, upon receiving the tPA, the stroke symptoms completely 
resolve within 24 hours and imaging studies (if performed) are 
negative, the patient has suffered what is clinically defined as a 
transient ischemic attack, not a stroke. According to the requestor, 
the current MS-DRG assignments do not account for this subset of 
patients who were successfully treated with tPA to prevent a stroke.
    In addition, the requestor expressed concerns regarding 
documentation and quality of the data. For example, the requestor noted 
that the terms ``stroke-in-evolution'' and ``aborted stroke'' may be 
documented as a ``workaround'' for a patient exhibiting symptoms of a 
stroke who receives tPA and, regardless of the outcome, would result in 
assignment to MS-DRG 061, 062, or 063. Therefore, in cases where the 
patient's stroke symptoms completely resolved upon receiving tPA and 
the patient clinically suffered a precerebral occlusion or transient 
ischemia, this documentation practice is incorrectly labeling these 
patients as having had a stroke and ultimately leading to inaccurate 
data.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19822 through 19824), we analyzed claims data from the December 2016 
update of the FY 2016 MedPAR file for MS-DRGs 061, 062, and 063. Our 
findings are shown in the tables below.

                        MS-DRGs for Acute Ischemic Stroke With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 061-All cases............................................           4,528             6.4         $20,270
MS-DRG 062-All cases............................................           8,600             4.2          14,124
MS-DRG 063-All cases............................................           1,859             3.0          11,898
----------------------------------------------------------------------------------------------------------------

    Our analysis also consisted of claims data for MS-DRGs 067 and 068 
when reported with a procedure code describing the use of tPA. As shown 
in the table below, the total number of cases reported in MS-DRG 067 
was 811, with an average length of stay of 4.8 days and average costs 
of $10,248. There were 9 cases in MS-DRG 067 with a precerebral 
occlusion receiving tPA, with an average length of stay of 5.2 days and 
average costs of $20,156. The total number of cases reported in MS-DRG 
068 was 3,809, with an average length of stay of 2.8 days and average 
costs of $6,555. There were 33 cases in MS-DRG 068 with a precerebral 
occlusion receiving tPA, with an average length of stay of 4.3 days and 
average costs of $13,814.

                        MS-DRGs for Precerebral Occlusion With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 067--All cases...........................................             811             4.8         $10,248
MS-DRG 067--Cases with tPA......................................               9             5.2          20,156
MS-DRG 068--All cases...........................................           3,809             2.8           6,555
MS-DRG 068--Cases with tPA......................................              33             4.3          13,814
----------------------------------------------------------------------------------------------------------------

    As we stated in the proposed rule, we recognize that while the 
volume of cases for patients with a diagnosis of precerebral occlusion 
receiving tPA in MS-DRGs 067 and 068 is relatively low, the average 
length of stay is longer, and the average costs for this subset of 
patients is approximately twice the amount of the average costs in 
comparison to all cases in MS-DRGs 067 and 068.
    We then analyzed claims data for cases in MS-DRG 069 when reported 
with a procedure code describing the use of tPA. As shown in the table 
below, the total number of cases reported in MS-DRG 069 was 50,633, 
with an average length of stay of 2.5 days and average costs of $5,518. 
There were 554 cases of transient ischemia receiving tPA, with an 
average length of stay of 3.2 days and average costs of $12,481.

                          MS-DRG for Transient Ischemia With Use of Thrombolytic Agent
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 069--All cases...........................................          50,633             2.5          $5,518
MS-DRG 069--Cases with tPA......................................             554             3.2          12,481
----------------------------------------------------------------------------------------------------------------

    Similar to the findings for MS-DRGs 067 and 068, the number of 
cases for transient ischemia receiving tPA in MS-DRG 069 was relatively 
low in comparison to all the cases in the MS-DRG, with a longer average 
length of

[[Page 38022]]

stay and approximately twice the amount of average costs in comparison 
to all cases in MS-DRG 069.
    We stated in the proposed rule that the results of analysis of the 
data and the advice of our clinical advisors support adding the ICD-10-
CM diagnosis codes in MS-DRGs 067, 068, and 069 to the list of 
principal diagnoses in MS-DRGs 061, 062, and 063 to better account for 
this subset of patients who were successfully treated with tPA to 
prevent a stroke, to identify the increasing use of thrombolytics at 
the onset of symptoms of a stroke, to further encourage appropriate 
physician documentation for a precerebral occlusion or transient 
ischemic attack when patients are treated with tPA, and to reflect more 
appropriate payment for the resources involved in evaluating and 
treating these patients. We stated that we believe this approach will 
improve accuracy of the data and assist in addressing the concern that 
facilities may be reporting incorrect diagnoses for this subset of 
patients.
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19824), for FY 2018, we proposed to add the ICD-10-CM diagnosis codes 
listed earlier in this section that are currently assigned to MS-DRGs 
067 and 068 and the ICD-10-CM diagnosis codes currently assigned to MS-
DRG 069 to the GROUPER logic for MS-DRGs 061, 062, and 063 when those 
conditions are sequenced as the principal diagnosis and reported with 
an ICD-10-PCS procedure code describing use of a thrombolytic agent 
(for example, tPA). We invited public comments on our proposal.
    We also proposed to retitle MS-DRGs 061, 062, and 063 as ``Ischemic 
Stroke, Precerebral Occlusion or Transient Ischemia with Thrombolytic 
Agent with MCC, with CC and without CC/MCC'', respectively, and to 
retitle MS-DRG 069 as ``Transient Ischemia without Thrombolytic''.
    We invited public comments on our proposals.
    Comment: Several commenters supported the proposal to modify the 
GROUPER logic for MS-DRGs 061, 062, and 063 to better account for the 
subset of patients who are treated successfully with tPA at the onset 
of stroke symptoms. The commenters agreed that this change will 
encourage appropriate physician documentation for a precerebral 
occlusion or transient ischemic attack when patients are treated with 
tPA and that it will more accurately reflect proper payment for stroke 
care. Commenters also agreed with retitling MS-DRGs 061, 062, 063 and 
069. One commenter who supported the proposals also suggested that CMS 
consider developing new MS-DRGs in the future to specifically 
distinguish acute ischemic strokes from precerebral occlusions and 
transient ischemia, with and without thrombolytics, with and without 
MCC/CC, respectively.
    Response: We appreciate the commenters' support. As additional ICD-
10 claims data become available, we will continue to welcome input from 
the public and consider further modifications to the ICD-10 MS-DRGs if 
warranted.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the ICD-10-CM diagnosis codes listed 
earlier in this section that are currently assigned to MS-DRGs 067 and 
068 and the ICD-10-CM diagnosis codes currently assigned to MS-DRG 069 
to the GROUPER logic for MS-DRGs 061, 062, and 063 when those 
conditions are sequenced as the principal diagnosis and reported with 
an ICD-10-PCS procedure code describing use of a thrombolytic agent 
(for example, tPA). We also are finalizing our proposal to retitle MS-
DRGs 061, 062, and 063 as ``Ischemic Stroke, Precerebral Occlusion or 
Transient Ischemia with Thrombolytic Agent with MCC, with CC and 
without CC/MCC'', respectively, and to retitle MS-DRG 069 as 
``Transient Ischemia without Thrombolytic'' effective October 1, 2017 
for the ICD-10 MS-DRGs Version 35.
3. MDC 2 (Diseases and Disorders of the Eye: Swallowing Eye Drops 
(Tetrahydrozoline)
    We received a request to reassign the following ICD-10-CM diagnosis 
codes that capture swallowing eye drops from MS-DRGs 124 and 125 (Other 
Disorders of the Eye with and without MCC, respectively) to MS-DRGs 917 
and 918 (Poisoning and Toxic Effects of Drugs with and without MCC, 
respectively). The requestor described a case where a patient was 
treated following swallowing eye drops, specifically Tetrahydrozoline, 
which the provider considers to be a poisoning, not a disorder of the 
eye.
     T49.5X1A (Poisoning by ophthalmological drugs and 
preparations, accidental (unintentional), initial encounter);
     T49.5X2A (Poisoning by ophthalmological drugs and 
preparations, intentional self-harm, initial encounter);
     T49.5X3A (Poisoning by ophthalmological drugs and 
preparations, assault, initial encounter); and
     T49.5X4A (Poisoning by ophthalmological drugs and 
preparations, undetermined, initial encounter).
    As stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19824 
through 19825), we agree with the requestor that the four diagnosis 
codes describe a poisoning, not a disorder of the eye. We examined 
claims data for cases in MS-DRGs 124 and 125 from the December 2016 
update of the FY 2016 MedPAR file. Our findings are shown in the table 
below.

                                            MS-DRG 124 and 125 Cases
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 124--All cases...........................................             874             4.8          $8,826
MS-DRG 124--Cases reporting poisoning by ophthalmological drugs                1             2.0           3,007
 and preparations code..........................................
MS-DRG 125--All cases...........................................           3,205             3.3           5,565
MS-DRG 125--Cases reporting poisoning by ophthalmological drugs                1             2.0           1,446
 and preparations code..........................................
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, there were only 2 cases of poisoning 
by ophthalmological drugs and preparations--1 case in MS-DRG 124 with 
an average length of stay of 2 days and average costs of $3,007 and 1 
case in MS-DRG 125 with an average length of stay of 2 days and average 
costs of $1,446. The case of poisoning by ophthalmological drugs and 
preparations in MS-DRG 124 had a shorter average length of stay than 
the average length of stay for all cases in MS-DRG 124 (2.0 days 
compared to 4.8 days) and lower average costs than the average costs 
for all cases in MS-DRG 124 ($3,007 compared to $8,826). The case of 
poisoning by ophthalmological

[[Page 38023]]

drugs and preparations in MS-DRG 125 also had a shorter average length 
of stay than the average length of stay for all cases in MS-DRG 125 
(2.0 days compared to 3.3 days) and lower average costs than the 
average costs for all cases in MS-DRG 125 ($1,446 compared to $5,565).
    We also examined claims data on cases reported in MS-DRGs 917 and 
918 from the December 2016 update of the FY 2016 MedPAR file. Our 
findings are shown in the table below.

                                            MS-DRGs 917 and 918 Cases
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 917-- All cases..........................................          32,381             4.8          $9,882
MS-DRG 918--All cases...........................................          24,061             3.0           5,326
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, the 2 cases of poisoning by 
ophthalmological drugs and preparations also had shorter average 
lengths of stay than the average length of stay for all cases in MS-
DRGs 917 and 918 (2.0 days compared to 4.8 days in MS-DRG 917 and 2.0 
days compared to 3.0 days in MS-DRG 918). The average costs also were 
lower for the 2 cases of poisoning by ophthalmological drugs and 
preparations than the average costs for all cases in MS-DRGs 917 and 
918 ($3,007 compared to $9,882 for all cases in MS-DRG 917 and $1,446 
compared to $5,326 for all cases in MS-DRG 918). Therefore, cases with 
this type of poisoning had lower average lengths of stay and lower 
average costs than all other cases assigned to MS-DRGs 124 and 125 and 
cases in MS-DRGs 917 and 918 where poisonings are assigned.
    Because the codes clearly capture a poisoning and not an eye 
disorder, we stated in the proposed rule that we believe that these 
codes are more appropriately assigned to MS-DRGs 917 and 918 where 
other poisonings are assigned. Our clinical advisors also reviewed this 
issue and agreed that the codes should be moved from MS-DRGs 124 and 
125 to MS-DRGs 917 and 918 because they clearly capture a poisoning and 
not a disorder of the eye. Because MS-DRGs 917 and 918 contain cases 
with multiple types of poisonings, it is expected that some types of 
poisoning cases will have longer lengths of stay and greater average 
costs than other types of poisoning cases. Therefore, in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19824 through 19825), we proposed to 
reassign the following ICD-10-CM diagnosis codes from MS-DRGs 124 and 
125 to MS-DRGs 917 and 918 for FY 2018: T49.5X1A; T49.5X2A; T49.5X3A; 
and T49.5X4A.
    We invited public comments on our proposal.
    Comment: Several commenters supported CMS' proposal to reassign 
four poisoning codes from MS-DRGs 124 and 125 to MS-DRGs 917 and 918. 
The commenters stated that the proposal was reasonable considering the 
information provided.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comments that we received, we are 
finalizing our proposal to reassign the following ICD-10-CM diagnosis 
codes from MS-DRGs 124 and 125 to MS-DRGs 917 and 918 for FY 2018: 
T49.5X1A; T49.5X2A; T49.5X3A; and T49.5X4A.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Percutaneous Cardiovascular Procedures and Insertion of a 
Radioactive Element
    Currently, under ICD-10-PCS, the logic for MS-DRG 246 (Percutaneous 
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+ 
Vessels or Stents), MS-DRG 247 (Percutaneous Cardiovascular Procedures 
with Drug-Eluting Stent without MCC), MS-DRG 248 (Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ 
Vessels or Stents), and MS-DRG 249 (Percutaneous Cardiovascular 
Procedures with Non-Drug-Eluting Stent without MCC) includes six 
procedure codes that describe the insertion of a radioactive element. 
When any of these six procedure codes are reported without the 
reporting of a percutaneous cardiovascular procedure code, they are 
assigned to MS-DRG 264 (Other Circulatory System O.R. Procedures). The 
six specific procedure codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0WHC01Z...................  Insertion of radioactive element into
                             mediastinum, open approach.
0WHC31Z...................  Insertion of radioactive element into
                             mediastinum, percutaneous approach.
0WHC41Z...................  Insertion of radioactive element into
                             mediastinum, percutaneous endoscopic
                             approach.
0WHD01Z...................  Insertion of radioactive element into
                             pericardial cavity, open approach.
0WHD31Z...................  Insertion of radioactive element into
                             pericardial cavity, percutaneous approach.
0WHD41Z...................  Insertion of radioactive element into
                             pericardial cavity, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    Unlike procedures involving the insertion of stents, none of the 
procedures described by the procedure codes listed above are performed 
in conjunction with a percutaneous cardiovascular procedure, and two of 
the six procedures described by these procedure codes (ICD-10-PCS codes 
0WHC01Z and 0WHD01Z) are not performed using a percutaneous approach, 
but rather describe an open approach to performing the specific 
procedure. We stated in the proposed rule that our clinical advisors 
agreed that these procedures should not be used to classify cases 
within MS-DRGs 246 through 249 because they are not performed in 
conjunction with a percutaneous cardiovascular procedure. Furthermore, 
the indications for the insertion of a radioactive element typically 
involve a diagnosis of cancer, whereas the indications for the 
insertion of a coronary artery stent typically involve a diagnosis of 
coronary artery disease.
    We conducted an analysis for the six procedures described by these 
procedure codes by reviewing the claims data for MS-DRGs 246 through 
249 from the December 2016 update of the FY 2016 MedPAR file. We did 
not find any cases where any one of the six

[[Page 38024]]

procedure codes listed above was reported. As noted earlier, when any 
of these six procedure codes are reported without the reporting of a 
percutaneous cardiovascular procedure code, the case is assigned to MS-
DRG 264. Therefore, as we discussed in the proposed rule, our clinical 
advisors also agreed that it would be more appropriate to remove these 
six procedure codes from MS-DRGs 246 through 249, but maintain their 
current assignment in MS-DRG 264. Based on our analysis and the advice 
from our clinical advisors, in the FY 2018 IPPS/LTCH PPS proposed rule 
(82 FR 19825 through 19826), for FY 2018, we proposed to remove ICD-10-
PCS procedure codes 0WHC01Z, 0WHC31Z, 0WHC41Z, 0WHD01Z, 0WHD31Z, and 
0WHD41Z from MS-DRGs 246 through 249, but maintain their current 
assignment in MS-DRG 264.
    We invited public comments on our proposal to remove the six 
procedure codes listed above from MS-DRGs 246 through 249. We also 
invited public comments on our proposal to maintain their current 
assignment in MS-DRG 264.
    Comment: Commenters supported the proposal to remove the six 
procedure codes describing insertion of radioactive element into the 
mediastinum and insertion of radioactive element into the pericardial 
cavity from MS-DRGs 246 through 249 and to maintain their assignment in 
MS-DRG 264.
    Response: We appreciate the commenters' support.
    Comment: One commenter noted that CMS did not discuss how we 
identified the listed procedure codes or why CMS believes these 
procedure codes were assigned to MS-DRGs 246 through 249 erroneously. 
However, the commenter also agreed with the proposal to remove the six 
procedure codes describing insertion of radioactive element into the 
mediastinum and insertion of radioactive element into the pericardial 
cavity from MS-DRGs 246 through 249 and to maintain their assignment in 
MS-DRG 264. The commenter acknowledged that eliminating erroneous 
assignments that may have occurred as a result of the transition to 
ICD-10 is important and requires ongoing efforts.
    Response: We appreciate the commenter's support. In response to the 
comment regarding how these procedure codes were identified, as 
discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19825), we 
recognized the fact that two of the six procedure codes describing 
insertion of radioactive element (0WHC01Z and 0WHD01Z) are not 
performed using a percutaneous approach, but rather described an open 
approach to performing the specific procedure and their assignment was 
to a group of ``percutaneous'' cardiovascular procedure MS-DRGs. 
Because the comparable translation of these procedure codes under ICD-
9-CM, procedure code 92.27 (Implantation or insertion of radioactive 
element) did not specify an approach, all comparable ICD-10-PCS 
translations of the ICD-9-CM code were automatically replicated to the 
same ICD-10 MS-DRGs during the transition. We agree with the commenter 
that eliminating erroneous assignments that may have occurred as a 
result of the transition to ICD-10 is important and requires ongoing 
efforts.
    After consideration of the public comments that we received, we are 
finalizing our proposal to remove ICD-10-PCS procedure codes 0WHC01Z, 
0WHC31Z, 0WHC41Z, 0WHD01Z, 0WHD31Z, and 0WHD41Z from MS-DRGs 246 
through 249, and maintain their current assignment in MS-DRG 264 
effective October 1, 2017 for ICD-10 MS-DRGs Version 35.
b. Proposed Modification of the Titles for MS-DRG 246 (Percutaneous 
Cardiovascular Procedures With Drug-Eluting Stent With MCC or 4+ 
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular 
Procedures With Non-Drug-Eluting Stent With MCC or 4+ Vessels or 
Stents)
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19826), we 
proposed to revise the titles for MS-DRGs 246 (Percutaneous 
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+ 
Vessels or Stents) and MS-DRG 248 (Percutaneous Cardiovascular 
Procedures with Non-Drug-Eluting Stent with MCC or 4+ Vessels or 
Stents) to better reflect the ICD-10-PCS terminology of ``arteries'' 
versus ``vessels'' as used in the procedure code titles within the 
classification. Specifically, we proposed to revise the title of MS-DRG 
246 to ``Percutaneous Cardiovascular Procedures with Drug-Eluting Stent 
with MCC or 4+ Arteries or Stents''. We proposed to revise the title of 
MS-DRG 248 to ``Percutaneous Cardiovascular Procedures with Non-Drug-
Eluting Stent with MCC or 4+ Arteries or Stents''. We invited public 
comments on our proposals.
    Comment: Commenters agreed with the proposal to update the titles 
for MS-DRG 246 and MS-DRG 248 to better reflect the ICD-10-PCS 
terminology of ``arteries'' versus ``vessels'' as used in the procedure 
code titles within the classification. One commenter noted that this 
change adds specificity and makes sense anatomically because 
percutaneous coronary intervention procedures are performed in 
arteries, which are a type of vessel.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to revise the titles for MS-DRGs 246 and MS-DRG 
248. We are finalizing the title of MS-DRG 246 to ``Percutaneous 
Cardiovascular Procedures with Drug-Eluting Stent with MCC or 4+ 
Arteries or Stents'' and the title of MS-DRG 248 to ``Percutaneous 
Cardiovascular Procedures with Non-Drug-Eluting Stent with MCC or 4+ 
Arteries or Stents'' effective October 1, 2017 for ICD-10 MS-DRGs 
Version 35.
c. Transcatheter Aortic Valve Replacement (TAVR) and Left Atrial 
Appendage Closure (LAAC)
    We received a request to create new MS-DRGs for cases involving 
transcatheter aortic valve replacement (TAVR) and left atrial appendage 
closure (LAAC) procedures when performed in combination in the same 
operative episode. The requestor stated that there are both clinical 
and financial advantages for the patient when performing concomitant 
procedures. For example, the requestor indicated that the clinical 
advantages for the patient may include single exposure to anesthesia 
and a reduction in overall procedure time, while the financial 
advantages may include lower cost-sharing. The requestor further 
believed that a single hospitalization for these concomitant procedures 
could be cost-effective for various providers and payers.
    TAVR is indicated and approved as a treatment option for patients 
diagnosed with symptomatic aortic stenosis who are not surgical 
candidates for traditional open surgical techniques. Cases involving 
TAVR procedures are assigned to MS-DRGs 266 and 267 (Endovascular 
Cardiac Valve Replacement with MCC and without MCC, respectively), and 
are identified by the following ICD-10-PCS procedure codes shown in the 
table below.

[[Page 38025]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02RF37Z...................  Replacement of aortic valve with autologous
                             tissue substitute, percutaneous approach.
02RF38Z...................  Replacement of aortic valve with zooplastic
                             tissue, percutaneous approach.
02RF3JZ...................  Replacement of aortic valve with synthetic
                             substitute, percutaneous approach.
02RF3KZ...................  Replacement of aortic valve with
                             nonautologous tissue substitute,
                             percutaneous approach.
02RF37H...................  Replacement of aortic valve with autologous
                             tissue substitute, transapical,
                             percutaneous approach.
02RF38H...................  Replacement of aortic valve with zooplastic
                             tissue, transapical, percutaneous approach.
02RF3JH...................  Replacement of aortic valve with synthetic
                             substitute, transapical, percutaneous
                             approach.
02RF3KH...................  Replacement of aortic valve with
                             nonautologous tissue substitute,
                             transapical, percutaneous approach.
------------------------------------------------------------------------

    LAAC is indicated and approved as a treatment option for patients 
diagnosed with atrial fibrillation. Cases involving LAAC procedures are 
assigned to MS-DRGs 273 and 274 (Percutaneous Intracardiac Procedures 
with MCC and without MCC, respectively), and are identified by ICD-10-
PCS procedure code 02L73DK (Occlusion of left atrial appendage with 
intraluminal device, percutaneous approach).
    The requestor suggested that the structure of the possible new MS-
DRGs for TAVR procedures performed in combination with LAAC procedures 
could be modeled similar to the structure of MS-DRGs 266 and 267. While 
contemplating creation of the new MS-DRGs, the requestor asked CMS to 
also consider subdividing the possible new MS-DRGs into two severity 
levels and title them as follows:
     Suggested MS-DRG 26x (Endovascular Cardiac Valve 
Replacement with LAAC with MCC); and
     Suggested MS-DRG 26x (Endovascular Cardiac Valve 
Replacement with LAAC without MCC).
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19826 through 19827), we analyzed claims data from the December 2016 
update of the FY 2016 MedPAR file for MS-DRGs 266 and 267 and 
identified the cases reporting TAVR procedures with and without an LAAC 
procedure. As shown in the table below, the data findings show that the 
total number of cases reported in MS-DRG 266 was 9,949, with an average 
length of stay of 7.2 days and average costs of $56,762. There were 
9,872 cases involving a TAVR procedure, with an average length of stay 
of 7.2 days and average costs of $56,628. There was only one case 
identified in MS-DRG 266 where both a TAVR and an LAAC procedure were 
reported. This case had an average length of stay of 21.0 days and 
average costs of $60,226. For MS-DRG 267, the total number of cases 
found was 13,290, with an average length of stay of 3.5 days and 
average costs of $45,297. There were 13,245 cases involving a TAVR 
procedure, with an average length of stay of 3.5 days and average costs 
of $45,302. There were no cases identified in MS-DRG 267 where both a 
TAVR and an LAAC procedure were reported.

                                           MS-DRGs for TAVR Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 266--All cases...........................................           9,949             7.2         $56,762
MS-DRG 266--Cases with TAVR.....................................           9,872             7.2          56,628
MS-DRG 266--Cases TAVR and LAAC.................................               1            21.0          60,226
MS-DRG 267--All cases...........................................          13,290             3.5          45,297
MS-DRG 267--Cases with TAVR.....................................          13,245             3.5          45,302
MS-DRG 267--Cases TAVR and LAAC.................................               0               0               0
----------------------------------------------------------------------------------------------------------------

    We then analyzed claims data in MS-DRGs 273 and 274 for cases 
reporting an LAAC procedure. As shown in the table below, the data 
findings show that the total number of cases reported in MS-DRG 273 was 
6,541, with an average length of stay of 7.7 days and average costs of 
$26,042. There were 179 cases involving an LAAC procedure, with an 
average length of stay of 3.6 days and average costs of $30,131. For 
MS-DRG 274, the total number of cases found was 14,441, with an average 
length of stay of 3.0 days and average costs of $20,267. There were 
2,428 cases involving an LAAC procedure, with an average length of stay 
of 1.2 days and average costs of $26,213.

                                           MS-DRGs for LAAC Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 273--All cases...........................................           6,541             7.7         $26,042
MS-DRG 273--Cases with LAAC.....................................             179             3.6          30,131
MS-DRG 274--All cases...........................................          14,441             3.0          20,267
MS-DRG 274--Cases with LAAC.....................................           2,428             1.2          26,213
----------------------------------------------------------------------------------------------------------------

    We stated in the proposed rule that the analysis of claims data for 
MS-DRGs 266, 267, 273, and 274 and input from our clinical advisors do 
not support creating new MS-DRGs for TAVR and LAAC procedures when 
performed in combination in the same operative episode. We found only 
one case in MS-DRG 266 where both a TAVR and an LAAC procedure were 
reported and the claims data for cases reporting an LAAC procedure in 
MS-DRGs 273 and 274 support their current assignment. Our clinical 
advisors agreed the current MS-DRG assignments are appropriate for each 
respective procedure.
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19827), we

[[Page 38026]]

did not propose to create new MS-DRGs for cases involving TAVR and LAAC 
procedures when performed in combination in the same operative episode. 
We invited public comments on our proposal to maintain the current MS-
DRG structure for TAVR procedures in MS-DRGs 266 and 267, as well as 
the current MS-DRG structure for LAAC procedures in MS-DRGs 273 and 
274.
    Comment: Commenters supported the proposal to maintain the current 
MS-DRG structure for TAVR and LAAC procedures when performed in 
combination in the same operative episode.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to maintain the current MS-DRG structure for 
TAVR procedures in MS-DRGs 266 and 267, as well as the current MS-DRG 
structure for LAAC procedures in MS-DRGs 273 and 274 effective October 
1, 2017 for ICD-10 MS-DRGs Version 35.
d. Percutaneous Mitral Valve Replacement Procedures
    We received a request to reassign four ICD-10-PCS procedure codes 
that describe percutaneous mitral valve replacement procedures from MS-
DRGs 216 through 221 (Cardiac Valve and Other Major Cardiothoracic 
Procedures with and without Cardiac Catheterization with MCC, with CC 
and without CC/MCC, respectively) to MS-DRGs 266 and 267 (Endovascular 
Cardiac Valve Replacement with MCC and without MCC, respectively). The 
requestor indicated that there are inconsistencies in the current 
GROUPER logic for endovascular cardiac valve replacement procedures. 
Specifically, the requestor stated that the procedure codes that 
describe both the percutaneous approach and the transapical, 
percutaneous approach for the aortic and pulmonary valves are included 
in MS-DRGs 266 and 267. However, for the mitral valve, the GROUPER 
logic only includes the procedure codes that describe the transapical, 
percutaneous approach.
    The requestor also stated that when MS-DRGs 266 and 267 were 
created, the intent was to include percutaneous replacement procedures 
for all cardiac valves. Therefore, the requestor recommended that CMS 
reassign the four ICD-10-PCS procedure codes shown in the table below 
that describe mitral valve replacement procedures, performed with the 
percutaneous approach from MS-DRGs 216 through 221 to MS-DRGs 266 and 
267 to more appropriately group these procedures within the MS-DRG 
structure.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
02RG37Z...................  Replacement of mitral valve with autologous
                             tissue substitute, percutaneous approach.
02RG38Z...................  Replacement of mitral valve with zooplastic
                             tissue, percutaneous approach.
02RG3JZ...................  Replacement of mitral valve with synthetic
                             substitute, percutaneous approach.
02RG3KZ...................  Replacement of mitral valve with
                             nonautologous tissue substitute,
                             percutaneous approach.
------------------------------------------------------------------------

    We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19827 
through 19828) that we agree with the requestor regarding the intent of 
the creation of MS-DRGs 266 and 267. As discussed in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49890 through 49893), MS-DRGs 266 and 267 
were created to uniquely classify the subset of high-risk cases 
representing patients who undergo a cardiac valve replacement procedure 
performed by a percutaneous (endovascular) approach. As such, we agree 
that all cardiac valve replacement procedures should be grouped within 
the same MS-DRG. In FY 2015, under the ICD-9-CM classification, there 
was not a specific procedure code for a percutaneous mitral valve 
replacement procedure. Therefore, when we converted from the ICD-9 
based MS-DRGs to the ICD-10 MS-DRGs, there was not a code available 
from which to replicate. We refer the reader to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 49890 through 49893) for a detailed discussion on 
the initial request to create new MS-DRGs for endovascular cardiac 
valve replacement procedures, as well as the FY 2016 IPPS/LTCH PPS 
final rule (80 FR 49354 through 49358) and the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56787 through 56790) for a detailed discussion of the 
conversion to ICD-10 MS-DRGs, including our analysis of claims data and 
the need to accurately replicate the ICD-9-CM based MS-DRGs.
    The requestor also noted that a proposal was discussed at the 
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee 
meeting involving the creation of procedure codes that describe 
percutaneous tricuspid valve replacement procedures and, if finalized, 
these new procedure codes would also be assigned to MS-DRGs 266 and 
267.
    As shown in the table below and in Table 6B.-New Procedure Codes, 
which is associated with the proposed rule and this final rule and 
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html, 
there are eight new procedure codes that describe tricuspid valve 
replacement procedures performed with percutaneous and transapical 
types of percutaneous approaches that will be effective October 1, 
2017.

------------------------------------------------------------------------
 ICD-10-PCS procedure code                Code description
------------------------------------------------------------------------
02RJ37H...................  Replacement of tricuspid valve with
                             autologous tissue substitute, transapical,
                             percutaneous Approach.
02RJ37Z...................  Replacement of tricuspid valve with
                             autologous tissue substitute, percutaneous
                             approach.
02RJ38H...................  Replacement of tricuspid valve with
                             zooplastic tissue, transapical,
                             percutaneous approach.
02RJ38Z...................  Replacement of tricuspid valve with
                             zooplastic tissue, percutaneous approach.
02RJ3JH...................  Replacement of tricuspid valve with
                             synthetic substitute, transapical,
                             percutaneous approach.
02RJ3JZ...................  Replacement of tricuspid valve with
                             synthetic substitute, percutaneous
                             approach.
02RJ3KH...................  Replacement of tricuspid valve with
                             nonautologous tissue substitute,
                             transapical, percutaneous approach.
02RJ3KZ...................  Replacement of tricuspid valve with
                             nonautologous tissue substitute,
                             percutaneous approach.
------------------------------------------------------------------------


[[Page 38027]]

    We stated in the proposed rule that we agree with the requestor and 
believe that, in addition to the four procedure codes that describe the 
percutaneous mitral valve replacement procedures listed earlier in this 
section, the eight codes that describe percutaneous and transapical 
types of percutaneous tricuspid valve replacement procedures also 
should be grouped with the other endovascular cardiac valve replacement 
procedures. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 
FR 19827 through 19828), we proposed to reassign the four percutaneous 
mitral valve replacement procedures described by the procedure codes 
listed in the table above from MS-DRGs 216 through 221 to MS-DRGs 266 
and 267. In addition, we proposed to assign the eight new procedure 
codes (also listed in a separate table above) that describe 
percutaneous and transapical, percutaneous tricuspid valve replacement 
procedures to MS-DRGs 266 and 267.
    We invited public comments on our proposals.
    Comment: Many commenters supported the proposal to reassign the 
four percutaneous mitral valve replacement procedures from MS-DRGs 216 
through 221 to MS-DRGs 266 and 267 and to assign the eight new 
procedure codes that describe percutaneous and transapical, 
percutaneous tricuspid valve replacement procedures to MS-DRGs 266 and 
267. Commenters noted that these updates will appropriately reflect the 
clinical characteristics and resource use for this group of 
endovascular cardiac valve replacement procedures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to reassign the four percutaneous mitral valve 
replacement procedures described by the procedure codes listed in the 
table above from MS-DRGs 216 through 221 to MS-DRGs 266 and 267 and 
assign the eight new procedure codes (also listed in a separate table 
above) that describe percutaneous and transapical, percutaneous 
tricuspid valve replacement procedures to MS-DRGs 266 and 267 effective 
October 1, 2017 for ICD-10 MS-DRGs Version 35.
e. Percutaneous Tricuspid Valve Repair
    We received a request to reassign cases reporting ICD-10-PCS 
procedure code 02UJ3JZ (Supplement tricuspid valve with synthetic 
substitute, percutaneous approach) from MS-DRGs 216 through 221 
(Cardiac Valve and Other Major Cardiothoracic Procedures with and 
without Cardiac Catheterization with MCC, with CC and without CC/MCC, 
respectively) to MS-DRGs 228 and 229 (Other Cardiothoracic Procedures 
with MCC and without MCC, respectively). According to the requestor, 
reassigning cases involving these procedures would more appropriately 
align the cohesiveness with other clinically similar procedures, such 
as percutaneous mitral valve repair (for example, procedures involving 
the Mitraclip) described by procedure code 02UG3JZ (Supplement mitral 
valve with synthetic substitute, percutaneous approach), which are 
assigned to MS-DRGs 228 and 229.
    The requestor noted that the FORMA Tricuspid Transcatheter Repair 
System (herein after referred to as the FORMA system) is currently in 
clinical trials in the United States, Europe, and Canada, but has not 
received FDA approval/clearance marketing authorization. However, the 
FORMA system is presently available through a compassionate use 
program. The FORMA system technology is indicated for use in the 
treatment of patients diagnosed with tricuspid regurgitation and 
occupies the regurgitant area of the affected valve, providing a 
surface for native leaflet coaptation. The requestor stated that the 
technology offers a viable alternative treatment using traditional 
tricuspid valve surgery. According to the requestor, the technology 
consists of a rail and a spacer, and the procedure to insert the device 
involves fluoroscopic imaging guidance.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19828 through 19829), we analyzed claims data from the December 2016 
update of the FY 2016 MedPAR file for MS-DRGs 216 through 221 for cases 
reporting procedure code 02UJ3JZ (Supplement tricuspid valve with 
synthetic substitute, percutaneous approach). Our findings are shown in 
the following table.

                       MS-DRGs for Cardiac Valve and Other Major Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 216--All cases...........................................           9,139            14.4         $68,304
MS-DRG 216--Cases with percutaneous tricuspid valve repair......               1             5.0          14,954
MS-DRG 217--All cases...........................................           3,536             8.9          45,857
MS-DRG 217--Cases with percutaneous tricuspid valve repair......               1             3.0          16,234
MS-DRG 218--All cases...........................................             498             5.9          41,274
MS-DRG 218--Cases with percutaneous tricuspid valve repair......               0               0               0
MS-DRG 219--All cases...........................................          16,011            11.1          54,519
MS-DRG 219--Cases with percutaneous tricuspid valve repair......               6             9.0          58,075
MS-DRG 220--All cases...........................................          18,476             6.8          37,506
MS-DRG 220--Cases with percutaneous tricuspid valve repair......               1             5.0          90,155
MS-DRG 221--All cases...........................................           3,547             5.0          33,606
MS-DRG 221--Cases with percutaneous tricuspid valve repair......               0               0               0
----------------------------------------------------------------------------------------------------------------

    We also analyzed claims data for MS-DRGs 228 and 229. Our findings 
are shown in the following table below.

                                   MS-DRGs for Other Cardiothoracic Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 228--All cases...........................................           3,466             9.8         $47,435

[[Page 38028]]

 
MS-DRG 229--All cases...........................................           4,553             4.9          33,347
----------------------------------------------------------------------------------------------------------------

    The claims data show that there were very few cases reported for 
performing a percutaneous tricuspid valve repair procedure in MS-DRGs 
216 through 221. Of the 6 cases found in MS-DRG 219, with average costs 
of $58,075, the average cost of these cases aligned with the average 
cost of all cases in the MS-DRG assignment ($54,519). We stated in the 
proposed rule that the data analysis and our clinical advisors do not 
support reassigning cases reporting procedure code 02UJ3JZ to MS-DRGs 
228 and 229. The current MS-DRG assignment for percutaneous tricuspid 
valve repair procedures to MS-DRGs 216 through 221 is clinically 
coherent with the other percutaneous procedures performed on the heart 
valves that are currently assigned to these MS-DRGs. Percutaneous 
repair of the aortic, pulmonary and tricuspid valves utilizing various 
tissue substitutes (autologous, nonautologous, zooplastic, and 
synthetic) are assigned to MS-DRGs 216 through 221. The exception is 
the percutaneous mitral valve repair, which, as the requestor pointed 
out, is assigned to MS-DRGs 228 and 229 as discussed in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56809 through 56813). Our clinical 
advisors also agreed that the limited number of cases reported in MS-
DRGs 216 through 221 does not warrant reassignment.
    As a result of our review and the input from our clinical advisors, 
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19829), we did not 
propose to reassign cases reporting procedure code 02UJ3JZ from MS-DRGs 
216 through 221 to MS-DRGs 228 and 229.
    We invited public comments on our proposal to maintain the current 
MS-DRG assignment for cases reporting procedure code 02UJ3JZ.
    Comment: Commenters supported the proposal to maintain the current 
MS-DRG assignment for ICD-10-PCS procedure code 02UJ3JZ in MS-DRGs 216 
through 221. One commenter also noted that, while CMS' analysis 
demonstrated the current assignment is appropriate, CMS should consider 
revisiting this procedure in the future in the event it becomes more 
common and warrants further consideration for reassignment. The 
commenter believed that there could be value in creating MS-DRGs for 
endovascular cardiac repair similar to those MS-DRGs for endovascular 
cardiac valve replacement.
    Response: We appreciate the commenters' support. As additional ICD-
10 claims data become available, we will continue to welcome input from 
the public and consider further modifications to the ICD-10 MS-DRGs if 
warranted.
    Comment: One commenter did not agree with the proposal to maintain 
the current MS-DRG assignment for ICD-10-PCS procedure code 02UJ3JZ in 
MS-DRGs 216 through 221. The commenter stated that transcatheter 
tricuspid valve repair procedures are clinically coherent with other 
percutaneous transcatheter cardiac valve repair procedures. This 
commenter asserted that the devices utilized in these procedures are 
currently under clinical investigation and the utilization of these 
technologies is expected to increase through clinical trials. 
Therefore, the commenter suggested that these procedures should be 
assigned to MS-DRGs 228 and 229.
    Response: As we noted in the FY 2018 IPPS/LTCH PPS proposed rule 
(82 FR 19829), the results of our analysis of the current MS-DRG 
assignment for percutaneous tricuspid valve repair procedures to MS-
DRGs 216 through 221 and the advice of our clinical advisors 
demonstrate that this procedure is clinically coherent with the other 
percutaneous procedures performed on the heart valves that are 
currently assigned to these MS-DRGs because percutaneous repair of the 
aortic, pulmonary, and tricuspid valves utilizing various tissue 
substitutes (autologous, nonautologous, zooplastic, and snythetic) are 
assigned to MS-DRGs 216 through 221. We will continue to consider 
further modifications to the ICD-10 MS-DRGs as additional ICD-10 claims 
data become available that support suggested changes.
    After consideration of the public comments that we received, we are 
finalizing our proposal to maintain the current MS-DRG assignment for 
cases reporting procedure code 02UJ3JZ (Supplement tricuspid valve with 
synthetic substitute, percutaneous approach) to MS-DRGs 216 through 221 
for FY 2018.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Total Ankle Replacement (TAR) Procedures
    For FY 2018, we again received two requests for the reassignment of 
total ankle replacement (TAR) procedures to a different MS-DRG. TAR 
procedures are currently assigned to MS-DRGs 469 and 470 (Major Joint 
Replacement or Reattachment of Lower Extremity with and without MCC, 
respectively). This topic was discussed previously in the FY 2015 IPPS/
LTCH PPS proposed and final rules (79 FR 28013 through 28015 and 79 FR 
49896 through 49899, respectively) and in the FY 2017 IPPS/LTCH PPS 
proposed and final rules (81 FR 24989 through 24990 and 81 FR 56814 
through 56816, respectively). For FY 2015 and FY 2017, we did not 
change the MS-DRG assignment for TAR procedures. The requestors 
indicated that TAR procedures are currently assigned to MS-DRGs 469 and 
470, to which total hip replacement and total knee replacement 
procedures also are assigned. The requestors stated that there are 
significant clinical and cost differences among these procedures, which 
results in underpayment for TAR procedures. The requestors asked CMS to 
examine claims data for the following six ICD-10-PCS codes within MS-
DRGs 469 and 470:
     0SRF0J9 (Replacement of right ankle joint with synthetic 
substitute, cemented, open approach);
     0SRF0JA (Replacement of right ankle joint with synthetic 
substitute, uncemented, open approach);
     0SRF0JZ (Replacement of right ankle joint with synthetic 
substitute, open approach);
     0SRG0J9 (Replacement of left ankle joint with synthetic 
substitute, cemented, open approach);
     0SRG0JA (Replacement of left ankle joint with synthetic 
substitute, uncemented, open approach); and
     0SRG0JZ (Replacement of left ankle joint with synthetic 
substitute, open approach).
    The requestors recommended that, if the claims data show a 
disparity in costs between TAR procedures and total hip and knee 
replacement procedures, the TAR procedures be reassigned to a more 
appropriate MS-DRG.

[[Page 38029]]

    The requestors also stated that total ankle replacement is a 
complicated surgery that involves the replacement of the damaged parts 
of the three bones that comprise the ankle joint, as compared to the 
two bones in hip and knee replacement procedures. Furthermore, as the 
smallest weight-bearing large joint in the body, the requestors stated 
that TAR procedures demand a complexity of implant device design, 
engineering, and manufacture to exacting functional specifications that 
is vastly different from that of total hip and knee replacement 
devices. One of the requestors stated that the ankle region typically 
has poorer circulation and thinner soft tissue coverage than the hip 
and knee, leading to a higher risk of wound complications and infection 
that may be more challenging and expensive to treat. In addition, this 
requestor stated that the unique anatomical characteristics and 
function of the ankle joint require a specialized surgical skill set, 
operative technique, and level of operating room resource utilization 
that is vastly dissimilar from that of total hip and knee replacement 
procedures.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19829 through 19830), we examined claims data from the December 2016 
update of the FY 2016 MedPAR file on reported cases of TAR procedures 
in MS-DRGs 469 and 470. Our findings are shown in the table below.

                                       Total Ankle Replacements Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases...........................................          25,778             6.7         $22,139
MS-DRG 469--Cases reporting TAR procedure codes.................              31             4.6          23,828
MS-DRG 470--All cases...........................................         461,553             2.7          14,751
MS-DRG 470--Cases reporting TAR procedure codes.................           2,114             1.9          20,862
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, for MS-DRG 469, there were a total of 
25,778 cases, with an average length of stay of 6.7 days and average 
costs of $22,139. Of the 25,778 cases in MS-DRG 469, there were 31 
cases reporting a TAR procedure, with an average length of stay of 4.6 
days and average costs of $23,828. For MS-DRG 470, there were a total 
of 461,553 cases, with an average length of stay of 2.7 days and 
average costs of $14,751. Of the 461,553 cases in MS-DRG 470, there 
were 2,114 cases reporting a TAR procedure, with an average length of 
stay of 1.9 days and average costs of $20,862. As mentioned earlier, 
there were only 31 TAR procedure cases in MS-DRG 469, and these cases 
had average costs of $1,689 higher than the average costs of all cases 
within MS-DRG 469. The relatively small number of cases may have been 
impacted by other factors. Several expensive cases could impact the 
average costs for a very small number of patients. We also note that 
the average length of stay for the TAR procedure cases was 4.6 days, as 
compared to 6.7 days for all cases within MS-DRG 469. The 2,114 TAR 
procedure cases in MS-DRG 470 had average costs that were $6,111 higher 
than the average costs of all cases in MS-DRG 470 ($20,862 compared to 
$14,751 for all cases). We stated in the proposed rule that the data 
support reassigning all of the TAR procedures to MS-DRG 469, even when 
there is no MCC reported. While the average costs of the TAR procedures 
in MS-DRG 470 are lower than the average costs for all cases in MS-DRG 
469 ($20,862 compared to $22,139), the average costs are much closer to 
the average costs of TAR procedure cases in MS-DRG 470.
    We stated in the proposed rule that our clinical advisors reviewed 
this clinical issue and the claims data, and agreed that it is 
clinically appropriate to reassign all of the TAR procedure cases from 
MS-DRG 470 to MS-DRG 469, even when there is no MCC reported. The 
claims data support the fact that these cases require more resources 
than other cases assigned to MS-DRG 470. Therefore, in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19829 through 19830), we proposed to 
reassign the following TAR procedure codes from MS-DRG 470 to MS-DRG 
469, even if there is no MCC reported: 0SRF0J9; 0SRF0JA; 0SRF0JZ; 
0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018.
    We proposed to change the titles of MS-DRGs 469 and 470 to the 
following to reflect these proposed MS-DRG reassignments:
     Proposed retitle of MS-DRG 469: ``Major Hip and Knee Joint 
Replacement or Reattachment of Lower Extremity with MCC or Total Ankle 
Replacement''; and
     Proposed retitle of MS-DRG 470: ``Major Hip and Knee Joint 
Replacement or Reattachment of Lower Extremity without MCC.''
    We invited public comments on our proposals.
    Comment: Several commenters supported CMS' recommendation to 
reassign the following TAR procedure codes from MS DRG 470 to MS DRG 
469, even if there is no MCC reported: 0SRF0J9; 0SRF0JA; 0SRF0JZ; 
0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018. The commenters also 
supported the change in MS-DRG titles for MS-DRG 469 and 470 to reflect 
this MS-DRG update. One commenter stated that claims data supported 
this recommendation because, as CMS pointed out, the average costs of 
TAR cases in MS-DRG 470 are much closer to the average costs of all 
cases in MS-DRG 469 ($20,862 versus $22,139). The commenter also agreed 
with the CMS clinical advisors that it was clinically appropriate to 
reassign all TAR procedure cases from MS-DRG 470 to MS-DRG 469, even 
when there is no MCC reported. The commenter stated that the update 
will remedy a historical cost-to-payment disparity, and thus enable 
hospitals to continue offering Primary TAR surgery to Medicare 
beneficiaries as an economically sustainable, and clinically viable, 
alternative to ankle fusion when medically appropriate. The commenter 
commended CMS for its consideration of how to address this MS-DRG 
issue.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
reassigning the following TAR procedure codes from MS DRG 470 to MS DRG 
469, even if there is no MCC reported: 0SRF0J9; 0SRF0JA; 0SRF0JZ; 
0SRG0J9; 0SRG0JA; and 0SRG0JZ for FY 2018. We are changing the titles 
of MS-DRGs 469 and 470 to the following to reflect these MS-DRG 
reassignments:
     MS-DRG 469: ``Major Hip and Knee Joint Replacement or 
Reattachment of Lower Extremity with MCC or Total Ankle Replacement''; 
and
     MS-DRG 470: ``Major Hip and Knee Joint Replacement or 
Reattachment of Lower Extremity without MCC.''

[[Page 38030]]

b. Revision of Total Ankle Replacement (TAR) Procedures
    We received two requests to modify the MS-DRG assignment for 
revision of total ankle replacement (TAR) procedures, which the 
requestors indicated are assigned to MS-DRGs 515, 516, and 517 (Other 
Musculoskeletal System and Connective Tissue O.R. Procedures with MCC, 
with CC, and without CC/MCC, respectively). This topic was discussed in 
the FY 2015 IPPS/LTCH PPS proposed and final rules (79 FR 28013 through 
28015 and 79 FR 49896 through 49899, respectively) and in the FY 2017 
IPPS/LTCH PPS proposed and final rules (81 FR 24992 through 24993 and 
81 FR 56819 through 56820, respectively). For FY 2015 and FY 2017, we 
did not change the MS-DRG assignment for revision of TAR procedures.
    The requestors asked that CMS examine the following eight ICD-10-
PCS codes which they indicated identify revision of TAR procedures and 
which are assigned to MS-DRGs 515, 516, and 517. As we discuss later in 
this section in response to public comments, while the requestors 
requested that we analyze these eight procedure codes for revisions of 
TAR procedures in the proposed rule, these procedures are in fact 
represented by a combination of other codes that capture the root 
operation removal and replacement of joint devices.
     0SWF0JZ (Revision of synthetic substitute in right ankle 
joint, open approach);
     0SWF3JZ (Revision of synthetic substitute in right ankle 
joint, percutaneous approach);
     0SWF4JZ (Revision of synthetic substitute in right ankle 
joint, percutaneous endoscopic approach);
     0SWFXJZ (Revision of synthetic substitute in right ankle 
joint, external approach);
     0SWG0JZ (Revision of synthetic substitute in left ankle 
joint, open approach);
     0SWG3JZ (Revision of synthetic substitute in left ankle 
joint, percutaneous approach);
     0SWG4JZ (Revision of synthetic substitute in left ankle 
joint, percutaneous endoscopic approach); and
     0SWGXJZ (Revision of synthetic substitute in left ankle 
joint, external approach).
    One requestor stated that these ICD-10-PCS codes more specifically 
identify the revision of TAR procedures than the prior ICD-9-CM codes. 
Specifically, ICD-9-CM code 81.59 (Revision of joint replacement of 
lower extremity, not elsewhere classified) was an unspecified code, 
which included toe and foot joint revision procedures in addition to 
revision of TAR procedures. The requestor stated that claims data 
reporting these ICD-10-PCS codes would allow CMS to better identify 
revisions of TAR procedures, and determine if the procedures are 
assigned to the appropriate MS-DRGs.
    One requestor suggested the following three options for MS-DRG 
assignments:
     Assign the ICD-10-PCS ankle revision procedure codes to 
MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with 
MCC, with CC, and without CC/MCC, respectively), and rename MS-DRGs 
466, 467, and 468 as ``Revision of Hip, Knee or Ankle with MCC, with 
CC, and without CC/MCC,'' respectively);
     Assign the ICD-10-PCS ankle revision procedure codes to 
MS-DRG 469 (Major Joint Replacement or Reattachment of Lower Extremity 
with MCC) to more appropriately recognize higher hospital procedure 
costs associated with revision of TAR procedures; or
     Establish a new MS-DRG for the assignment of revision of 
TAR procedures.
    The other requestor asked that CMS consider reassigning revision of 
TAR procedures to MS-DRGs that better address the cost-to-payment 
differential, such as MS-DRGs 466, 467, and 468.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19830 through 19831), we examined claims data from the December 2016 
update of the FY 2016 MedPAR file on cases reporting the eight revision 
codes listed above as well as cases assigned to MS-DRGs 466, 467, 468, 
and MS-DRG 469. Our findings are shown in the tables below.

                                   Revisions of Joint Replacements Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 515--All cases...........................................           5,038             8.0         $20,562
MS-DRG 515--Cases reporting revision of total ankle replacement                0               0               0
 procedure codes................................................
MS-DRG 516--All cases...........................................          13,276             4.8          13,524
MS-DRG 516--Cases reporting revision of total ankle replacement                2             2.5          11,400
 procedure codes................................................
MS-DRG 517--All cases...........................................          13,330             2.8          10,003
MS-DRG 517--Cases reporting revision of total ankle replacement                4             1.5           7,423
 procedure codes................................................
----------------------------------------------------------------------------------------------------------------


                                     Cases in MS-DRGs 466, 467, 468, and 469
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay   Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 466--All cases...........................................           3,886             8.4         $33,720
MS-DRG 467--All cases...........................................          19,145             4.2          24,609
MS-DRG 468--All cases...........................................          16,529             2.7          20,208
MS-DRG 469--All cases...........................................          25,778             6.7          22,139
----------------------------------------------------------------------------------------------------------------

    As shown in the tables above, there were only 6 cases identified 
with the eight revision codes suggested by the requestor with no cases 
in MS-DRG 515, two cases in MS-DRG 516, and four cases in MS-DRG 517. 
We stated in the proposed rule that the limited number of six cases 
does not justify the creation of a new MS-DRG for the assignment of 
revision of TAR procedures. Our data analysis demonstrates that the 
average length of stay for these revision procedures was lower than 
that for all cases in MS-DRG 516 (2.5 days compared to 4.8 days), and 
the average costs were lower ($11,400 compared to $13,524). The average 
length of stay for these revision

[[Page 38031]]

procedures also was lower than that for all cases in MS-DRG 517 (1.5 
days compared to 2.8 days), and the average costs were lower ($7,423 
compared to $10,003). We stated that the data do not support 
reassigning the cases from MS-DRGs 515, 516, and 517.
    Furthermore, we stated that the average length of stay and average 
costs of cases in MS-DRGs 466, 467, 468, and 469 are significantly 
higher than those for these revision procedures in MS-DRG 516 and 517. 
We stated that the average length of stay for all cases in MS-DRGs 466, 
467, 468, and 469 is 8.4, 4.2, 2.7, and 6.7 days, respectively, 
compared to the average length of stay of 2.5 and 1.5 days for cases 
representing these revision procedures in MS-DRGs 516 and 517, 
respectively. The average costs for all cases in MS-DRGs 466, 467, 468, 
and 469 are $33,720, $24,609, $20,208, and $22,139, respectively, 
compared to the average costs of $11,400 and $7,423 for cases 
representing these revision procedures in MS-DRGs 516 and 517, 
respectively. Therefore, we stated that in the proposed rule that the 
data do not support reassigning the cases to MS-DRGs 466, 467, 468, or 
469.
    We stated in the proposed rule that our clinical advisors reviewed 
the clinical issue and the claims data and agreed that the eight 
revision codes are appropriately assigned to MS-DRGs 515, 516, and 517, 
along with other procedures that describe revisions of joint 
replacements of the lower extremities, including the foot and toe. Our 
clinical advisors did not support reassigning these cases to MS-DRGs 
466, 467, 468, or 469, or creating a new MS-DRG. Therefore, based on 
the findings of our analysis of claims data and the advice of our 
clinical advisors, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19830 through 19831), we proposed to maintain the current MS-DRG 
assignment for these revision procedures within MS-DRGs 515, 516, and 
517 for FY 2018.
    Comment: Commenters supported CMS' proposal to maintain the current 
MS-DRG assignments for procedures within MS-DRGs 515, 516, and 517 for 
FY 2018.
    Several commenters questioned the reliability of the revision of 
TAR data presented in the proposed rule. The commenters questioned the 
codes used in the analysis and stated that revision of TAR procedures 
are not captured with the Revision of synthetic substitute codes 
identified in the proposed rule. The commenters stated that the 
procedures are captured by reporting a combination of codes that 
capture the removal of a prior device and the replacement of the device 
with a new device. The commenters stated that the correct root 
operations for these codes would be Removal and Replacement instead of 
Revision as stated in the proposed rule. The commenters provided the 
following codes which reported in combination would identify revision 
of TAR procedures. The commenters stated that revisions of TAR 
procedures are performed with an open approach.

    Removals
     0SPG0JZ (Removal of Synthetic Substitute from Left Ankle 
Joint, Open Approach); and
     0SPF0JZ (Removal of Synthetic Substitute from Right Ankle 
Joint, Open Approach)
    Replacements
     0SRF0J9 (Replacement of right ankle joint with synthetic 
substitute, cemented, open approach);
     0SRF0JA (Replacement of right ankle joint with synthetic 
substitute, uncemented, open approach);
     0SRF0JZ (Replacement of right ankle joint with synthetic 
substitute, open approach);
     0SRG0J9 (Replacement of left ankle joint with synthetic 
substitute, cemented, open approach);
     0SRG0JA (Replacement of left ankle joint with synthetic 
substitute, uncemented, open approach); and
     0SRG0JZ (Replacement of left ankle joint with synthetic 
substitute, open approach).

    The commenters requested that CMS encourage the correct coding of 
revision of TAR cases through additional educational materials. The 
commenters requested that CMS review hospital claims data for revision 
of TAR procedures using the list of Removal and Replacement code 
combinations provided to identify revision of TAR cases. The commenter 
stated that an increasing number of claims for revision of TAR 
procedures will become identifiable in the future as patients and 
implants naturally age into a need for revision surgery.
    Response: We appreciate the commenters' support for our proposal to 
maintain the current MS-DRG assignment for procedures within MS-DRGs 
515, 516, and 517 for FY 2018.
    We conducted an analysis of the correct coding of revision of TARs 
and agree with the commenters that these cases are not captured with 
ICD-10-PCS codes with the root operation Revision as stated in the 
proposed rule. The commenters are correct that the revision of TAR 
cases are correctly coded using a combination of codes with the root 
operation Removal and Replacement as the commenters suggested. Updates 
were made to the ICD-10-PCS index on October 1, 2015 to reinforce this 
direction. The index entry is shown below:
    Revision
    Correcting a portion of existing device
    see Revision of device in Removal of device without replacement
    see Removal of device from Replacement of existing device
    see Removal of device from
    see Root operation to place new device, e.g., Insertion, 
Replacement, Supplement
    We agree that this index entry clearly indicates that the correct 
root operations for revision of TARs would be Removal and Replacement. 
The codes with the root operation Revision (included in the Revision of 
synthetic substitute codes used in our original analysis) would not be 
used to capture revision of TAR procedures. Cases reporting the 
combination codes are assigned to MS-DRGs 469 and 470 (Major Joint 
Replacement or Reattachment of Lower Extremity with and without MCC, 
respectively).
    As requested by the commenters, we identified revision of TAR cases 
using the correct ICD-10-PCS codes that are captured with the root 
operation of Removal and Replacement. We examined our claims data for 
cases within MDC 8 that reported one of the Removal codes with one of 
the Replacement codes for ankle joint devices. These codes accurately 
capture revision of TAR cases. The following table shows our findings.

                     Revision of Total Ankle Replacement Procedures Using Code Combinations
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of      length  of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases...........................................          25,778             6.7         $22,139
MS-DRG 469--Cases reporting revision of TAR code combinations...               0  ..............  ..............

[[Page 38032]]

 
MS-DRG 470--All cases...........................................         461,553             2.7          14,751
MS-DRG 470--Cases reporting revision of TAR code combinations...              59             1.7          19,594
----------------------------------------------------------------------------------------------------------------

    Using the updated correct ICD-10-PCS codes, we found that there 
were 59 revision of TAR procedures in MS-DRG 470 with average costs of 
$19,594 and average length of stay of 1.7 days compared to average 
costs of $14,751 and average length of stay of 2.7 days for all cases 
in MS-DRG 470. There were no revision of TAR procedures in MS-DRG 469. 
As discussed in section II.5.a. of the preamble of this final rule on 
Total Ankle Replacements, we are finalizing updates to reassign all of 
the TAR procedure codes to MS-DRG 469, even if there is no MCC present, 
for FY 2018. This update will also impact revision of TAR cases because 
the same total ankle replacement codes are also used to identify 
revision of TAR procedures. Therefore, the MS-DRG 469 and 470 updates 
result in all revision of TAR procedures being assigned to MS-DRG 469 
even if there is no MCC reported in FY 2018.
    Revisions of TARs were assigned to MS-DRGs 515, 516, and 517 under 
the ICD-9-CM MS-DRGs. However, an error in replication for the ICD-10 
MS-DRGs resulted in the revision of TAR procedure cases being assigned 
to MS-DRGs 469 and 470. This replication error was not noticed until 
the commenters on the FY 2018 IPPS/LTCH PPS proposed rule pointed out 
that accurate coding of revision of TARs would result in cases not 
being assigned to MS-DRGs 515, 516, and 517. Since the implementation 
of ICD-10 MS-DRGs, revision of TAR procedure cases have not been 
assigned to MS-DRGs 515, 516, and 517. Therefore, we do not need to 
modify MS-DRG logic to reassign revision of TAR procedures from MS-DRGs 
515, 516, and 517 because correctly coded cases are not assigned there, 
but instead to MS-DRGs 469 and 470. As noted earlier, under our 
finalized policy for FY 2018, all revision of TAR procedures will be 
assigned to MS-DRG 469, even if there is no MCC reported.
    We agree with the commenters that it is important to encourage the 
accurate and consistent use of ICD-10-PCS to capture procedures such as 
revision of TAR. Therefore, we have asked the American Hospital 
Association to provide additional information on how to capture 
revision of TARs in a future issue of Coding Clinic for ICD-10. We 
encourage any providers that have revision of TAR cases on which they 
need ICD-10 coding assistance to submit this information and their 
questions to the American Hospital Association's Central Office on ICD-
10 at https://www.codingclinicadvisor.com/. We share information 
included in Coding Clinic for ICD-10 with our contractors.
    After consideration of the public comments that we received, we are 
not finalizing any changes to MS-DRGs 515, 516, and 517 for FY 2018 
because, as noted, the revision of TAR procedures are not assigned to 
these MS-DRGs. Under our finalized policy regarding TAR procedures, as 
discussed in section II.5.a. of the preamble of this final rule, all 
TAR procedure cases, as well as revision of TAR procedure cases, will 
be assigned to MS-DRG 469 for FY 2018, even if there is no MCC present.
c. Magnetic Controlled Growth Rods (MAGEC[supreg] System)
    We received a request to add six ICD-10-PCS procedure codes that 
describe the use of magnetically controlled growth rods for the 
treatment of early onset scoliosis (MAGEC[supreg] System) to MS-DRGs 
456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature 
or Malignancy or Infection or Extensive Fusions with MCC, with CC or 
without CC/MCC, respectively). The MAGEC[supreg] System was discussed 
in the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25040 through 25042) 
and final rule (81 FR 56888 through 56891) as a new technology add-on 
payment application. The application was approved for FY 2017 new 
technology add-on payments, effective with discharges occurring on and 
after October 1, 2016. The request for new procedure codes to identify 
the MAGEC[supreg] System technology was discussed at the March 9-10, 
2016 ICD-10 Coordination and Maintenance Committee meeting. Six new 
procedure codes were approved, effective October 1, 2016, and were 
displayed in Table 6B.--New Procedure Codes associated with the FY 2017 
IPPS/LTCH PPS final rule (which is available via the Internet on the 
CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page.html). These 
six procedure codes are currently assigned to MS-DRGs 518, 519, and 520 
(Back and Neck Procedure Except Spinal Fusion with MCC or Disc Device/
Neurostimulator, with CC, or without CC/MCC, respectively) and are 
shown in the table below.

------------------------------------------------------------------------
     ICD-10-PCS  code                     Code description
------------------------------------------------------------------------
XNS0032...................  Reposition of lumbar vertebra using
                             magnetically controlled growth rod(s), open
                             approach, new technology group 2.
XNS0432...................  Reposition of lumbar vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
XNS3032...................  Reposition of cervical vertebra using
                             magnetically controlled growth rod(s), open
                             approach, new technology group 2.
XNS3432...................  Reposition of cervical vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
XNS4032...................  Reposition of thoracic vertebra using
                             magnetically controlled growth rod(s), open
                             approach, new technology group 2.
XNS4432...................  Reposition of thoracic vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
------------------------------------------------------------------------


[[Page 38033]]

    According to the requestor, adding these six procedure codes will 
allow these cases to group to MS-DRGs that more accurately reflect the 
diagnosis of early onset scoliosis for which the MAGEC[supreg] System 
is indicated. In addition, the requestor stated that because this 
technology is utilized on a small subset of patients with approximately 
2,500 cases per year, adding these procedure codes to MS-DRGs 456, 457, 
and 458 would have little impact.
    We stated in the proposed rule that because these six procedure 
codes shown in the table above were effective as of October 1, 2016, 
there are no MedPAR claims data available to analyze. More importantly, 
we noted that cases are assigned to MS-DRGs 456, 457, and 458 when an 
actual spinal fusion procedure is performed. We stated that our 
clinical advisors agree that use of the MAGEC[supreg] System's 
magnetically controlled growth rods technology alone does not 
constitute a spinal fusion. Therefore, because there were no claims 
data available at the time of development of the proposed rule and 
based on the advice of our clinical advisors, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19832), we did not propose to add the six 
procedure codes to MS-DRGs 456, 457, or 458. We stated that if a spinal 
fusion procedure is performed along with the procedure to insert the 
MAGEC[supreg] System's magnetically controlled growth rods, it would be 
appropriate to report that a spinal fusion was performed and the case 
would be assigned to one of the spinal fusion MS-DRGs.
    We invited public comments on our proposal to maintain the current 
GROUPER logic for cases assigned to MS-DRGs 456, 457, and 458 and not 
add the six procedure codes describing the use of the MAGEC[supreg] 
System magnetically controlled growth rods. We also invited public 
comments on our proposal to maintain the assignment of the six 
procedure codes in MS-DRGs 518, 519, and 520.
    Comment: Commenters agreed with CMS' proposal to maintain the 
assignment of the six procedure codes in MS-DRGs 518, 519, and 520 and 
to not reassign the six procedure codes describing the use of the 
MAGEC[supreg] System magnetically controlled growth rods to the spinal 
fusion MS-DRGs 456, 457 and 458.
    Response: We appreciate the commenters' support. We also take this 
time to point out that the three ICD-10-PCS procedure codes describing 
reposition of the vertebra using magnetically controlled growth rods 
with a percutaneous endoscopic approach listed below have been deleted 
as displayed in Table 6D.--Invalid Procedure Codes associated with this 
FY 2018 IPPS/LTCH PPS final rule (which is available via the Internet 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) effective October 1, 2017 
in the ICD-10 MS-DRGs Version 35.

------------------------------------------------------------------------
     ICD-10-PCS  code                     Code description
------------------------------------------------------------------------
XNS0432...................  Reposition of lumbar vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
XNS3432...................  Reposition of cervical vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
XNS4432...................  Reposition of thoracic vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous endoscopic approach, new
                             technology group 2.
------------------------------------------------------------------------

    The three ICD-10-PCS procedure codes listed in the table above were 
discussed in a proposal at the March 7-8, 2017 ICD-10 Coordination and 
Maintenance Committee meeting. Decisions for proposals presented at 
that meeting were not finalized at the time of publication of the FY 
2018 IPPS/LTCH PPS proposed rule. Additional information relating to 
the discussion of these codes can be located via the Internet on the 
CMS Web site at: https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. 
Also included in that discussion was a proposal to add a new approach 
value to the procedures describing Reposition of the vertebra. As 
displayed in Table 6B.--New Procedure Codes associated with this FY 
2018 IPPS/LTCH PPS final rule (which is available via the Internet on 
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html), the following three ICD-
10-PCS codes have been created effective October 1, 2017 in the ICD-10 
MS-DRGs Version 35 and are assigned to MS-DRGs 518, 519 and 520.

------------------------------------------------------------------------
     ICD-10-PCS  code                     Code description
------------------------------------------------------------------------
XNS0332...................  Reposition of lumbar vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous approach, new technology group
                             2.
XNS3332...................  Reposition of cervical vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous approach, new technology group
                             2.
XNS4332...................  Reposition of thoracic vertebra using
                             magnetically controlled growth rod(s),
                             percutaneous approach, new technology group
                             2.
------------------------------------------------------------------------

    After consideration of the public comments that we received, we are 
finalizing our proposal to maintain the current GROUPER logic for cases 
assigned to MS-DRGs 456, 457, and 458. We also are finalizing our 
proposal to maintain the assignment of the three existing ICD-10-PCS 
procedure codes (describing an open approach) and finalizing assignment 
of the three new ICD-10-PCS codes (describing a percutaneous approach) 
for the use of magnetically controlled growth rods in the treatment of 
early onset scoliosis to MS-DRGs 518, 519, and 520 for FY 2018.
d. Combined Anterior/Posterior Spinal Fusion
    It was brought to our attention that 7 of the 10 new ICD-10-PCS 
procedure codes describing fusion using a nanotextured surface 
interbody fusion device were not added to the appropriate GROUPER logic 
list for MS-

[[Page 38034]]

DRGs 453, 454, and 455 (Combined Anterior/Posterior Spinal Fusion with 
MCC, with CC and without CC/MCC, respectively), effective October 1, 
2016. The logic for MS-DRGs 453, 454, and 455 is comprised of two 
lists: An anterior spinal fusion list and a posterior spinal fusion 
list. Assignment to one of the combined spinal fusion MS-DRGs requires 
that a code from each list be reported.
    The seven new ICD-10-PCS procedure codes currently included in the 
posterior spinal fusion list for MS-DRGs 453, 454, and 455 are shown in 
the table below.

------------------------------------------------------------------------
     ICD-10-PCS  code                     Code description
------------------------------------------------------------------------
XRG6092...................  Fusion of thoracic vertebral joint using
                             nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRG7092...................  Fusion of 2 to 7 thoracic vertebral joints
                             using nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRG8092...................  Fusion of 8 or more thoracic vertebral
                             joints using nanotextured surface interbody
                             fusion device, open approach, new
                             technology group 2.
XRGA092...................  Fusion of thoracolumbar vertebral joint
                             using nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRGB092...................  Fusion of lumbar vertebral joint using
                             nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRGC092...................  Fusion of 2 or more lumbar vertebral joints
                             using nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
XRGD092...................  Fusion of lumbosacral joint using
                             nanotextured surface interbody fusion
                             device, open approach, new technology group
                             2.
------------------------------------------------------------------------

    We note that the remaining three new procedure codes are accurately 
reflected in the anterior spinal fusion list; that is, ICD-10-PCS code 
XRG1092 (Fusion of cervical vertebral joint using nanotextured surface 
interbody fusion device, open approach, new technology group 2); ICD-
10-PCS code XRG2092 (Fusion of 2 or more cervical vertebral joints 
using nanotextured surface interbody fusion device, open approach, new 
technology group 2); and ICD-10-PCS code XRG4092 (Fusion of 
cervicothoracic vertebral joint using nanotextured surface interbody 
fusion device, open approach, new technology group 2).
    The seven procedure codes currently included in the posterior 
spinal fusion list describe an anterior spinal fusion by use of the 
interbody fusion device. In an interbody fusion, the anterior column of 
the spine is being fused. We stated in the proposed rule that the 
results of our review of these procedure codes discussed below and the 
advice of our clinical advisors support moving the seven procedure 
codes from the posterior spinal fusion list to the anterior spinal 
fusion list in the GROUPER logic for MS-DRGs 453, 454, and 455. We 
stated that this will improve clinical accuracy and allow appropriate 
assignment to these MS-DRGs when both an anterior and posterior spinal 
fusion is performed.
    During our review of the spinal fusion codes using a nanotextured 
surface interbody fusion device in MS-DRGs 453, 454, and 455, we 
identified 149 additional procedure codes that should be moved from the 
posterior spinal fusion list to the anterior spinal fusion list. These 
codes describe spinal fusion of the anterior column with a posterior 
approach. As mentioned earlier, the logic for MS-DRGs 453, 454, and 455 
is dependent upon a code from the anterior spinal fusion list and a 
code from the posterior spinal fusion list. Spinal fusion codes 
involving the anterior column should be included on the anterior spinal 
fusion list only. In the FY 2018 IPPS/LTCH PPS proposed rule, we 
proposed to move the 149 ICD-10-PCS procedure codes listed in Table 
6P.3a. associated with the proposed rule (which is available via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the 
posterior spinal fusion list to the anterior spinal fusion list in MS-
DRGs 453, 454, and 455.
    In addition, we also identified 33 ICD-10-PCS procedure codes in 
the posterior spinal fusion list in MS-DRGs 453, 454, and 455 that 
describe an interbody fusion device in the posterior column and, 
therefore, are not considered clinically valid spinal fusion 
procedures. These procedure codes are shown in the table below.

------------------------------------------------------------------------
     ICD-10-PCS  code                     Code description
------------------------------------------------------------------------
0RG00A1...................  Fusion of occipital-cervical joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG03A1...................  Fusion of occipital-cervical joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG04A1...................  Fusion of occipital-cervical joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG10A1...................  Fusion of cervical vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG13A1...................  Fusion of cervical vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG14A1...................  Fusion of cervical vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG20A1...................  Fusion of 2 or more cervical vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column, open
                             approach.
0RG23A1...................  Fusion of 2 or more cervical vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous approach.
0RG24A1...................  Fusion of 2 or more cervical vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous endoscopic approach.
0RG40A1...................  Fusion of cervicothoracic vertebral joint
                             with interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG43A1...................  Fusion of cervicothoracic vertebral joint
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.

[[Page 38035]]

 
0RG44A1...................  Fusion of cervicothoracic vertebral joint
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG60A1...................  Fusion of thoracic vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG63A1...................  Fusion of thoracic vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG64A1...................  Fusion of thoracic vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG70A1...................  Fusion of 2 to 7 thoracic vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, open approach.
0RG73A1...................  Fusion of 2 to 7 thoracic vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RG74A1...................  Fusion of 2 to 7 thoracic vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0RG80A1...................  Fusion of 8 or more thoracic vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column, open
                             approach.
0RG83A1...................  Fusion of 8 or more thoracic vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous approach.
0RG84A1...................  Fusion of 8 or more thoracic vertebral
                             joints with interbody fusion device,
                             posterior approach, posterior column,
                             percutaneous endoscopic approach.
0RGA0A1...................  Fusion of thoracolumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0RGA3A1...................  Fusion of thoracolumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0RGA4A1...................  Fusion of thoracolumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0SG00A1...................  Fusion of lumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, open approach.
0SG03A1...................  Fusion of lumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0SG04A1...................  Fusion of lumbar vertebral joint with
                             interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0SG10A1...................  Fusion of 2 or more lumbar vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, open approach.
0SG13A1...................  Fusion of 2 or more lumbar vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             approach.
0SG14A1...................  Fusion of 2 or more lumbar vertebral joints
                             with interbody fusion device, posterior
                             approach, posterior column, percutaneous
                             endoscopic approach.
0SG30A1...................  Fusion of lumbosacral joint with interbody
                             fusion device, posterior approach,
                             posterior column, open approach.
0SG33A1...................  Fusion of lumbosacral joint with interbody
                             fusion device, posterior approach,
                             posterior column, percutaneous approach.
0SG34A1...................  Fusion of lumbosacral joint with interbody
                             fusion device, posterior approach,
                             posterior column, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------

    In the proposed rule, we proposed to delete these 33 procedure 
codes from MS-DRGs 453, 454, and 455 for FY 2018. We also noted that 
some of the above listed codes also may be included in the logic for 
MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with Spinal 
Curvature or Malignancy or Infection or Extensive Fusions with MCC, 
with CC or without CC/MCC, respectively), MS-DRGs 459 and 460 (Spinal 
Fusion Except Cervical with MCC and without MCC, respectively), and MS-
DRGs 471, 472, and 473 (Cervical Spinal Fusion with MCC, with CC and 
without CC/MCC, respectively). Therefore, we proposed to delete the 33 
procedure codes from the logic for those spinal fusion MS-DRGs as well. 
In addition, we proposed to delete the 33 procedure codes from the ICD-
10-PCS classification as shown in Table 6D.--Invalid Procedure Codes 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    In summary, we invited public comments on our proposal to move the 
seven procedure codes describing spinal fusion using a nanotextured 
surface interbody fusion device from the posterior spinal fusion list 
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs 
453, 454, and 455. We also invited public comments on our proposal to 
move the 149 procedure codes describing spinal fusion of the anterior 
column with a posterior approach from the posterior spinal fusion list 
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs 
453, 454, and 455. In addition, we invited public comments on our 
proposal to delete the 33 procedure codes describing spinal fusion of 
the posterior column with an interbody fusion device from MS-DRGs 453, 
454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, as well as from 
the ICD-10-PCS classification.
    Comment: Many commenters supported CMS' proposals related to the 
combined anterior/posterior spinal fusion MS-DRGs, including (1) 
support to move the seven procedure codes describing spinal fusion 
using a nanotextured surface interbody fusion device from the posterior 
spinal fusion list to the anterior spinal fusion list in the GROUPER 
logic for MS-DRGs 453, 454, and 455; (2) support to move the 149 
procedure codes describing spinal fusion of the anterior column with a 
posterior approach from the posterior spinal fusion list to the 
anterior spinal fusion list in the GROUPER logic for MS-DRGs 453, 454, 
and 455; and (3) to delete the 33 procedure codes describing spinal 
fusion of the posterior column with an interbody fusion device from MS-
DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, as well 
as from the ICD-10-PCS classification.
    Response: We appreciate the commenters' support.
    Comment: One commenter expressed concern with the proposal to move 
the 149 ICD-10-PCS procedure codes describing spinal fusion of the 
anterior column with a posterior approach that are currently on the 
posterior spinal fusion list to the anterior spinal fusion list and 
indicated that the proposed decrease in payment weights for this set of 
MS-DRGs would affect providers' ability to continue treating patients 
necessitating these procedures. The commenter noted that results from 
an

[[Page 38036]]

independent analysis it had conducted demonstrated that reassignment of 
these procedure codes and the resulting combinations for anterior/
posterior spinal fusion are less costly in comparison to other 
procedure combinations assigned to MS-DRGs 453, 454 and 455. This 
commenter acknowledged that ICD-10 coded claims data enable CMS to make 
important clinical refinements to the ICD-10 MS-DRGs. However, the 
commenter stated, the resource homogeneity of the MS-DRGs may be 
adversely affected. The commenter also stated that it understood that 
the greater specificity of ICD-10 codes will naturally lead to changes 
in the MS-DRG weights and assignments and that these changes should 
generally lead to improved payment accuracy within the IPPS. However, 
the commenter pointed out that not all weight fluctuations occurring 
during the early stages of the ICD-10 transition necessarily reflect 
improvements in coding and payment. The commenter stated that providers 
should not be subject to such disruptive fluctuations in their payments 
in a single year. The commenter recommended applying a cap to the 
decline in the MS-DRG payment weights relative to the FY 2017 payment 
weights until the fluctuations in the number of cases and the case 
weights can be determined and Medicare's utilization reflects hospital 
adaptation to ICD-10 coding. The commenter stated that applying a cap 
would allow CMS to move forward with the proposal to move the 149 ICD-
10-PCS spinal fusion procedure codes from the posterior spinal fusion 
list to the anterior spinal fusion list.
    Response: We acknowledge the commenter's concerns and appreciate 
the analysis that was conducted. In response to the recommendation that 
we implement a cap to the decline in the MS-DRG payment weights 
relative to the FY 2017 payment weights, we refer readers to section 
II.G. of the preamble of this FY 2018 IPPS/LTCH PPS final rule for 
further discussion regarding recalibration of the FY 2018 MS-DRG 
relative weights, including our response to comments requesting a 
transition period for substantial reductions in relative weights in 
order to facilitate payment stability.
    We also believe it is important to be able to fully evaluate the 
MS-DRGs for which all spinal fusion procedures are currently assigned 
under ICD-10 with additional claims data. Therefore, in response to the 
public comments received, we are planning to review the ICD-10 logic 
for the MS-DRGs where procedures involving spinal fusion are currently 
assigned for FY 2019.
    After consideration of the public comments we received, we are 
finalizing our proposal to: (1) Move the seven procedure codes 
describing spinal fusion using a nanotextured surface interbody fusion 
device from the posterior spinal fusion list to the anterior spinal 
fusion list in the GROUPER logic for MS-DRGs 453, 454, and 455; (2) 
move the 149 procedure codes describing spinal fusion of the anterior 
column with a posterior approach from the posterior spinal fusion list 
to the anterior spinal fusion list in the GROUPER logic for MS-DRGs 
453, 454, and 455; and (3) delete the 33 procedure codes describing 
spinal fusion of the posterior column with an interbody fusion device 
from MS-DRGs 453, 454, 455, 456, 457, 458, 459, 460, 471, 472, and 473, 
as well as from the ICD-10-PCS classification for FY 2018.
6. MDC 14 (Pregnancy, Childbirth and the Puerperium)
a. Vaginal Delivery and Complicating Diagnoses
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56854), we noted 
that the code list as displayed in the ICD-10 MS-DRG Version 33 
Definitions Manual for MS-DRG 774 (Vaginal Delivery with Complicating 
Diagnoses) required further analysis to clarify what constitutes a 
vaginal delivery to satisfy the ICD-10 MS-DRG logic. We stated our 
plans to conduct further analysis of the diagnosis code lists in MS-DRG 
774 for FY 2018. We stated in the proposed rule that we believe that 
the Version 34 Definitions Manual and GROUPER logic for MS-DRG 774 
continues to require additional analysis to determine how best to 
classify a vaginal delivery. For example, under MS-DRG 774, the 
Definitions Manual currently states that three conditions must be met, 
the first of which is a vaginal delivery. To satisfy this first 
condition, codes that describe conditions or circumstances from among 
three lists of codes must be reported. The first list is comprised of 
ICD-10-CM diagnosis codes that may be reported as a principal diagnosis 
or a secondary diagnosis. These diagnosis codes describe conditions in 
which it is assumed that a vaginal delivery has occurred. The second 
list of codes is a list of ICD-10-PCS procedure codes that also 
describe circumstances in which it is assumed that a vaginal delivery 
occurred. The third list of codes identifies diagnoses describing the 
outcome of the delivery. Therefore, if any code from one of those three 
lists is reported, the first condition (vaginal delivery) is considered 
to be met for assignment to MS-DRG 774.
    As discussed in the proposed rule, our continued concern with the 
first list of ICD-10-CM diagnosis codes as currently displayed in the 
Definitions Manual under the first condition is that not all of the 
conditions necessarily reflect that a vaginal delivery occurred. 
Several of the diagnosis codes listed could also reflect that a 
cesarean delivery occurred. For example, ICD-10-CM diagnosis code 
O10.02 (Pre-existing essential hypertension complicating childbirth) 
does not specify that a vaginal delivery took place; yet it is included 
in the list of conditions that may be reported as a principal diagnosis 
or a secondary diagnosis in the GROUPER logic for a vaginal delivery. 
The reporting of this code also could be appropriate for a delivery 
that occurred by cesarean section.
    As noted earlier, the second list of codes for the first condition 
are comprised of ICD-10-PCS procedure codes. As we stated in the 
proposed rule, while we agree that the current list of procedure codes 
in MS-DRG 774 may appropriately describe that a vaginal delivery 
occurred, we also believe this list could be improved and warrants 
closer review.
    The third list of codes for the first condition in MS-DRG 774 
includes conditions describing the outcome of the delivery that would 
be reported as secondary diagnoses. Similar to concerns with the first 
list of codes, we believe the conditions do not necessarily reflect 
that a vaginal delivery occurred because they also can be reported on 
claims where a cesarean delivery occurred.
    For the second condition in MS-DRG 774 to be met, diagnosis codes 
that are identified as a complicating diagnosis from among two lists 
may be reported. The first list is comprised of ICD-10-CM diagnosis 
codes that may be reported as a principal or secondary diagnosis. The 
second list is comprised of ICD-10-CM diagnosis codes that may be 
reported as a secondary diagnosis. Currently, there is only one code 
listed under the secondary diagnosis list. We have concerns with these 
lists and what is classified as a complicating diagnosis when reviewing 
the code lists for this and other MS-DRGs that use that logic in MDC 
14.
    For the third condition in MS-DRG 774 to be met, a limited set of 
O.R. procedures, including both extensive and nonextensive procedures, 
are listed. We have concerns with this third condition as being needed 
to satisfy the logic for a vaginal delivery MS-DRG.

[[Page 38037]]

    In summary, the MS-DRG logic involving a vaginal delivery under MDC 
14 is technically complex as a result of the requirements that must be 
met to satisfy assignment to the affected MS-DRGs. As discussed in the 
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19834), upon review and 
discussion, our clinical advisors recommended, and we agreed, that we 
should solicit public comments on further refinement to the following 
four MS-DRGs related to vaginal delivery: MS-DRG 767 (Vaginal Delivery 
with Sterilization and/or D&C); MS-DRG 768 (Vaginal Delivery with O.R. 
Procedure Except Sterilization and/or D&C); MS-DRG 774 (Vaginal 
Delivery with Complicating Diagnosis); and MS-DRG 775 (Vaginal Delivery 
without Complicating Diagnosis).
    In addition, our clinical advisors agreed that we should solicit 
public comments on further refinement to the conditions defined as a 
complicating diagnosis in MS-DRG 774 and MS-DRG 781 (Other Antepartum 
Diagnoses with Medical Complications).
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19834), we solicited public comments on which diagnosis or procedure 
codes, or both, should be considered in the logic to identify a vaginal 
delivery and which diagnosis codes should be considered in the logic to 
identify a complicating diagnosis. As MS-DRGs 767, 768, 774, 775, and 
781 incorporate one or both aspects (vaginal delivery or complicating 
diagnosis), we stated that public comments that we receive from this 
solicitation will be helpful in determining what proposed revisions to 
the current logic should be made. We indicated that we will review 
public comments received in response to this solicitation as we 
continue to evaluate these areas under MDC 14 and, if warranted, we 
would propose refinements for FY 2019. We requested that all comments 
be directed to the CMS MS-DRG Classification Change Request Mailbox 
located at: [email protected] by November 1, 2017.
    Comment: Commenters agreed that the MS-DRG logic for a vaginal 
delivery under MDC 14 is technically complex. One commenter stated its 
intention to provide separate comments related to the solicitation in 
accordance with the November 1, 2017 deadline.
    Response: We thank the commenters for their acknowledgment of the 
complexity with the GROUPER logic for vaginal deliveries under MDC 14 
and for their support and consideration of these issues as we continue 
to consider possible refinement to the logic. We will review the 
comments received in response to the solicitation as we continue to 
evaluate this area and, if warranted, we will propose refinements for 
the FY 2019 rulemaking.
b. MS-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis)
    The logic for MS-DRG 998 (Principal Diagnosis Invalid as Discharge 
Diagnosis) currently includes a list of diagnoses that are considered 
inappropriate for reporting as a principal diagnosis on an inpatient 
hospital claim. In other words, these conditions would reasonably be 
expected not to necessitate an inpatient admission. Examples of these 
diagnosis codes include what are referred to as the ``Supervision of 
pregnancy'' codes, as well as pregnancy, maternal care and fetal 
related codes with an ``unspecified trimester''. We refer the reader to 
the ICD-10 Version 34 Definitions Manual which is available via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the 
complete list of diagnosis codes in MS-DRG 998 under MDC 14.
    In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56840 through 
56841), there was discussion regarding the supervision of ``high-risk'' 
pregnancy codes, including elderly primigravida and multigravida 
specifically, with regard to removing them from the Unacceptable 
principal diagnosis edit code list in the Medicare Code Editor (MCE). 
After consultation with the staff at the CDC's NCHS, we learned that 
the FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting were 
updated to explain appropriate coding for this set of codes. As a 
result, the codes describing supervision of high-risk pregnancy (and 
other supervision of pregnancy codes) remained on the Unacceptable 
principal diagnosis edit code list in the MCE. Therefore, the MCE code 
edit is consistent with the logic of MS-DRG 998 (Principal Diagnosis 
Invalid as Discharge Diagnosis) for these supervision of pregnancy 
codes.
    However, as a result of our review and consultation with our 
clinical advisors regarding the ``unspecified trimester'' codes in MS-
DRG 998, as discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19835), we determined that there are more appropriate MS-DRG 
assignments for this set of codes. Although it may seem unlikely that a 
patient would be admitted and ultimately discharged or transferred 
without the caregiver or medical personnel having any further knowledge 
of the exact trimester, it is conceivable that a situation may present 
itself. For example, the pregnant patient may be from out of town or 
unable to communicate effectively. The fact that the specific trimester 
is not known or documented does not preclude the resources required to 
care for the patient with the particular diagnosis.
    Therefore, as shown in Table 6P.3b. associated with the proposed 
rule (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html), we proposed to remove the 314 ICD-10-CM 
diagnosis codes identified with ``unspecified trimester'' from MS-DRG 
998 and reassign them to the MS-DRGs in which their counterparts (first 
trimester, second trimester, or third trimester) are currently assigned 
as specified in Column C. We stated that this would enable more 
appropriate MS-DRG assignments and payment for these cases. We invited 
public comments on our proposal.
    Comment: Commenters agreed with the proposal to remove the 314 ICD-
10-CM diagnosis codes identified with ``unspecified trimester'' from 
MS-DRG 998 and reassign them to the MS-DRGs in which their counterparts 
(first trimester, second trimester, or third trimester) are currently 
assigned. However, one commenter disagreed with the proposal and noted 
that lack of documentation that specifies the trimester on an inpatient 
record is representative of poor documentation and should not be 
acceptable for valid MS-DRG assignment. This commenter believed that 
the trimester could reasonably be determined or estimated, despite the 
patient's circumstances, such as being from out of town or unable to 
communicate effectively.
    Response: We appreciate the commenters' support. In response to the 
commenter who did not support our proposal, we acknowledge that any 
diagnosis involving the term ``unspecified'' in a code title can appear 
to be the result of poor documentation. However, there are several 
instances across the ICD-10 MS-DRG GROUPER logic where an 
``unspecified'' principal diagnosis leads to a valid MS-DRG assignment 
as a result of the resources and/or complexities involved regarding the 
condition itself. The ``unspecified trimester'' diagnoses involved in 
the proposal included significant clinical conditions such as 
eclampsia, preexisting hypertensive heart disease, and cerebral venous 
thrombosis, to

[[Page 38038]]

name a few. The fact that the trimester is not specified does not 
preclude the significance of these conditions nor the resources 
involved in caring for the patients with these conditions. Therefore, 
while we encourage providers to continue to focus efforts on improving 
their respective facilities medical record documentation practices, we 
also believe that the MS-DRG assignment should appropriately reflect 
the resources involved in evaluating and caring for these patients.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the 314 ICD-10-CM diagnosis codes 
identified with ``unspecified trimester'' from MS-DRG 998 as shown in 
Table 6P.3b. associated with this final rule (which is available via 
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html and 
reassign them to the MS-DRGs in which their counterparts (first 
trimester, second trimester, or third trimester) are currently assigned 
as specified in Column C, in the ICD-10 MS-DRGs Version 35, effective 
October 1, 2017.
c. MS-DRG 782 (Other Antepartum Diagnoses Without Medical 
Complications)
    The following three ICD-10-CM diagnosis codes are currently on the 
principal diagnosis list for the MS-DRG 782 (Other Antepartum Diagnoses 
without Medical Complications) logic.

 
------------------------------------------------------------------------
      ICD-10-CM  code                     Code description
------------------------------------------------------------------------
O09.41....................  Supervision of pregnancy with grand
                             multiparity, first trimester.
O09.42....................  Supervision of pregnancy with grand
                             multiparity, second trimester.
O09.43....................  Supervision of pregnancy with grand
                             multiparity, third trimester.
------------------------------------------------------------------------

    It was brought to our attention that these codes also are included 
in the MCE Unacceptable principal diagnosis code edit list. As 
discussed in section II.F.6.b. of the preamble of the FY 2018 IPPS/LTCH 
PPS proposed rule, the supervision of pregnancy codes are accurately 
reflected in the MCE code edit list for Unacceptable principal 
diagnosis. Therefore, we stated that it is not appropriate to include 
the three above listed codes in MS-DRG 782.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19835), we 
proposed to remove the three codes describing supervision of pregnancy 
from MS-DRG 782 and reassign them to MS-DRG 998 (Principal Diagnosis 
Invalid as Discharge Diagnosis) to reflect a more appropriate MS-DRG 
assignment. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to remove the three 
codes (ICD-10-CM diagnosis codes O09.41, O09.42 and O09.43) describing 
supervision of pregnancy and reassign them to a more appropriate MS-DRG 
assignment.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove ICD-10-CM diagnosis codes O09.41, 
O09.42 and O09.43, which describe supervision of pregnancy, from MS-DRG 
782 and reassign them to MS-DRG 998 (Principal Diagnosis Invalid as 
Discharge Diagnosis) in the ICD-10 MS-DRGs Version 35, effective 
October 1, 2017.
d. Shock During or Following Labor and Delivery
    We received a request to review ICD-10-CM diagnosis code O75.1 
(Shock during or following labor and delivery), which is currently 
assigned to MS-DRG 774 (Vaginal Delivery with Complicating Diagnosis), 
MS-DRG 767 (Vaginal Delivery with Sterilization and/or D&C), and MS-DRG 
768 (Vaginal Delivery with O.R. Procedure Except Sterilization and/or 
D&C).
    The requestor provided an example of a patient that delivered at 
Hospital A and was transferred to Hospital B for specialized care 
related to the diagnosis of shock. The claim for Hospital B resulted in 
assignment to a delivery MS-DRG, despite the fact that a delivery did 
not occur during that hospitalization. The requestor noted that, by not 
reporting the diagnosis code for shock, the claim grouped to a 
postpartum MS-DRG and recommended that we evaluate the issue further.
    Our analysis initially involved reviewing the GROUPER logic for MS-
DRGs 774, 767 and 768. As discussed in section II.F.14.a. of the 
preamble of the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19835 
through 19836) and this final rule, the GROUPER logic for 
classification and assignment to MS-DRG 774 requires that three 
conditions must be met, the first of which is a vaginal delivery. 
Similar GROUPER logic applies for assignment to MS-DRGs 767 and 768, 
except that only two conditions must be met, with the first condition 
being a vaginal delivery. For each of these three MS-DRGs, to satisfy 
the first condition, one code that describes a condition or 
circumstance from among the three separate lists of codes must be 
reported. The first list is comprised of ICD-10-CM diagnosis codes that 
may be reported as a principal or secondary diagnosis. These diagnosis 
codes describe conditions in which it is assumed that a vaginal 
delivery has occurred. Among this first list is ICD-10-CM diagnosis 
code O75.1, which is included in the GROUPER logic for MS-DRGs 774, 767 
and 768 (under the first condition-vaginal delivery). We refer readers 
to the ICD-10 MS-DRG Version 34 Definitions Manual located via the 
Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for 
documentation of the GROUPER logic associated with these MS-DRGs.
    In addition, in MS-DRG 774, to satisfy the second condition, 
diagnosis codes that are identified as a complicating diagnosis from 
among two lists may be reported. The first list is comprised of ICD-10-
CM diagnosis codes that may be reported as a principal or secondary 
diagnosis. The second list is comprised of ICD-10-CM diagnosis codes 
that may be reported as a secondary diagnosis. Currently, there is only 
one code listed under the secondary diagnosis list.
    Next, our analysis involved reviewing the GROUPER logic for 
assignment to post-partum MS-DRG 769 (Postpartum and Post Abortion 
Diagnoses with Major Procedure) and MS-DRG 776 (Postpartum and Post 
Abortion Diagnoses without O.R. Procedure). The GROUPER logic for these 
postpartum

[[Page 38039]]

MS-DRGs requires that a principal diagnosis be reported from a list of 
several conditions, such as those following pregnancy, those 
complicating the puerperium, conditions that occurred during or 
following delivery and conditions associated with lactation disorders. 
For assignment to MS-DRG 769, the GROUPER logic also requires that a 
major procedure be reported in addition to a principal diagnosis from 
the list of conditions.
    We stated in the proposed rule that as a result of our analysis, we 
agree with the requestor that ICD-10-CM diagnosis code O75.1 should be 
added to the GROUPER logic for assignment to the postpartum MS-DRGs. 
This diagnosis code is consistent with other diagnosis codes structured 
within the GROUPER logic for assignment to MS-DRGs 769 and 776, and 
clearly represents a post-partum diagnosis with the terminology 
``during or following labor and delivery'' in the title. We stated that 
we believe that adding this diagnosis code to the postpartum MS-DRGs 
will enable more appropriate MS-DRG assignment for cases where a 
delivery did not occur.
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19835 
through 19836), we proposed the following:
     Removing ICD-10-CM diagnosis code O75.1 from the list of 
principal or secondary diagnosis under the first condition-vaginal 
delivery GROUPER logic in MS-DRGs 774, 767, and 768;
     Moving ICD-10-CM diagnosis code O75.1 from the list of 
principal or secondary diagnosis under the second condition-
complicating diagnosis for MS-DRG 774 to the secondary diagnosis list 
only; and
     Adding ICD-10-CM diagnosis code O75.1 to the principal 
diagnosis list GROUPER logic in MS-DRGs 769 and 776.
    We invited public comments on our proposals.
    Comment: Many commenters supported all of CMS' proposals involving 
diagnosis code O75.1 and MS-DRGs 767, 768, 769, 774, and 776.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the following in the ICD-10 MS-DRGs Version 35, effective 
October 1, 2017:
     Removing ICD-10-CM diagnosis code O75.1 from the list of 
principal or secondary diagnosis under the first condition-vaginal 
delivery GROUPER logic in MS-DRGs 774, 767, and 768;
     Moving ICD-10-CM diagnosis code O75.1 from the list of 
principal or secondary diagnosis under the second condition-
complicating diagnosis for MS-DRG 774 to the secondary diagnosis list 
only; and
     Adding ICD-10-CM diagnosis code O75.1 to the principal 
diagnosis list GROUPER logic in MS-DRGs 769 and 776.
7. MDC 15 (Newborns and Other Neonates With Conditions Originating in 
Perinatal Period): Observation and Evaluation of Newborn
    We received a request to add the ICD-10-CM diagnosis codes 
describing observation and evaluation of newborns for suspected 
conditions that are ruled out to MS-DRG 795 (Normal Newborn). The 14 
diagnosis codes describing observation and evaluation of newborn for 
suspected conditions ruled out are displayed in the table below.

 
------------------------------------------------------------------------
      ICD-10-CM  code                     Code description
------------------------------------------------------------------------
Z05.0.....................  Observation and evaluation of newborn for
                             suspected cardiac condition ruled out.
Z05.1.....................  Observation and evaluation of newborn for
                             suspected infectious condition ruled out.
Z05.2.....................  Observation and evaluation of newborn for
                             suspected neurological condition ruled out.
Z05.3.....................  Observation and evaluation of newborn for
                             suspected respiratory condition ruled out.
Z05.41....................  Observation and evaluation of newborn for
                             suspected genetic condition ruled out.
Z05.42....................  Observation and evaluation of newborn for
                             suspected metabolic condition ruled out.
Z05.43....................  Observation and evaluation of newborn for
                             suspected immunologic condition ruled out.
Z05.5.....................  Observation and evaluation of newborn for
                             suspected gastrointestinal condition ruled
                             out.
Z05.6.....................  Observation and evaluation of newborn for
                             suspected genitourinary condition ruled
                             out.
Z05.71....................  Observation and evaluation of newborn for
                             suspected skin and subcutaneous tissue
                             condition ruled out.
Z05.72....................  Observation and evaluation of newborn for
                             suspected musculoskeletal condition ruled
                             out.
Z05.73....................  Observation and evaluation of newborn for
                             suspected connective tissue condition ruled
                             out.
Z05.8.....................  Observation and evaluation of newborn for
                             other specified suspected condition ruled
                             out.
Z05.9.....................  Observation and evaluation of newborn for
                             unspecified suspected condition ruled out.
------------------------------------------------------------------------

    The requestor expressed concern that currently when one of these 
ruled out. codes is added to a newborn encounter with a principal 
diagnosis described by ICD-10-CM code Z38.00 (Single liveborn infant, 
delivered vaginally), the case is assigned to MS-DRG 794 (Neonate with 
Other Significant Problems). The requestor stated that this assignment 
appears to be in error and that the assignment should instead be to MS-
DRG 795 (Normal Newborn).
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19836), we reviewed Section I.C.16.b. of the 2017 ICD-10-CM Official 
Guidelines for Coding and Reporting which includes the following 
instructions for the diagnosis codes listed in the table above:
     Assign a code from category Z05 (Observation and 
evaluation of newborns and infants for suspected conditions ruled out.) 
to identify those instances when a healthy newborn is evaluated for a 
suspected condition that is determined after study not to be present. 
Do not use a code from category Z05 when the patient has identified 
signs or symptoms of a suspected problem; in such cases code the sign 
or symptom.
     A code from category Z05 may also be assigned as a 
principal or first-listed code for readmissions or encounters when the 
code from category Z38 code no longer applies. Codes from category Z05 
are for use only for healthy newborns and infants for which no 
condition after study is found to be present.
     A code from category Z05 is to be used as a secondary code 
after the code from category Z38, Liveborn infants according to place 
of birth and type of delivery.
    We stated in the proposed rule that after review of the guidelines 
and discussion with our clinical advisors, we agree with the requestor 
that the assignment of these codes to MS-DRG

[[Page 38040]]

794 is not accurate because the assignment incorrectly labels the 
newborns as having a significant problem when the condition does not 
truly exist. We stated that we and our clinical advisors also agree 
that the above list of diagnosis codes should be added to MS-DRG 795. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19836), we 
proposed to add the 14 diagnosis codes describing observation and 
evaluation of newborns for suspected conditions that are ruled out 
listed in the table above to the GROUPER logic for MS-DRG 795. We 
invited public comments on our proposals.
    Comment: Commenters supported the proposal to add the 14 diagnosis 
codes describing observation and evaluation of newborn for suspected 
conditions ruled out to the MS-DRG logic for normal newborn.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the 14 diagnosis codes describing 
observation and evaluation of newborns for suspected conditions that 
are ruled out listed in the table above to the GROUPER logic for MS-DRG 
795 (Normal newborn) in the ICD-10 MS-DRGs Version 35, effective 
October 1, 2017.
8. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): 
Complication Codes
    We received a request to examine the ICD-10-CM diagnosis codes in 
the T85.8-series of codes that describe other specified complications 
of internal prosthetic devices, implants and grafts, not elsewhere 
classified and their respective MS-DRG assignments. According to the 
requestor, the 7th character values in this series of codes impact the 
MS-DRG assignment under MDC 21 (Injuries, Poisonings and Toxic Effects 
of Drugs) and MDC 23 (Factors Influencing Health Status & Other 
Contacts with Health Services) that have resulted in inconsistencies 
(that is, shifts) between the MS-DRG assignments under Version 33 and 
Version 34 of the ICD-10 MS-DRGs.
    Under ICD-10-CM, diagnosis codes in the range of S00 through T88 
require a 7th character value of ``A-'' initial encounter, ``D-
''subsequent encounter, or ``S-''sequela to identify if the patient is 
undergoing active treatment for a condition. For complication codes, 
active treatment refers to treatment for the condition described by the 
code, even though it may be related to an earlier precipitating 
problem.
    The requestor suggested that the following list of diagnosis codes 
with the 7th character ``A'' (initial encounter) may have been 
inadvertently assigned to the GROUPER logic in the list of diagnoses 
(Assignment of Diagnosis Codes) under MDC 23 because when one of these 
diagnosis codes was reported with an O.R. procedure, the requestor 
found claims grouping to MS-DRG 939, 940, or 941 (O.R. Procedures with 
Diagnoses of Other Contact with Health Services with MCC, with CC and 
without CC/MCC, respectively) that had previously grouped to MDC 21 
under Version 33 of the ICD-10 MS-DRGs. The requestor also suggested 
these codes may have been inadvertently assigned to the GROUPER logic 
list of principal diagnoses for MS-DRGs 949 and 950 (Aftercare with CC/
MCC and without CC/MCC, respectively) under MDC 23 because it found 
claims that grouped to these MS-DRGs (949 and 950) when one of the 
following diagnosis codes was reported as a principal diagnosis that 
had previously grouped to MDC 21 under Version 33 of the ICD-10 MS-
DRGs.

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.818A..................  Embolism due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.828A..................  Fibrosis due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.838A..................  Hemorrhage due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.848A..................  Pain due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.858A..................  Stenosis due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.868A..................  Thrombosis due to other internal prosthetic
                             devices, implants and grafts, initial
                             encounter.
T85.898A..................  Other specified complication of other
                             internal prosthetic devices, implants and
                             grafts, initial encounter.
------------------------------------------------------------------------

    The requestor believed that the above list of diagnosis codes with 
the 7th character ``A'' (initial encounter) would be more appropriately 
assigned under MDC 21 to MS-DRGs 919, 920, and 921 (Complications of 
Treatment with MCC, with CC and without CC/MCC, respectively), 
according to its review of the 2017 Official Coding Guidelines for use 
of the 7th character and assignment of other diagnoses of associated 
complications of care. The requestor also noted that these codes were 
new, effective October 1, 2016 (FY 2017), and the predecessor codes 
grouped to MS-DRGs 919, 920, and 921 in MDC 21 under Version 33 of the 
ICD-10 MS-DRGs in FY 2016.
    In addition, the requestor suggested that the following list of 
diagnosis codes with the 7th character ``D'' (subsequent encounter) may 
have been inadvertently assigned to the GROUPER logic list of principal 
diagnoses for MS-DRG 919, 920, or 921 in MDC 21. The requestor noted 
that these codes were new, effective October 1, 2016 (FY 2017), and the 
predecessor codes grouped to MS-DRGs 949 and 950 (Aftercare with CC/MCC 
and without CC/MCC, respectively) in MDC 23 under Version 33 of the 
ICD-10 MS-DRGs in FY 2016.

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.810D..................  Embolism due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.820D..................  Fibrosis due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.830D..................  Hemorrhage due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.840D..................  Pain due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.850D..................  Stenosis due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.860D..................  Thrombosis due to nervous system prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.890D..................  Other specified complication of nervous
                             system prosthetic devices, implants and
                             grafts, subsequent encounter.
------------------------------------------------------------------------


[[Page 38041]]

    The requestor also suggested that the following list of additional 
diagnosis codes with the 7th character ``D'' (subsequent encounter) may 
have been inadvertently assigned to the GROUPER logic list of principal 
diagnoses for MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic 
Effect with MCC and without MCC, respectively) also under MDC 21. The 
requestor noted these codes were also new, effective October 1, 2016 
(FY 2017) and that the predecessor codes grouped to MS-DRGs 949 and 950 
in MDC 23 under Version 33 of the ICD-10 MS-DRGs in FY 2016.

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.818D..................  Embolism due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.828D..................  Fibrosis due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.838D..................  Hemorrhage due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.848D..................  Pain due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.858D..................  Stenosis due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.868D..................  Thrombosis due to other internal prosthetic
                             devices, implants and grafts, subsequent
                             encounter.
T85.898D..................  Other specified complication of other
                             internal prosthetic devices, implants and
                             grafts, subsequent encounter.
------------------------------------------------------------------------

    The requestor believed that the lists of diagnosis codes above with 
7th character ``D'' (subsequent encounter) would be more appropriately 
assigned to MS-DRGs 949 and 950 under MDC 23, according to its review 
of the 2017 Official Coding Guidelines for use of the 7th character and 
assignment of other diagnoses of associated complications of care.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19837 through 19839), we ran test cases to determine if we could 
duplicate the requestor's findings with regard to the shifts in MS-DRG 
assignment between Version 33 and Version 34 of the ICD-10 MS-DRGs. 
Results of our review were consistent with the requestor's findings. We 
found that the T85.8- series of diagnosis codes with the 7th character 
of ``A'' (initial encounter) and 7th character of ``D'' (subsequent 
encounter) were inadvertently assigned to the incorrect MDC for Version 
34 of the ICD-10 MS-DRGs, which led to inconsistencies (MS-DRG shifts) 
when compared to Version 33 of the ICD-10 MS-DRGs. Our analysis also 
included review of all of the diagnosis codes in the T85.8- series and 
their current MDC and MS-DRG assignments, as well as review of the 2017 
Official Coding Guidelines for use of the 7th character and assignment 
of other diagnoses of associated complications of care. Based on the 
results of our review, we agreed with the requestor's findings.
    In addition, we identified the following list of diagnosis codes 
with the 7th character ``S'' (sequela) that appear to have been 
inadvertently assigned to MS-DRGs 949 and 950 in MDC 23 rather than MDC 
21 in MS-DRGs 922 and 923 (Other Injury, Poisoning and Toxic Effect 
with MCC and without MCC, respectively).

------------------------------------------------------------------------
 ICD-10-CM diagnosis code                 Code description
------------------------------------------------------------------------
T85.810S..................  Embolism due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.820S..................  Fibrosis due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.830S..................  Hemorrhage due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.840S..................  Pain due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.850S..................  Stenosis due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.860S..................  Thrombosis due to nervous system prosthetic
                             devices, implants and grafts, sequela.
T85.890S..................  Other specified complication of nervous
                             system prosthetic devices, implants and
                             grafts, sequela.
------------------------------------------------------------------------

    In the FY 2018 IPPS/LTCH PPS proposed rule, we invited public 
comment on our proposals to (1) reassign the ICD-10-CM diagnosis codes 
with the 7th character ``A'' (initial encounter) from MS-DRGs 949 and 
950 in MDC 23 to MS-DRGs 919, 920 and 921 in MDC 21; (2) reassign the 
ICD-10-CM diagnosis codes with the 7th character ``D'' (subsequent 
encounter) from MS-DRGs 919, 920, 921, 922, and 923 in MDC 21 to MS-
DRGs 949 and 950 in MDC 23; and (3) reassign the ICD-10-CM diagnosis 
codes with the 7th character ``S'' (sequela) from MS-DRGs 949 and 950 
in MDC 23 to MS-DRGs 922 and 923 in MDC 21 for FY 2018. The table below 
displays the current Version 34 MDC and MS-DRG assignments and the 
proposed Version 35 MDC and MS-DRG assignments on which we sought 
public comment for the respective ICD-10-CM diagnosis codes.

----------------------------------------------------------------------------------------------------------------
                                                    Current V34   Current V34 MS-  Proposed V35    Proposed V35
       ICD-10-CM code          Code description         MDC             DRG             MDC           MS-DRG
----------------------------------------------------------------------------------------------------------------
T85.810D...................  Embolism due to                  21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.810S...................  Embolism due to                  23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.818A...................  Embolism due to                  23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.818D...................  Embolism due to                  21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.820D...................  Fibrosis due to                  21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.820S...................  Fibrosis due to                  23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.

[[Page 38042]]

 
T85.828A...................  Fibrosis due to                  23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.828D...................  Fibrosis due to                  21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.830D...................  Hemorrhage due to                21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.830S...................  Hemorrhage due to                23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.838A...................  Hemorrhage due to                23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.838D...................  Hemorrhage due to                21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.840D...................  Pain due to nervous              21   919, 920, 921              23        949, 950
                              system prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.840S...................  Pain due to nervous              23        949, 950              21        922, 923
                              system prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.848A...................  Pain due to other                23        949, 950              21   919, 920, 921
                              internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.848D...................  Pain due to other                21        922, 923              23        949, 950
                              internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.850D...................  Stenosis due to                  21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.850S...................  Stenosis due to                  23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.858A...................  Stenosis due to                  23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.858D...................  Stenosis due to                  21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.860D...................  Thrombosis due to                21   919, 920, 921              23        949, 950
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.860S...................  Thrombosis due to                23        949, 950              21        922, 923
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.868A...................  Thrombosis due to                23        949, 950              21   919, 920, 921
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.868D...................  Thrombosis due to                21        922, 923              23        949, 950
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.890D...................  Other specified                  21   919, 920, 921              23        949, 950
                              complication of
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
T85.890S...................  Other specified                  23        949, 950              21        922, 923
                              complication of
                              nervous system
                              prosthetic
                              devices, implants
                              and grafts,
                              sequela.
T85.898A...................  Other specified                  23        949, 950              21   919, 920, 921
                              complication of
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              initial encounter.
T85.898D...................  Other specified                  21        922, 923              23        949, 950
                              complication of
                              other internal
                              prosthetic
                              devices, implants
                              and grafts,
                              subsequent
                              encounter.
----------------------------------------------------------------------------------------------------------------

    Comment: Commenters supported the proposals to (1) reassign the 
ICD-10-CM diagnosis codes with the 7th character ``A'' (initial 
encounter) from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 919, 920 and 
921 in MDC 21; (2) reassign the ICD-10-CM diagnosis codes with the 7th 
character ``D'' (subsequent encounter) from MS-DRGs 919, 920, 921, 922, 
and 923 in MDC 21 to MS-DRGs 949 and 950 in MDC 23; and (3) reassign 
the ICD-10-CM diagnosis codes with the 7th character ``S'' (sequela) 
from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in MDC 21 for 
FY 2018. However, one commenter did not support the reassignment of 
ICD-10-CM diagnosis codes with the 7th character ``S'' (sequela) from 
MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in MDC 21. This 
commenter agreed that the codes with the 7th character ``S'' should not 
be assigned to MS-DRGs 949 and 950. However, the commenter disagreed 
with the proposed reassignment to MS-DRGs 922 and 923 and referenced 
language from the FY 2017 ICD-10-CM Official Guidelines for Coding and 
Reporting under Section I.B.10. Sequela (Late Effects) which states: 
``A sequela is the residual effect (condition produced) after the acute 
phase of an illness or injury has terminated. The condition or nature 
of the sequela is sequenced first. The sequela code is sequenced 
second.'' According to the commenter, sequela cases are appropriately 
classified to the MS-DRGs corresponding to the reported residual 
condition rather than MS-DRGs 922 and 923 or MS-DRGs 949 and 950.
    Response: We appreciate the support of the commenters on our 
proposals. In response to the commenter who did not agree with the 
reassignment of ICD-10-CM diagnosis codes with the 7th character ``S'' 
(sequela) from MS-DRGs 949 and 950 in MDC 23 to MS-DRGs 922 and 923 in 
MDC 21, we note that the proposal for the ICD-10-CM diagnosis codes 
with the 7th character ``S'' (sequela) is consistent with the 
assignments under Version 33 of the ICD-10 MS-DRGs from which their 
respective predecessor codes were derived. For example, under Version 
33 of the ICD-10 MS-DRGs, ICD-10-CM diagnosis code T85.81XS (Embolism 
due to internal prosthetic devices, implants and grafts, not elsewhere

[[Page 38043]]

classified, sequela) was assigned to MDC 21 under MS-DRGs 922 and 923. 
Similar to the inadvertent errors in MDC and MS-DRG assignments that 
occurred with the ICD-10-CM diagnosis codes involving 7th characters 
``A'' (initial encounter) and ``D'' (subsequent encounter) from Version 
33 to Version 34 of the ICD-10 MS-DRGs, the ICD-10-CM diagnosis codes 
involving 7th character ``S'' were also inadvertently assigned to the 
incorrect MDC and MS-DRGs under Version 34 of the ICD-10 MS-DRGs. 
Therefore, the proposal is consistent for all the 7th characters. In 
addition, while the commenter disagreed with our proposed MDC and MS-
DRG assignments, the commenter did not offer suggestions on alternative 
assignments.
    After consideration of the public comments we received, we are 
finalizing our proposals as set forth in the FY 2018 IPPS/LTCH PPS 
proposed rule for the complication codes discussed above in the ICD-10 
MS-DRGs Version 35, effective October 1, 2017.
9. MDC 23 (Factors Influencing Health Status and Other Contacts With 
Health Services): Updates to MS-DRGs 945 and 946 (Rehabilitation With 
CC/MCC and Without CC/MCC, Respectively)
    In FY 2016, we received requests to modify the MS-DRG assignment 
for MS-DRGs 945 and 946 (Rehabilitation with CC/MCC and without CC/MCC, 
respectively). This issue was addressed in the FY 2017 IPPS/LTCH PPS 
proposed and final rules (81 FR 24998 through 25000 and 81 FR 56826 
through 56831). For FY 2017, we did not change the MS-DRG assignments 
for MS-DRGs 945 and 946.
    We did not receive a request to address this issue as part of the 
FY 2018 IPPS/LTCH PPS proposed rule or suggestions on how to update the 
MS-DRGs 945 and 946 logic. However, we did refer the FY 2016 requests 
for a new ICD-10-CM diagnosis code to the Centers for Disease Control 
and Prevention (CDC) for consideration at a future meeting of the ICD-
10 Coordination and Maintenance Committee. CDC has the lead on updating 
and maintaining ICD-10-CM codes. CDC did not address the issue at the 
September 13-14, 2016 ICD-10 Coordination and Maintenance Committee 
meeting. When the topic was not addressed at the September 13-14, 2016 
ICD-10 Coordination and Maintenance Committee meeting, we asked CDC to 
address the code request at the March 7-8, 2017 meeting of the ICD-10 
Coordination and Maintenance Committee. The topic was on the agenda for 
the March 7-8, 2017 ICD-10 Coordination and Maintenance Committee 
meeting. The deadline for providing comments on proposals considered at 
this meeting was April 7, 2017. Any new codes approved after this 
meeting which will be implemented on October 1, 2017 were posted on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html 
and on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10.html in 
June 2017. New codes also are included in Table 6A associated with this 
FY 2018 IPPS/LTCH PPS final rule (which is available via the Internet 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    As addressed in the FY 2017 IPPS/LTCH PPS final rule, the ICD-9-CM 
MS-DRGs used ICD-9-CM codes reported as the principal diagnosis that 
clearly identified an encounter for rehabilitation services, such as 
diagnosis codes V57.89 (Care involving other specified rehabilitation 
procedure) and V57.9 (Care involving unspecified rehabilitation 
procedure), and these codes were not included in ICD-10-CM. Given this 
lack of ICD-10-CM codes to indicate that the reason for the encounter 
was for rehabilitation, the ICD-10 MS-DRG logic could not reflect the 
logic of the ICD-9-CM MS-DRGs. Commenters on the final rule recommended 
that CDC create new diagnosis codes for these concepts in ICD-10-CM so 
that the MS-DRG logic could be updated to more closely reflect that of 
the ICD-9-CM MS-DRGs.
    As we stated in the proposed rule, if new ICD-10-CM codes are 
created for encounter for rehabilitation services, we would address any 
updates to MS-DRGs 945 and 946 utilizing these new codes in future 
rulemaking. In the meantime, we welcome other specific recommendations 
on how to update MS-DRGs 945 and 946. We are sharing the following data 
on these MS-DRGs from the MedPAR file.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
               FY 2015 MS-DRGs with ICD-9-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945......................................................           3,991            10.3          $8,242
MS-DRG 946......................................................           1,184             8.0           7,322
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
              FY 2016 MS-DRGs with ICD-10-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 945......................................................             671            10.8          $7,814
MS-DRG 946......................................................             157             7.3           7,672
----------------------------------------------------------------------------------------------------------------

    As shown by the tables above, there was a decrease of 3,320 MS-DRG 
945 cases (from 3,991 to 671) from FY 2015, when claims were submitted 
with ICD-9-CM codes, to FY 2016 when ICD-10 codes were submitted. There 
was a decrease of 1,027 MS-DRG 946 cases (from 1,184 to 157) from FY 
2015 to FY 2016. The average length of stay increased 0.5 days (from 
10.3 to 10.8 days) for MS-DRG 945 and decreased 0.7 days (from 8.0 to 
7.3 days) for MS-DRG 946. The average costs decreased by $428 (from 
$8,242 to $7,814) for MS-DRG 945 cases and increased by $350 (from 
$7,322 to $7,672) for MS-DRG 946 cases. The number of cases was 
significantly lower in FY 2016 compared to FY 2015. However, the 
difference in average length of stay and average costs did not show 
large changes.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule, we also 
examined possible MS-DRGs where these cases may have been assigned in 
FY 2016 based on increases in the number of claims. Because there is 
not a diagnosis code that could be reported as a principal diagnosis, 
which would indicate if the admissions were for rehabilitation 
services, we are unable to determine if these were cases admitted for 
rehabilitation that moved from MS-DRGs 945 and 946 because of the lack 
of a code for encounter for rehabilitation, or if there was simply a 
change in the number of cases. The following tables show our findings 
for MS-DRG 056 (Degenerative Nervous System Disorders with MCC); MS-DRG 
057 (Degenerative Nervous System

[[Page 38044]]

Disorders without MCC); MS-DRG 079 (Hypertensive Encephalopathy without 
CC/MCC); MS DRG 083 (Traumatic Stupor & Coma, Coma >1 Hour with CC); 
MS-DRG 084 (Traumatic Stupor & Coma, Coma >1 Hour without CC/MCC); MS-
DRG 092 (Other Disorders of Nervous System with MCC); and MS-DRG 093 
(Other Disorders of Nervous System without CC/MCC).

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
               FY 2015 MS-DRGs with ICD-9-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056......................................................           9,548             7.3         $12,606
MS-DRG 057......................................................          25,652             5.1           7,918
MS-DRG 079......................................................             618             2.7           5,212
MS-DRG 083......................................................           2,516             4.3           9,446
MS-DRG 084......................................................           1,955             2.8           6,824
MS-DRG 092......................................................          12,643             5.7          11,158
MS-DRG 093......................................................           7,928             2.8           5,182
----------------------------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
              FY 2016 MS-DRGs with ICD-10-CM codes                     cases          of stay      Average cost
----------------------------------------------------------------------------------------------------------------
MS-DRG 056......................................................          10,817             7.6         $12,930
MS-DRG 057......................................................          28,336             5.3           7,902
MS-DRG 079......................................................           1,233             2.7           5,579
MS-DRG 083......................................................           4,058             6.2           9,134
MS-DRG 084......................................................           3,016             2.7           6,508
MS-DRG 092......................................................          19,392             3.9           6,706
MS-DRG 093......................................................           8,120             2.7           5,253
----------------------------------------------------------------------------------------------------------------

    As shown by the tables above, some of the MS-DRGs that show the 
largest increase in number of cases do not show significant changes in 
the average length of stay or average costs. For instance, MS-DRG 079 
cases doubled from FY 2015 to FY 2016 (from 618 to 1,233). However, the 
average length of stay did not change from 2.7 days and the average 
costs increased only $367 (from $5,212 to $5,579). MS-DRG 083 cases 
increased by 1,542 (from 2,516 to 4,058) with a 1.9 day increase in the 
average length of stay (from 4.3 to 6.2 days); however, the average 
costs decreased only $312 (from $9,446 to $9,134). There were large 
changes for MS-DRG 092 with cases increasing by 6,749 (from 12,643 to 
19,392), the average length of stay decreasing by 1.8 days (from 5.7 to 
3.9) and the average costs decreasing by $4,452 (from $11,158 to 
$6,706). Once again, it is not possible to determine if any changes are 
a result of the impact of not having a code for the encounter for 
rehabilitation services to report as a principal diagnosis, or if other 
factors such as changes in types of patient admissions were involved.
    Given the lack of a diagnosis code to capture the principal 
diagnosis of encounter for rehabilitation, we stated in the FY 2018 
proposed rule that we were unable to update MS-DRG 945 or MS-DRG 946 to 
better identify those cases in which patients are admitted for 
rehabilitation services. If the CDC creates a new code, we will 
consider proposing updates to MS-DRGs 945 and 946 in the future.
    We invited public comments on our proposal not to update MS-DRGs 
945 and 946 for FY 2018.
    Comment: Several commenters acknowledged that CMS' analysis 
indicates that there was a decrease in the number of cases reported in 
MS-DRG 945 and 946 from FY 2015 to FY 2016 and there was an increase in 
average length of stay for MS-DRG 945 and a decrease in average length 
of stay for MS-DRG 946 from FY 2015 to FY 2016. The commenters stated 
that, without an ICD-10-CM diagnosis code to capture encounters for 
rehabilitation therapy, it was not possible to identify any specific 
shifts in these cases. The commenters stated that they had written to 
CDC to support the creation of a new diagnosis code to capture these 
admissions after the topic was presented at the March 7-8, 2017 ICD-10 
Coordination and Maintenance Committee meeting. The commenters stated 
that if CDC creates a new ICD-10-CM code for encounters for 
rehabilitation therapy, it recommended that CMS propose adding the new 
code as part of the MS-DRG logic for MS-DRGs 945 and 946 as part of the 
FY 2019 IPPS/LTCH PPS proposed rule. The commenters stated that if CDC 
decides not to create a new ICD-10-CM code for encounters for 
rehabilitation therapy, CMS should consider assembling a technical 
advisory panel made up of stakeholders, such as rehabilitation 
providers and other representation, to conduct an evaluation of this 
issue and recommend options to improve the MS-DRG logic and changes 
that could be proposed as part of future rulemaking.
    Response: We agree with the commenters that without a specific ICD-
10-CM code for encounters for rehabilitation therapy, it is not 
possible to identify any specific shifts in these cases. If the CDC 
creates a new code effective October 1, 2018, we will evaluate 
potential updates to the MS-DRGs utilizing this new code as part of the 
FY 2019 IPPS/LTCH PPS proposed rule. If the CDC decides not to create a 
new code, we welcome recommendations from the public on how the MS-DRG 
logic could be updated to better capture patients within MS-DRGs 945 
and 946.
    After consideration of the public comments that we received, we are 
finalizing our proposal not to update MS-DRGs 945 and 946 for FY 2018.
10. Changes to the Medicare Code Editor (MCE)
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56831 
through 56844), we made available the FY 2017 ICD-10 MCE Version 34 
manual file and an ICD-9-CM MCE

[[Page 38045]]

Version 34.0A manual file (for analysis purposes only). The links to 
these MCE manual files, along with the links to purchase the mainframe 
and computer software for the MCE Version 34 (and ICD-10 MS-DRGs) are 
posted on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 
2017 IPPS Final Rule Home Page.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19840 through 
19846), we addressed the MCE requests we received by the December 7, 
2016 deadline. We also discussed the proposals we made based on our 
internal review and analysis. In addition, as a result of new and 
modified code updates approved after the annual spring ICD-10 
Coordination and Maintenance Committee meeting, we routinely make 
changes to the MCE. In the past, in both the IPPS proposed and final 
rules, we have only provided the list of changes to the MCE that were 
brought to our attention after the prior year's final rule. We 
historically have not listed the changes we have made to the MCE as a 
result of the new and modified codes approved after the annual spring 
ICD-10 Coordination and Maintenance Committee meeting. These changes 
are approved too late in the rulemaking schedule for inclusion in the 
proposed rule. Furthermore, although our MCE policies have been 
described in our proposed and final rules, we have not provided the 
detail of each new or modified diagnosis and procedure code edit in the 
final rule. However, we make available the finalized Definitions of 
Medicare Code Edits (MCE) file. Therefore, we have made available the 
FY 2018 ICD-10 MCE Version 35 manual file. The link to this MCE manual 
file, along with the link to the mainframe and computer software for 
the MCE Version 35 (and ICD-10 MS-DRGs) are posted on the CMS Web site 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html through the FY 2018 IPPS Final Rule Home 
Page.
a. Age Conflict Edit
    In the MCE, the Age Conflict edit exists to detect inconsistencies 
between a patient's age and any diagnosis on the patient's record; for 
example, a 5-year-old patient with benign prostatic hypertrophy or a 
78-year-old patient coded with a delivery. In these cases, the 
diagnosis is clinically and virtually impossible for a patient of the 
stated age. Therefore, either the diagnosis or the age is presumed to 
be incorrect. Currently, in the MCE, the following four age diagnosis 
categories appear under the Age Conflict edit and are listed in the 
manual and written in the software program:
     Perinatal/Newborn--Age of 0 years only; a subset of 
diagnoses which will only occur during the perinatal or newborn period 
of age 0 (for example, tetanus neonatorum, health examination for 
newborn under 8 days old).
     Pediatric--Age is 0 to 17 years inclusive (for example, 
Reye's syndrome, routine child health examination).
     Maternity--Age range is 12 to 55 years inclusive (for 
example, diabetes in pregnancy, antepartum pulmonary complication).
     Adult--Age range is 15 to 124 years inclusive (for 
example, senile delirium, mature cataract).
    We received a request to provide clarification regarding the 
overlapping age ranges (0 to 17 years and 15 to 124 years) in the 
Pediatric and Adult categories under the Age Conflict edit. The 
requestor questioned which diagnosis code would be most appropriate to 
identify when a general or routine health examination is performed on 
patients who are within the age range of 15 to 17 years. The specific 
ICD-10-CM diagnosis codes that the requestor inquired about related to 
a child or to an adult encounter for a health examination are displayed 
in the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z00.00....................  Encounter for general adult medical
                             examination without abnormal findings.
Z00.01....................  Encounter for general adult medical
                             examination with abnormal findings.
Z00.121...................  Encounter for routine child health
                             examination with abnormal findings.
Z00.129...................  Encounter for routine child health
                             examination without abnormal findings.
------------------------------------------------------------------------

    The age ranges defined within the Age Conflict edits were 
established with the implementation of the IPPS. The adult age range 
includes the minimum age of 15 years for those patients who are 
declared emancipated minors. We note that, historically, we have not 
provided coding advice in rulemaking with respect to policy. We 
collaborate with the American Hospital Association (AHA) through the 
Coding Clinic for ICD-10-CM and ICD-10-PCS to promote proper coding. We 
recommend that the requestor and other interested parties submit any 
questions pertaining to correct coding practices for this specific 
issue to the AHA.
    Comment: Some commenters believe that CMS is responsible for 
addressing questions relating to the pediatric and adult age ranges in 
the Age Conflict edit. Other commenters stated that, while the Coding 
Clinic for ICD-10-CM and ICD-10-PCS addresses proper coding, it cannot 
address issues related to payer-specific edits or definitions.
    Response: We believe there is some confusion with regard to the 
issue presented in the FY 2018 IPPS/LTCH PPS proposed rule pertaining 
to the Age Conflict edit. We specifically responded to a request that 
sought clarification regarding the overlapping age ranges (0 to 17 
years and 15 to 124 years) in the Pediatric and Adult categories under 
the Age Conflict edit. We responded that the age ranges defined within 
the Age Conflict edits were established with the implementation of the 
IPPS and noted that the adult age range includes the minimum age of 15 
years for those patients who are declared emancipated minors. 
Therefore, we fully responded to the request that we clarify the Age 
ranges in the MCE. However, in addition to the request regarding the 
overlapping age ranges in the Age Conflict edit, the requester 
specifically asked for coding advice. As noted earlier, ``The requester 
questioned which diagnosis code would be most appropriate to identify 
when a general or routine health examination is performed on patients 
who are within the age range of 15 to 17 years.'' We provided the 
specific ICD-10-CM diagnosis codes that the requestor inquired about 
related to a child or to an adult encounter for a health examination as 
displayed in the table above. The statement recommending that the 
requester and other interested parties submit questions pertaining to 
correct coding practices for this specific issue to the AHA was with 
regard to reporting the most appropriate diagnosis code based on the 
clarification provided regarding the Age Conflict edit. As stated in 
the FY 2018 IPPS/LTCH PPS proposed rule, we have not provided coding 
advice in rulemaking with respect to policy. Accordingly, any

[[Page 38046]]

questions regarding which diagnosis code would be most appropriate to 
report when a general or routine health examination is performed on 
patients who are within the age range of 15 to 17 years would be best 
addressed by the Coding Clinic.
(1) Perinatal/Newborn Diagnosis Category
    Under the ICD-10 MCE, the Perinatal/Newborn Diagnosis category 
under the Age Conflict edit considers the age of 0 years only; a subset 
of diagnoses which will only occur during the perinatal or newborn 
period of age 0 to be inclusive. This includes conditions that have 
their origin in the fetal or perinatal period (before birth through the 
first 28 days after birth) even if morbidity occurs later. For that 
reason, the diagnosis codes on this Age Conflict edit list would be 
expected to apply to conditions or disorders specific to that age group 
only.
    In the ICD-10-CM classification, there are two diagnosis codes that 
describe conditions as occurring during infancy and the neonatal period 
that are currently not on the Perinatal/Newborn Diagnosis category edit 
code list. We consulted with staff at the Centers for Disease Control's 
(CDC's) National Center for Health Statistics (NCHS) because NCHS has 
the lead responsibility for the ICD-10-CM diagnosis codes. The NCHS' 
staff confirmed that, although diagnosis codes D80.7 (Transient 
hypogammaglobulinemia of infancy) and diagnosis code E71.511 (Neonatal 
adrenoleukodystrophy) do occur during infancy and the neonatal period, 
both conditions can last beyond the 28-day timeframe which is used to 
define the perinatal/newborn period. These diagnosis codes are not 
intended to be restricted for assignment to newborn patients. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19841), we 
proposed to not add these two diagnosis codes to the Perinatal/Newborn 
Diagnosis category under the Age Conflict edit. We invited public 
comments on our proposal.
    Comment: Commenters agreed that ICD-10-CM diagnosis codes D80.7 and 
E71.511 should not be added to the Perinatal/Newborn Diagnosis category 
under the Age Conflict edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to not add diagnosis code D80.7 (Transient 
hypogammaglobulinemia of infancy) and diagnosis code E71.511 (Neonatal 
adrenoleukodystrophy) to the Perinatal/Newborn Diagnosis category under 
the Age Conflict edit.
(2) Pediatric Diagnosis Category
    Under the ICD-10 MCE, the Pediatric diagnosis category under the 
Age Conflict edit considers the age range of 0 to 17 years inclusive. 
For that reason, the diagnosis codes on this Age Conflict edit list 
would be expected to apply to conditions or disorders specific to that 
age group only.
    The ICD-10-CM diagnosis code list for the Pediatric diagnosis 
category under the Age Conflict edit currently includes a diagnosis 
code pertaining to dandruff that is not intended to apply to pediatric 
patients only. We consulted with staff at the Centers for Disease 
Control's (CDC's) National Center for Health Statistics (NCHS) because 
NCHS has the lead responsibility for the ICD-10-CM diagnosis codes. The 
NCHS' staff confirmed that, although diagnosis code L21.0 (Seborrhea 
capitis) has an inclusion term of ``Cradle cap,'' the description of 
the diagnosis code is not intended to be restricted for assignment of 
pediatric patients. Therefore, in the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 19841), we proposed to remove diagnosis code L21.0 from the 
list of diagnosis codes for the Pediatric diagnosis category under the 
Age Conflict edit. We invited public comments on our proposal.
    Comment: Commenters agreed that diagnosis code L21.0 should be 
removed from the list of diagnosis codes for the Pediatric diagnosis 
category under the Age Conflict edit.
    Response: We appreciate the commenters support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to remove diagnosis code L21.0 (Seborrhea 
capitis) from the Pediatric diagnosis category under the Age Conflict 
edit in the ICD-10 MCE Version 35, effective October 1, 2017.
(3) Maternity Diagnoses
    Under the ICD-10 MCE, the Maternity diagnosis category under the 
Age Conflict edit considers the age range of 12 to 55 years inclusive. 
For that reason, the ICD-10-CM diagnosis codes on this Age Conflict 
edit list would be expected to apply to conditions or disorders 
specific to that age group only.
    As discussed in section II.F.12. of the preamble of the proposed 
rule and this final rule, Table 6A.--New Diagnosis Codes lists the new 
ICD-10-CM diagnosis codes that have been approved to date, which will 
become effective with discharges occurring on and after October 1, 
2017. Included on this list are a number of diagnosis codes associated 
with pregnancy and maternal care that we believe are appropriate to add 
to the list of diagnosis codes for the Maternity diagnoses category 
under the Age Conflict edit. We refer readers to Table 6P.1a. 
associated with the FY 2018 IPPS/LTCH PPS proposed rule (which is 
available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) 
for a review of the ICD-10-CM diagnosis codes that we proposed to add 
to the Age Conflict edit list. We invited public comments on our 
proposal.
    Comment: Commenters supported the proposal to add the list of 
diagnosis codes displayed in Table 6P.1a. associated with the FY 2018 
IPPS/LTCH PPS proposed rule to the Maternity diagnoses category under 
the Age Conflict edit. Commenters recommended that this same list of 
diagnosis codes also be added to the Diagnoses for Females Only edit.
    Response: We appreciate the commenters' support. We agree that the 
diagnosis codes proposed to be added to the Maternity diagnoses 
category under the Age Conflict edit are also appropriate to be added 
to the Diagnoses for Females Only edit code list under the Sex Conflict 
edit with other diagnosis codes associated with pregnancy and maternal 
care.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the list of diagnosis codes displayed in 
Table 6P.1a. associated with the FY 2018 IPPS/LTCH PPS proposed rule 
and this final rule (which is available via the Internet on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the Maternity diagnoses category under 
the Age Conflict edit and we are adding this same list of diagnosis 
codes to the Diagnoses for Females Only code list under the Sex 
Conflict edit, effective October 1, 2017.
b. Sex Conflict Edit
    In the MCE, the Sex Conflict edit detects inconsistencies between a 
patient's sex and any diagnosis or procedure on the patient's record; 
for example, a male patient with cervical cancer (diagnosis) or a 
female patient with a prostatectomy (procedure). In both instances, the 
indicated diagnosis or the procedure conflicts with the stated sex of 
the patient. Therefore, the patient's diagnosis, procedure, or sex is 
presumed to be incorrect.

[[Page 38047]]

(1) Diagnoses for Males Only Edit
    We received a request to review the following ICD-10-CM diagnosis 
codes pertaining to conditions associated with males for possible 
inclusion on the list of diagnosis codes for the Diagnoses for Males 
Only edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
B37.42....................  Candidal balanitis.
N35.011...................  Post-traumatic bulbous urethral stricture.
N35.012...................  Post-traumatic membranous urethral
                             stricture.
N35.013...................  Post-traumatic anterior urethral stricture.
N35.112...................  Postinfective bulbous urethral stricture,
                             not elsewhere classified.
N35.113...................  Postinfective membranous urethral stricture,
                             not elsewhere classified.
N35.114...................  Postinfective anterior urethral stricture,
                             not elsewhere classified.
N99.115...................  Postprocedural fossa navicularis urethral
                             stricture.
------------------------------------------------------------------------

    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19842), we agreed with the requestor that diagnosis code B37.42 
describes a condition that is applicable only to males. Balanitis is 
the inflammation of the glans (rounded head) of the penis. We also 
agreed that the diagnosis codes listed above that align under 
subcategory N35.01 (Post-traumatic urethral stricture, male) and 
subcategory N35.11 (Postinfection urethral stricture, not elsewhere 
classified, male) are appropriate to add to the list of diagnosis codes 
for the Diagnoses for Males Only edit because these diagnosis codes 
include specific terminology that is applicable only to males. Further, 
we agreed that diagnosis code N99.115 is appropriate to add to the list 
of diagnosis codes for the Diagnoses for Males Only edit because 
subcategory N99.11 (Postprocedural urethral stricture, male) includes 
specific terminology that is applicable to males only as well. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule, we proposed to 
add the ICD-10-CM diagnosis codes listed in the table above to the list 
of diagnosis codes for the Diagnoses for Males Only edit.
    We also proposed to remove ICD-10-CM diagnosis code Q64.0 
(Epispadias) from the list of diagnosis codes for the Diagnoses for 
Males Only edit because this rare, congenital condition involving the 
opening of the urethra can occur in both males and females.
    In addition, as discussed in section II.F.12. of the preamble of 
the proposed rule, Table 6A.--New Diagnosis Codes associated with the 
proposed rule listed the new ICD-10-CM diagnosis codes that had been 
approved to date, which will become effective with discharges occurring 
on and after October 1, 2017. Included on this list are a number of 
diagnosis codes associated with male body parts that we believe are 
appropriate to add to the list of diagnosis codes for the Diagnoses for 
Males Only category under the Sex Conflict edit. We refer readers to 
Table 6P.1b. associated with the proposed rule (which is available via 
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for a 
review of the ICD-10-CM diagnosis codes that we proposed to add to the 
list of diagnosis codes for the Diagnoses for Males Only category.
    We invited public comments on our proposals.
    Comment: Commenters supported the proposal to add the diagnosis 
codes listed in the table in the proposed rule describing conditions 
applicable to males to the Diagnoses for Males Only edit. Commenters 
also supported the addition of new diagnosis codes associated with male 
body parts as displayed in Table 6P.1b. associated with the proposed 
rule to the Diagnoses for Males Only edit. In addition, commenters 
supported the proposal to remove diagnosis code Q64.0 (Epispadias) from 
the list of diagnosis codes for the Diagnoses for Males Only edit 
because this condition can occur in both males and females.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposals to add the eight diagnosis codes displayed in 
the table above and the new diagnosis codes associated with male body 
parts as displayed in Table 6P.1b. associated with the proposed rule 
and this final rule (which is available via the Internet on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the Diagnoses for Males Only edit, 
effective October 1, 2017. We are also finalizing our proposal to 
remove diagnosis code Q64.0 (Epispadias) from the list of diagnosis 
codes for the Diagnoses for Males Only edit, effective October 1, 2017.
(2) Diagnoses for Females Only
    We received a request to review the following ICD-10-CM diagnosis 
codes for possible removal from the list of diagnosis codes for the 
Diagnoses for Females Only edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
F52.6.....................  Dyspareunia not due to a substance or known
                             physiological condition.
J84.81....................  Lymphangioleiomyomatosis.
R97.1.....................  Elevated cancer antigen 125 [CA 125].
------------------------------------------------------------------------

    The requestor noted that, in the ICD-10-CM classification, the term 
``Dyspareunia'' (painful sexual intercourse) has specified codes for 
males and females located in the Alphabetic Index to Diseases for 
Reporting Physiological Dyspareunia. However, the indexing for 
diagnosis code F52.6 (Dyspareunia not due to a substance or known 
physiological condition) specifies that it is not due to a 
physiological condition and the entry is not gender specific. According 
to the requestor, while the condition is most often associated with 
female sexual dysfunction, there is a subset of males who also suffer 
from this condition.

[[Page 38048]]

    In addition, the requestor stated that diagnosis code J84.81 
(Lymphangioleiomyomatosis) describes a rare form of lung disease 
believed to occur more often in patients with tuberous sclerosis 
complex (TSC), a disorder due to genetic mutation. Although the 
condition is described as being exclusive to women, unique cases for 
men with TSC have also been reported.
    Lastly, the requestor indicated that diagnosis code R97.1 (Elevated 
cancer antigen 125 [CA 125]) describes the tumor marker that commonly 
identifies ovarian cancer cells in women. However, the requestor stated 
that high levels have also been demonstrated in men (and women) with 
lung cancer as well.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19842 through 19843), we reviewed ICD-10-CM diagnosis codes F52.6, 
J84.81, and R97.1, and we agree with the requestor that Dyspareunia, 
not due to a physiological condition, can also occur in males. We also 
agree that the condition of Lymphangioleiomyomatosis and Elevated CA 
125 levels can be found in males. Therefore, we proposed to remove 
these three diagnosis codes from the list of diagnosis codes for the 
Diagnoses for Females Only edit. We invited public comments on our 
proposals.
    In addition, we proposed to add new diagnosis code Z40.03 
(Encounter for prophylactic removal of fallopian tube(s)) to the list 
of diagnosis codes for the Diagnoses for Females Only edit. Currently, 
diagnosis code Z40.02 (Encounter for prophylactic removal of ovary) is 
on the edit's code list; therefore, inclusion of new diagnosis code 
Z40.03 would be consistent. We referred readers to Table 6A.--New 
Diagnosis Codes associated with the FY 2018 IPPS/LTCH PPS proposed rule 
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the list of new ICD-10-CM diagnosis 
codes that had been finalized to date. We invited public comments on 
our proposal.
    Comment: Commenters supported the proposal to remove diagnosis 
codes F52.6, J84.81, and R97.1 from the list of diagnosis codes for the 
Diagnoses for Females Only edit. Commenters also supported the proposal 
to add new diagnosis code Z40.03 to the list of diagnosis codes for the 
Diagnoses for Females Only edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to remove diagnosis codes F52.6 (Dyspareunia 
not due to a substance or known physiological condition), J84.81 
(Lymphangioleiomyomatosis) and diagnosis code R97.1 (Elevated cancer 
antigen 125 [CA 125]) from the Diagnoses for Females Only edit, 
effective October 1, 2017. We are also finalizing our proposal to add 
new diagnosis code Z40.03 (Encounter for prophylactic removal of 
fallopian tube(s)) to the list of diagnosis codes for the Diagnoses for 
Females Only edit, effective Octber 1, 2017.
c. Non-Covered Procedure Edit: Gender Reassignment Surgery
    In the MCE, the Non-Covered Procedure edit identifies procedures 
for which Medicare does not provide payment. Payment is not provided 
due to specific criteria that are established in the National Coverage 
Determination (NCD) process. We refer readers to the Web site at: 
https://www.cms.gov/Medicare/Coverage/DeterminationProcess/howtorequestanNCD.html for additional information on this process. In 
addition, there are procedures that would normally not be paid by 
Medicare but, due to the presence of certain diagnoses, are paid.
    We issued instructions on June 27, 2014, as a one-time 
notification, Pub. 100-03, Transmittal 169, Change Request 8825, 
effective May 30, 2014, announcing to MACs the invalidation of National 
Coverage Determination (NCD) 140.3 for Transsexual Surgery. As a 
result, MACs determined coverage on a case-by-case basis. The 
transmittal is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R169NCD.html?DLPage=1&DLEntries=10&DLFilter=Transsexual&DLSort=1&DLSortDir=ascending.
    It was brought to our attention that the ICD-10-PCS procedure codes 
shown in the table below are currently included on the list of 
procedure codes for the Non-Covered Procedure edit. As a result, when 
one of these procedure codes is reported on a claim, the edit for Non-
Covered Procedure is triggered and claims are not able to process 
correctly.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0W4M070...................  Creation of vagina in male perineum with
                             autologous tissue substitute, open
                             approach.
0W4M0J0...................  Creation of vagina in male perineum with
                             synthetic substitute, open approach.
0W4M0K0...................  Creation of vagina in male perineum with
                             nonautologous tissue substitute, open
                             approach.
0W4M0Z0...................  Creation of vagina in male perineum, open
                             approach.
0W4N071...................  Creation of penis in female perineum with
                             autologous tissue substitute, open
                             approach.
0W4N0J1...................  Creation of penis in female perineum with
                             synthetic substitute, open approach.
0W4N0K1...................  Creation of penis in female perineum with
                             nonautologous tissue substitute, open
                             approach.
0W4N0Z1...................  Creation of penis in female perineum, open
                             approach.
------------------------------------------------------------------------

    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19843), we proposed to remove the ICD-10-PCS procedure codes included 
in the table above from the list of procedure codes for the Non-Covered 
Procedure edit to help resolve claims processing issues associated with 
the reporting of these procedure codes. We invited public comments on 
our proposal.
    Comment: Commenters agreed with the proposal to remove the ICD-10-
PCS procedure codes included in the table in the proposed rule from the 
list of procedure codes under the Non-Covered Procedure edit. One 
commenter who supported the proposal also requested that CMS review 
current policies related to breast implant procedures for transgender 
females. This commenter noted that estrogen therapy by itself does not 
provide adequate growth tissue. Another commenter stated that these 
gender reassignment procedures should remain noncovered as they are a 
form of plastic surgery and, in principle, are not unlike elective 
abortion procedures.
    Response: We appreciate the commenters' support. In response to the 
commenter who requested that we review current policies related to 
breast implant procedures for transgender females, we recommend that 
the commenter contact its local MAC for additional information because 
there is

[[Page 38049]]

no national coverage determination (NCD) for this service. With regard 
to the commenter who stated that the procedure codes describing gender 
reassignment surgery listed in the table in the proposed rule should 
remain noncovered, we note that, as mentioned earlier in this section, 
NCD 140.3 for Transsexual Surgery was invalidated effective May 30, 
2014, and therefore, the MACs determine coverage on a case-by-case 
basis.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the ICD-10-PCS procedure codes 
included in the table above from the list of procedure codes for the 
Non-Covered Procedure edit to help resolve claims processing issues 
associated with the reporting of these procedure codes.
d. Unacceptable Principal Diagnosis Edit
    In the MCE, there are select codes that describe a circumstance 
that influences an individual's health status, but does not actually 
describe a current illness or injury. There also are codes that are not 
specific manifestations but may be due to an underlying cause. These 
codes are considered unacceptable as a principal diagnosis. In limited 
situations, there are a few codes on the MCE Unacceptable Principal 
Diagnosis edit code list that are considered ``acceptable'' when a 
specified secondary diagnosis is also coded and reported on the claim.
(1) Bacterial and Viral Infectious Agents (B95 Through B97)
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19843), we examined ICD-10-CM diagnosis codes in Chapter 1 (Certain 
Infectious and Parasitic Diseases) of the Classification Manual that 
fall within the range of three code categories for ``Bacterial and 
Viral Infectious Agents'' (B95 through B97). The instructional note 
provided at this section states that these categories are provided for 
use as supplementary or additional codes to identify the infectious 
agent(s) in diseases classified elsewhere. We identified 45 ICD-10-CM 
diagnosis codes within the range of these code categories for 
``Bacterial and Viral Infectious Agents'' (B95 through B97) that, as a 
result of the instructional note, are not appropriate to report as a 
principal diagnosis. In the FY 2018 IPPS/LTCH PPS proposed rule, we 
proposed to add the 45 ICD-10-CM diagnosis codes shown in Table 6P.1c. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for 
the Unacceptable Principal Diagnosis edit. We invited public comments 
on our proposal.
    Comment: Commenters supported the proposal to add the 45 ICD-10-CM 
diagnosis codes shown in Table 6P.1c. associated with the proposed rule 
to the list of codes for the Unacceptable Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the 45 ICD-10-CM diagnosis codes shown 
in Table 6P.1c. associated with the proposed rule and this final rule 
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit, effective October 1, 2017.
(2) Mental Disorders Due to Known Physiological Conditions (F01 Through 
F09)
    We examined ICD-10-CM diagnosis codes in Chapter 5 (Mental and 
Behavioral Disorders) of the Classification Manual that fall within the 
range of nine code categories for ``Mental Disorders Due to Known 
Physiological Conditions'' (F01 through F09). The instructional note 
provided at this section states that this block comprises a range of 
mental disorders grouped together on the basis of their having in 
common a demonstrable etiology in cerebral disease, brain injury, or 
other insult leading to cerebral dysfunction. The dysfunction may be 
primary, as in diseases, injuries, and insults that affect the brain 
directly and selectively; or secondary, as in systemic diseases and 
disorders that attack the brain only as one of the multiple organs or 
systems of the body that are involved.
    We identified 21 ICD-10-CM diagnosis codes that fall within the 
range of these code categories for ``Mental Disorders Due to Known 
Physiological Conditions'' (F01 through F09). Of these nine code 
categories, seven have a ``Code first the underlying physiological 
condition'' note. For example, at code category F01--Vascular dementia, 
the note reads, ``Code first the underlying physiological condition or 
sequelae of cerebrovascular disease.'' We stated in the proposed rule 
that there are a total of 19 diagnosis codes that fall under these 7 
code categories with a ``Code first'' note and, therefore, are not 
appropriate to report as a principal diagnosis. Therefore, in the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19843 through 19844), we 
proposed to add the 19 ICD-10-CM diagnosis codes shown in Table 6P.1d. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for 
the Unacceptable Principal Diagnosis edit. We invited public comments 
on our proposal.
    Comment: Some commenters disagreed with the proposal to add the 19 
ICD-10-CM diagnosis codes shown in Table 6P.1d. associated with the 
proposed rule to the list of codes for the Unacceptable Principal 
Diagnosis edit. The commenters suggested that CMS consult with the NCHS 
to determine if any of the codes may appropriately be sequenced as a 
principal diagnosis in certain circumstances. One commenter noted it 
had been informed through communications with the NCHS and AHA that, 
within the ICD-10-CM classification, there are instances where some 
``Code first'' notes are intended to be interpreted as ``Code first, if 
applicable'' or ``Code first, if known,'' although those terms are not 
explicitly stated in the instructional note. The commenter acknowledged 
that while some of the diagnosis codes that were proposed to be added 
to the Unacceptable Principal Diagnosis edit appear straightforward, 
such as diagnosis code F04 (Amnestic disorder due to known 
physiological condition), other diagnosis codes are not as clear, such 
as diagnosis code F01.5 (Vascular dementia) or diagnosis code F07.81 
(Postconcussional syndrome).
    Response: We appreciate the commenters' review and input regarding 
the proposal. We consulted with the staff at NCHS and they acknowledged 
that this group of codes was modified from the original World Health 
Organization (WHO) version of ICD-10. They indicated that while some 
code titles do include the language ``due to known physiological 
condition,'' they are evaluating these ``Code first'' instructional 
notes further as they perform their annual review of the coding 
guidelines and consider updates for FY 2018.
    After consideration of the public comments that we received and for 
the reasons described, we are not finalizing our proposal to add the 19 
ICD-10-CM diagnosis codes shown in Table 6P.1d. associated with the 
proposed rule to the list of codes for the Unacceptable Principal 
Diagnosis edit.

[[Page 38050]]

(3) Other Obstetric Conditions, Not Elsewhere Classified (O94 Through 
O9A)
    We examined ICD-10-CM diagnosis codes in Chapter 15 (Pregnancy, 
Childbirth and the Puerperium) of the Classification Manual that fall 
within the range of four code categories for ``Other Obstetric 
Conditions, Not Elsewhere Classified'' (O94 through O9A). The 
instructional note provided at this section under category O94 states 
that ``this category is to be used to indicate conditions in O00 
through O77, O85 through O94 and O98 through O9A as the cause of late 
effects. The sequelae include conditions specified as such, or as late 
effects, which may occur at any time after the puerperium. Code first 
condition resulting from (sequela) of complication of pregnancy, 
childbirth, and the puerperium.''
    We stated in the proposed rule that we identified one ICD-10-CM 
diagnosis code within the range of these code categories for ``Other 
Obstetric Conditions, Not Elsewhere Classified'' (O94 through O9A) 
that, as a result of the instructional note, is not appropriate to 
report as a principal diagnosis because that code identifies the cause 
of the late effect. This ICD-10-CM diagnosis code is O94 (Sequelae of 
complication of pregnancy, childbirth, and the puerperium). In the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19844), we proposed to add ICD-
10-CM diagnosis code O94 to the list of codes for the Unacceptable 
Principal Diagnosis edit. We invited public comments on our proposal.
    Comment: Commenters agreed with the proposal to add diagnosis code 
O94 to the list of codes for the Unacceptable Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add diagnosis code O94 (Sequelae of 
complication of pregnancy, childbirth, and the puerperium) to the list 
of codes for the Unacceptable Principal Diagnosis edit, effective 
October 1, 2017.
(4) Symptoms and Signs Involving Cognition, Perception, Emotional State 
and Behavior (R40 Through R46)
    We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms, 
Signs and Abnormal Findings) of the Classification Manual that fall 
within the range of code categories for ``Symptoms and Signs Involving 
Cognition, Perception, Emotional State and Behavior'' (R40 through 
R46), specifically under code category R40--Somnolence, stupor and 
coma. At subcategory R40.2--Coma, there is an instructional note, which 
states ``Code first any associated: Fracture of skull (S02.-); 
Intracranial injury (S06.-).'' We stated in the proposed rule that we 
identified 96 ICD-10-CM diagnosis codes under this subcategory that, as 
a result of the instructional note, are not appropriate to report as a 
principal diagnosis. In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19844), we proposed to add the 96 ICD-10-CM diagnosis codes shown in 
Table 6P.1e. associated with the proposed rule (which is available via 
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the 
list of codes for the Unacceptable Principal Diagnosis edit. We invited 
public comments on our proposal.
    Comment: Commenters agreed with the proposed addition of 95 of the 
96 diagnosis codes included in Table 6P.1e. associated with the 
proposed rule. The commenters specifically disagreed with the proposal 
to include diagnosis code R40.20 (Unspecified coma) to the Unacceptable 
Principal Diagnosis edit because the term ``any'' in the instructional 
note ``Code first any associated: Fracture of skull (S02.-); 
Intracranial injury (S06.-)'' indicates that if there is not a 
documented skull fracture or intracranial injury, then diagnosis code 
R40.20 could appropriately be reported as a Principal Diagnosis.
    Response: We appreciate the commenters' support to add 95 of the 96 
diagnosis codes included in our proposal as shown in Table 6P.1e. 
associated with the proposed rule. We agree with the commenters that 
there could be circumstances in which diagnosis code R40.20 would 
appropriately be reported as the principal diagnosis in the absence of 
a documented fracture of skull or intracranial injury.
    After consideration of the public comments we received, we are 
finalizing the addition of 95 of the 96 diagnosis codes shown in Table 
6P.1e. associated with the proposed rule (which is available via the 
Internet on the CMS Web site) to the list of codes for the Unacceptable 
Principal Diagnosis edit. For the reasons stated, we are not finalizing 
the proposal to add diagnosis code R40.20 (Unspecified coma) to the 
Unacceptable Principal Diagnosis edit. Table 6P.1e. associated with 
this final rule (which is available via the Internet on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) sets forth the 95 diagnosis codes that we 
are adding to the list of codes for the Unacceptable Principal 
Diagnosis edit, consistent with our finalized policy.
(5) General Symptoms and Signs (R50 Through R69)
    We examined ICD-10-CM diagnosis codes in Chapter 18 (Symptoms, 
Signs and Abnormal Findings) of the Classification Manual that fall 
within the range of code categories for ``General Symptoms and Signs'' 
(R50 through R69), specifically, at code category R65--Symptoms and 
signs associated with systemic inflammation and infection. There is an 
instructional note at subcategory R65.1--Systemic inflammatory response 
syndrome (SIRS) of non-infectious origin, which states ``Code first 
underlying condition, such as: Heatstroke (T67.0); Injury and trauma 
(S00-T88).'' There is also an instructional note at subcategory R65.2--
Severe sepsis, which states ``Code first underlying infection, such 
as:'' and provides a list of examples.
    We identified four ICD-10-CM diagnosis codes in these subcategories 
that, as a result of the instructional notes described above, are not 
appropriate to report as a principal diagnosis. These four ICD-10-CM 
codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
R65.10....................  Systemic inflammatory response syndrome
                             (SIRS) of non-infectious origin without
                             acute organ dysfunction.
R65.11....................  Systemic inflammatory response syndrome
                             (SIRS) of non-infectious origin with acute
                             organ dysfunction.
R65.20....................  Severe sepsis without septic shock.
R65.21....................  Severe sepsis with septic shock.
------------------------------------------------------------------------


[[Page 38051]]

    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19844), we 
proposed to add the four ICD-10-CM diagnosis codes shown in the table 
above to the list of codes for the Unacceptable Principal Diagnosis 
edit. We invited public comments on our proposal.
    Comment: Commenters agreed with the proposal to add the four 
diagnosis codes listed in the table in the proposed rule to the 
Unacceptable Principal Diagnosis edit. However, another commenter 
disagreed with adding diagnosis code R65.10 (Systemic inflammatory 
response syndrome (SIRS) of non-infectious origin without acute organ 
dysfunction) and diagnosis code R65.11 (Systemic inflammatory response 
syndrome (SIRS) of non-infectious origin with acute organ dysfunction) 
to the edit. According to the commenter, if the underlying condition is 
not known, it would be appropriate to report either one of the two 
codes (R65.10 and R65.11) as the principal diagnosis.
    Response: We appreciate the commenters' support. We disagree with 
the commenter who asserted that if the underlying condition is not 
known, it would be appropriate to report either diagnosis code R65.10 
or R65.11 as a principal diagnosis. The current FY 2017 ICD-10-CM 
Official Guidelines for Coding and Reporting at Section 1.C.18.g. 
states, ``The systemic inflammatory response syndrome (SIRS) can 
develop as a result of certain non-infectious disease processes, such 
as trauma, malignant neoplasm, or pancreatitis. When SIRS is documented 
with a noninfectious condition, and no subsequent infection is 
documented, the code for the underlying condition, such as an injury, 
should be assigned, followed by code R65.10, Systemic inflammatory 
response syndrome (SIRS) of non-infectious origin without acute organ 
dysfunction, or code R65.11, Systemic inflammatory response syndrome 
(SIRS) of non-infectious origin with acute organ dysfunction.'' 
Therefore, the underlying condition (for example, trauma, neoplasm, 
pancreatitis, amongothers) responsible for causing the systemic 
inflammatory response syndrome (SIRS) should be readily available in 
the medical record documentation due to its clinical significance for 
the care and treatment of the patient.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the four diagnosis codes shown in the 
table above from code category R65 (Symptoms and signs associated with 
systemic inflammation and infection) to the Unacceptable Principal 
Diagnosis edit code list, effective October 1, 2017.
(6) Poisoning by, Adverse Effects of, and Underdosing of Drugs, 
Medicaments and Biological Substances (T36 Through T50)
    We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and 
Poisoning) of the Classification Manual that fall within the range of 
code categories for ``Poisoning by, Adverse Effects of and Underdosing 
of Drugs, Medicaments and Biological Substances'' (T36 through T50). 
The instructional note provided at this section states ``Code first, 
for adverse effects, the nature of the adverse effect, such as:'' and 
provides a list of examples. In addition, the FY 2017 ICD-10-CM 
Official Guidelines for Coding and Reporting at Section I.C.19.e.5.c., 
state that ``Codes for underdosing should never be assigned as 
principal or first-listed codes.''
    We identified 996 ICD-10-CM diagnosis codes that, as a result of 
the instructional note for adverse effects and the guideline for 
reporting diagnosis codes for underdosing, are not appropriate to 
report as a principal diagnosis. In the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 19844 through 19845), we proposed to add the 996 ICD-10-CM 
diagnosis codes shown in Table 6P.1f. associated with the proposed rule 
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to add the 996 ICD-10-CM 
diagnosis codes shown in Table 6P.1f. associated with the proposed rule 
describing adverse effects and underdosing to the Unacceptable 
Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the 996 ICD-10-CM diagnosis codes shown 
in Table 6P.1f. associated with the proposed rule and this final rule 
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) to the list of codes for the Unacceptable 
Principal Diagnosis edit code list, effective October 1, 2017.
(7) Complications of Surgical and Medical Care, Not Elsewhere 
Classified (T80 Through T88)
    We examined ICD-10-CM diagnosis codes in Chapter 19 (Injury and 
Poisoning) of the Classification Manual that fall within the range of 
code categories for ``Complications of Surgical and Medical Care, Not 
Elsewhere Classified'' (T80 through T88), specifically, at code 
category T81--Complications of procedures, not elsewhere classified. 
There is an instructional note at subcategory T81.12x--Postprocedural 
septic shock, which states, ``Code first underlying infection.''
    We identified two ICD-10-CM diagnosis codes in this subcategory 
that, as a result of the instructional note, are not appropriate to 
report as a principal diagnosis. These two ICD-10-CM codes are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
T81.12XD..................  Postprocedural septic shock, subsequent
                             encounter.
T81.12XS..................  Postprocedural septic shock, sequela.
------------------------------------------------------------------------

    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19845), we 
proposed to add the two ICD-10-CM diagnosis codes shown in the table 
above to the list of codes for the Unacceptable Principal Diagnosis 
edit. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to add the two diagnosis 
codes shown in the table in the proposed rule to the Unacceptable 
Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add the two diagnosis codes describing 
postprocedural septic shock listed in the

[[Page 38052]]

proposed rule and above in this final rule to the list of codes for the 
Unacceptable Principal Diagnosis edit, effective October 1, 2017.
(8) Persons Encountering Health Services for Examinations (Z00 Through 
Z13)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Persons Encountering Health 
Services for Examinations'' (Z00 through Z13), specifically, at code 
category Z00--Encounter for general examination without complaint, 
suspected or reported diagnosis. The FY 2017 ICD-10-CM Official 
Guidelines for Coding and Reporting at Section I.C.21.c.16., state that 
the following ICD-10-CM Z-codes/categories may only be reported as the 
principal/first-listed diagnosis, except when there are multiple 
encounters on the same day and the medical records for the encounters 
are combined:
     Z00 (Encounter for general examination without complaint, 
suspected or reported diagnosis); except Z00.6 (Encounter for 
examination for normal comparison and control in clinical research 
program).
    Therefore, we stated in the proposed rule that diagnosis code Z00.6 
should not be reported as a principal/first-listed diagnosis. In the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19845), we proposed to add ICD-
10-CM diagnosis code Z00.6 to the list of codes for the Unacceptable 
Principal Diagnosis edit. We invited public comments on our proposal.
    Comment: Commenters did not support the proposal to add diagnosis 
code Z00.6 to the list of codes for the Unacceptable Principal 
Diagnosis edit. The commenters stated that, although this diagnosis 
code is listed as an exception in the FY 2017 ICD-10-CM Official 
Guidelines for Coding and Reporting, the code is not prohibited from 
ever being reported as a principal diagnosis, rather, it is not 
required to be reported as a principal diagnosis. According to the 
commenters, there are circumstances when a control subject in a 
clinical research program may be admitted to the hospital and diagnosis 
code Z00.6 would be appropriate to report as the principal diagnosis. 
One commenter also noted that while Medicare may not be the responsible 
payer in these circumstances, other payers use the MCE edits, and these 
edits are frequently programmed in their billing software. Therefore, 
the commenter believed that including diagnosis code Z00.6 on the edit 
could cause unintended coding and reporting issues.
    Response: We appreciate the commenters' feedback on our proposal. 
We agree that there could be circumstances where it would be 
appropriate to report diagnosis code Z00.6 as the principal diagnosis. 
We have noted previously (72 FR 47152) that we encourage other payers 
to develop refinements to Medicare's DRG system, which includes the 
Medicare code edits, consistent with their population's needs. However, 
we also recognize that tother payers use the MCE edits in their 
systems.
    After consideration of the public comments we received and for the 
reasons described, we are not finalizing our proposal to add diagnosis 
code Z00.6 (Encounter for examination for normal comparison and control 
in clinical research program) to the list of codes for the Unacceptable 
Principal Diagnosis edit.
    To address a separate issue, in the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 19845), we proposed to remove the diagnosis codes under 
category Z05 (Encounter for observation and examination of newborn for 
suspected diseases and conditions ruled out) from the list of codes for 
the Unacceptable Principal Diagnosis edit. The FY 2017 ICD-10-CM 
Official Guidelines for Coding and Reporting at Section I.C.16.b. state 
the following:
     Assign a code from category Z05, Observation and 
evaluation of newborns and infants for suspected conditions ruled out, 
to identify those instances when a healthy newborn is evaluated for a 
suspected condition that is determined after study not to be present. 
Do not use a code from category Z05 when the patient has identified 
signs or symptoms of a suspected problem; in such cases code the sign 
or symptom.
     A code from category Z05 may also be assigned as a 
principal or first-listed code for readmissions or encounters when the 
code from category Z38 no longer applies. Codes from category Z05 are 
for use only for healthy newborns and infants for which no condition 
after study is found to be present.
     A code from category Z05 is to be used as a secondary code 
after the code from category Z38, Liveborn infants according to place 
of birth and type of delivery.
    Therefore, the ICD-10-CM diagnosis codes under category Z05 are 
allowed to be reported as a principal diagnosis. We proposed to remove 
the 14 ICD-10-CM diagnosis codes shown in the table below from the list 
of codes for the Unacceptable Principal Diagnosis edit.

------------------------------------------------------------------------
      ICD-10-CM code                      Code description
------------------------------------------------------------------------
Z05.0.....................  Observation and evaluation of newborn for
                             suspected cardiac condition ruled out.
Z05.1.....................  Observation and evaluation of newborn for
                             suspected infectious condition ruled out.
Z05.2.....................  Observation and evaluation of newborn for
                             suspected neurological condition ruled out.
Z05.3.....................  Observation and evaluation of newborn for
                             suspected respiratory condition ruled out.
Z05.41....................  Observation and evaluation of newborn for
                             suspected genetic condition ruled out.
Z05.42....................  Observation and evaluation of newborn for
                             suspected metabolic condition ruled out.
Z05.43....................  Observation and evaluation of newborn for
                             suspected immunologic condition ruled out.
Z05.5.....................  Observation and evaluation of newborn for
                             suspected gastrointestinal condition ruled
                             out.
Z05.6.....................  Observation and evaluation of newborn for
                             suspected genitourinary condition ruled
                             out.
Z05.71....................  Observation and evaluation of newborn for
                             suspected skin and subcutaneous tissue
                             condition ruled out.
Z05.72....................  Observation and evaluation of newborn for
                             suspected musculoskeletal condition ruled
                             out.
Z05.73....................  Observation and evaluation of newborn for
                             suspected connective tissue condition ruled
                             out.
Z05.8.....................  Observation and evaluation of newborn for
                             other specified suspected condition ruled
                             out.
Z05.9.....................  Observation and evaluation of newborn for
                             unspecified suspected condition ruled out.
------------------------------------------------------------------------

    We invited public comments on our proposal.
    Comment: Commenters agreed with the proposal to remove the 14 ICD-
10-CM diagnosis codes describing observation and evaluation of newborn 
for various suspected conditions that have been ruled out as shown in 
the

[[Page 38053]]

table in the proposed rule from the list of codes for the Unacceptable 
Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the 14 ICD-10-CM diagnosis codes as 
shown in the table above from the list of codes for the Unacceptable 
Principal Diagnosis edit, effective October 1, 2017.
(9) Encounters for Other Specific Health Care (Z40 Through Z53)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Encounters for Other Specific 
Health Care'' (Z40 through Z53), specifically, at code category Z52--
Donors of organs and tissues. The FY 2017 ICD-10-CM Official Guidelines 
for Coding and Reporting at Section I.C.21.c.16. state that the 
following Z-codes/categories may only be reported as the principal/
first-listed diagnosis, except when there are multiple encounters on 
the same day and the medical records for the encounters are combined:
     Z52 (Donors of organs and tissues); except Z52.9 (Donor of 
unspecified organ or tissue).
    Therefore, we stated in the proposed rule that ICD-10-CM diagnosis 
code Z52.9 should not be reported as a principal/first-listed 
diagnosis. In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19846), we 
proposed to add ICD-10-CM diagnosis code Z52.9 to the list of codes for 
the Unacceptable Principal Diagnosis edit. We invited public comments 
on our proposal.
    Comment: Commenters supported the proposal to add diagnosis code 
Z52.9 to the list of codes for the Unacceptable Principal Diagnosis 
edit. Commenters stated that this code is on the list of ``non-specific 
Z codes'' in the FY 2017 ICD-10-CM Official Guidelines for Coding and 
Reporting, indicating that this code is so nonspecific that there is 
little justification for its use in the hospital inpatient setting. 
However, another commenter disagreed with adding diagnosis code Z52.9 
to the list of codes for the Unacceptable Principal Diagnosis edit. 
Similar to the circumstances with diagnosis code Z00.6 (Encounter for 
examination for normal comparison and control in clinical research 
program) discussed earlier in this section, this commenter stated that 
the FY 2017 ICD-10-CM Official Guidelines for Coding and Reporting does 
not prohibit diagnosis code Z52.9 from ever being reported as a 
principal diagnosis; rather, it is not required to be reported as a 
principal diagnosis.
    Response: We thank the commenters for their support and feedback. 
Upon further review, we agree that, consistent with the FY 2017 ICD-10-
CM Official Guidelines for Coding and Reporting, the interpretation of 
the exception for diagnosis code Z52.9 is that it does not prohibit the 
code from ever being reported as a principal diagnosis; rather, the 
exception is indicating that the code is not required to be reported as 
a principal diagnosis.
    After consideration of the public comments we received and for the 
reasons described, we are not finalizing our proposal to add ICD-10-CM 
diagnosis code Z52.9 to the list of codes for the Unacceptable 
Principal Diagnosis edit.
(10) Persons Encountering Health Services in Other Circumstances (Z69 
Through Z76)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Persons Encountering Health 
Services in Other Circumstances'' (Z69 through Z76), specifically, at 
subcategory Z71.8--Other specified counseling. Consistent with ICD-10-
CM diagnosis codes Z71.81 (Spiritual or religious counseling) and 
Z71.89 (Other specified counseling), in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19846), we proposed to add new diagnosis code 
Z71.82 (Exercise counseling) to the list of codes for the Unacceptable 
Principal Diagnosis edit. We referred readers to Table 6A.--New 
Diagnosis Codes associated with the proposed rule (which is available 
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the 
list of new ICD-10-CM diagnosis codes that had been finalized to date. 
We invited public comments on our proposal.
    Comment: Commenters supported the proposal to add new diagnosis 
code Z71.82 (Exercise counseling) to the list of codes for the 
Unacceptable Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to add new ICD-10-CM diagnosis code Z71.82 
(Exercise counseling) to the list of codes for the Unacceptable 
Principal Diagnosis edit, effective October 1, 2017.
(11) Persons With Potential Health Hazards Related to Family and 
Personal History and Certain Conditions Influencing Health Status (Z77 
Through Z99)
    We examined ICD-10-CM diagnosis codes in Chapter 21 (Factors 
Influencing Health Status) of the Classification Manual that fall 
within the range of code categories for ``Persons with Potential Health 
Hazards Related to Family and Personal History and Certain Conditions 
Influencing Health Status'' (Z77 through Z99), specifically, at code 
category Z91.8--Other specified personal risk factors, not elsewhere 
classified. Consistent with ICD-10-CM diagnosis codes Z91.81 (History 
of falling), Z91.82 (Personal history of military deployment), and 
Z91.89 (Other specified personal risk factors, not elsewhere 
classified), in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19846), 
we proposed to add new ICD-10-CM diagnosis codes Z91.841 (Risk for 
dental caries, low), Z91.842 (Risk for dental caries, moderate), 
Z91.843 (Risk for dental caries, high), and Z91.849 (Unspecified risk 
for dental caries) to the list of codes for the Unacceptable Principal 
Diagnosis edit. We referred readers to Table 6A.--New Diagnosis Codes 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) for the list of new ICD-
10-CM diagnosis codes that had been finalized to date. We invited 
public comments on our proposal.
    Comment: Commenters supported the proposal to add new diagnosis 
codes in subcategory Z91.84, Risk for dental caries, to the list of 
codes for the Unacceptable Principal Diagnosis edit.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to add new ICD-10-CM diagnosis codes Z91.841 
(Risk for dental caries, low), Z91.842 (Risk for dental caries, 
moderate), Z91.843 (Risk for dental caries, high), and Z91.849 
(Unspecified risk for dental caries) to the list of codes for the 
Unacceptable Principal Diagnosis edit, effective October 1, 2017.
e. Future Enhancement
    Similar to our discussion in the FY 2017 IPPS/LTCH PPS final rule 
(81 FR 56843 through 56844), with the implementation of ICD-10, it is 
clear that there are several new concepts in the classification. 
Looking ahead to the needs and uses of coded data as the data

[[Page 38054]]

continue to evolve from the reporting, collection, processing, 
coverage, payment and analysis aspects, we believe the need to ensure 
the accuracy of the coded data becomes increasingly significant.
    The purpose of the MCE is to ensure that errors and inconsistencies 
in the coded data are recognized during Medicare claims processing. As 
we continue to evaluate the purpose and function of the MCE with 
respect to ICD-10, we encourage public input for future discussion. As 
we discussed in the FY 2017 IPPS/LTCH PPS final rule, we recognize a 
need to further examine the current list of edits and the definitions 
of those edits. We continue to encourage public comments on whether 
there are additional concerns with the current edits, including 
specific edits or language that should be removed or revised, edits 
that should be combined, or new edits that should be added to assist in 
detecting errors or inaccuracies in the coded data. Comments should be 
directed to the MS-DRG Classification Change Mailbox located at 
[email protected] by November 1, 2017 for FY 2019.
11. 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.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19846), because the relative resource intensity of surgical classes can 
shift as a function of MS-DRG reclassification and recalibrations, for 
FY 2018, we reviewed the surgical hierarchy of each MDC, as we have for 
previous reclassifications and recalibrations, to determine if the 
ordering of classes coincides with the intensity of resource 
utilization.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed in 
this rule.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    We received a request to examine a case involving the principal 
procedure for excision of pituitary gland (ICD-10-PCS code 0GB00ZZ 
(Excision of pituitary gland, open approach)) with a secondary 
procedure for harvesting of a fat graft (ICD-10-PCS code 0JB80ZZ 
(Excision of abdomen subcutaneous tissue and fascia, open approach)) to 
treat a condition of pituitary adenoma (ICD-10-CM diagnosis code D35.2 
(Benign neoplasm of pituitary gland)) and the resulting sella turcica 
defect. The requestor noted that when the procedure code for harvesting 
of the fat graft is reported on the claim, the case currently groups to 
MS-DRGs 622, 623, and 624 (Skin Grafts and Wound Debridement for 
Endocrine, Nutritional, and Metabolic Disorders with MCC, with CC and 
without CC/MCC, respectively). However, when the procedure code for 
harvesting of the fat graft is not reported on the claim, the case 
groups to MS-DRGs 614 and 615 (Adrenal and Pituitary Procedures with 
CC/MCC and without CC/MCC, respectively), which appears to be a more 
appropriate assignment. The requester expressed concern regarding the 
procedure code for harvesting of the fat graft in the secondary 
position driving the MS-DRG assignment versus the principal procedure 
of the excision of pituitary gland.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19847), we analyzed the codes provided by the requestor in the GROUPER 
to determine if we could duplicate the requestor's findings. The 
findings from our analysis were consistent with the requestor's 
findings. Our clinical advisors reviewed this issue and agreed that it 
should be the procedure code for excision of the pituitary gland that 
is used to determine the MS-DRG assignment in this scenario and not the 
harvesting of the fat graft procedure code.
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule, we proposed 
to move MS-DRGs 614 and 615 above MS-DRGs 622, 623, and 624 in the 
surgical hierarchy to enable more appropriate MS-DRG assignment for 
these types of cases.
    We invited public comments on our proposal.
    Comment: Commenters supported the proposal to move MS-DRGs 614 and

[[Page 38055]]

615 above MS-DRGs 622, 623, and 624 in the surgical hierarchy. Another 
commenter expressed concern that the proposal to move MS-DRGs 614 and 
615 above MS-DRGs 622, 623, and 624 in the surgical hierarchy was made 
as the result of a single scenario and recommended that a more thorough 
analysis be performed to determine the potential impact of such a 
change prior to modifying existing GROUPER logic.
    Response: We appreciate the commenters' support. In response to the 
commenter who expressed concern that the proposal to move MS-DRGs 614 
and 615 above MS-DRGs 622, 623, and 624 in the surgical hierarchy was 
made as the result of a single scenario and that additional analysis 
should be performed to determine potential impacts, we are unclear as 
to what specific impacts the commenter is referring to and what type of 
analysis the commenter is recommending. However, we did analyze claims 
from the December 2016 update of the FY 2016 MedPAR file for MS-DRGs 
614 and 615, as well as from MS-DRGs 622, 623 and 624, to determine the 
volume of cases where procedure codes from both sets of MS-DRGs were 
reported. Our findings are shown in the tables below.

                                  MS-DRGs for Adrenal and Pituitary Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 614--All cases...........................................           1,526               5         $16,957
MS-DRG 615--All cases...........................................           1,007             2.4          10,680
----------------------------------------------------------------------------------------------------------------


                            MS-DRGs for Skin Grafts and Wound Debridement Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 622--All cases...........................................           1,289            10.7         $23,954
MS-DRG 623--All cases...........................................           4,423             6.3          12,522
MS-DRG 624--All cases...........................................             454             3.5           9,345
----------------------------------------------------------------------------------------------------------------

    As shown in the tables above, there were a total of 1,526 cases in 
MS-DRG 614 with an average length of stay of 5 days and average costs 
of $16,957. There were a total of 1,007 cases in MS-DRG 615 with an 
average length of stay of 2.4 days and average costs of $10,680. For 
MS-DRG 622, there were a total of 1,289 cases with an average length of 
stay of 10.7 days and average costs of $23,954. For MS-DRG 623, there 
were a total of 4,423 cases with an average length of stay of 6.3 days 
and average costs of $12,522. For MS-DRG 624, there were a total of 454 
cases with an average length of stay of 3.5 days and average costs of 
$9,345.
    We then analyzed claims from the March 2017 update of the FY 2016 
MedPAR file to determine the number of cases where a procedure code 
from MS-DRG 614 or MS-DRG 615 was reported with a procedure code from 
MS-DRGs 622, 623 or 624 on the same claim. Our findings are shown in 
the table below.

                  MS-DRGs for Adrenal, Pituitary, Skin Grafts and Wound Debridement Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 614 procedures with MS-DRG 622 procedures................              46            10.2         $12,977
MS-DRG 614 procedures with MS-DRG 623 procedures................             240             4.4          11,540
MS-DRG 615 procedures with MS-DRG 624 procedures................             125             2.9          14,494
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, there were a total of 46 cases 
reporting procedures from MS-DRG 614 and 622 on the same claim with an 
average length of stay of 10.15 days and average costs of $12,977. 
There were a total of 240 cases reporting procedures from MS-DRG 614 
and MS-DRG 623 on the same claim with an average length of stay of 4.42 
days and average costs of $11,540. Lastly, there were a total of 125 
cases reporting procedures from MS-DRG 615 and MS-DRG 624 on the same 
claim with an average length of stay of 2.93 days and average costs of 
$14,494.
    We then examined the redistribution of cases that is anticipated to 
occur as a result of the proposal to move MS-DRGs 614 and 615 above MS-
DRGs 622, 623, and 624 in the surgical hierarchy for Version 35 of the 
ICD-10 MS-DRGs, by processing the claims data from the March update of 
the FY 2016 MedPAR file through the ICD-10 MS-DRG GROUPER Version 34 
and then processing the same claims data through the ICD-10 MS-DRG 
GROUPER Version 35 for comparison. The number of cases from this 
comparison that result in different MS-DRG assignments is the number of 
the cases that are anticipated to potentially shift or be 
redistributed. We found that the number of cases moving out of MS-DRG 
622 and into MS-DRG 614 is approximately 46 cases, the number of cases 
moving out of MS-DRG 623 and into MS-DRG 614 is approximately 240 cases 
and the number of cases moving out of MS-DRG 624 and into MS-DRG 615 is 
approximately 125 cases. We believe that overall, the impact of this 
change is limited because the subset of cases that would be 
reclassified is approximately 6.7 percent of the total cases currently 
grouping to MS-DRGs 622, 623 and 624. Additionally, as shown above, in 
the analysis of claims where a procedure code from MS-DRG 614 or MS-DRG 
615 was reported with a procedure code from MS-DRGs 622, 623, or 624 on 
the same claim, the average costs for those cases are consistent with 
the average costs for all cases in MS DRGs 614 and 615.
    For issues pertaining to the surgical hierarchy, as with other MS-
DRG

[[Page 38056]]

related requests, we encourage commenters to submit requests to examine 
ICD-10 claims data via the CMS MS-DRG Classification Change Requests 
Mailbox located at [email protected] by November 1, 
2017 for FY 2019 consideration.
    After consideration of the public comments we received, we are 
finalizing our proposal to move MS-DRGs 614 and 615 above MS-DRGs 622, 
623, and 624 in the surgical hierarchy effective October 1, 2017.
12. Changes to the MS-DRG Diagnosis Codes for FY 2018
a. Background of the CC List and the CC Exclusions List
    Under the IPPS MS-DRG classification system, we have developed a 
standard list of diagnoses that are considered CCs. Historically, we 
developed this list using physician panels that classified each 
diagnosis code based on whether the diagnosis, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. A substantial complication or comorbidity was defined as a 
condition that, because of its presence with a specific principal 
diagnosis, would cause an increase in the length-of-stay by at least 1 
day in at least 75 percent of the patients. However, depending on the 
principal diagnosis of the patient, some diagnoses on the basic list of 
complications and comorbidities may be excluded if they are closely 
related to the principal diagnosis. In FY 2008, we evaluated each 
diagnosis code to determine its impact on resource use and to determine 
the most appropriate CC subclassification (non-CC, CC, or MCC) 
assignment. We refer readers to sections II.D.2. and 3. of the preamble 
of the FY 2008 IPPS final rule with comment period for a discussion of 
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 
(72 FR 47152 through 47171).
b. Additions and Deletions to the Diagnosis Code Severity Levels for FY 
2018
    We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19847) 
that the following tables identifying the proposed additions and 
deletions to the MCC severity levels list and the proposed additions 
and deletions to the CC severity levels list for FY 2018 are available 
via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Table 6I.1--Proposed Additions to the MCC List--FY 2018;
    Table 6I.2--Proposed Deletions to the MCC List--FY 2018;
    Table 6J.1--Proposed Additions to the CC List--FY 2018; and
    Table 6J.2--Proposed Deletions to the CC List--FY 2018.
    We invited public comments on our proposed severity level 
designations for the diagnosis codes listed in Table 6I.1. and Table 
6J.1. We noted that, for Table 6I.2. and Table 6J.2., the proposed 
deletions were a result of code expansions. Therefore, the diagnosis 
codes on these lists are no longer valid codes, effective FY 2018. For 
example, diagnosis code O00.10 (Tubal pregnancy without intrauterine 
pregnancy) is a current CC for FY 2017 under Version 34 of the ICD-10 
MS-DRGs. Effective FY 2018, under Version 35 of the ICD-10 MS-DRGs, 
this single code has been expanded into three diagnosis codes to 
include laterality (left/right) and an unspecified option with the 
addition of a sixth character. Therefore, diagnosis code O00.10 is 
included in Table 6J.2. for deletion from the CC list because it is no 
longer a valid code in FY 2018.
    Comment: Commenters agreed with the proposed additions and 
deletions to the MCC and CC List severity level designations for FY 
2018. One commenter suggested that CMS also consider adding existing 
diagnosis codes from subcategories L97.5 (Non-pressure chronic ulcer of 
other part of foot) and L98.4 (Non-pressure chronic ulcer of skin, not 
elsewhere classified) to the CC List. This commenter noted that new 
diagnosis codes from these subcategories were proposed to be added to 
the CC List. However, according to the commenter, existing codes from 
these same subcategories are not currently included in the CC List even 
though some of them represent a greater severity level than the new 
codes that were proposed to be added to the CC List.
    Response: We appreciate the commenters' support. In response to the 
commenter who suggested that we consider adding existing diagnosis 
codes in subcategories L97.5 and L98.4 to the CC list, we were unable 
to fully evaluate this request for FY 2018 but will consider this 
recommendation as part of our comprehensive review of the CC and MCC 
lists. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19848) and in the sections that follow, we have plans to conduct a 
comprehensive review of the CC and MCC lists for FY 2019. Therefore, we 
will be evaluating all of the ICD-10-CM diagnosis codes for this 
effort.
    After consideration of the public comments we received, we are 
finalizing our proposed additions and deletions to the MCC severity 
levels list and the proposed additions and deletions to the CC severity 
levels list for FY 2018. We refer readers to the Tables 6I.1, 6I.2, 
6J.1, and 6J.2 associated with this final rule, which are available via 
the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
c. Principal Diagnosis Is Its Own CC or MCC
    CMS' initial goal in developing the ICD-10 MS-DRGs was to ensure 
that a patient case was assigned to the same MS-DRG, regardless of 
whether the patient record was to be coded in ICD-9-CM or ICD-10. When 
certain ICD-10-CM combination codes are reported as a principal 
diagnosis, it implies that a CC or MCC is present. This occurs as a 
result of evaluating the cluster of ICD-9-CM codes that would have been 
coded on an ICD-9-CM record. If one of the ICD-9-CM codes in the 
cluster was a CC or an MCC, the single ICD-10-CM combination code used 
as a principal diagnosis also must imply that the CC or MCC is present.
    The ICD-10-CM diagnosis codes to which this logic applies are 
included in Appendix J of the ICD-10 MS-DRG Version 34 Definitions 
Manual (which is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending). 
Appendix J includes two lists: Part 1 is the list of principal 
diagnosis codes where the ICD-10-CM code is its own MCC. Part 2 is the 
list of principal diagnosis codes where the ICD-10-CM code is its own 
CC. Part 1 of Appendix J corresponds to Table 6L.--Principal Diagnosis 
Is Its Own MCC List, and Part 2 of Appendix J corresponds to Table 
6M.--Principal Diagnosis Is Its Own CC List.
    We received a request to add the ICD-10-CM diagnosis codes for 
acute myocardial infarction, decompensated heart failure and specified 
forms of shock, which are currently designated as a CC or an MCC when 
reported as a secondary diagnosis, to Table 6L.--Principal Diagnosis Is 
Its Own MCC List. According to the requestor, the addition of these 
codes to the list is necessary for bundled payment initiatives and so 
that facilities that

[[Page 38057]]

accept these patients in transfer have resources to care for them.
    As we stated in the proposed rule, the purpose of the Principal 
Diagnosis Is Its Own CC or MCC Lists was to ensure consistent MS-DRG 
assignment between the ICD-9-CM and ICD-10 MS-DRGs due to the clusters 
and combination codes. There are a number of other ICD-10-CM 
combination codes that, due to their prior designation as a CC or an 
MCC when reported as a secondary diagnosis, are not on either of these 
lists. Having multiple lists for CC and MCC diagnoses when reported as 
a principal and/or secondary diagnosis may not provide an accurate 
representation of resource utilization for the MS-DRGs. As discussed in 
further detail below, we have plans to conduct a comprehensive review 
of the CC and MCC lists for FY 2019. We believe the results of that 
review will help to inform the future of these lists.
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19848), we did not propose to add the ICD-10-CM diagnosis codes for 
acute myocardial infarction, decompensated heart failure and specified 
forms of shock to Table 6L.--Principal Diagnosis Is Its Own MCC List. 
In addition, we did not propose any changes to Table 6L.--Principal 
Diagnosis Is Its Own MCC List and Table 6M.--Principal Diagnosis Is Its 
Own CC List. We invited public comments on our proposal to maintain the 
existing lists of principal diagnosis codes in Tables 6L. and 6M for FY 
2018.
    Comment: Commenters supported the proposal to not make changes to 
Table 6L and Table 6M. One commenter acknowledged that CMS is delaying 
further modifications to Tables 6L. and 6M. until the severity level 
(MCC and CC) analysis is performed for FY 2019. However, this commenter 
requested that the proposed MS-DRG assignments for the new myocardial 
infarction type 2 diagnosis codes be reviewed for more appropriate 
assignments.
    Response: We appreciate the commenters' support. In response to the 
commenter's request that we review the proposed MS-DRG assignments for 
the new myocardial infarction type 2 diagnosis codes for more 
appropriate assignments, we point out that the codes identifying 
myocardial infarction type 2 diagnoses were not finalized at the time 
of publication of the FY 2018 IPPS/LTCH PPS proposed rule and, 
therefore, were not included in Table 6A.--New Diagnosis Codes that was 
associated with the proposed rule. As discussed in the section that 
follows, we have made available the final tables associated with this 
final rule via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. We refer readers to the final rule Table 
6A.--New Diagnosis Codes for the MS-DRG assignments for the acute 
myocardial infarction type 2 diagnosis codes for FY 2018, which are 
based on our usual process of assigning new codes to their predecessor 
code's MS-DRG assignment(s).
    After consideration of the public comments we received, we are 
maintaining the current code lists for Table 6L.--Principal Diagnosis 
Is Its Own MCC and Table 6M.--Principal Diagnosis Is Its Own CC List 
for FY 2018.
    d. CC Exclusions List for FY 2018
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) To preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair. As previously indicated, 
we developed a list of diagnoses, using physician panels, to include 
those diagnoses that, when present as a secondary condition, would be 
considered a substantial complication or comorbidity.
    In previous years, we made changes to the list of CCs, either by 
adding new CCs or deleting CCs already on the list.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC. We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541 
through 50544) for detailed information regarding revisions that were 
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19848), for FY 
2018, we proposed changes to the ICD-10 MS-DRGs Version 35 CC Exclusion 
List. Therefore, we developed Table 6G.1.--Proposed Secondary Diagnosis 
Order Additions to the CC Exclusions List--FY 2018; Table 6G.2.--
Proposed Principal Diagnosis Order Additions to the CC Exclusions 
List--FY 2018; Table 6H.1.--Proposed Secondary Diagnosis Order 
Deletions to the CC Exclusions List--FY 2018; and Table 6H.2.--Proposed 
Principal Diagnosis Order Deletions to the CC Exclusions List--FY 2018. 
Each of these principal diagnosis codes for which there is a CC 
exclusion is shown in Table 6G.2. with an asterisk and the conditions 
that will not count as a CC are provided in an indented column 
immediately following the affected principal diagnosis. Beginning with 
discharges on or after October 1 of each year, the indented diagnoses 
are not recognized by the GROUPER as valid CCs for the asterisked 
principal diagnoses. Tables 6G. and 6H. associated with the proposed 
rule are available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Comment: Commenters supported the proposed modifications to the CC 
Exclusion List for FY 2018 as displayed in Table 6G.1., Table 6G.2., 
Table 6H.1., and Table 6H.2. that were associated with the proposed 
rule and made available via the Internet on the CMS Web site.
    Response: We appreciate the commenters' support.
    We note that, for this FY 2018 IPPS/LTCH PPS final rule, we have 
developed Table 6K.--Complete List of CC Exclusions. Table 6K. 
corresponds to the Part 1 list of Appendix C in the ICD-10 MS-DRG 
Definitions Manual as described above.
    The complete documentation of the ICD-10 MS-DRG Version 35 GROUPER 
logic, including the CC Exclusion List, is available via the Internet 
on the CMS Acute Inpatient PPS Web page at: https://www.cms.gov/
Medicare/

[[Page 38058]]

Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    To identify new, revised and deleted diagnosis and procedure codes, 
for FY 2018, we developed Table 6A.--New Diagnosis Codes, Table 6B.--
New Procedure Codes, Table 6C.--Invalid Diagnosis Codes, Table 6D.--
Invalid Procedure Codes, Table 6E.--Revised Diagnosis Code Titles, and 
Table 6F.--Revised Procedure Code Titles for the proposed rule and this 
final rule.
    These tables are not published in the Addendum to the proposed rule 
or the final rule but are available via the Internet on the CMS Web 
site at: (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) as described in section VI. of 
the Addendum to this final rule. As discussed in section II.F.15. of 
the preamble of this final rule, the code titles are adopted as part of 
the ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee 
process. Therefore, although we publish the code titles in the IPPS 
proposed and final rules, they are not subject to comment in the 
proposed or final rules. In the FY 2018 IPPS/LTCH PPS proposed rule (82 
FR 19849), we invited public comments on the MDC and MS-DRG assignments 
for the new diagnosis and procedure codes as set forth in Table 6A.--
New Diagnosis Codes and Table 6B.--New Procedure Codes. In addition, we 
invited public comments on the proposed severity level designations for 
the new diagnosis codes as set forth in Table 6A. and the proposed O.R. 
status for the new procedure codes as set forth in Table 6B.
    Comment: One commenter disagreed with the addition of new ICD-10-CM 
diagnosis code R06.03 (Acute respiratory distress) as displayed in 
Table 6A.--New Diagnosis Codes associated with the FY 2018 IPPS/LTCH 
PPS proposed rule, stating that the terminology for this code title is 
outdated. The commenter stated that physician documentation generally 
supports either Acute Respiratory Distress Syndrome (ARDS) or Acute 
Respiratory Failure (ARF). The commenter requested that new diagnosis 
codes be created to avoid confusion and to support appropriate 
physician documentation.
    Response: As noted earlier and discussed in section II.F.15. of the 
preamble of this final rule, the code titles are adopted as part of the 
ICD-10 (previously ICD-9-CM) Coordination and Maintenance Committee 
process. Therefore, although we publish the code titles in the IPPS 
proposed and final rules, they are not subject to comment in the 
proposed or final rules. We also note that the condition of ARDS is 
identified by ICD-10-CM diagnosis code J80 (Acute respiratory distress 
syndrome) and ARF is identified in ICD-10-CM subcategory J96.0 (Acute 
respiratory failure). Therefore, it is not necessary to submit a 
request for new diagnosis codes to the ICD-10 Coordination and 
Maintenance Committee.
    Comment: Several commenters disagreed with the proposed Non-O.R. 
designations for certain procedure codes displayed in Table 6B.--New 
Procedure Codes associated with the FY 2018 IPPS/LTCH PPS proposed 
rule. The commenters recommended that CMS consider revising the 
designation of these procedure codes from Non-O.R. to O.R. The 
commenters identified approximately 200 new procedure codes describing 
the insertion, removal, or revision of ``other device'' in various body 
parts that they stated require an O.R. setting or are most often 
performed in the O.R. setting using sterile technique. The commenters 
further stated that patients undergoing these procedures are placed 
under general anesthesia and the procedures require significant time 
and skill.
    Response: We reexamined a significant portion of the procedure 
codes listed in Table 6B.--New Procedure Codes that was associated with 
the FY 2018 IPPS/LTCH PPS proposed rule that the commenters recommended 
we consider revising from Non-O.R. to O.R. We note that we were unable 
to fully reevaluate the complete list for FY 2018, but we plan to 
conduct a review for FY 2019. Based upon our review, and upon further 
consideration of whether these procedures would be performed in an O.R. 
setting, we are revising the designation of the new procedure codes in 
the following table from non-O.R. to O.R.

 
------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
00H03YZ...................  Insertion of Other Device into Brain,
                             Percutaneous Approach.
00H04YZ...................  Insertion of Other Device into Brain,
                             Percutaneous Endoscopic Approach.
00H63YZ...................  Insertion of Other Device into Cerebral
                             Ventricle, Percutaneous Approach.
00H64YZ...................  Insertion of Other Device into Cerebral
                             Ventricle, Percutaneous Endoscopic
                             Approach.
00HU0YZ...................  Insertion of Other Device into Spinal Canal,
                             Open Approach.
00HV0YZ...................  Insertion of Other Device into Spinal Cord,
                             Open Approach.
00HV3YZ...................  Insertion of Other Device into Spinal Cord,
                             Percutaneous Approach.
00HV4YZ...................  Insertion of Other Device into Spinal Cord,
                             Percutaneous Endoscopic Approach.
02H43YZ...................  Insertion of Other Device into Coronary
                             Vein, Percutaneous Approach.
02H44YZ...................  Insertion of Other Device into Coronary
                             Vein, Percutaneous Endoscopic Approach.
02H63YZ...................  Insertion of Other Device into Right Atrium,
                             Percutaneous Approach.
02H64YZ...................  Insertion of Other Device into Right Atrium,
                             Percutaneous Endoscopic Approach.
02H73YZ...................  Insertion of Other Device into Left Atrium,
                             Percutaneous Approach.
02H74YZ...................  Insertion of Other Device into Left Atrium,
                             Percutaneous Endoscopic Approach.
02HA3YZ...................  Insertion of Other Device into Heart,
                             Percutaneous Approach.
02HA4YZ...................  Insertion of Other Device into Heart,
                             Percutaneous Endoscopic Approach.
02HK3YZ...................  Insertion of Other Device into Right
                             Ventricle, Percutaneous Approach.
02HK4YZ...................  Insertion of Other Device into Right
                             Ventricle, Percutaneous Endoscopic
                             Approach.
02HL3YZ...................  Insertion of Other Device into Left
                             Ventricle, Percutaneous Approach.
02HL4YZ...................  Insertion of Other Device into Left
                             Ventricle, Percutaneous Endoscopic
                             Approach.
02HN3YZ...................  Insertion of Other Device into Pericardium,
                             Percutaneous Approach.
02HN4YZ...................  Insertion of Other Device into Pericardium,
                             Percutaneous Endoscopic Approach.
02HP0YZ...................  Insertion of Other Device into Pulmonary
                             Trunk, Open Approach.
02HP3YZ...................  Insertion of Other Device into Pulmonary
                             Trunk, Percutaneous Approach.
02HP4YZ...................  Insertion of Other Device into Pulmonary
                             Trunk, Percutaneous Endoscopic Approach.
02HQ3YZ...................  Insertion of Other Device into Right
                             Pulmonary Artery, Percutaneous Approach.
02HQ4YZ...................  Insertion of Other Device into Right
                             Pulmonary Artery, Percutaneous Endoscopic
                             Approach.

[[Page 38059]]

 
02HR3YZ...................  Insertion of Other Device into Left
                             Pulmonary Artery, Percutaneous Approach.
02HR4YZ...................  Insertion of Other Device into Left
                             Pulmonary Artery, Percutaneous Endoscopic
                             Approach.
02HS3YZ...................  Insertion of Other Device into Right
                             Pulmonary Vein, Percutaneous Approach.
02HS4YZ...................  Insertion of Other Device into Right
                             Pulmonary Vein, Percutaneous Endoscopic
                             Approach.
02HT3YZ...................  Insertion of Other Device into Left
                             Pulmonary Vein, Percutaneous Approach.
02HT4YZ...................  Insertion of Other Device into Left
                             Pulmonary Vein, Percutaneous Endoscopic
                             Approach.
02HV3YZ...................  Insertion of Other Device into Superior Vena
                             Cava, Percutaneous Approach.
02HV4YZ...................  Insertion of Other Device into Superior Vena
                             Cava, Percutaneous Endoscopic Approach.
02HW0YZ...................  Insertion of Other Device into Thoracic
                             Aorta, Descending, Open Approach.
02HW3YZ...................  Insertion of Other Device into Thoracic
                             Aorta, Descending, Percutaneous Approach.
02HW4YZ...................  Insertion of Other Device into Thoracic
                             Aorta, Descending, Percutaneous Endoscopic
                             Approach.
07HK0YZ...................  Insertion of Other Device into Thoracic
                             Duct, Open Approach.
07HK4YZ...................  Insertion of Other Device into Thoracic
                             Duct, Percutaneous Endoscopic Approach.
07HL0YZ...................  Insertion of Other Device into Cisterna
                             Chyli, Open Approach.
07HL4YZ...................  Insertion of Other Device into Cisterna
                             Chyli, Percutaneous Endoscopic Approach.
07HM0YZ...................  Insertion of Other Device into Thymus, Open
                             Approach.
07HM4YZ...................  Insertion of Other Device into Thymus,
                             Percutaneous Endoscopic Approach.
07HN0YZ...................  Insertion of Other Device into Lymphatic,
                             Open Approach.
07HP0YZ...................  Insertion of Other Device into Spleen, Open
                             Approach.
09HY0YZ...................  Insertion of Other Device into Sinus, Open
                             Approach.
0BH04YZ...................  Insertion of Other Device into
                             Tracheobronchial Tree, Percutaneous
                             Endoscopic Approach.
0BH14YZ...................  Insertion of Other Device into Trachea,
                             Percutaneous Endoscopic Approach.
0BHK4YZ...................  Insertion of Other Device into Right Lung,
                             Percutaneous Endoscopic Approach.
0BHK8YZ...................  Insertion of Other Device into Right Lung,
                             Via Natural or Artificial Opening
                             Endoscopic.
0BHL4YZ...................  Insertion of Other Device into Left Lung,
                             Percutaneous Endoscopic Approach.
0BHL8YZ...................  Insertion of Other Device into Left Lung,
                             Via Natural or Artificial Opening
                             Endoscopic.
0BHQ4YZ...................  Insertion of Other Device into Pleura,
                             Percutaneous Endoscopic Approach.
0BHQ8YZ...................  Insertion of Other Device into Pleura, Via
                             Natural or Artificial Opening Endoscopic.
0BHT4YZ...................  Insertion of Other Device into Diaphragm,
                             Percutaneous Endoscopic Approach.
0BPK4YZ...................  Removal of Other Device from Right Lung,
                             Percutaneous Endoscopic Approach.
0BPK8YZ...................  Removal of Other Device from Right Lung, Via
                             Natural or Artificial Opening Endoscopic.
0BPL4YZ...................  Removal of Other Device from Left Lung,
                             Percutaneous Endoscopic Approach.
0BPL8YZ...................  Removal of Other Device from Left Lung, Via
                             Natural or Artificial Opening Endoscopic.
0BPQ0YZ...................  Removal of Other Device from Pleura, Open
                             Approach.
0BPQ4YZ...................  Removal of Other Device from Pleura,
                             Percutaneous Endoscopic Approach.
0BPQ8YZ...................  Removal of Other Device from Pleura, Via
                             Natural or Artificial Opening Endoscopic.
0BPT4YZ...................  Removal of Other Device from Diaphragm,
                             Percutaneous Endoscopic Approach.
0BWK4YZ...................  Revision of Other Device in Right Lung,
                             Percutaneous Endoscopic Approach.
0BWK8YZ...................  Revision of Other Device in Right Lung, Via
                             Natural or Artificial Opening Endoscopic.
0BWL4YZ...................  Revision of Other Device in Left Lung,
                             Percutaneous Endoscopic Approach.
0BWL8YZ...................  Revision of Other Device in Left Lung, Via
                             Natural or Artificial Opening Endoscopic.
0BWQ4YZ...................  Revision of Other Device in Pleura,
                             Percutaneous Endoscopic Approach.
0BWQ8YZ...................  Revision of Other Device in Pleura, Via
                             Natural or Artificial Opening Endoscopic.
0BWT4YZ...................  Revision of Other Device in Diaphragm,
                             Percutaneous Endoscopic Approach.
0HPT0YZ...................  Removal of Other Device from Right Breast,
                             Open Approach.
0HPU0YZ...................  Removal of Other Device from Left Breast,
                             Open Approach.
0HWT0YZ...................  Revision of Other Device in Right Breast,
                             Open Approach.
0HWU0YZ...................  Revision of Other Device in Left Breast,
                             Open Approach.
0JHS0YZ...................  Insertion of Other Device into Head and Neck
                             Subcutaneous Tissue and Fascia, Open
                             Approach.
0JHT0YZ...................  Insertion of Other Device into Trunk
                             Subcutaneous Tissue and Fascia, Open
                             Approach.
0JHV0YZ...................  Insertion of Other Device into Upper
                             Extremity Subcutaneous Tissue and Fascia,
                             Open Approach.
0JHW0YZ...................  Insertion of Other Device into Lower
                             Extremity Subcutaneous Tissue and Fascia,
                             Open Approach.
0TH58YZ...................  Insertion of Other Device into Kidney, Via
                             Natural or Artificial Opening Endoscopic.
0TH98YZ...................  Insertion of Other Device into Ureter, Via
                             Natural or Artificial Opening Endoscopic.
0THB8YZ...................  Insertion of Other Device into Bladder, Via
                             Natural or Artificial Opening Endoscopic.
0TP58YZ...................  Removal of Other Device from Kidney, Via
                             Natural or Artificial Opening Endoscopic.
0TW98YZ...................  Revision of Other Device in Ureter, Via
                             Natural or Artificial Opening Endoscopic.
0TWB8YZ...................  Revision of Other Device in Bladder, Via
                             Natural or Artificial Opening Endoscopic.
------------------------------------------------------------------------

    After consideration of the public comments that we received, we are 
finalizing the designation of the procedure codes listed in the table 
above from non-O.R. to O.R., effective October 1, 2017.
    We note that, historically, when new procedure codes were created, 
they were proposed to be given the same O.R. designation as their 
predecessor code. However, with the transition from ICD-9 to ICD-10, 
the determination of when a procedure code should be designated as an 
O.R. procedure has become a much more complex task. This is, in part, 
due to the number of various approaches available in the ICD-10-PCS 
classification. While we have typically evaluated procedures on the 
basis of whether or not they would be performed in an operating room, 
we believe that there may be other factors to consider, particularly 
with the implementation of ICD-10. Therefore, we are soliciting 
comments on what factors or criteria to consider in determining whether 
a procedure should be designated as an O.R. procedure in the ICD-10-PCS

[[Page 38060]]

classification system. We encourage commenters to submit comments via 
the CMS MS-DRG Classification Change Requests Mailbox located at 
[email protected] by November 1, 2017 for FY 2019 
consideration.
    We are also making available on the CMS Web site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html the following final tables associated with 
this final rule:
     Table 6A.--New Diagnosis Codes-FY 2018;
     Table 6B.--New Procedure Codes-FY 2018;
     Table 6C.--Invalid Diagnosis Codes-FY 2018;
     Table 6D.--Invalid Procedure Codes-FY 2018;
     Table 6E.--Revised Diagnosis Code Titles-FY 2018;
     Table 6F.--Revised Procedure Code Titles-FY 2018;
     Table 6G.1.--Secondary Diagnosis Order Additions to the CC 
Exclusions List--FY 2018;
     Table 6G.2.--Principal Diagnosis Order Additions to the CC 
Exclusions List--FY 2018;
     Table 6H.1.--Secondary Diagnosis Order Deletions to the CC 
Exclusions List--FY 2018;
     Table 6H.2.--Principal Diagnosis Order Deletions to the CC 
Exclusions List--FY 2018;
     Table 6I.--Complete MCC List--FY 2018;
     Table 6I.1.--Additions to the MCC List-FY 2018;
     Table 6I.2.-Deletions to the MCC List--FY 2018;
     Table 6J.--Complete CC List--FY 2018;
     Table 6J.1.--Additions to the CC List-FY 2018;
     Table 6J.2.--Deletions to the CC List -FY 2018;
     Table 6K.--Complete List of CC Exclusions-FY 2018;
     Table 6L.--Principal Diagnosis Is Its Own MCC List-FY 
2018; and
     Table 6M.--Principal Diagnosis Is Its Own CC List-FY 2018.
13. Comprehensive Review of CC List for FY 2019
    In the FY 2008 IPPS final rule (72 FR 47153 through 47175), we 
discussed our efforts to better recognize severity of illness which 
began with a comprehensive review of the CC list and, ultimately, the 
implementation of the MS-DRGs. Similar to the analysis that was 
performed at that time, we are providing the public with notice of our 
plans to conduct a comprehensive review of the CC and MCC lists for FY 
2019.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19849), as a result of the time that has elapsed since that review and 
changes to how inpatient care is currently delivered, we plan to 
analyze if further refinements to these lists are warranted. For 
example, over the past several years, there has been a steady increase 
in the proportion of cases grouping to the MS-DRGs with an MCC severity 
level than had previously occurred. Our evaluation will assist in 
determining if the conditions designated as an MCC continue to 
represent significant increases in resource utilization that support 
the MCC designation.
    We currently utilize a statistical algorithm to determine the 
impact on resource use of each secondary diagnosis. Each diagnosis for 
which Medicare data are available is evaluated to determine its impact 
on resource use and to determine the most appropriate CC subclass (non-
CC, CC, or MCC) assignment. In order to make this determination, the 
average costs for each subset of cases is compared to the expected 
costs for cases in that subset. The following format is used to 
evaluate each diagnosis:

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
           Code  Diagnosis               Cnt1          C1            Cnt2          C2            Cnt3          C3
----------------------------------------------------------------------------------------------------------------

    Count (Cnt) is the number of patients in each subset and C1, C2, 
and C3 are a measure of the impact on resource use of patients in each 
of the subsets. The C1, C2, and C3 values are a measure of the ratio of 
average costs for patients with these conditions to the expected 
average costs across all cases. The C1 value reflects a patient with no 
other secondary diagnosis or with all other secondary diagnoses that 
are non-CCs. The C2 value reflects a patient with at least one other 
secondary diagnosis that is a CC but none that is an MCC. The C3 value 
reflects a patient with at least one other secondary diagnosis that is 
an MCC. A value close to 1.0 in the C1 field would suggest that the 
code produces the same expected value as a non-CC diagnosis. That is, 
average costs for the case are similar to the expected average costs 
for that subset and the diagnosis is not expected to increase resource 
usage. A higher value in the C1 (or C2 and C3) field suggests more 
resource usage is associated with the diagnosis and an increased 
likelihood that it is more like a CC or major CC than a non-CC. Thus, a 
value close to 2.0 suggests the condition is more like a CC than a non-
CC but not as significant in resource usage as an MCC. A value close to 
3.0 suggests the condition is expected to consume resources more 
similar to an MCC than a CC or non-CC. For example, a C1 value of 1.8 
for a secondary diagnosis means that for the subset of patients who 
have the secondary diagnosis and have either no other secondary 
diagnosis present, or all the other secondary diagnoses present are 
non-CCs, the impact on resource use of the secondary diagnoses is 
greater than the expected value for a non-CC by an amount equal to 80 
percent of the difference between the expected value of a CC and a non-
CC (that is, the impact on resource use of the secondary diagnosis is 
closer to a CC than a non-CC).
    We invited public comments regarding other possible ways we can 
incorporate meaningful indicators of clinical severity.
    We did not receive any public comments offering suggestions on 
alternate ways to incorporate meaningful indicators of clinical 
severity. Therefore, we expect to continue to utilize this same 
statistical algorithm to determine the impact on resource use of each 
secondary diagnosis to conduct our comprehensive review of the CC and 
MCC lists for FY 2019.
14. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through 
986; and 987 Through 989
    Each year, we review cases assigned to MS-DRGs 981, 982, and 983 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively); MS-DRGs 984, 985, and 986 
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively); and MS-DRGs 987, 988, and 
989 (Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with 
MCC, with CC, and without CC/MCC, respectively) to determine whether it 
would be appropriate to change the procedures assigned among these MS-
DRGs. MS-DRGs 981 through 983, 984 through 986, and 987 through 989 are 
reserved for those cases in which none of the O.R. procedures performed 
are related to the principal diagnosis. These MS-DRGs

[[Page 38061]]

are intended to capture atypical cases, that is, those cases not 
occurring with sufficient frequency to represent a distinct, 
recognizable clinical group.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19849), we stated 
that under the ICD-10 MS-DRGs Version 34, MS-DRGs 984 through 986 are 
assigned when one or more of the procedures described by ICD-10-PCS 
codes in Table 6P.2. that was associated with the FY 2018 proposed rule 
(which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) are performed and are unrelated to the 
principal diagnosis. All remaining O.R. procedures are assigned to MS-
DRGs 981 through 983 and 987 through 989, with MS-DRGs 987 through 989 
assigned to those discharges in which the only procedures performed are 
nonextensive procedures that are unrelated to the principal diagnosis.
    We refer the reader to the FY 2017 IPPS/LTCH PPS final rule (81 FR 
56847 through 56848) for a discussion of the movement and redesignation 
of procedure codes from MS-DRGs 984 through 986 related to the 
transition of the ICD-10 MS-DRGs.
    Our review of MedPAR claims data showed that there are no cases 
that merited movement or should logically be reassigned from ICD-10 MS-
DRGs 984 through 986 to any of the other MDCs for FY 2018. Therefore, 
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19849 through 19850), 
for FY 2018, we did not propose to change the procedures assigned among 
these MS-DRGs. We invited public comments on our proposal to maintain 
the current structure of these MS-DRGs.
    Comment: Commenters supported the proposal to maintain the current 
structure of MS-DRGs 984 through 986 and not to reassign or change the 
procedures assigned among these MS-DRGs to other MDCs.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to maintain the current structure of MS-DRGs 
984 through 986 (Prostatic O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively) and not 
to reassign or change the procedures assigned among these MS-DRGs to 
other MDCs for ICD-10 MS-DRGs Version 35, effective October 1, 2017.
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 we indicated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19850), upon review of the claims data from the December 2016 update of 
the FY 2016 MedPAR file, we did not find any cases that merited 
movement or that should logically be assigned to any of the other MDCs. 
Therefore, for FY 2018, we 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 invited public comments on our proposal to maintain the 
current structure of these MS-DRGs.
    Comment: Commenters supported the proposal to maintain the current 
structure of MS-DRGs 981 through 983 and MS-DRGs 987 through 989.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to not remove any procedures from 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) into one 
of the surgical MS-DRGs for the MDC into which the principal diagnosis 
is assigned for ICD-10 MS-DRGs Version 35, effective October 1, 2017.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    We also review the list of ICD-10-PCS procedures that, when in 
combination with their principal diagnosis code, result in assignment 
to MS-DRGs 981 through 983, 984 through 986, or 987 through 989, to 
ascertain whether any of those procedures should be reassigned from one 
of those three groups of MS-DRGs to another of the three groups of MS-
DRGs based on average costs and the length of stay. We look at the data 
for trends such as shifts in treatment practice or reporting practice 
that would make the resulting MS-DRG assignment illogical. If we find 
these shifts, we would propose to move cases to keep the MS-DRGs 
clinically similar or to provide payment for the cases in a similar 
manner. Generally, we move only those procedures for which we have an 
adequate number of discharges to analyze the data.
    Based on the results of our review of the December 2016 update of 
the FY 2016 MedPAR file, in the FY 2018 IPPS/LTCH PPS proposed rule (82 
FR 19850), we proposed to reassign the procedure codes currently 
assigned to MS-DRGs 984 through 986 (Prostatic O.R. Procedure Unrelated 
to Principal Diagnosis with MCC, with CC and without CC/MCC, 
respectively) to MS-DRGs 987 through 989 (Non-extensive O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC and without CC/MCC, 
respectively). As shown in the table below, we found a total of 1,001 
cases in MS-DRGs 984 through 986 with an average length-of-stay of 7.5 
days and average costs of $16,539. In MS-DRGs 987 through 989, we found 
a total of 17,772 cases, with an average length of stay of 7.5 days and 
average costs of $16,193.

[[Page 38062]]



                                O.R. Procedures Unrelated to Principal Diagnosis
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay     Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 984, 985 and 986 (Prostatic O.R. Procedure Unrelated to            1,001             7.5         $16,539
 Principal Diagnosis with MCC, with CC, and without CC/MCC,
 respectively)..................................................
MS-DRGs 987, 988 and 989 (Non[dash]extensive O.R. Procedure               17,772             7.5          16,193
 Unrelated to Principal Diagnosis with MCC, with CC, and without
 CC/MCC, respectively)..........................................
----------------------------------------------------------------------------------------------------------------

    The claims data demonstrate that it is no longer necessary to 
maintain a separate set of MS-DRGs specifically for the prostatic O.R. 
procedures. The average length of stay of 7.5 days is identical in both 
sets of MS-DRGs and the average costs are very similar with a 
difference of only $346. As we discussed in the proposed rule, our 
clinical advisors reviewed the data and support movement of these 1,001 
cases into the nonextensive O.R. procedures MS-DRGs. They noted that 
treatment practices have shifted since the inception of the prostatic 
O.R. procedures grouping and the average costs are in alignment.
    Therefore, for FY 2018, we proposed to reassign the prostatic O.R. 
procedure codes from MS-DRGs 984 through 986 to MS-DRGs 987 through 989 
and to delete MS-DRGs 984, 985 and 986 because they would no longer be 
needed as a result of this proposed movement. We invited public 
comments on our proposals.
    Comment: Commenters supported the proposal to reassign the 
prostatic O.R. procedure codes from MS-DRGs 984 through 986 to MS-DRGs 
987 through 989 and to delete MS-DRGs 984, 985 and 986.
    Response: We appreciate the commenters' support.
    After consideration of the public comments that we received, we are 
finalizing our proposal to reassign the prostatic O.R. procedure codes 
from MS-DRGs 984 through 986 to MS-DRGs 987 through 989 (Non-extensive 
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without CC/MCC, respectively) and to delete MS-DRGs 984, 985 and 986 
(Prostatic O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC and without CC/MCC, respectively) for ICD-10 MS-DRGs Version 
35, effective October 1, 2017.
15. Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the National Center for Health Statistics (NCHS), the 
Centers for Disease Control and Prevention (CDC), and CMS, charged with 
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the 
Committee was changed to the ICD-10 Coordination and Maintenance 
Committee, effective with the March 19-20, 2014 meeting. The ICD-10 
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible 
for approving coding changes, and developing errata, addenda, and other 
modifications to the coding systems to reflect newly developed 
procedures and technologies and newly identified diseases. The 
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a 
view toward standardizing coding applications and upgrading the quality 
of the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official 
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the previously mentioned 
process by health-related organizations. In this regard, the Committee 
holds public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA), the 
American Hospital Association (AHA), and various physician specialty 
groups, as well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed at the public 
meetings and in writing, the Committee formulates recommendations, 
which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2018 at a public meeting held on September 13-14, 
2016, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 13, 2016.
    The Committee held its 2017 meeting on March 7-8, 2017. The 
deadline for submitting comments on these code proposals was April 7, 
2017. It was announced at this meeting that any new ICD-10-CM/PCS codes 
for which there was consensus of public support and for which complete 
tabular and indexing changes would be made by May 2017 would be 
included in the October 1, 2017 update to ICD-10-CM/ICD-10-PCS. As 
discussed in earlier sections of the preamble of the proposed rule and 
this final rule, there are new, revised, and deleted ICD-10-CM 
diagnosis codes and ICD-10-PCS procedure codes that are captured in 
Table 6A.--New Diagnosis Codes, Table 6B.--New Procedure Codes, Table 
6C.--Invalid Diagnosis Codes, Table 6D.--Invalid Procedure Codes, Table 
6E.--Revised Diagnosis Code Titles, and Table 6F.--Revised Procedure 
Code Titles for the proposed rule and this final rule, which are 
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. 
Because of the length of these tables, they are not published in the 
Addendum to this final rule. Rather, they are available via the 
Internet as discussed in section VI. of the Addendum to this final 
rule.
    We note that after publication of the FY 2018 IPPS/LTCH PPS 
proposed rule, we were notified by the CDC of changes to the FY 2018 
ICD-10-CM diagnosis codes that were listed in Table 6A.--New Diagnosis 
Codes and Table 6C.-- Invalid Diagnosis Codes that were

[[Page 38063]]

associated with the proposed rule. Specifically, ICD-10-CM diagnosis 
code K61.3 (Ischiorectal abscess) was listed in Table 6C. as an invalid 
diagnosis, and diagnosis codes K61.31 (Horseshoe abscess) and K61.32 
(Ischiorectal abscess, NOS) were listed in Table 6A. as new diagnosis 
codes. The CDC informed us that they reversed their decision with 
respect to these codes. Therefore, diagnosis codes K61.31 and K61.32 
are not being created for FY 2018 and are not reflected in Table 6A.--
New Diagnosis Codes associated with this FY 2018 IPPS/LTCH PPS final 
rule. In addition, diagnosis code K61.3 is no longer reflected in Table 
6C. associated with this final rule as an invalid diagnosis. Diagnosis 
code K61.3 will continue to be a valid code for FY 2018 in the ICD-10-
CM classification.
    The CDC also informed us of changes to diagnosis code K61.5 
(Supralevator abscess). This diagnosis code was listed as a new 
diagnosis code in Table 6A.--New Diagnosis Codes that was associated 
with the proposed rule. However, this decision was also reversed. 
Therefore, diagnosis code K61.5 is not reflected in Table 6A. 
associated with this FY 2018 IPPS/LTCH PPS final rule and will not be 
reflected in the ICD-10-CM classification.
    We also note that after publication of the FY 2018 IPPS/LTCH PPS 
proposed rule, the CDC revised the title for diagnosis code O00.212 
from ``Left ovarian pregnancy without intrauterine pregnancy'' to 
``Left ovarian pregnancy with intrauterine pregnancy''. The description 
of the code title changed from ``without'' to ``with'' for this 
diagnosis code. This change will not be reflected in Table 6E.--Revised 
Diagnosis Code Titles because it is a new diagnosis code effective FY 
2018. Rather, the corrected code title description will appear in Table 
6A.--New Diagnosis Codes associated with this FY 2018 IPPS/LTCH PPS 
final rule. Furthermore, the CDC issued an ICD-10-CM Errata on June 27, 
2017 regarding this code title change for diagnosis code O00.212. The 
Errata document is available via the Internet on the CMS Web site at: 
https://www.cms.gov/Medicare/Coding/ICD10/2018-ICD-10-CM-and-GEMs.html.
    Live Webcast recordings of the discussions of procedure codes at 
the Committee's September 13-14, 2016 meeting and March 7-8, 2017 
meeting can be obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the 
discussions of diagnosis codes at the September 13-14, 2016 meeting and 
March 7-8, 2017 meeting can be found at: http://www.cdc.gov/nchs/icd/icd10cm_maintenance.html. These Web sites also provide detailed 
information about the Committee, including information on requesting a 
new code, attending a Committee meeting, and timeline requirements and 
meeting dates.
    We encourage commenters to address suggestions on coding issues 
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-10 
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo 
Road, Hyattsville, MD 20782. Comments may be sent by Email to: 
[email protected].
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia Brooks, Co-Chairperson, ICD-10 Coordination and 
Maintenance Committee, CMS, Center for Medicare Management, Hospital 
and Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500 
Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by 
Email to: [email protected].
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we indicated we would attempt 
to include proposals for procedure codes that would describe new 
technology discussed and approved at the Spring meeting as part of the 
code revisions effective the following October.
    Section 503(a) of Public Law 108-173 included a requirement for 
updating diagnosis and procedure codes twice a year instead of a single 
update on October 1 of each year. This requirement was included as part 
of the amendments to the Act relating to recognition of new technology 
under the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act 
by adding a clause (vii) which states that the Secretary shall provide 
for the addition of new diagnosis and procedure codes on April 1 of 
each year, but the addition of such codes shall not require the 
Secretary to adjust the payment (or diagnosis-related group 
classification) until the fiscal year that begins after such date. This 
requirement improves the recognition of new technologies under the IPPS 
system by providing information on these new technologies at an earlier 
date. Data will be available 6 months earlier than would be possible 
with updates occurring only once a year on October 1.
    While section 1886(d)(5)(K)(vii) of the Act states that the 
addition of new diagnosis and procedure codes on April 1 of each year 
shall not require the Secretary to adjust the payment, or DRG 
classification, under section 1886(d) of the Act until the fiscal year 
that begins after such date, we have to update the DRG software and 
other systems in order to recognize and accept the new codes. We also 
publicize the code changes and the need for a mid-year systems update 
by providers to identify the new codes. Hospitals also have to obtain 
the new code books and encoder updates, and make other system changes 
in order to identify and report the new codes.
    The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance 
Committee holds its meetings in the spring and fall in order to update 
the codes and the applicable payment and reporting systems by October 1 
of each year. Items are placed on the agenda for the Committee meeting 
if the request is received at least 2 months prior to the meeting. This 
requirement allows time for staff to review and research the coding 
issues and prepare material for discussion at the meeting. It also 
allows time for the topic to be publicized in meeting announcements in 
the Federal Register as well as on the CMS Web site. Final decisions on 
code title revisions are currently made by March 1 so that these titles 
can be included in the IPPS proposed rule. A complete addendum 
describing details of all diagnosis and procedure coding changes, both 
tabular and index, is published on the CMS and NCHS Web sites in June 
of each year. Publishers of coding books and software use this 
information to modify their products that are used by health care 
providers. This 5-month time period has proved to be necessary for 
hospitals and other providers to update their systems.
    A discussion of this timeline and the need for changes are included 
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance 
Committee Meeting minutes. The public agreed that there was a need to 
hold the fall meetings earlier, in September or October, in order to 
meet the new implementation dates. The public provided comment that 
additional time would be needed to update hospital systems and obtain 
new code books and coding software. There was considerable concern 
expressed about the impact this 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

[[Page 38064]]

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, 2017 implementation of a code at the 
September 13-14, 2016 Committee meeting. Therefore, there were no new 
codes implemented on April 1, 2017.
    ICD-9-CM addendum and code title information is published on the 
CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect/icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and 
ICD-10-PCS addendum and code title information is published on the CMS 
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html. 
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at: 
http://www.cdc.gov/nchs/icd/icd10.htm. Information on new, revised, and 
deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for 
publication in the Coding Clinic for ICD-10. AHA also distributes 
information to publishers and software vendors.
    CMS also sends copies of all ICD-10-CM and ICD-10-PCS coding 
changes to its Medicare contractors for use in updating their systems 
and providing education to providers.
    The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore, 
although we publish the code titles in the IPPS proposed and final 
rules, they are not subject to comment in the proposed or final rules.
    The following chart shows the number of ICD-10-CM and ICD-10-PCS 
codes and code changes since FY 2016 when ICD-10 was implemented.

  Total Number of Codes and Changes in Total Number of Codes per Fiscal
                   Year ICD-10-CM and ICD-10-PCS Codes
------------------------------------------------------------------------
                  Fiscal year                      Number       Change
------------------------------------------------------------------------
FY 2016
ICD-10-CM.....................................       69,823  ...........
ICD-10-PCS....................................       71,974  ...........
FY 2017
ICD-10-CM.....................................       71,486       +1,663
ICD-10-PCS....................................       75,789       +3,815
FY 2018
ICD-10-CM.....................................       71,704         +218
ICD-10-PCS....................................       78,705       +2,916
------------------------------------------------------------------------

    As mentioned previously, the public is provided the opportunity to 
comment on any requests for new diagnosis or procedure codes discussed 
at the ICD-10 Coordination and Maintenance Committee meeting.
    At the September 12-13, 2016 and March 7-8, 2017 Committee 
meetings, we discussed any requests we had received for new ICD-10-CM 
diagnosis codes and ICD-10-PCS procedure codes that were to be 
implemented on October 1, 2017. We invited public comments on any code 
requests discussed at the September 12-13, 2016 and March 7-8, 2017 
Committee meetings for implementation as part of the October 1, 2017 
update. The deadline for commenting on code proposals discussed at the 
September 12-13, 2016 Committee meeting was November 13, 2016. The 
deadline for commenting on code proposals discussed at the March 7-8, 
2017 Committee meeting was April 7, 2017.
    Comment: One commenter stated that coding updates interfere with 
consistent clinical vocabulary maintenance. The commenter pointed to 
ICD-10-PCS code updates for FY 2018 which involve the addition of 
specificity beyond what was included in the 2017 version of ICD-10-PCS. 
The commenter stated that a core principle of clinical vocabulary 
maintenance is that the meaning of a code should not change over time. 
The commenter acknowledged that deadline for submitting comments on 
code proposals for the FY 2018 ICD-10-PCS had passed. The commenter 
stated that clinical vocabulary maintenance should be a primary 
consideration of the ICD-10 Coordination and Maintenance Committee 
before any further coding updates are proposed. The commenter looked 
forward to working with the ICD-10 Coordination and Maintenance 
Committee meeting on future code updates.
    Response: CMS and CDC welcome the participation of the public at 
the ICD-10 Coordination and Maintenance Committee meetings. CMS and CDC 
encourage comments on any ICD-10-CM and ICD-10-PCS code updates 
presented at the meetings. The ICD-10-CM and ICD-10-PCS coding systems 
are not clinical vocabularies. The coding systems do not attempt to 
clarify or standardize how physicians describe clinical conditions or 
procedures. The ICD-10-CM and ICD-10-PCS coding systems are clinical 
classification systems. Classification systems arrange and organize 
like or related clinical conditions and procedures. The coding systems 
assign codes to capture diagnoses and procedures as documented by 
physicians. This can involve multiple diagnosis and procedure terms 
being captured in a single code. It is recognized that not all 
physicians use consistent terminology for identifying a condition or 
procedure. The coding systems recognize this fact and develop codes 
which capture this group of similar terms into a single code. The 
coding systems should not be viewed as a means to standardize medical 
terminology.
    In response to public requests for updates to ICD-10-CM and ICD-10-
PCS, the ICD-10 Coordination and Maintenance Committee presents the 
requested code updates and then solicits comments prior to making those 
updates. The ICD-9-CM and ICD-10 coding systems have been updated 
through the Coordination and Maintenance Committee since 1985, making 
updates to the coding systems that capture advances in medicine and 
changes in medical practices. The Committee will continue to meet to 
allow the public to provide comments on any requests to update the ICD-
10-CM and ICD-10-PCS coding systems.
    Comment: One commenter stated that it was a strong supporter of the 
conversion from ICD-9-CM to ICD-10-CM, including the creation of the 
new Section ``X'' codes to identify new medical services and 
technologies, because the newer, more robust coding system will allow 
for recognition of more technologies, procedures, and variations in 
patients' conditions on Medicare claims, which in turn will support 
greater specificity in MS-DRGs. However, the commenter asked that CMS 
provide additional information about how the ``X'' codes will be used 
and applied.
    Response: We encourage the public to participate in the ICD-10 
Coordination and Maintenance Committee meetings to offer comments on 
code updates. Any new codes that are finalized prior to the IPPS/LTCH 
PPS proposed rules, including ICD-10-PCS ``X'' codes, are included in 
the Table 6 series in the

[[Page 38065]]

IPPS/LTCH PPS proposed rule along with their proposed MS-DRG 
classifications. The public is offered the opportunity to comment on 
those MS-DRG classifications. Any new codes that are finalized after 
the IPPS/LTCH PPS proposed rule are included in the IPPS/LTCH PPS final 
rule along with their MS-DRG classifications. We refer the commenter to 
section II.H. of the preamble of this final rule for additional 
discussion of the section ``X'' codes.
16. Replaced Devices Offered Without Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that has been recalled determined the base MS-DRG assignment. At 
that time, we specified that we will reduce a hospital's IPPS payment 
for those MS-DRGs where the hospital received a credit for a replaced 
device equal to 50 percent or more of the cost of the device.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through 
51557), we clarified this policy to state that the policy applies if 
the hospital received a credit equal to 50 percent or more of the cost 
of the replacement device and issued instructions to hospitals 
accordingly.
b. Changes for FY 2018
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19852 through 
19853), for FY 2018, we did not propose to add any MS-DRGs to the 
policy for replaced devices offered without cost or with a credit. We 
proposed to continue to include the existing MS-DRGs currently subject 
to the policy as displayed in a table in the proposed rule.
    In the proposed rule, we solicited public comments on our proposal 
to continue to include the existing MS-DRGs currently subject to the 
policy for replaced devices offered without cost or with credit and to 
not add any additional MS-DRGs to the policy. We noted that, as 
discussed in section II.F.2.b. and in section II.F.5.a. of the preamble 
of the proposed rule, we proposed to revise the titles for MS-DRG 023 
and MS-DRGs 469 and 470. We referred readers to those discussions of 
the specific proposed MS-DRG titles. We did not receive any public 
comments opposing our proposal to continue to include the existing MS-
DRGs currently subject to the policy and to not add any additional MS-
DRGs. Therefore, we are finalizing the list of MS-DRGs displayed in the 
table in the proposed rule and below, with conforming changes to the 
finalized titles for MS-DRGs 023, 469, and 470, that will be subject to 
the replaced devices offered without cost or with a credit policy, 
effective October 1, 2017. As we indicated in the proposed rule, we 
also will issue this final list of MS-DRGs subject to the payment 
policy for devices provided at no cost or with a credit for FY 2018 to 
providers through guidance and instructions in the form of a Change 
Request (CR).

----------------------------------------------------------------------------------------------------------------
                    MDC                           MS-DRG                          MS-DRG title
----------------------------------------------------------------------------------------------------------------
Pre-MDC...................................                001  Heart Transplant or Implant of Heart Assist
                                                                System with MCC.
Pre-MDC...................................                002  Heart Transplant or Implant of Heart Assist
                                                                System without MCC.
1.........................................                023  Craniotomy with Major Device Implant or Acute CNS
                                                                Principal Diagnosis with MCC or Chemotherapy
                                                                Implant or Epilepsy with Neurostimulator.
1.........................................                024  Craniotomy with Major Device Implant or Acute
                                                                Complex CNS Principal Diagnosis without MCC.
1.........................................                025  Craniotomy & Endovascular Intracranial Procedures
                                                                with MCC.
1.........................................                026  Craniotomy & Endovascular Intracranial Procedures
                                                                with CC.
1.........................................                027  Craniotomy & Endovascular Intracranial Procedures
                                                                without CC/MCC.
1.........................................                040  Peripheral, Cranial Nerve & Other Nervous System
                                                                Procedures with MCC.
1.........................................                041  Peripheral, Cranial Nerve & Other Nervous System
                                                                Procedures with CC or Peripheral
                                                                Neurostimulator.
1.........................................                042  Peripheral, Cranial Nerve & Other Nervous System
                                                                Procedures without CC/MCC.
3.........................................                129  Major Head & Neck Procedures with CC/MCC or Major
                                                                Device.
3.........................................                130  Major Head & Neck Procedures without CC/MCC.
5.........................................                215  Other Heart Assist System Implant.
5.........................................                216  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure with Cardiac Catheterization with MCC.
5.........................................                217  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure with Cardiac Catheterization with CC.
5.........................................                218  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure with Cardiac Catheterization without
                                                                CC/MCC.
5.........................................                219  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure without Cardiac Catheterization with
                                                                MCC.
5.........................................                220  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure without Cardiac Catheterization with
                                                                CC.
5.........................................                221  Cardiac Valve & Other Major Cardiothoracic
                                                                Procedure without Cardiac Catheterization
                                                                without CC/MCC.
5.........................................                222  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization with AMI/Heart Failure/Shock
                                                                with MCC.
5.........................................                223  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization with AMI/Heart Failure/Shock
                                                                without MCC.
5.........................................                224  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization without AMI/Heart Failure/Shock
                                                                with MCC.
5.........................................                225  Cardiac Defibrillator Implant with Cardiac
                                                                Catheterization without AMI/Heart Failure/Shock
                                                                without MCC.
5.........................................                226  Cardiac Defibrillator Implant without Cardiac
                                                                Catheterization with MCC.
5.........................................                227  Cardiac Defibrillator Implant without Cardiac
                                                                Catheterization without MCC.
5.........................................                242  Permanent Cardiac Pacemaker Implant with MCC.
5.........................................                243  Permanent Cardiac Pacemaker Implant with CC.
5.........................................                244  Permanent Cardiac Pacemaker Implant without CC/
                                                                MCC.
5.........................................                245  AICD Generator Procedures.
5.........................................                258  Cardiac Pacemaker Device Replacement with MCC.
5.........................................                259  Cardiac Pacemaker Device Replacement without MCC.
5.........................................                260  Cardiac Pacemaker Revision Except Device
                                                                Replacement with MCC.
5.........................................                261  Cardiac Pacemaker Revision Except Device
                                                                Replacement with CC.
5.........................................                262  Cardiac Pacemaker Revision Except Device
                                                                Replacement without CC/MCC.
5.........................................                265  AICD Lead Procedures.
5.........................................                266  Endovascular Cardiac Valve Replacement with MCC.
5.........................................                267  Endovascular Cardiac Valve Replacement without
                                                                MCC.

[[Page 38066]]

 
5.........................................                268  Aortic and Heart Assist Procedures Except
                                                                Pulsation Balloon with MCC.
5.........................................                269  Aortic and Heart Assist Procedures Except
                                                                Pulsation Balloon without MCC.
5.........................................                270  Other Major Cardiovascular Procedures with MCC.
5.........................................                271  Other Major Cardiovascular Procedures with CC.
5.........................................                272  Other Major Cardiovascular Procedures without CC/
                                                                MCC.
8.........................................                461  Bilateral or Multiple Major Joint Procedures Of
                                                                Lower Extremity with MCC.
8.........................................                462  Bilateral or Multiple Major Joint Procedures of
                                                                Lower Extremity without MCC.
8.........................................                466  Revision of Hip or Knee Replacement with MCC.
8.........................................                467  Revision of Hip or Knee Replacement with CC.
8.........................................                468  Revision of Hip or Knee Replacement without CC/
                                                                MCC.
8.........................................                469  Major Hip and Knee Joint Replacement or
                                                                Reattachment of Lower Extremity with MCC or
                                                                Total Ankle Replacement.
8.........................................                470  Major Hip and Knee Joint Replacement or
                                                                Reattachment of Lower Extremity without MCC.
----------------------------------------------------------------------------------------------------------------

17. Other Policy Changes: Other Operating Room (O.R.) and Non-O.R. 
Issues
a. O.R. Procedures to Non-O.R. Procedures
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19853), we have continued our efforts to address the recommendations 
for consideration that we received in response to some of the proposals 
set forth in the FY 2017 IPPS/LTCH PPS proposed rule pertaining to 
changing the designation of ICD-10-PCS procedure codes from O.R. 
procedures to non-O.R. procedures. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56871), we received requests and 
recommendations for over 800 procedure codes that we were not able to 
fully evaluate and finalize for FY 2017. We discuss these requests and 
recommendations below.
    As discussed in the proposed rule, we also are addressing separate 
requests that we received regarding changing the designation of 
specific ICD-10-PCS procedure codes. For each group summarized below, 
the detailed lists of procedure codes are shown in Tables 6P.4a. 
through 6P.4p. (ICD-10-CM and ICD-10-PCS Code Designations, MCE and MS-
DRG Changes--FY 2018) associated with the FY 2018 proposed rule and 
this final rule (which are available via the Internet on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
    Comment: Some commenters expressed concern with the proposed 
changes from O.R. procedures to non-O.R. procedures for such a large 
number of procedure codes without having more detailed analysis of the 
impact to specific MS-DRGs. The commenters stated that many of the 
proposed changes for FY 2018 go beyond last year's changes when the 
changes from O.R. procedures to non-O.R. procedures were done for 
purposes of replicating the logic of the ICD-9 MS-DRGs.
    Response: We acknowledge the concerns of the commenters regarding 
the volume of proposed changes for procedures to be redesignated from 
O.R. to non-O.R. As we stated in the FY 2018 IPPS/LTCH PPS proposed 
rule, we continued our efforts to address the recommendations that we 
received in response to some of the proposals set forth in the FY 2017 
IPPS/LTCH PPS proposed rule pertaining to changing the designation of 
ICD-10-PCS procedure codes from O.R. procedures to non-O.R. procedures. 
We noted that those recommendations were for over 800 procedure codes 
that we were not able to fully evaluate and finalize for FY 2017. 
Therefore, we discussed the proposed changes for FY 2018.
    The commenters are correct that the proposed changes for FY 2018 go 
beyond the FY 2017 proposed (and finalized) MS-DRG updates to change 
the designation of procedure codes from O.R. to non-O.R. that were done 
for purposes of replicating the logic of the ICD-9 MS-DRGs. We stated 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56790) that some of the 
issues evaluated for the FY 2017 MS-DRGs update continued to relate to 
the need for the ICD-10 MS-DRGs to accurately replicate the logic of 
the ICD-9-CM based version of the MS-DRGs. We noted that replication 
was important because both the logic for the MS-DRGs and the data 
source used to calculate and develop the relative payment weights were 
based on the same MedPAR claims data. We further noted that the logic 
for the proposed and final FY 2017 ICD-10 MS-DRGs was based upon the FY 
2015 ICD-9-CM MedPAR claims data, which was also the data source used 
to calculate and develop the FY 2017 relative payment weights. However, 
for FY 2018 and future fiscal years, we are no longer replicating the 
ICD-9 MS-DRGs. As discussed in the FY 2018 IPPS/LTCH PPS proposed rule 
and this final rule, we are using ICD-10 coded claims data for the 
first time to propose changes to the ICD-10 MS-DRG classifications and 
to compute the relative weights. Therefore, our proposals and final 
policies for FY 2018 are based solely on the ICD-10 claims data from 
the FY 2016 MedPAR file.
    As such, procedures that were designated as O.R. under ICD-9 will 
not necessarily be appropriate to designate as O.R. under ICD-10. 
Conversely, procedures that were not designated as O.R. under ICD-9 may 
be appropriate to designate as O.R. under ICD-10. As discussed 
elsewhere in this final rule, with the transition from ICD-9 to ICD-10, 
the determination of when a procedure code should be designated as an 
O.R. procedure has become a much more complex task. This is, in part, 
due to the number of various approaches available in the ICD-10-PCS 
classification, as well as changes in medical practice. While we have 
typically evaluated procedures on the basis of whether or not they 
would be performed in an operating room, we believe that there may be 
other factors to consider with regard to resource utilization, 
particularly with the implementation of ICD-10. Therefore, we are 
soliciting comments on what factors or criteria to consider in 
determining whether a procedure is designated as an O.R. procedure in 
the ICD-10-PCS classification system for FY 2019 consideration. 
Commenters should submit their recommendations to the following email 
address: [email protected] by November 1, 2017.
(1) Percutaneous/Diagnostic Drainage
    One commenter identified 135 ICD-10-PCS procedure codes describing 
procedures involving percutaneous diagnostic and therapeutic drainage 
of central nervous system, vascular and other body sites that generally 
would not require the resources of an operating room and can be 
performed at the bedside. The list includes procedure codes that 
describe procedures

[[Page 38067]]

involving drainage with or without placement of a drainage device. We 
stated in the proposed rule that we agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19853), we 
proposed that the 135 ICD-10-PCS procedure codes listed in Table 6P.4a. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 135 procedure codes describing percutaneous 
diagnostic and therapeutic drainage of central nervous system, vascular 
and other body sites. However, one commenter disagreed with 
reclassifying procedure codes 009330Z (Drainage of Epidural Space with 
Drainage Device, Percutaneous Approach) and 00933ZZ (Drainage of 
Epidural Space, Percutaneous Approach) to non-O.R. procedures. 
According to the commenter, these two codes are assigned for 
percutaneous burr hole drainage of acute traumatic and nontraumatic 
intracranial epidural hematomas, and for drainage of intracranial 
epidural abscesses. The commenter noted that, although percutaneous 
burr hole drainages are performed through smaller openings in the skull 
than open burr hole drainages, they require drilling through the skull 
under sterile technique and anesthesia for pain control. The commenter 
also noted that similar procedure codes such as 009430Z (Drainage of 
Subdural Space with Drainage Device, Percutaneous Approach) and 00943ZZ 
(Drainage of Subdural Space, Percutaneous Approach) are currently 
classified as O.R. procedures.
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with reclassifying procedure codes 009330Z and 
00933ZZ to non-O.R. procedures, upon further review and consideration, 
for the reasons the commenter pointed out and consistent with the 
current designation of procedure codes 009430Z and 00943ZZ, which are 
classified as O.R. procedures, we believe it is appropriate to maintain 
the current O.R. designation of procedure codes 009330Z and 00933ZZ.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of 133 ICD-10-PCS 
procedure codes listed in Table 6P.4a. associated with this final rule 
(which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017. We also are finalizing the 
designation of procedure codes 009330Z and 00933ZZ to remain O.R. 
procedures for FY 2018. We note that, as shown in Table 6F.--Revised 
Procedure Code Titles associated with this final rule, the titles for 
procedure codes 009330Z, 00933ZZ, 009430Z and 00943ZZ are revised to 
include the term ``intracranial.'' Effective October 1, 2017, the title 
of ICD-10-PCS procedure code 009330Z is revised to read ``Drainage of 
Intracranial Epidural Space with Drainage Device, Percutaneous 
Approach''; the title of ICD-10-PCS procedure code 00933ZZ is revised 
to read ``Drainage of Intracranial Epidural Space, Percutaneous 
Approach''; the title of ICD-10-PCS procedure code 009430Z is revised 
to read ``Drainage of Intracranial Subdural Space with Drainage Device, 
Percutaneous Approach''; and the title of ICD-10-PCS procedure code 
00943ZZ is revised to read ``Drainage of Intracranial Subdural Space, 
Percutaneous Approach''.
(2) Percutaneous Insertion of Intraluminal or Monitoring Device
    One commenter identified 28 ICD-10-PCS procedure codes describing 
procedures involving the percutaneous insertion of intraluminal and 
monitoring devices into central nervous system and other cardiovascular 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. We stated in the 
proposed rule that we agreed with the commenter. Therefore, in the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19853), we proposed that the 28 
ICD-10-PCS procedure codes listed in Table 6P.4b. associated with the 
proposed rule (which is available via the Internet on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 28 procedure codes describing percutaneous insertion 
of intraluminal or monitoring devices into central nervous system and 
other cardiovascular body parts. However, one commenter disagreed with 
changing the designation for 15 of the 28 listed procedure codes. The 
commenter disagreed with changing the designation for ICD-10-PCS 
procedure codes 00H032Z (Insertion of Monitoring Device into Brain, 
Percutaneous Approach) and 00H632Z (Insertion of Monitoring Device into 
Cerebral Ventricle, Percutaneous Approach). According to the commenter, 
these two codes are assigned for inserting a monitoring device into the 
brain or cerebral ventricle by a percutaneous burr hole which is most 
often performed in the O.R. setting under sterile technique and 
requires anesthesia for pain control. In addition, the commenter 
disagreed with changing the designation for the following 13 ICD-10-PCS 
procedure codes. The commenter stated that these intravascular 
procedures are performed in specialized vascular suites and involve 
insertion of a filter into the vena cava for prevention of pulmonary 
emboli or the insertion of vascular stents for conditions such as 
stenosis and other types of intraluminal devices into the great vessels 
and are significant procedures that warrant an O.R. designation.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
02H43DZ...................  Insertion of intraluminal device into
                             coronary vein, percutaneous approach.
02H63DZ...................  Insertion of intraluminal device into right
                             atrium, percutaneous approach.
02H73DZ...................  Insertion of intraluminal device into left
                             atrium, percutaneous approach.
02HK3DZ...................  Insertion of intraluminal device into right
                             ventricle, percutaneous approach.
02HL3DZ...................  Insertion of intraluminal device into left
                             ventricle, percutaneous approach.
02HP3DZ...................  Insertion of intraluminal device into
                             pulmonary trunk, percutaneous approach.
02HQ3DZ...................  Insertion of intraluminal device into right
                             pulmonary artery, percutaneous approach.
02HR3DZ...................  Insertion of intraluminal device into left
                             pulmonary artery, percutaneous approach.
02HS3DZ...................  Insertion of intraluminal device into right
                             pulmonary vein, percutaneous approach.
02HT3DZ...................  Insertion of intraluminal device into left
                             pulmonary vein, percutaneous approach.
02HV3DZ...................  Insertion of intraluminal device into
                             superior vena cava, percutaneous approach.

[[Page 38068]]

 
02HW3DZ...................  Insertion of intraluminal device into
                             thoracic aorta, percutaneous approach.
06H03DZ...................  Insertion of intraluminal device into
                             inferior vena cava, percutaneous approach.
------------------------------------------------------------------------

    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with changing the designation for 15 of the 28 
procedure codes, upon further review and consideration, we agree that 
the status of the above list of procedure codes, in addition to the two 
procedure codes discussed earlier in this section (00H032Z and 00H632Z) 
should be maintained as O.R. procedures due to the indications for 
which these procedures may be performed and the risks involved.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of 13 ICD-10-PCS 
procedure codes listed in Table 6P.4b. associated with this final rule 
(which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017. We also are finalizing 
maintaining the designation of ICD-10-PCS procedure codes 00H032Z 
(Insertion of Monitoring Device into Brain, Percutaneous Approach) and 
00H632Z (Insertion of Monitoring Device into Cerebral Ventricle, 
Percutaneous Approach) and the list of procedure codes shown in the 
table above as O.R. procedures, effective October 1, 2017.
(3) Percutaneous Removal of Drainage, Infusion, Intraluminal or 
Monitoring Device
    One commenter identified 22 ICD-10-PCS procedure codes that 
describe procedures involving the percutaneous removal of drainage, 
infusion, intraluminal and monitoring devices from central nervous 
system and other vascular body parts that generally would not require 
the resources of an operating room and can be performed at the bedside. 
We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19854), we proposed that the 22 ICD-10-PCS 
procedure codes listed in Table 6P.4c. associated with the proposed 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of 22 ICD-10-PCS procedure codes describing the 
percutaneous removal of drainage, infusion, intraluminal and monitoring 
devices from central nervous system and other vascular body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 22 ICD-10-PCS 
procedure codes listed in Table 6P.4c. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(4) External Removal of Cardiac or Neurostimulator Lead
    One commenter identified four ICD-10-PCS procedure codes that 
describe procedures involving the external removal of cardiac leads 
from the heart and neurostimulator leads from central nervous system 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
00P6XMZ...................  Removal of neurostimulator lead from
                             cerebral ventricle, external approach.
00PEXMZ...................  Removal of neurostimulator lead from cranial
                             nerve, external approach.
01PYXMZ...................  Removal of neurostimulator lead from
                             peripheral nerve, external approach.
02PAXMZ...................  Removal of cardiac lead from heart, external
                             approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19854), we proposed that the four ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of four ICD-10-PCS procedure codes that describe the 
external removal of cardiac leads from the heart and neurostimulator 
leads from central nervous system body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(5) Percutaneous Revision of Drainage, Infusion, Intraluminal or 
Monitoring Device
    One commenter identified 28 ICD-10-PCS procedure codes that 
describe procedures involving the percutaneous revision of drainage, 
infusion, intraluminal and monitoring devices for vascular and heart 
and great vessel body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. We 
agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19854), we proposed that the 28 ICD-10-PCS 
procedure codes listed in Table 6P.4d. associated with the proposed 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of 28 ICD-10-PCS procedure codes that describe the 
percutaneous revision of drainage, infusion, intraluminal and 
monitoring devices for vascular and heart and great vessel body parts.
    Response: We appreciate the commenters' support.

[[Page 38069]]

    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation for the 28 ICD-10-PCS 
procedure codes listed in Table 6P.4d. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(6) Percutaneous Destruction
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving the percutaneous destruction of retina 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
085E3ZZ...................  Destruction of right retina, percutaneous
                             approach.
085F3ZZ...................  Destruction of left retina, percutaneous
                             approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19854), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of two ICD-10-PCS procedure codes that describe the 
percutaneous destruction of retina body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the two ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(7) External/Diagnostic Drainage
    One commenter identified 20 ICD-10-PCS procedure codes that 
describe procedures involving external drainage for structures of the 
eye that generally would not require the resources of an operating room 
and can be performed at the bedside. We agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19854), we 
proposed that the 20 ICD-10-PCS procedure codes listed in Table 6P.4e. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of 20 ICD-10-PCS procedure codes that describe external 
drainage for structures of the eye.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation for the 20 ICD-10-PCS 
procedure codes listed in Table 6P.4e. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(8) External Extirpation
    One commenter identified four ICD-10-PCS procedure codes that 
describe procedures involving external extirpation of matter from eye 
structures that generally would not require the resources of an 
operating room and can be performed at the bedside. These four ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
08C0XZZ...................  Extirpation of matter from right eye,
                             external approach.
08C1XZZ...................  Extirpation of matter from left eye,
                             external approach.
08CSXZZ...................  Extirpation of matter from right
                             conjunctiva, external approach.
08CTXZZ...................  Extirpation of matter from left conjunctiva,
                             external approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19854 through 19855), we proposed that the 
four ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the four ICD-10-PCS procedure codes shown in the table 
above that describe procedures involving external extirpation of matter 
from eye structures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(9) External Removal of Radioactive Element or Synthetic Substitute
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving the external removal of radioactive or 
synthetic substitutes from the eye that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These three ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
08P0X1Z...................  Removal of radioactive element from right
                             eye, external approach.
08P0XJZ...................  Removal of synthetic substitute from right
                             eye, external approach.
08P1XJZ...................  Removal of synthetic substitute from left
                             eye, external approach.
------------------------------------------------------------------------


[[Page 38070]]

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19855), we proposed that the three ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the three ICD-10-PCS procedure codes shown in the table 
above that describe the external removal of radioactive or synthetic 
substitutes from the eye.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(10) Endoscopic/Transorifice Diagnostic Drainage
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) drainage of ear structures that generally would not 
require the resources of an operating room and can be performed at the 
bedside. These eight ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
09977ZX...................  Drainage of right tympanic membrane, via
                             natural or artificial opening, diagnostic.
09978ZX...................  Drainage of right tympanic membrane, via
                             natural or artificial opening endoscopic,
                             diagnostic.
09987ZX...................  Drainage of left tympanic membrane, via
                             natural or artificial opening, diagnostic.
09988ZX...................  Drainage of left tympanic membrane, via
                             natural or artificial opening endoscopic,
                             diagnostic.
099F7ZX...................  Drainage of right eustachian tube, via
                             natural or artificial opening, diagnostic.
099F8ZX...................  Drainage of right eustachian tube, via
                             natural or artificial opening endoscopic,
                             diagnostic.
099G7ZX...................  Drainage of left eustachian tube, via
                             natural or artificial opening, diagnostic.
099G8ZX...................  Drainage of left eustachian tube, via
                             natural or artificial opening endoscopic,
                             diagnostic.
------------------------------------------------------------------------

    We stated in the proposed rule that we agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19855), we 
proposed that the eight ICD-10-PCS procedure codes shown in the table 
above be designated as non-O.R. procedures. We invited public comments 
on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the eight ICD-10-PCS procedure codes shown in the table 
above that describe drainage of ear structures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(11) External Release
    One commenter identified four ICD-10-PCS procedure codes that 
describe procedures involving the external release of ear structures 
that generally would not require the resources of an operating room and 
can be performed at the bedside. These four ICD-10-PCS codes are shown 
in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
09N0XZZ...................  Release right external ear, external
                             approach.
09N1XZZ...................  Release left external ear, external
                             approach.
09N3XZZ...................  Release right external auditory canal,
                             external approach.
09N4XZZ...................  Release left external auditory canal,
                             external approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19855), we proposed that the four ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the four ICD-10-PCS procedure codes shown in the table 
above that describe external release of ear structures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the four ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(12) External Repair
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving the external repair of body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. These three ICD-10-PCS codes are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
09QKXZZ...................  Repair nose, external approach.
0CQ4XZZ...................  Repair buccal mucosa, external approach.
0CQ7XZZ...................  Repair tongue, external approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2019 IPPS/LTCH 
PPS proposed rule (82 FR 19855), we proposed that the three ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the three ICD-10-PCS procedure codes shown in the table 
above that describe

[[Page 38071]]

external repair of body parts of various structures.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(13) Endoscopic/Transorifice Destruction
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving the endoscopic/transorifice destruction 
of respiratory system body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These eight ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0B538ZZ...................  Destruction of right main bronchus, via
                             natural or artificial opening endoscopic.
0B548ZZ...................  Destruction of right upper lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0B558ZZ...................  Destruction of right middle lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0B568ZZ...................  Destruction of right lower lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0B578ZZ...................  Destruction of left main bronchus, via
                             natural or artificial opening endoscopic.
0B588ZZ...................  Destruction of left upper lobe bronchus, via
                             natural or artificial opening endoscopic.
0B598ZZ...................  Destruction of lingula bronchus, via natural
                             or artificial opening endoscopic.
0B5B8ZZ...................  Destruction of left lower lobe bronchus, via
                             natural or artificial opening endoscopic.
------------------------------------------------------------------------

    We stated in the proposed rule that we agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19855 
through 19856), we proposed that the eight ICD-10-PCS procedure codes 
shown in the table above be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Some commenters agreed with the proposal to change the 
designation of the eight ICD-10-PCS procedure codes that describe 
procedures involving the endoscopic/transorifice destruction of 
respiratory system body parts from O.R. procedures to non-O.R. 
procedures. However, other commenters disagreed with the proposal. 
These commenters believed that these procedures do, in fact, require 
the resources of an operating room and stated that the suggestion that 
these procedures can be performed at the bedside is clinically 
inaccurate and misrepresents the nature of these procedures. According 
to the commenters, the only instances in which these procedures would 
be performed at the bedside would be if the patient was in the 
intensive care unit and in emergent need of care. Otherwise, the 
commenters indicated that providing these services at the patient's 
bedside would not be appropriate. Commenters also noted that the 
patients who undergo the above procedures typically have poor 
respiratory function that requires treatment within an O.R. setting for 
clinical and safety purposes. In addition, the commenters reported that 
the administration of anesthesia during these procedures is critically 
important. The commenters conducted an in-depth analysis to determine 
the impact of the proposed change and noted that the resource 
utilization associated with the inpatient claims reporting these 
procedures more closely aligns with surgical MS-DRGs versus medical MS-
DRGs.
    Response: We appreciate the commenters' support. In response to the 
commenters who disagreed with changing the designation of the eight 
ICD-10-PCS procedure codes that describe the endoscopic/transorifice 
destruction of respiratory system body parts, we appreciate the 
thorough review and analysis conducted in response to our solicitation 
for comments on the proposal. Upon further review and consideration, we 
agree that these procedures warrant an O.R. setting and assignment to 
surgical MS-DRGs.
    After consideration of the public comments we received, we are not 
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures. The eight procedure codes shown in the table above 
will maintain their O.R. designation for FY 2018.
(14) Endoscopic/Transorifice Drainage
    One commenter identified 40 ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) drainage of respiratory system body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. We agreed with the commenter. Therefore, 
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19856), we proposed 
that the 40 ICD-10-PCS procedure codes listed in Table 6P.4f. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 40 ICD-10-PCS procedure codes that describe 
endoscopic/transorifice (via natural or artificial opening) drainage of 
respiratory system body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 40 ICD-10-PCS 
procedure codes listed in Table 6P.4f. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(15) Endoscopic/Transorifice Extirpation
    One commenter identified nine ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice extirpation of 
matter from respiratory system body parts that generally would not 
require the resources of an operating room and can be performed at the 
bedside. These nine ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BCC8ZZ...................  Extirpation of matter from right upper lung
                             lobe, via natural or artificial opening
                             endoscopic.

[[Page 38072]]

 
0BCD8ZZ...................  Extirpation of matter from right middle lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCF8ZZ...................  Extirpation of matter from right lower lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCG8ZZ...................  Extirpation of matter from left upper lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCH8ZZ...................  Extirpation of matter from lung lingula, via
                             natural or artificial opening endoscopic.
0BCJ8ZZ...................  Extirpation of matter from left lower lung
                             lobe, via natural or artificial opening
                             endoscopic.
0BCK8ZZ...................  Extirpation of matter from right lung, via
                             natural or artificial opening endoscopic.
0BCL8ZZ...................  Extirpation of matter from left lung, via
                             natural or artificial opening endoscopic.
0BCM8ZZ...................  Extirpation of matter from bilateral lungs,
                             via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We stated in the proposed rule that we agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19856), we 
proposed that the nine ICD-10-PCS procedure codes shown in the table 
above be designated as non-O.R. procedures. We invited public comments 
on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the nine ICD-10-PCS procedure codes that describe 
endoscopic/transorifice extirpation of matter from respiratory system 
body parts. However, one commenter disagreed with the proposal. 
According to the commenter, the codes describe endoscopic procedures 
performed on the lung and are more invasive in comparison to 
endobronchial procedures and they require specialized equipment. The 
commenter also noted that time, skill, and duration of sedation are 
increased for endoscopic lung procedures versus procedures performed on 
the bronchus (endobronchial).
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with our proposal, upon further review and 
consideration, we agree that these procedure codes warrant an O.R. 
setting.
    After consideration of the public comments we received, we are not 
finalizing our proposal to designate the nine ICD-10-PCS procedure 
codes shown in the table above as non-O.R. procedures. These procedure 
codes will remain designated as O.R. procedures for FY 2018.
(16) Endoscopic/Transorifice Fragmentation
    One commenter identified 16 ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice fragmentation of 
respiratory system body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These 16 ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BF37ZZ...................  Fragmentation in right main bronchus, via
                             natural or artificial opening.
0BF38ZZ...................  Fragmentation in right main bronchus, via
                             natural or artificial opening endoscopic.
0BF47ZZ...................  Fragmentation in right upper lobe bronchus,
                             via natural or artificial opening.
0BF48ZZ...................  Fragmentation in right upper lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF57ZZ...................  Fragmentation in right middle lobe bronchus,
                             via natural or artificial opening.
0BF58ZZ...................  Fragmentation in right middle lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF67ZZ...................  Fragmentation in right lower lobe bronchus,
                             via natural or artificial opening.
0BF68ZZ...................  Fragmentation in right lower lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF77ZZ...................  Fragmentation in left main bronchus, via
                             natural or artificial opening.
0BF78ZZ...................  Fragmentation in left main bronchus, via
                             natural or artificial opening endoscopic.
0BF87ZZ...................  Fragmentation in left upper lobe bronchus,
                             via natural or artificial opening.
0BF88ZZ...................  Fragmentation in left upper lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
0BF97ZZ...................  Fragmentation in lingula bronchus, via
                             natural or artificial opening.
0BF98ZZ...................  Fragmentation in lingula bronchus, via
                             natural or artificial opening endoscopic.
0BFB7ZZ...................  Fragmentation in left lower lobe bronchus,
                             via natural or artificial opening.
0BFB8ZZ...................  Fragmentation in left lower lobe bronchus,
                             via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19856 through 19857), we proposed that the 16 
ICD-10-PCS procedure codes shown in the table above be designated as 
non-O.R. procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the16 ICD-10-PCS procedure codes that describe 
endoscopic/transorifice fragmentation of respiratory system body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 16 ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(17) Endoscopic/Transorifice Insertion of Intraluminal Device
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving an endoscopic/transorifice (via natural 
or artificial opening) insertion of intraluminal devices into 
respiratory system body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These two ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BH17DZ...................  Insertion of intraluminal device into
                             trachea, via natural or artificial opening.
0BH18DZ...................  Insertion of intraluminal device into
                             trachea, via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------


[[Page 38073]]

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19857), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the two ICD-10-PCS procedure codes that describe an 
endoscopic/transorifice (via natural or artificial opening) insertion 
of intraluminal devices into respiratory system body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the two ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(18) Endoscopic/Transorifice Removal of Radioactive Element
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving the endoscopic/transorifice removal of 
radioactive elements from respiratory system body parts that generally 
would not require the resources of an operating room and can be 
performed at the bedside. These two ICD-10-PCS codes are shown in the 
table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0BPK71Z...................  Removal of radioactive element from right
                             lung, via natural or artificial opening.
0BPK81Z...................  Removal of radioactive element from right
                             lung, via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19857), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the two ICD-10-PCS procedure codes that describe 
procedures involving the endoscopic/transorifice removal of radioactive 
elements from respiratory system body parts. However, one commenter 
disagreed with the proposal and asserted that endoscopic procedures 
performed on the lung are more invasive than endobronchial procedures.
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with our proposal, we recognize that endoscopic 
procedures performed on the lung may be considered more invasive than 
endobronchial procedures. However, according to the American Cancer 
Society, in most cases, anesthesia is not needed when the applicator 
and/or radioactive implant is removed, as it is usually done in the 
hospital room.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of ICD-10-PCS 
procedure codes 0BPK71Z and 0BPK81Z from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(19) Endoscopic/Transorifice Revision of Drainage, Infusion, 
Intraluminal or Monitoring Device
    One commenter identified 18 ICD-10-PCS procedure codes that 
describe procedures involving the revision of drainage, infusion, 
intraluminal, or monitoring devices from respiratory system body parts 
that generally would not require the resources of an operating room and 
can be performed at the bedside. We agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19857), we 
proposed that the 18 ICD-10-PCS procedure codes listed in Table 6P.4g. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 18 ICD-10-PCS procedure codes that describe 
procedures involving the revision of drainage, infusion, intraluminal, 
or monitoring devices from respiratory system body parts. However, one 
commenter disagreed with the proposal and recommended that CMS maintain 
an O.R. designation of 12 of the 18 proposed codes. The commenter 
stated that, although it is uncertain how often a device within the 
lung would be revised versus removed and replaced, endoscopic 
procedures performed on the lung are more invasive than endobronchial 
procedures.
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with 12 of the 18 procedure codes in our 
proposal, we still believe our proposal is appropriate, given that 
there are a wide range of procedures that may be performed and are 
described as a revision of a drainage, infusion, intraluminal, or 
monitoring device in the lung and generally do not require the 
resources of an operating room.
    After consideration of the public comments we received, we are 
finalizing our proposal to designate the 18 ICD-10-PCS procedure codes 
listed in Table 6P.4g. associated with the proposed rule and this final 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) as non-O.R. procedures, effective October 
1, 2017.
(20) Endoscopic/Transorifice Excision
    One commenter identified one ICD-10-PCS procedure code that 
describes the procedure involving endoscopic/transorifice (via natural 
or artificial opening) excision of the digestive system body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. This code is 0DBQ8ZZ (Excision of anus, 
via natural or artificial opening endoscopic). We agreed with the 
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19857), we proposed that ICD-10-PCS procedure code 0DBQ8ZZ be 
designated as a non-O.R. procedure. We invited public comments on our 
proposal.
    Comment: Commenters supported the proposal to change the 
designation of ICD-10-PCS procedure code 0DBQ8ZZ.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of ICD-10-PCS 
procedure code 0DBQ8ZZ (Excision of anus, via natural or artificial 
opening endoscopic) from an O.R. procedure to a non-O.R. procedure, 
effective October 1, 2017.
(21) Endoscopic/Transorifice Insertion
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving the endoscopic/transorifice (via natural 
or artificial opening) insertion of intraluminal device into the 
stomach that generally would not require the resources of an operating 
room and can be performed at

[[Page 38074]]

the bedside. These two ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DH67DZ...................  Insertion of intraluminal device into
                             stomach, via natural or artificial opening.
0DH68DZ...................  Insertion of intraluminal device into
                             stomach, via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19857), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the two ICD-10-PCS procedure codes that describe the 
endoscopic/transorifice (via natural or artificial opening) insertion 
of intraluminal device into the stomach.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the two ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(22) Endoscopic/Transorifice Removal
    One commenter identified six ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) removal of feeding devices that generally would not 
require the resources of an operating room and can be performed at the 
bedside. These six ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DP07UZ...................  Removal of feeding device from upper
                             intestinal tract, via natural or artificial
                             opening.
0DP08UZ...................  Removal of feeding device from upper
                             intestinal tract, via natural or artificial
                             opening endoscopic.
0DP67UZ...................  Removal of feeding device from stomach, via
                             natural or artificial opening.
0DP68UZ...................  Removal of feeding device from stomach, via
                             natural or artificial opening endoscopic.
0DPD7UZ...................  Removal of feeding device from lower
                             intestinal tract, via natural or artificial
                             opening.
0DPD8UZ...................  Removal of feeding device from lower
                             intestinal tract, via natural or artificial
                             opening endoscopic.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19857 through 19858), we proposed that the six 
ICD-10-PCS procedure codes shown in the table above be designated as 
non-O.R. procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the six ICD-10-PCS procedure codes that describe the 
endoscopic/transorifice (via natural or artificial opening) removal of 
feeding devices.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the six ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(23) External Reposition
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving external reposition of gastrointestinal 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These two ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0DS5XZZ...................  Reposition esophagus, external approach.
0DSQXZZ...................  Reposition anus, external approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19858), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the two ICD-10-PCS procedure codes that describe the 
external reposition of gastrointestinal body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the two ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(24) Endoscopic/Transorifice Drainage
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) drainage of hepatobiliary system and pancreatic 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These eight ICD-10-
PCS codes are shown in the table below.

[[Page 38075]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0F9580Z...................  Drainage of right hepatic duct with drainage
                             device, via natural or artificial opening
                             endoscopic.
0F958ZZ...................  Drainage of right hepatic duct, via natural
                             or artificial opening endoscopic.
0F9680Z...................  Drainage of left hepatic duct with drainage
                             device, via natural or artificial opening
                             endoscopic.
0F968ZZ...................  Drainage of left hepatic duct, via natural
                             or artificial opening endoscopic.
0F9880Z...................  Drainage of cystic duct with drainage
                             device, via natural or artificial opening
                             endoscopic.
0F988ZZ...................  Drainage of cystic duct, via natural or
                             artificial opening endoscopic.
0F9D8ZZ...................  Drainage of pancreatic duct, via natural or
                             artificial opening endoscopic.
0F9F8ZZ...................  Drainage of accessory pancreatic duct, via
                             natural or artificial opening endoscopic.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19858), we proposed that the eight ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the eight ICD-10-PCS procedure codes that describe 
endoscopic/transorifice (via natural or artificial opening) drainage of 
hepatobiliary system and pancreatic body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the eight ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(25) Endoscopic/Transorifice Fragmentation
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) fragmentation of hepatobiliary system and 
pancreatic body parts that generally would not require the resources of 
an operating room and can be performed at the bedside. These two ICD-
10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0FFD8ZZ...................  Fragmentation in pancreatic duct, via
                             natural or artificial opening endoscopic.
0FFF8ZZ...................  Fragmentation in accessory pancreatic duct,
                             via natural or artificial opening
                             endoscopic.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19858), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the two ICD-10-PCS procedure codes that describe 
endoscopic/transorifice (via natural or artificial opening) 
fragmentation of hepatobiliary system and pancreatic body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the two ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(26) Percutaneous Alteration
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving percutaneous alteration of the breast 
that generally would not require the resources of an operating room and 
can be performed at the bedside. These three ICD-10-PCS codes are shown 
in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0H0T3JZ...................  Alteration of right breast with synthetic
                             substitute, percutaneous approach.
0H0U3JZ...................  Alteration of left breast with synthetic
                             substitute, percutaneous approach.
0H0V3JZ...................  Alteration of bilateral breast with
                             synthetic substitute, percutaneous
                             approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19858 through 19859), we proposed that the 
three ICD-10-PCS procedure codes shown in the table above be designated 
as non-O.R. procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the three ICD-10-PCS procedure codes that describe 
percutaneous alteration of the breast.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(27) External Division and Excision of Skin
    One commenter identified 41 ICD-10-PCS procedure codes that 
describe procedures involving external division and excision of the 
skin for body parts that generally would not require the resources of 
an operating room and can be performed at the bedside. We agreed with 
the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule 
(82 FR 19859), we proposed that the 41 ICD-10-PCS procedure codes 
listed in Table 6P.4h. associated with the proposed rule (which is 
available via the Internet on the CMS Web site at: http://www.cms.gov/
Medicare/Medicare-Fee-for-Service-Payment/

[[Page 38076]]

AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 41 ICD-10-PCS procedure codes that describe external 
division and excision of the skin for body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 41 ICD-10-PCS 
procedure codes listed in Table 6P.4h. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(28) External Excision of Breast
    One commenter identified six ICD-10-PCS procedure codes that 
describe procedures involving external excision of the breast that they 
believed would generally not require the resources of an operating room 
and can be performed at the bedside. These six ICD-10-PCS codes are 
shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0HBTXZZ...................  Excision of right breast, external approach.
0HBUXZZ...................  Excision of left breast, external approach.
0HBVXZZ...................  Excision of bilateral breast, external
                             approach.
0HBWXZZ...................  Excision of right nipple, external approach.
0HBXXZZ...................  Excision of left nipple, external approach.
0HBYXZZ...................  Excision of supernumerary breast, external
                             approach.
------------------------------------------------------------------------

    We disagreed with the commenter because these procedure codes 
describe various types of surgery performed on the breast or nipple 
(for example, partial mastectomy) that would typically involve the use 
of general anesthesia. Therefore, in the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 19859), we proposed that the six ICD-10-PCS procedure codes 
shown in the table above remain designated as O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to maintain the current 
designation of the six ICD-10-PCS procedure codes that describe 
external excision of the breast. However, one commenter disagreed 
specifically with the example of a partial mastectomy utilizing an 
external approach. The commenter stated that the breast itself includes 
glandular and ductal tissue, although it is assigned with skin to 
Section 0H in the Medical and Surgical section of the ICD-10-PCS 
classification. Therefore, according to the commenter, by definition, a 
partial mastectomy, which involves excision of glandular/ductal tissue, 
cannot be performed by an external approach because glandular tissue 
cannot be removed through direct action upon the skin or mucous 
membrane.
    Response: We appreciate the commenters' support. In response to the 
commenter who noted the example of a partial mastectomy that cannot be 
performed by an external approach, we agree that the example may not 
have been an appropriate illustration of an external approach according 
to the ICD-10-PCS definitions. A more appropriate example would be an 
excision of lesion of breast for the external approach. As the 
commenter pointed out, the breast itself includes glandular and ductal 
tissue, although it is assigned with skin to Chapter 0H. Because the 
code title description does not specifically include the term ``skin,'' 
it can lead to confusion. We believe this area in the classification 
may benefit from further review to determine if modifications are 
warranted, in which case any proposals would be presented at a future 
ICD-10 Coordination and Maintenance Committee meeting.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the six ICD-10-PCS procedure codes 
shown in the table above as O.R. procedures for FY 2018.
(29) Percutaneous Supplement
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving percutaneous supplement of the breast 
with synthetic substitute that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These three ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0HUT3JZ...................  Supplement right breast with synthetic
                             substitute, percutaneous approach.
0HUU3JZ...................  Supplement left breast with synthetic
                             substitute, percutaneous approach.
0HUV3JZ...................  Supplement bilateral breast with synthetic
                             substitute, percutaneous approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19859), we proposed that the three ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the three ICD-10-PCS procedure codes that describe 
percutaneous supplement of the breast with synthetic substitute.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the three ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(30) Open Drainage
    One commenter identified 25 ICD-10-PCS procedure codes that 
describe procedures involving open drainage of subcutaneous tissue and 
fascia body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. The list includes 
procedure codes for drainage with or without placement of a drainage 
device. We stated in the

[[Page 38077]]

proposed rule that we agreed with the commenter. Therefore, in the FY 
2018 IPPS/LTCH PPS proposed rule (82 FR 19859), we proposed that the 25 
ICD-10-PCS procedure codes listed in Table 6P.4i. associated with the 
proposed rule (which is available via the Internet on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 25 ICD-10-PCS procedure codes that describe 
procedures involving open drainage of subcutaneous tissue and fascia 
body parts. However, one commenter disagreed with changing the 
designation for 22 of the 25 procedure codes in the proposal from O.R. 
to non-O.R. This commenter agreed with the proposal to change the 
designation for 3 of the 25 procedure codes because these codes 
specifically describe the objective of placing a drainage device. The 
commenter noted that the other procedures described by the 22 procedure 
codes are performed on deeper subcutaneous tissue and fascia, are more 
invasive, and are most often performed in the O.R. setting under 
general anesthesia. According to the commenter, these codes are 
assigned when the primary objective of the procedure is to incise 
through the skin into the subcutaneous tissue and/or fascia in order to 
drain and clean out an abscess or hematoma (fluid collection). The 
commenter also noted that CMS disagreed with the recommendation to 
reclassify open extraction of subcutaneous tissue and fascia to non-
O.R. procedures as discussed with regard to Table 6P.4k associated with 
the FY 2018 IPPS/LTCH PPS proposed rule and for the same reasons, the 
commenter believed that open drainage of subcutaneous tissue and fascia 
should not be changed from an O.R. procedure to a non-O.R. procedure.
    Response: We appreciate the commenters' support. In response to the 
commenter who noted that the procedures described by the 22 procedure 
codes are performed on deeper subcutaneous tissue and fascia, are more 
invasive, and are most often performed in the O.R. setting under 
general anesthesia, upon further review and consideration, we agree 
that it is appropriate to maintain the designation of the procedure 
codes as O.R. procedures.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the following 
three ICD-10-PCS procedure codes that were listed in Table 6P.4i. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0J9100Z...................  Drainage of Face Subcutaneous Tissue and
                             Fascia with Drainage Device, Open Approach.
0J9J00Z...................  Drainage of Right Hand Subcutaneous Tissue
                             and Fascia with Drainage Device, Open
                             Approach.
0J9K00Z...................  Drainage of Left Hand Subcutaneous Tissue
                             and Fascia with Drainage Device, Open
                             Approach.
------------------------------------------------------------------------

    We are not finalizing our proposal to change the designation for 
the remaining 22 ICD-10-PCS procedure codes that were listed in Table 
6P.4i. associated with the proposed rule (which is available via the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. 
procedures to non-O.R. procedures. Rather, these codes will maintain 
their O.R. designation for FY 2018.
(31) Percutaneous Drainage
    One commenter identified two ICD-10-PCS procedure codes that 
describe procedures involving percutaneous drainage of subcutaneous 
tissue and fascia body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. 
These two ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0J9J3ZZ...................  Drainage of right hand subcutaneous tissue
                             and fascia, percutaneous approach.
0J9K3ZZ...................  Drainage of left hand subcutaneous tissue
                             and fascia, percutaneous approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19859), we proposed that the two ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the two ICD-10-PCS procedure codes that describe 
percutaneous drainage of subcutaneous tissue and fascia body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the two ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(32) Percutaneous Extraction
    One commenter identified 22 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous extraction of subcutaneous 
tissue and fascia body parts that generally would not require the 
resources of an operating room and can be performed at the bedside. We 
agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19859 through 19860), we proposed that the 22 ICD-
10-PCS procedure codes listed in Table 6P.4j. associated with the 
proposed rule (which is available via the Internet on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 22 ICD-10-PCS procedure codes that describe 
percutaneous extraction of

[[Page 38078]]

subcutaneous tissue and fascia body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 22 ICD-10-PCS 
procedure codes listed in Table 6P.4j. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(33) Open Extraction
    One commenter identified 22 ICD-10-PCS procedure codes that 
describe procedures involving open extraction of subcutaneous tissue 
and fascia body parts that the commenter believed would generally not 
require the resources of an operating room and can be performed at the 
bedside. We stated in the proposed rule that we disagreed with the 
commenter because these codes describe procedures that utilize an open 
approach and are being performed on the skin and subcutaneous tissue. 
Depending on the medical reason for the open extraction, the procedures 
may require an O.R. setting. Therefore, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19860), we proposed that the 22 ICD-10-PCS 
procedure codes listed in Table 6P.4k. associated with the proposed 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) remain designated as O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to maintain the 
designation of the 22 ICD-10-PCS procedure codes that describe open 
extraction of subcutaneous tissue and fascia body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the 22 ICD-10-PCS procedure codes 
listed in Table 6P.4k. associated with the proposed rule and this final 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) as O.R. procedures for FY 2018.
(34) Percutaneous and Open Repair
    One commenter identified 44 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous and open repair of 
subcutaneous tissue and fascia body parts that generally would not 
require the resources of an operating room and can be performed at the 
bedside. We stated in the proposed rule that we agreed with the 
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19860), we proposed that the 44 ICD-10-PCS procedure codes listed in 
Table 6P.4l. associated with the proposed rule (which is available via 
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be 
designated as non-O.R. procedures. We invited public comments on our 
proposal.
    Comment: Commenters supported the proposal to change the 
designation of 44 ICD-10-PCS procedure codes that describe percutaneous 
and open repair of subcutaneous tissue and fascia body parts from O.R. 
to non-O.R. However, one commenter disagreed with changing the 
designation of 22 of the 44 procedure codes. The commenter stated that 
open repair of deeper subcutaneous tissue and fascia is much more 
invasive and often performed in the O.R. setting under general 
anesthesia. The commenter noted that patients who are admitted to the 
inpatient setting following trauma often have multiple traumatic 
injuries whereby extensive wound lacerations often require the O.R. 
setting for complex repair and debridement under anesthesia.
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with the proposal to change the designation of 
22 of the 44 procedure codes, we agree that open repair of deeper 
subcutaneous tissue and fascia is much more invasive and may be 
performed in the O.R. setting under general anesthesia.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation for 22 procedure 
codes that describe percutaneous repair of subcutaneous tissue and 
fascia body parts listed in Table 6P.4l. associated with this final 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017. We are not finalizing our 
proposal to change the designation for the other 22 procedure codes 
that describe open repair of subcutaneous tissue and fascia body parts 
from O.R. procedures to non-O.R. procedures. Rather, they will maintain 
their O.R. designation for FY 2018.
(35) External Release
    One commenter identified 28 ICD-10-PCS procedure codes that 
describe procedures involving external release of bursa and ligament 
body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. We agreed with the 
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19860), we proposed that the 28 ICD-10-PCS procedure codes listed in 
Table 6P.4m. associated with the proposed rule (which is available via 
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be 
designated as non-O.R. procedures. We invited public comments on our 
proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 28 ICD-10-PCS procedure codes that describe 
procedures involving external release of bursa and ligament body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 28 ICD-10-PCS 
procedure codes listed in Table 6P.4m. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(36) External Repair
    One commenter identified 135 ICD-10-PCS procedure codes that 
describe procedures involving external repair of various bones and 
joints. We stated in the proposed rule that we believed that these 
procedures generally would not be performed in the operating room. In 
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19860), we proposed that 
the 135 ICD-10-PCS procedure codes listed in Table 6P.4n. associated 
with the proposed rule (which is available via the Internet on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. 
procedures. We invited public comments on our proposal.

[[Page 38079]]

    Comment: Commenters supported the proposal to change the 
designation of the 135 ICD-10-PCS procedure codes that describe 
external repair of various bones and joints.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 135 ICD-10-PCS 
procedure codes listed in Table 6P.4n. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(37) External Reposition
    One commenter identified 14 ICD-10-PCS procedure codes that 
describe procedures involving external reposition of various bones. 
These 14 ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0NS0XZZ...................  Reposition skull, external approach.
0NS1XZZ...................  Reposition right frontal bone, external
                             approach.
0NS2XZZ...................  Reposition left frontal bone, external
                             approach.
0NS3XZZ...................  Reposition right parietal bone, external
                             approach.
0NS4XZZ...................  Reposition left parietal bone, external
                             approach.
0NS5XZZ...................  Reposition right temporal bone, external
                             approach.
0NS6XZZ...................  Reposition left temporal bone, external
                             approach.
0NS7XZZ...................  Reposition right occipital bone, external
                             approach.
0NS8XZZ...................  Reposition left occipital bone, external
                             approach.
0PS3XZZ...................  Reposition cervical vertebra, external
                             approach.
0PS4XZZ...................  Reposition thoracic vertebra, external
                             approach.
0QS0XZZ...................  Reposition lumbar vertebra, external
                             approach.
0QS1XZZ...................  Reposition sacrum, external approach.
0QSSXZZ...................  Reposition coccyx, external approach.
------------------------------------------------------------------------

    We stated in the proposed rule that we believed that these 
procedures generally would not be performed in the operating room. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19860), we 
proposed that the 14 ICD-10-PCS procedure codes shown in the table 
above be designated as non-O.R. procedures. We invited public comments 
on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 14 ICD-10-PCS procedure codes that describe 
procedures involving external reposition of various bones.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 14 ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017. We note that, effective 
October 1, 2017, the code titles for procedure code 0NS1XZZ (Reposition 
right frontal bone, external approach) and procedure code 0NS7XZZ 
(Reposition right occipital bone, external approach) have been revised 
as reflected in Table 6F.--Revised Procedure Code Titles, and procedure 
codes 0NS2XZZ (Reposition left frontal bone, external approach) and 
0NS8XZZ (Reposition left occipital bone, external approach) have been 
deleted as reflected in Table 6D. --Invalid Procedure Codes associated 
with this final rule (which is available via the Internet on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html).
(38) Endoscopic/Transorifice Dilation
    One commenter identified eight ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) dilation of urinary system body parts that 
generally would not require the resources of an operating room and can 
be performed at the bedside. These eight ICD-10-PCS codes are shown in 
the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0T767ZZ...................  Dilation of right ureter, via natural or
                             artificial opening.
0T768ZZ...................  Dilation of right ureter, via natural or
                             artificial opening endoscopic.
0T777ZZ...................  Dilation of left ureter, via natural or
                             artificial opening.
0T778ZZ...................  Dilation of left ureter, via natural or
                             artificial opening endoscopic.
0T7B7DZ...................  Dilation of bladder with intraluminal
                             device, via natural or artificial opening.
0T7B7ZZ...................  Dilation of bladder, via natural or
                             artificial opening.
0T7B8DZ...................  Dilation of bladder with intraluminal
                             device, via natural or artificial opening
                             endoscopic.
0T7B8ZZ...................  Dilation of bladder, via natural or
                             artificial opening endoscopic.
------------------------------------------------------------------------

    We stated in the proposed rule that we agreed with the commenter. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19860 
through 19861), we proposed that the eight ICD-10-PCS procedure codes 
shown in the table above be designated as non-O.R. procedures. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the eight ICD-10-PCS procedure codes that describe 
procedures involving endoscopic/transorifice (via natural or artificial 
opening) dilation of urinary system body parts. However, one commenter 
disagreed with changing the designation for four of the eight procedure 
codes. These four codes are shown in the table below:

[[Page 38080]]



------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0T768ZZ...................  Dilation of right ureter, via natural or
                             artificial opening endoscopic.
0T778ZZ...................  Dilation of left ureter, via natural or
                             artificial opening endoscopic.
0T7B8DZ...................  Dilation of bladder with intraluminal
                             device, via natural or artificial opening
                             endoscopic.
0T7B8ZZ...................  Dilation of bladder, via natural or
                             artificial opening endoscopic.
------------------------------------------------------------------------

    According to the commenter, these four endoscopic procedures 
typically require the use of the operating room or a dedicated suite 
with specialized equipment and anesthesia.
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with changing the designation for four of the 
eight procedure codes that are displayed above, upon further review and 
consideration, we agree that these four procedures are appropriate to 
designate as O.R. procedures for the reasons provided by the commenter.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation for four ICD-10-PCS 
procedure codes describing a transorifice (via natural or artificial 
opening) approach for dilation of urinary system body parts from O.R. 
procedures to non-O.R. procedures as shown in the table below, 
effective October 1, 2017.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0T767ZZ...................  Dilation of right ureter, via natural or
                             artificial opening.
0T777ZZ...................  Dilation of left ureter, via natural or
                             artificial opening.
0T7B7DZ...................  Dilation of bladder with intraluminal
                             device, via natural or artificial opening.
0T7B7ZZ...................  Dilation of bladder, via natural or
                             artificial opening.
------------------------------------------------------------------------

    We are not finalizing our proposal to change the designation of 
four procedure codes (0T768ZZ, 0T778ZZ, 0T7B8DZ, and 0T7B8ZZ) that 
describe endoscopic dilation of urinary system body parts from O.R. 
procedures to non-O.R. procedures. Rather, they will maintain their O.R 
designation for FY 2018.
(39) Endoscopic/Transorifice Excision
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving endoscopic/transorifice (via natural or 
artificial opening) excision of urinary system body parts that the 
commenter believed would generally not require the resources of an 
operating room and can be performed at the bedside. These three ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0TBD7ZZ...................  Excision of urethra, via natural or
                             artificial opening.
0TBD8ZZ...................  Excision of urethra, via natural or
                             artificial opening endoscopic.
0TBDXZZ...................  Excision of urethra, external approach.
------------------------------------------------------------------------

    We disagreed with the commenter because, depending on the medical 
reason for the excision, the procedures may require an O.R. setting. 
Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19861), we 
proposed that the three ICD-10-PCS procedure codes shown in the table 
above remain designated as O.R. procedures. We invited public comments 
on our proposal.
    Comment: Commenters supported the proposal to maintain the 
designation for three ICD-10-PCS procedure codes that describe an 
endoscopic/transorifice (via natural or artificial opening) excision of 
urinary system body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal for the three ICD-10-PCS procedure codes shown 
in the table above to maintain the O.R. designation for FY 2018.
(40) External/Transorifice Repair
    One commenter identified three ICD-10-PCS procedure codes that 
describe procedures involving external and transorifice (via natural or 
artificial opening) repair of the vagina body part that generally would 
not require the resources of an operating room and can be performed at 
the bedside. These three ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
0UQG7ZZ...................  Repair vagina, via natural or artificial
                             opening.
0UQGXZZ...................  Repair vagina, external approach.
0UQMXZZ...................  Repair vulva, external approach.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19861), we proposed that these three ICD-10-
PCS procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.

[[Page 38081]]

    Comment: Commenters supported the proposal to change the 
designation for three ICD-10-PCS procedure codes that describe external 
and transorifice (via natural or artificial opening) repair of the 
vagina body part.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal for the three ICD-10-PCS procedure codes shown 
in the table above to change the designation from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
(41) Percutaneous Transfusion
    One commenter identified 20 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous transfusion of bone marrow 
and stem cells that generally would not require the resources of an 
operating room and can be performed at the bedside. We agreed with the 
commenter. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19861), we proposed that the 20 ICD-10-PCS procedure codes listed in 
Table 6P.4o. associated with the proposed rule (which is available via 
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be 
designated as non-O.R. procedures. We invited public comments on our 
proposal.
    Comment: Numerous commenters expressed concern with the proposal 
that involved 20 ICD-10-PCS procedure codes describing percutaneous 
transfusion of bone marrow and stem cells. The commenters agreed that, 
clinically, the proposal to designate these procedures as non-O.R. is 
appropriate. However, the commenters objected to the notion that these 
procedures would be reassigned to medical MS-DRGs with lower payment 
rates as a result of the proposal. The commenters urged CMS to maintain 
the current Pre-MDC logic for patients undergoing bone marrow 
transplants and to maintain their respective MS-DRG assignments to MS-
DRG 014 (Allogeneic Bone Marrow Transplant); MS-DRG 016 (Autologous 
Bone Marrow Transplant with CC/MCC and MS-DRG 017 (Autologous Bone 
Marrow Transplant without CC/MCC).
    Response: We acknowledge the concerns of the commenters. We agree 
that it is important to maintain the current Pre-MDC logic for these 
procedures while also appropriately designating them as non-O.R. 
procedures.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation for the 20 ICD 10-PCS 
procedure codes listed in Table 6P.4o. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017, and maintaining their assignment 
to the Pre-MDC MS-DRGs 014, 016, and 017 for FY 2018.
(42) External/Percutaneous/Transorifice Introduction
    One commenter identified 51 ICD-10-PCS procedure codes that 
describe procedures involving external, percutaneous and transorifice 
(via natural or artificial opening) introduction of substances that 
generally would not require the resources of an operating room and can 
be performed at the bedside. We agreed with the commenter. Therefore, 
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19861), we proposed 
that the 51 ICD-10-PCS procedure codes listed in Table 6P.4p. 
associated with the proposed rule (which is available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 51 ICD-10-PCS procedure codes that describe 
procedures involving external, percutaneous and transorifice (via 
natural or artificial opening) introduction of substances.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 51 ICD-10-PCS 
procedure codes listed in Table 6P.4p. associated with the proposed 
rule and this final rule (which is available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from O.R. procedures to non-O.R. 
procedures, effective October 1, 2017.
(43) Percutaneous/Diagnostic and Endoscopic/Transorifice Irrigation, 
Measurement and Monitoring
    One commenter identified 15 ICD-10-PCS procedure codes that 
describe procedures involving percutaneous/diagnostic and endoscopic/
transorifice (via natural or artificial opening) irrigation, 
measurement and monitoring of structures, pressures and flow that 
generally would not require the resources of an operating room and can 
be performed at the bedside. These 15 ICD-10-PCS codes are shown in the 
table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
3E1N38X...................  Irrigation of male reproductive using
                             irrigating substance, percutaneous
                             approach, diagnostic.
3E1N38Z...................  Irrigation of male reproductive using
                             irrigating substance, percutaneous
                             approach.
3E1N78X...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening, diagnostic.
3E1N78Z...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening.
3E1N88X...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening endoscopic, diagnostic.
3E1N88Z...................  Irrigation of male reproductive using
                             irrigating substance, via natural or
                             artificial opening endoscopic.
4A0635Z...................  Measurement of lymphatic flow, percutaneous
                             approach.
4A063BZ...................  Measurement of lymphatic pressure,
                             percutaneous approach.
4A0C35Z...................  Measurement of biliary flow, percutaneous
                             approach.
4A0C3BZ...................  Measurement of biliary pressure,
                             percutaneous approach.
4A0C75Z...................  Measurement of biliary flow, via natural or
                             artificial opening.
4A0C7BZ...................  Measurement of biliary pressure, via natural
                             or artificial opening.
4A0C85Z...................  Measurement of biliary flow, via natural or
                             artificial opening endoscopic.
4A1635Z...................  Monitoring of lymphatic flow, percutaneous
                             approach.
4A163BZ...................  Monitoring of lymphatic pressure,
                             percutaneous approach.
------------------------------------------------------------------------


[[Page 38082]]

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19861 through 19862), we proposed that the 15 
ICD-10-PCS procedure codes shown in the table above be designated as 
non-O.R. procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the 15 ICD-10-PCS procedure codes that describe 
procedures involving percutaneous/diagnostic and endoscopic/
transorifice (via natural or artificial opening) irrigation, 
measurement and monitoring of structures, pressures and flow.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the 15 ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(44) Imaging
    One commenter identified six ICD-10-PCS procedure codes that 
describe procedures involving imaging with contrast of hepatobiliary 
system body parts that generally would not require the resources of an 
operating room and can be performed at the bedside. These six ICD-10-
PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
BF030ZZ...................  Plain radiography of gallbladder and bile
                             ducts using high osmolar contrast.
BF031ZZ...................  Plain radiography of gallbladder and bile
                             ducts using low osmolar contrast.
BF03YZZ...................  Plain radiography of gallbladder and bile
                             ducts using other contrast.
BF0C0ZZ...................  Plain radiography of hepatobiliary system,
                             all using high osmolar contrast.
BF0C1ZZ...................  Plain radiography of hepatobiliary system,
                             all using low osmolar contrast.
BF0CYZZ...................  Plain radiography of hepatobiliary system,
                             all using other contrast.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19862), we proposed that the six ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the six ICD-10-PCS procedure codes that describe imaging 
with contrast of hepatobiliary system body parts.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the six ICD-10-PCS 
procedure codes shown in the table above from O.R. procedures to non-
O.R. procedures, effective October 1, 2017.
(45) Prosthetics
    One commenter identified five ICD-10-PCS procedure codes that 
describe procedures involving the fitting and use of prosthetics and 
assistive devices that would not require the resources of an operating 
room. These five ICD-10-PCS codes are shown in the table below.

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
F0DZ8ZZ...................  Prosthesis device fitting.
F0DZ9EZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting using
                             orthosis.
F0DZ9FZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting using
                             assistive, adaptive, supportive or
                             protective equipment.
F0DZ9UZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting using
                             prosthesis.
F0DZ9ZZ...................  Assistive, adaptive, supportive or
                             protective devices device fitting.
------------------------------------------------------------------------

    We agreed with the commenter. Therefore, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19862), we proposed that the five ICD-10-PCS 
procedure codes shown in the table above be designated as non-O.R. 
procedures. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of the five ICD-10-PCS procedure codes that describe the 
fitting and use of prosthetics and assistive devices.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of the five ICD-10-
PCS procedure codes shown in the table above from O.R. procedures to 
non-O.R. procedures, effective October 1, 2017.
b. Revision of Neurostimulator Generator
    We received a request to review three ICD-10-PCS procedure codes 
that describe procedures for revision of a neurostimulator generator 
that are currently designated as O.R. procedures and assigned to MS-
DRGs 252, 253 and 254 (Other Vascular Procedures with MCC, with CC and 
without CC/MCC, respectively). The three codes are 0JWT0MZ (Revision of 
stimulator generator in trunk subcutaneous tissue and fascia, open 
approach), 0JWT3MZ (Revision of stimulator generator in trunk 
subcutaneous tissue and fascia, percutaneous approach), and 0JWTXMZ 
(Revision of stimulator generator in trunk subcutaneous tissue and 
fascia, external approach).
    The requester expressed concern with the MS-DRG assignments and 
noted that although these codes are used to report revision of a 
carotid sinus stimulator pulse generator and appropriately assigned to 
MS-DRGs 252, 253 and 254 in MDC 5 (Diseases and Disorders of the 
Circulatory System), they also are very frequently used for the 
revision of the more common (for example, gastric, intracranial, sacral 
and spinal) neurostimulator generators that would generally not require 
the resources of an operating room.
    The requestor also stated that the indication for revision of a 
neurostimulator generator is typically due to a complication, which 
would be reflected in a complication code such as ICD-10-CM diagnosis 
code T85.734A (Infection and inflammatory reaction

[[Page 38083]]

due to implanted electronic neurostimulator, generator, initial 
encounter) or T85.890A (Other specified complication of nervous system 
prosthetic devices, implants and grafts, initial encounter). Because 
both of these diagnosis codes are assigned to MDC 1 (Diseases and 
Disorders of the Nervous System), when either code is reported in 
combination with one of the three procedure codes that describe 
revision of neurostimulator generator codes (currently assigned to MDC 
5 (Diseases and Disorders of the Circulatory System)), the resulting 
MS-DRG assignment is to MS-DRGs 981, 982 and 983 (Extensive O.R. 
Procedure Unrelated to Principal Diagnosis with MCC, with CC and 
without CC/MCC, respectively).
    The requestor presented the following three options for 
consideration.
     Reclassify the ICD-10-PCS procedure codes from O.R. 
Procedures to non-O.R. procedures that affect MS-DRG assignment only in 
MDC 5. The requestor stated that, under this option, the procedure 
codes would continue to appropriately group to MDC 5 when representing 
cases involving carotid sinus stimulators and the other types of 
neurostimulator cases would appropriately group to medical MS-DRGs.
     Add the ICD-10-PCS procedure codes to MDC 1, such as to 
MS-DRGs 040, 041 and 042 (Peripheral, Cranial Nerve and Other Nervous 
System Procedures with MCC, with CC or Peripheral Neurostimulator and 
without CC/MCC, respectively) under MDC 1. The requestor stated that 
this option would resolve the inconsistency between a revision of a 
carotid sinus stimulator generator being classified as an O.R. 
procedure, while the other comparable procedures involving a revision 
of a regular neurostimulator generator are not. The requestor also 
stated that this option would preclude cases being assigned to MS-DRGs 
981 through 983.
     Stop classifying the ICD-10-PCS procedure codes as O.R. 
procedures entirely. The requestor stated that, under this option, all 
cases would then group to medical MS-DRGs, regardless of the type of 
neurostimulator generator.
    As discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19862 through 19863), we analyzed claims data for the three revision of 
neurostimulator generator procedure codes from the December 2016 update 
of the FY 2016 MedPAR file and identified cases under MDC 1 in MS-DRGs 
025, 026, and 027 (Craniotomy and Endovascular Intracranial Procedures 
with MCC, with CC and without CC/MCC, respectively); MS-DRGs 029 and 
030 (Spinal Procedures with CC or Neurostimulators and Spinal 
Procedures without CC/MCC, respectively); and MS-DRGs 041 and 042 
(Peripheral, Cranial Nerve and Other Nervous System Procedures with CC 
or Peripheral Neurostimulator and without CC/MCC, respectively). We 
also identified cases in MS-DRGs 982 and 983 (Extensive O.R. Procedure 
Unrelated to Principal Diagnosis with CC and without CC/MCC, 
respectively). Lastly, we identified cases under MDC 5 in MS-DRGs 252, 
253 and 254 (Other Vascular Procedures with MCC, with CC and without 
CC/MCC, respectively). Our findings are shown in the table below.

                                MS-DRGs for Revision of Neurostimulator Generator
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRG                                    cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 025--All cases...........................................          18,442             9.1         $29,984
MS-DRG 025--Cases with revision of neurostimulator generator....               1            12.0          73,716
MS-DRG 026--All cases...........................................           8,415             5.6          21,557
MS-DRG 026--Cases with revision of neurostimulator generator....               1             6.0           4,537
MS-DRG 027--All cases...........................................          10,089             2.9          17,320
MS-DRG 027--Cases with revision of neurostimulator generator....               4             1.8          13,906
MS-DRG 029--All cases...........................................           3,192             5.9          23,145
MS-DRG 029--Cases with revision of neurostimulator generator....               6             3.5          32,799
MS-DRG 030--All cases...........................................           1,933             2.9          14,901
MS-DRG 030--Cases with revision of neurostimulator generator....              11             2.2          18,294
MS-DRG 041--All cases...........................................           5,154             5.5          16,633
MS-DRG 041--Cases with revision of neurostimulator generator....               1             1.0          14,145
MS-DRG 042--All cases...........................................           2,099             3.2          13,725
MS-DRG 042--Cases with revision of neurostimulator generator....               2             2.0          28,587
MS-DRG 982--All cases...........................................          15,216             6.6          17,341
MS-DRG 982--Cases with revision of neurostimulator generator....              11             3.0          15,336
MS-DRG 983--All cases...........................................           3,508             3.2          11,627
MS-DRG 983--Cases with revision of neurostimulator generator....               9             4.2          19,951
MS-DRG 252--All cases...........................................          33,817             7.6          23,384
MS-DRG 252--Cases with revision of neurostimulator generator....               1             7.0          18,740
MS-DRG 253--All cases...........................................          27,456             5.5          18,519
MS-DRG 253--Cases with revision of neurostimulator generator....               7             2.4          19,078
MS-DRG 254--All cases...........................................          13,036             2.9          13,253
MS-DRG 254--Cases with revision of neurostimulator generator....               3             3.0          11,981
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, the overall volume of cases reporting 
revision of neurostimulator generator is low, with a total of only 57 
cases found across all of the MS-DRGs reviewed. The average length of 
stay for these cases reporting revision of neurostimulator generators 
is, in most cases, consistent with the average length of stay for all 
cases in the respective MS-DRG, with the majority having an average 
length of stay below the average length of stay of all cases in the 
respective MS-DRG. Finally, the average costs for cases reporting 
revision of neurostimulator generator reflect a wide range, with a low 
of $4,537 in MS-DRG 026 to a high of $73,716 in MS-DRG 025. It is clear 
that, for MS-DRG 025 where the average costs of all cases were $29,984 
and the average costs of the one case reporting revision of a 
neurostimulator generator was $73,716, this is an atypical case. It is 
also clear from the data that there were other procedures reported on 
the claims where a procedure code for a revision of a neurostimulator 
generator was assigned due to the various MS-DRG assignments.

[[Page 38084]]

    We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19862 
and 19863) that after review of the claims data and discussion with our 
clinical advisors, we agreed with and supported the requestor's first 
option--to reclassify the three ICD-10-PCS procedure codes for revision 
of neurostimulator generators from O.R. procedures to non-O.R. 
procedures that affect the assignment for MS-DRGs 252, 253 and 254 to 
account for the subset of patients undergoing revision of a carotid 
sinus neurostimulator generator specifically. In cases where one of the 
more common (for example, gastric, intracranial, sacral and spinal) 
neurostimulator generators are undergoing revision, in the absence of 
another O.R. procedure, these cases would group to a medical MS-DRG. We 
invited public comments on our proposal.
    Comment: Commenters supported the proposal to reclassify the 
procedures described by ICD-10-PCS procedure codes 0JWT0MZ, 0JWT3MZ, 
and 0JWTXMZ from O.R. procedures to non-O.R. procedures that affect the 
assignment for MS-DRGs 252, 253 and 254. One commenter agreed with 
reclassifying procedures described by ICD-10-PCS procedure codes 
0JWT3MZ and 0JWTXMZ from O.R. procedures to non-O.R. procedures. 
However, this commenter disagreed with reclassifying the procedure 
described by procedure code 0JWT0MZ and stated that the procedure 
utilizes an open approach and may require an O.R. setting. The 
commenter suggested that the procedure code should be retained as an 
O.R. designation to group to surgical MS-DRGs.
    Response: We appreciate the commenters' support. In response to the 
commenter who disagreed with reclassifying the procedure described by 
procedure code 0JWT0MZ from an O.R. procedure to a non-O.R. procedure, 
we note that, as discussed earlier, the three ICD-10-PCS procedure 
codes would be classified as non-O.R. procedures that affect MS-DRGs 
252, 253, and 254 for revision of carotid sinus neurostimulator 
generators. We also noted that the volume of cases reporting revision 
of neurostimulator generator is low, with a total of only 57 cases 
found across all of the MS-DRGs reviewed. The initial requestor pointed 
out that these three procedure codes are very frequently used for the 
revision of the more common (for example, gastric, intracranial, 
sacral, and spinal) neurostimulator generators that would generally not 
require the resources of an operating room. Therefore, we believe it is 
appropriate to classify the three procedure codes as non-O.R. 
procedures affecting MS-DRGs 252, 253, and 254 specifically.
    After consideration of the public comments we received, we are 
finalizing our proposal to reclassify the procedures described by ICD-
10-PCS procedure codes 0JWT0MZ (Revision of stimulator generator in 
trunk subcutaneous tissue and fascia, open approach), 0JWT3MZ (Revision 
of stimulator generator in trunk subcutaneous tissue and fascia, 
percutaneous approach), and 0JWTXMZ (Revision of stimulator generator 
in trunk subcutaneous tissue and fascia, external approach) from O.R. 
procedures to non-O.R. procedures that affect the assignment for MS-
DRGs 252, 253, and 254 to account for the subset of patients undergoing 
revision of a carotid sinus neurostimulator generator, effective 
October 1, 2017.
c. External Repair of Hymen
    We received a request to examine ICD-10-PCS procedure code 0UQKXZZ 
(Repair Hymen, External Approach). This procedure code is currently 
designated as an O.R. procedure in MS-DRGs 746 and 747 (Vagina, Cervix 
and Vulva Procedures with CC/MCC and without CC/MCC, respectively) 
under MDC 13. The requestor provided examples and expressed concern 
that procedure code 0UQKXZZ was assigned to MS-DRG 987 (Non-Extensive 
O.R. Procedures Unrelated to Principal Diagnosis with MCC) when 
reported on a maternal delivery claim. The requestor noted that when a 
similar code was reported with an external approach (for example, 
procedure code 0UQMXZZ (Repair vulva, external approach)), the case was 
appropriately assigned to MS-DRG 774 (Vaginal Delivery with 
Complicating Diagnosis). The requestor stated that the physician 
documentation was simply more specific to the location of the repair 
and this should not affect assignment to one of the MS-DRGs for vaginal 
delivery.
    As we discussed in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19863 through 19864), we reviewed claims data involving the examples 
provided by the requestor involving ICD-10-PCS procedure code 0UQKXZZ 
(Repair hymen, external approach). Our clinical advisors agreed with 
the requestor that reporting of this procedure code should not affect 
assignment to one of the MS-DRGs for vaginal delivery. We stated that, 
as discussed in section II.F.15.a. of the preamble of the proposed 
rule, we were proposing to change the designation for a number of 
procedure codes from O.R. procedures to non-O.R. procedures. Included 
in that proposal were ICD-10-PCS procedure codes 0UQGXZZ (Repair 
vagina, external approach) and 0UQMXZZ (Repair vulva, external 
approach). Consistent with the change in designation for these 
procedure codes, we also proposed to designate ICD-10-PCS procedure 
code 0UQKXZZ (Repair hymen, external approach) as a non-O.R. procedure. 
The procedure by itself would generally not require the resources of an 
operating room. If the procedure is performed following a vaginal 
delivery, it is the vaginal delivery procedure code 10E0XZZ (Delivery 
of products of conception) that determines the MS-DRG assignment 
because this code is designated as a non-O.R. procedure affecting the 
MS-DRG.
    Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19864), we proposed to change the designation of ICD-10-PCS procedure 
code 0UQKXZZ (Repair hymen, external approach) to a non-O.R. procedure. 
We stated that this redesignation will enable more appropriate MS-DRG 
assignment for these cases by eliminating erroneous assignment to MS-
DRGs 987 through 989. We invited public comments on our proposal.
    Comment: Commenters supported the proposal to change the 
designation of ICD-10-PCS procedure code 0UQKXZZ from an O.R. procedure 
to a non-O.R. procedure.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to change the designation of ICD-10-PCS 
procedure code 0UQKXZZ (Repair hymen, external approach) from an O.R. 
procedure to a non-O.R. procedure, effective October 1, 2017.
d. Non-O.R. Procedures in MDC 17 (Myeloproliferative Diseases and 
Disorders, Poorly Differentiated Neoplasms)
    Under MDC 17 (Myeloproliferative Diseases and Disorders, Poorly 
Differentiated Neoplasms), there are 11 surgical MS-DRGs. Of these 11 
surgical MS-DRGs, there are 5 MS-DRGs containing GROUPER logic that 
includes ICD-10-PCS procedure codes designated as O.R. procedures as 
well as non-O.R. procedures that affect the MS-DRG. These five MS-DRGs 
are MS-DRGs 823, 824, and 825 (Lymphoma and Non-Acute Leukemia with 
Other O.R. Procedure with MCC, with CC and without CC/MCC, 
respectively) and MS-DRGs 829 and 830 (Myeloproliferative Disorders or 
Poorly Differentiated Neoplasms with Other O.R. Procedure with CC/MCC 
and without CC/MCC, respectively). We

[[Page 38085]]

refer the reader to the ICD-10 Version 34 MS-DRG Definitions Manual 
which is available via the Internet on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Data-Files.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=ascending for the 
complete list of ICD-10-PCS procedure codes assigned to these five MS-
DRGs under MDC 17.
    We reviewed the list of 244 ICD-10-PCS non-O.R. procedure codes 
currently assigned to these 5 MS-DRGs. Of these 244 procedure codes, we 
determined that 55 of the procedure codes do not warrant being 
designated as non-O.R. procedures that affect these MS-DRGs because 
they describe procedures that would generally not require a greater 
intensity of resources for facilities to manage the cases included in 
the definition (logic) of these MS-DRGs. Therefore, in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19864), we proposed that the 55 ICD-
10-PCS procedure codes listed in Table 6P.3c. associated with the 
proposed rule (which is available via the Internet on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) be removed from the logic for MS-DRGs 
823, 824, 825, 829, and 830 as non-O.R. procedures affecting the MS-
DRG. We also proposed to revise the titles for these five MS-DRGs by 
deleting the reference to ``O.R.'' in the title. Specifically, we 
proposed to revise the titles for MS-DRGs 823, 824, and 825 to 
``Lymphoma and Non-Acute Leukemia with Other Procedure with MCC, with 
CC and without CC/MCC'', respectively, and we proposed to revise the 
titles for MS-DRGs 829 and 830 to ``Myeloproliferative Disorders or 
Poorly Differentiated Neoplasms with Other Procedure with CC/MCC and 
without CC/MCC'', respectively. We invited public comments on our 
proposals.
    Comment: Commenters supported the proposal to remove the 55 ICD-10-
PCS procedure codes listed in Table 6P.3c. associated with the proposed 
rule from the logic for MS-DRGs 823, 824, 825, 829, and 830 as non-O.R. 
procedures affecting the MS-DRG. Commenters also supported the proposal 
to revise the titles for MS-DRGs 823, 824, and 825, as well as for MS-
DRGs 829 and 830.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the 55 ICD-10-PCS procedure codes 
listed in Table 6P.3c. associated with the proposed rule and this final 
rule (which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) from the logic for MS-DRGs 823, 824, 825, 
829, and 830 as non-O.R. procedures affecting the MS-DRG, effective 
October 1, 2017. We also are finalizing our proposal to revise the 
titles for MS-DRGs 823, 824, and 825 to ``Lymphoma and Non-Acute 
Leukemia with Other Procedure with MCC, with CC and without CC/MCC'', 
respectively, and to revise the titles for MS-DRGs 829 and 830 to 
``Myeloproliferative Disorders or Poorly Differentiated Neoplasms with 
Other Procedure with CC/MCC and without CC/MCC'', respectively, 
effective October 1, 2017.

G. Recalibration of the FY 2018 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights
    In developing the FY 2018 system of weights, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19864), we proposed to use two data 
sources: Claims data and cost report data. As in previous years, the 
claims data source is the MedPAR file. This file is based on fully 
coded diagnostic and procedure data for all Medicare inpatient hospital 
bills. The FY 2016 MedPAR data used in this final rule include 
discharges occurring on October 1, 2015, through September 30, 2016, 
based on bills received by CMS through March 31, 2017, from all 
hospitals subject to the IPPS and short-term, acute care hospitals in 
Maryland (which at that time were under a waiver from the IPPS). The FY 
2016 MedPAR file used in calculating the relative weights includes data 
for approximately 9,647,256 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, 2017 update of the FY 2016 MedPAR file 
complies with version 5010 of the X12 HIPAA Transaction and Code Set 
Standards, and includes a variable called ``claim type.'' Claim type 
``60'' indicates that the claim was an inpatient claim paid as fee-for-
service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to 
encounter claims, Medicare Advantage IME claims, and HMO no-pay claims. 
Therefore, the calculation of the relative weights for FY 2018 also 
excludes claims with claim type values not equal to ``60.'' The data 
exclude CAHs, including hospitals that subsequently became CAHs after 
the period from which the data were taken. We note that the FY 2018 
relative weights are based on the ICD-10-CM diagnoses and ICD-10-PCS 
procedure codes from the FY 2016 MedPAR claims data, grouped through 
the ICD-10 version of the FY 2018 GROUPER (Version 35).
    The second data source used in the cost-based relative weighting 
methodology is the Medicare cost report data files from the HCRIS. 
Normally, we use the HCRIS dataset that is 3 years prior to the IPPS 
fiscal year. Specifically, we are using cost report data from the March 
31, 2017 update of the FY 2015 HCRIS for calculating the final FY 2018 
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 2018 relative weights based on 19 CCRs, 
as we did for FY 2017. The methodology we used to calculate the FY 2018 
MS-DRG cost-based relative weights based on claims data in the FY 2016 
MedPAR file and data from the FY 2015 Medicare cost reports is as 
follows:
     To the extent possible, all the claims were regrouped 
using the FY 2018 MS-DRG classifications discussed in sections II.B. 
and II.F. 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 2016 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is

[[Page 38086]]

necessary to subtract the acquisition charges from the total charges on 
each transplant bill that showed acquisition charges before computing 
the average cost for each MS-DRG and before eliminating statistical 
outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $30.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
implantable devices charges, supplies and equipment charges, therapy 
services charges, operating room charges, cardiology charges, 
laboratory charges, radiology charges, other service charges, labor and 
delivery charges, inhalation therapy charges, emergency room charges, 
blood and blood products charges, anesthesia charges, cardiac 
catheterization charges, CT scan charges, and MRI charges were also 
deleted.
     At least 92.2 percent of the providers in the MedPAR file 
had charges for 14 of the 19 cost centers. All claims of providers that 
did not have charges greater than zero for at least 14 of the 19 cost 
centers were deleted. In other words, a provider must have no more than 
five blank cost centers. If a provider did not have charges greater 
than zero in more than five cost centers, the claims for the provider 
were deleted.
     Statistical outliers were eliminated by removing all cases 
that were beyond 3.0 standard deviations from the geometric mean of the 
log distribution of both the total charges per case and the total 
charges per day for each MS-DRG.
     Effective October 1, 2008, because hospital inpatient 
claims include a POA indicator field for each diagnosis present on the 
claim, only for purposes of relative weight-setting, the POA indicator 
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have 
an ``N'' (No) or a ``U'' (documentation insufficient to determine if 
the condition was present at the time of inpatient admission) in the 
POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (that is, as if hospitals were not 
participating in those models under the BPCI initiative). The BPCI 
initiative, developed under the authority of section 3021 of the 
Affordable Care Act (codified at section 1115A of the Act), is 
comprised of four broadly defined models of care, which link payments 
for multiple services beneficiaries receive during an episode of care. 
Under the BPCI initiative, organizations enter into payment 
arrangements that include financial and performance accountability for 
episodes of care. For FY 2018, as we proposed, we are continuing to 
include all applicable data from subsection (d) hospitals participating 
in BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting 
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's Web 
site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
    The charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in 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. Statistical outliers were then removed. These charges were then 
adjusted to cost by applying the national average CCRs developed from 
the FY 2015 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. In the FY 2018 IPPS/LTCH PPS proposed 
rule, we stated that if stakeholders have comments about the groupings 
in this table, we may consider those comments as we finalize our 
policy. However, we did not receive any comments on the groupings in 
this table, and therefore, we are finalizing the groupings as proposed.

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3. Development of National Average CCRs
    We developed the national average CCRs as follows:
    Using the FY 2015 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. We then created CCRs for each provider for each cost 
center (see prior table for line items used in the calculations) and 
removed any CCRs that were greater than 10 or less than 0.01. We 
normalized the departmental CCRs by dividing the CCR for each 
department by the total CCR for the hospital for the 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

[[Page 38103]]

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 2018 cost-based relative weights were then normalized by an 
adjustment factor of 1.737382 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 2018 are as follows:

------------------------------------------------------------------------
                          Group                                 CCR
------------------------------------------------------------------------
Routine Days............................................           0.458
Intensive Days..........................................           0.373
Drugs...................................................           0.194
Supplies & Equipment....................................           0.297
Implantable Devices.....................................           0.332
Therapy Services........................................           0.321
Laboratory..............................................           0.120
Operating Room..........................................           0.191
Cardiology..............................................           0.112
Cardiac Catheterization.................................           0.117
Radiology...............................................           0.153
MRIs....................................................           0.079
CT Scans................................................           0.038
Emergency Room..........................................           0.171
Blood and Blood Products................................           0.322
Other Services..........................................           0.365
Labor & Delivery........................................           0.412
Inhalation Therapy......................................           0.169
Anesthesia..............................................           0.089
------------------------------------------------------------------------

    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 2018 IPPS/LTCH PPS proposed 
rule, we proposed to use that same case threshold in recalibrating the 
MS-DRG relative weights for FY 2018. Using data from the March 2017 
update of the FY 2016 MedPAR file, there are 7 MS-DRGs that contain 
fewer than 10 cases. We note that two MS-DRGs that were included as 
low-volume MS-DRGs in the proposed rule, MS-DRG 016 (Autologous Bone 
Marrow Transplant with CC/MCC) and MS-DRG 017 (Autologous Bone Marrow 
Transplant without CC/MCC), are no longer included in this list 
because, as discussed in section II.F.17.a. of the preamble of this 
final rule, we are maintaining the current Pre-MDC logic for the 
procedures assigned to those MS-DRGs in FY 2018. For FY 2018, because 
we do not have sufficient MedPAR data to set accurate and stable cost 
relative weights for these low-volume MS-DRGs, we proposed to compute 
relative weights for the low-volume MS-DRGs by adjusting their FY 2017 
relative weights by the percentage change in the average weight of the 
cases in other MS-DRGs. The crosswalk table based on data from the 
December 2016 update of the FY 2016 MedPAR file was included in the 
proposed rule. We invited public comments on our proposals.
    Comment: Some commenters requested a transition period for 
substantial reductions in relative weights in order to facilitate 
payment stability. Specifically, some commenters asked CMS to establish 
a cap of 10 percent for the degree to which a payment weight may 
decline in FY 2018 relative to FY 2017. Other commenters also suggested 
the possibility of a phase-in or multi-year transition period in cases 
of substantial fluctuation of payment rates. Commenters suggested that 
large decreases appear to result from the transition from ICD-9 coding 
to ICD-10 coding in the claims data used to establish the relative 
weights. These commenters also expressed concern that the proposed 
weights for MS-DRGs with significant reductions in relative weights 
would be too low to cover the costs of caring for patients, while other 
commenters expressed concern about access to such services.
    Commenters also indicated that the reductions to MS-DRG relative 
weights resulting from the transition from ICD-9 coding to ICD-10 
coding are in contrast to the goal of ICD-10 to accurately replicate 
ICD-9 assignments and avoid unintended payment redistribution. One 
commenter asserted that because IPPS is a prospective payment system, 
the future claims data should result in an upward adjustment to these 
MS-DRGs for FY 2019. The commenter believed that hospitals should not 
be penalized as significantly while the FY 2018 rates are in effect.
    Response: In considering these public comments, we examined the MS-
DRGs with proposed relative weights that were significantly lower than 
the FY 2017 relative weights. While we do not believe it is normally 
appropriate to address relative weight fluctuations that appear to be 
driven by changes in the underlying data, in this particular 
circumstance, we share the commenters' concern that, for a limited 
number of MS-DRGs, this may be more extensively related to the 
implementation of ICD-10 coding and believe this issue requires further 
analysis. In the interim, in response to these comments, we are 
adopting a temporary one-time measure for FY 2018 for MS-DRGs where the 
relative weight would have declined by more than 20 percent from the FY 
2017 relative weight. We believe this policy is consistent with our 
general authority to assign and update appropriate weighting factors 
under sections 1886(d)(4)(B) and (C) of the Act. Specifically, for 
these MS-DRGs, the relative weight will be set at 80 percent of the FY 
2017 final relative weight, and we will revisit this issue in the FY 
2019 rulemaking when additional ICD-10 claims data become available. We 
believe that 20 percent strikes an appropriate balance between 
addressing concerns that the relative weight changes for some MS-DRGs 
may be more extensively related to the implementation of ICD-10 and the 
fact that historically we occasionally have had appropriate relative 
weight changes of this magnitude. Further analysis and data will enable 
us to better determine the appropriateness of these changes, given the 
unique circumstances of the ICD-10 implementation.
    After consideration of the public comments we received, we are 
finalizing our proposal, with the modification for recalibrating the 
MS-DRG relative weights for FY 2018 at 80 percent of the FY 2017 final 
relative weights, for those MS-DRGs where the relative weight would 
have declined by more than 20 percent from the FY 2017 relative weight. 
The crosswalk table for the low-volume MS-DRGs is shown below.

[[Page 38104]]



------------------------------------------------------------------------
   Low-volume MS-DRG         MS-DRG title         Crosswalk to MS-DRG
------------------------------------------------------------------------
789...................  Neonates, Died or      Final FY 2017 relative
                         Transferred to         weight (adjusted by
                         Another Acute Care     percent change in
                         Facility.              average weight of the
                                                cases in other MS-DRGs).
790...................  Extreme Immaturity or  Final FY 2017 relative
                         Respiratory Distress   weight (adjusted by
                         Syndrome, Neonate.     percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
791...................  Prematurity with       Final FY 2017 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
792...................  Prematurity without    Final FY 2017 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
793...................  Full-Term Neonate      Final FY 2017 relative
                         with Major Problems.   weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
794...................  Neonate with Other     Final FY 2017 relative
                         Significant Problems.  weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
795...................  Normal Newborn.......  Final FY 2017 relative
                                                weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS-DRGs).
------------------------------------------------------------------------

H. Add-On Payments for New Services and Technologies for FY 2018

1. Background
    Sections 1886(d)(5)(K) and (L) of the Act establish a process of 
identifying and ensuring adequate payment for new medical services and 
technologies (sometimes collectively referred to in this section as 
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the 
Act specifies that a medical service or technology will be considered 
new if it meets criteria established by the Secretary after notice and 
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act 
specifies that a new medical service or technology may be considered 
for new technology add-on payment if, based on the estimated costs 
incurred with respect to discharges involving such service or 
technology, the DRG prospective payment rate otherwise applicable to 
such discharges under this subsection is inadequate. We note that, 
beginning with discharges occurring in FY 2008, CMS transitioned from 
CMS-DRGs to MS-DRGs.
    The regulations at 42 CFR 412.87 implement these provisions and 
specify three criteria for a new medical service or technology to 
receive the additional payment: (1) The medical service or technology 
must be new; (2) the medical service or technology must be costly such 
that the DRG rate otherwise applicable to discharges involving the 
medical service or technology is determined to be inadequate; and (3) 
the service or technology must demonstrate a substantial clinical 
improvement over existing services or technologies. Below we highlight 
some of the major statutory and regulatory provisions relevant to the 
new technology add-on payment criteria, as well as other information. 
For a complete discussion on the new technology add-on payment 
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51572 through 51574).
    Under the first criterion, as reflected in Sec.  412.87(b)(2), a 
specific medical service or technology will be considered ``new'' for 
purposes of new medical service or technology add-on payments until 
such time as Medicare data are available to fully reflect the cost of 
the technology in the MS-DRG weights through recalibration. We note 
that we do not consider a service or technology to be new if it is 
substantially similar to one or more existing technologies. That is, 
even if a technology receives a new FDA approval or clearance, it may 
not necessarily be considered ``new'' for purposes of new technology 
add-on payments if it is ``substantially similar'' to a technology that 
was approved or cleared by FDA and has been on the market for more than 
2 to 3 years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43813 through 43814), we established criteria for evaluating whether a 
new technology is substantially similar to an existing technology, 
specifically: (1) Whether a product uses the same or a similar 
mechanism of action to achieve a therapeutic outcome; (2) whether a 
product is assigned to the same or a different MS-DRG; and (3) whether 
the new use of the technology involves the treatment of the same or 
similar type of disease and the same or similar patient population. If 
a technology meets all three of these criteria, it would be considered 
substantially similar to an existing technology and would not be 
considered ``new'' for purposes of new technology add-on payments. For 
a detailed discussion of the criteria for substantial similarity, we 
refer readers to the FY 2006 IPPS final rule (70 FR 47351 through 
47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 43813 through 
43814).
    Under the second criterion, Sec.  412.87(b)(3) further provides 
that, to be eligible for the add-on payment for new medical services or 
technologies, the MS-DRG prospective payment rate otherwise applicable 
to discharges involving the new medical service or technology must be 
assessed for adequacy. Under the cost criterion, consistent with the 
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess 
the adequacy of payment for a new technology paid under the applicable 
MS-DRG prospective payment rate, we evaluate whether the charges for 
cases involving the new technology exceed certain threshold amounts. 
Table 10 that was released with the FY 2017 IPPS/LTCH PPS final rule 
contains the final thresholds that we used to evaluate applications for 
new medical service and new technology add-on payments for FY 2018. We 
refer readers to the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2017-IPPS-Final-Rule-Home-Page-Items/FY2017-IPPS-Final-Rule-Tables.html to download and 
view Table 10.
    In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46917), we discussed the 
issue of whether the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims 
information that providers submit with applications for new medical 
service and new technology add-on payments. We refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51573) for complete information on 
this issue.
    Under the third criterion, Sec.  412.87(b)(1) of our existing 
regulations provides that a new technology is an appropriate candidate 
for an additional payment when it represents an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries. For example, a 
new technology represents a substantial

[[Page 38105]]

clinical improvement when it reduces mortality, decreases the number of 
hospitalizations or physician visits, or reduces recovery time compared 
to the technologies previously available. (We refer readers to the 
September 7, 2001 final rule for a more detailed discussion of this 
criterion (66 FR 46902).)
    The new medical service or technology add-on payment policy under 
the IPPS provides additional payments for cases with relatively high 
costs involving eligible new medical services or technologies, while 
preserving some of the incentives inherent under an average-based 
prospective payment system. The payment mechanism is based on the cost 
to hospitals for the new medical service or technology. Under Sec.  
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec.  412.84(h)) exceed the full 
DRG payment (including payments for IME and DSH, but excluding outlier 
payments), Medicare will make an add-on payment equal to the lesser of: 
(1) 50 percent of the estimated costs of the new technology or medical 
service (if the estimated costs for the case including the new 
technology or medical service exceed Medicare's payment); or (2) 50 
percent of the difference between the full DRG payment and the 
hospital's estimated cost for the case. Unless the discharge qualifies 
for an outlier payment, the additional Medicare payment is limited to 
the full MS-DRG payment plus 50 percent of the estimated costs of the 
new technology or new medical service.
    Section 503(d)(2) of Public Law 108-173 provides that there shall 
be no reduction or adjustment in aggregate payments under the IPPS due 
to add-on payments for new medical services and technologies. 
Therefore, in accordance with section 503(d)(2) of Public Law 108-173, 
add-on payments for new medical services or technologies for FY 2005 
and later years have not been subjected to budget neutrality.
    In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we 
modified our regulations at Sec.  412.87 to codify our longstanding 
practice of how CMS evaluates the eligibility criteria for new medical 
service or technology add-on payment applications. That is, we first 
determine whether a medical service or technology meets the newness 
criterion, and only if so, do we then make a determination as to 
whether the technology meets the cost threshold and represents a 
substantial clinical improvement over existing medical services or 
technologies. We amended Sec.  412.87(c) to specify that all applicants 
for new technology add-on payments must have FDA approval or clearance 
for their new medical service or technology by July 1 of each year 
prior to the beginning of the fiscal year that the application is being 
considered.
    The Council on Technology and Innovation (CTI) at CMS oversees the 
agency's cross-cutting priority on coordinating coverage, coding and 
payment processes for Medicare with respect to new technologies and 
procedures, including new drug therapies, as well as promoting the 
exchange of information on new technologies and medical services 
between CMS and other entities. The CTI, composed of senior CMS staff 
and clinicians, was established under section 942(a) of Public Law 108-
173. The Council is co-chaired by the Director of the Center for 
Clinical Standards and Quality (CCSQ) and the Director of the Center 
for Medicare (CM), who is also designated as the CTI's Executive 
Coordinator.
    The specific processes for coverage, coding, and payment are 
implemented by CM, CCSQ, and the local Medicare Administrative 
Contractors (MACs) (in the case of local coverage and payment 
decisions). The CTI supplements, rather than replaces, these processes 
by working to assure that all of these activities reflect the agency-
wide priority to promote high-quality, innovative care. At the same 
time, the CTI also works to streamline, accelerate, and improve 
coordination of these processes to ensure that they remain up to date 
as new issues arise. To achieve its goals, the CTI works to streamline 
and create a more transparent coding and payment process, improve the 
quality of medical decisions, and speed patient access to effective new 
treatments. It is also dedicated to supporting better decisions by 
patients and doctors in using Medicare-covered services through the 
promotion of better evidence development, which is critical for 
improving the quality of care for Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in 2010 and is available on 
the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
    As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we 
invite any product developers or manufacturers of new medical services 
or technologies to contact the agency early in the process of product 
development if they have questions or concerns about the evidence that 
would be needed later in the development process for the agency's 
coverage decisions for Medicare.
    The CTI aims to provide useful information on its activities and 
initiatives to stakeholders, including Medicare beneficiaries, 
advocates, medical product manufacturers, providers, and health policy 
experts. Stakeholders with further questions about Medicare's coverage, 
coding, and payment processes, or who want further guidance about how 
they can navigate these processes, can contact the CTI at 
[email protected].
    We note that applicants for add-on payments for new medical 
services or technologies for FY 2019 must submit a formal request, 
including a full description of the clinical applications of the 
medical service or technology and the results of any clinical 
evaluations demonstrating that the new medical service or technology 
represents a substantial clinical improvement, along with a significant 
sample of data to demonstrate that the medical service or technology 
meets the high-cost threshold. Complete application information, along 
with final deadlines for submitting a full application, will be posted 
as it becomes available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical 
services or technologies under review before the publication of the 
proposed rule for FY 2019, the CMS Web site also will post the tracking 
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking 
on Add-On Payments
    Section 1886(d)(5)(K)(viii) of the Act, as amended by section 
503(b)(2) of Public Law 108-173, provides for a mechanism for public 
input before publication of a notice of proposed rulemaking regarding 
whether a medical service or technology represents a substantial 
clinical improvement or advancement. The process for evaluating new 
medical service and technology applications requires the Secretary to--
     Provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology represents an 
advance in medical technology that substantially

[[Page 38106]]

improves the diagnosis or treatment of Medicare beneficiaries;
     Make public and periodically update a list of the services 
and technologies for which applications for add-on payments are 
pending;
     Accept comments, recommendations, and data from the public 
regarding whether a service or technology represents a substantial 
clinical improvement; and
     Provide, before publication of a proposed rule, for a 
meeting at which organizations representing hospitals, physicians, 
manufacturers, and any other interested party may present comments, 
recommendations, and data regarding whether a new medical service or 
technology represents a substantial clinical improvement to the 
clinical staff of CMS.
    In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2018 prior 
to publication of the FY 2018 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on November 9, 2016 (81 FR 78814), and 
held a town hall meeting at the CMS Headquarters Office in Baltimore, 
MD, on February 14, 2017. In the announcement notice for the meeting, 
we stated that the opinions and presentations provided during the 
meeting would assist us in our evaluations of applications by allowing 
public discussion of the substantial clinical improvement criterion for 
each of the FY 2018 new medical service and technology add-on payment 
applications before the publication of the FY 2018 IPPS/LTCH PPS 
proposed rule.
    Approximately 66 individuals registered to attend the town hall 
meeting in person, while additional individuals listened over an open 
telephone line. We also live-streamed the town hall meeting and posted 
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=9niqfxXe4oA&t=217s. We considered each applicant's presentation 
made at the town hall meeting, as well as written comments submitted on 
the applications that were received by the due date of February 24, 
2017, in our evaluation of the new technology add-on payment 
applications for FY 2018 in the FY 2018 IPPS/LTCH PPS proposed rule.
    In response to the published notice and the February 14, 2017 New 
Technology Town Hall meeting, we received written comments regarding 
the applications for FY 2018 new technology add-on payments. We note 
that we do not summarize comments that are unrelated to the 
``substantial clinical improvement'' criterion. As explained above and 
in the Federal Register notice announcing the New Technology Town Hall 
meeting (81 FR78814 through 78816), the purpose of the meeting was 
specifically to discuss the substantial clinical improvement criterion 
in regard to pending new technology add-on payment applications for FY 
2018. Therefore, we did not summarize those written comments in the 
proposed rule. As we did in the proposed rule, we are summarizing below 
a general comment that we received prior to the issuance of the 
proposed rule that did not relate to a specific application for FY 2018 
new technology add-on payments. In addition, as we did in section 
II.H.5. of the preamble of the proposed rule, we are summarizing 
comments regarding individual applications, or, if applicable, 
indicating that there were no comments received in response to the New 
Technology Town Hall meeting notice, at the end of each discussion of 
the individual applications.
    Comment: One commenter recommended that CMS: (1) Prohibit local 
MACs from denying coverage and add-on payments for new medical services 
or technologies approved by the Secretary; and (2) broaden the criteria 
applied in making substantial clinical improvement determinations to 
require, in addition to existing criteria, that the Secretary consider 
whether the new technology or medical service meets one or more of the 
following criteria: (a) Results in a reduction of the length of a 
hospital stay; (b) improves patient quality of life; (c) creates long-
term clinical efficiencies in treatment; (d) addresses patient-centered 
objectives as defined by the Secretary; or (e) meets such other 
criteria as the Secretary may specify.
    Response: We appreciate the commenter's comments and will consider 
them in future rulemaking.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and 
Technologies
    As discussed in the FY 2016 IPPS/LTCH final rule (80 FR 49434), the 
ICD-10-PCS includes a new section containing the new Section ``X'' 
codes, which began being used with discharges occurring on or after 
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section 
``X'' codes will be handled in the same manner as the decisions for all 
of the other ICD-10-PCS code changes. That is, proposals to create, 
delete, or revise Section ``X'' codes under the ICD-10-PCS structure 
will be referred to the ICD-10 Coordination and Maintenance Committee. 
In addition, several of the new medical services and technologies that 
have been, or may be, approved for new technology add-on payments may 
now, and in the future, be assigned a Section ``X'' code within the 
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS 
Web site at: http://www.cms.gov/Medicare/Coding/ICD10/2016-ICD-10-PCS-and-GEMs.html, including guidelines for ICD-10-PCS Section ``X'' codes. 
We encourage providers to view the material provided on ICD-10-PCS 
Section ``X'' codes.
4. Revision of the Reference to an ICD-9-CM Code in Sec.  412.87(b)(2) 
of the Regulations
    As we discussed in the FY 2018 IPS/LTCH PPS proposed rule (82 FR 
19871), the existing regulations under Sec.  412.87(b)(2) state that a 
medical service or technology may be considered new within 2 or 3 years 
after the point at which data begin to become available reflecting the 
ICD-9-CM code assigned to the new service or technology (depending on 
when a new code is assigned and data on the new service or technology 
become available for DRG recalibration). After CMS has recalibrated the 
DRGs, based on available data, to reflect the costs of an otherwise new 
medical service or technology, the medical service or technology will 
no longer be considered ``new'' under the criterion of this section.
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49454), 
HIPAA covered entities are required, as of October 1, 2015, to use the 
ICD-10 coding system (ICD-10-PCS codes for procedures and ICD-10-CM 
codes for diagnoses), instead of the ICD-9-CM coding system, to report 
diagnoses and procedures for Medicare hospital inpatient services 
provided to Medicare beneficiaries as classified under the MS-DRG 
system and paid for under the IPPS. The language in Sec.  412.87(b)(2) 
only references an ``ICD-9-CM code.'' Therefore, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19871), we proposed to revise the 
regulations at Sec.  412.87(b)(2) to replace the term ``ICD-9-CM code'' 
with the term ``inpatient hospital code,'' as defined in section 
1886(d)(5)(K)(iii) of the Act. Section 1886(d)(5)(K)(iii) of the Act 
defines an ``inpatient hospital code'' as any code that is used with 
respect to inpatient hospital services for which payment may be made 
under this subsection of the Act and includes an alphanumeric code 
issued under the International Classification of Diseases, 9th 
Revision, Clinical Modification (``ICD-9-CM'')

[[Page 38107]]

and its subsequent revisions. We invited public comments on our 
proposal.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal to revise the regulations at Sec.  
412.87(b)(2) to replace the term ``ICD-9-CM code'' with the term 
``inpatient hospital code'', as defined in section 1886(d)(5)(K)(iii) 
of the Act.
5. FY 2018 Status of Technologies Approved for FY 2017 Add-On Payments
a. CardioMEMSTM HF (Heart Failure) Monitoring System
    CardioMEMS, Inc. submitted an application for new technology add-on 
payments for FY 2015 for the CardioMEMSTM HF (Heart Failure) 
Monitoring System, which is an implantable hemodynamic monitoring 
system comprised of an implantable sensor/monitor placed in the distal 
pulmonary artery. Pulmonary artery hemodynamic monitoring is used in 
the management of heart failure. The CardioMEMSTM HF 
Monitoring System measures multiple pulmonary artery pressure 
parameters for an ambulatory patient to measure and transmit data via a 
wireless sensor to a secure Web site.
    The CardioMEMSTM HF Monitoring System utilizes 
radiofrequency (RF) energy to power the sensor and to measure pulmonary 
artery (PA) pressure and consists of three components: An Implantable 
Sensor with Delivery Catheter, an External Electronics Unit, and a 
Pulmonary Artery Pressure Database. The system provides the physician 
with the patient's PA pressure waveform (including systolic, diastolic, 
and mean pressures) as well as heart rate. The sensor is permanently 
implanted in the distal pulmonary artery using transcatheter techniques 
in the catheterization laboratory where it is calibrated using a Swan-
Ganz catheter. PA pressures are transmitted by the patient at home in a 
supine position on a padded antenna, pushing one button which records 
an 18-second continuous waveform. The data also can be recorded from 
the hospital, physician's office, or clinic.
    The hemodynamic data, including a detailed waveform, are 
transmitted to a secure Web site that serves as the Pulmonary Artery 
Pressure Database, so that information regarding PA pressure is 
available to the physician or nurse at any time via the Internet. 
Interpretation of trend data allows the clinician to make adjustments 
to therapy and can be used along with heart failure signs and symptoms 
to adjust medications.
    The applicant received FDA approval on May 28, 2014. After 
evaluation of the newness, costs, and substantial clinical improvement 
criteria for new technology add-on payments for the 
CardioMEMSTM HF Monitoring System and consideration of the 
public comments we received in response to the FY 2015 IPPS/LTCH PPS 
proposed rule, we approved the CardioMEMSTM HF Monitoring 
System for new technology add-on payments for FY 2015 (79 FR 49940). 
Cases involving the CardioMEMSTM HF Monitoring System that 
are eligible for new technology add-on payments are identified by 
either ICD-10-PCS procedure code 02HQ30Z (Insertion of pressure sensor 
monitoring device into right pulmonary artery, percutaneous approach) 
or ICD-10-PCS procedure code 02HR30Z (Insertion of pressure sensor 
monitoring device into left pulmonary artery, percutaneous approach). 
With the new technology add-on payment application, the applicant 
stated that the total operating cost of the CardioMEMSTM HF 
Monitoring System is $17,750. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 50 percent of the average 
cost of the device or 50 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, the maximum new technology add-on 
payment for a case involving the CardioMEMSTM HF Monitoring 
System is $8,875. We refer the reader to the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 49937) for complete details on the 
CardioMEMSTM HF Monitoring System.
    Our policy is that a medical service or technology may be 
considered new within 2 or 3 years after the point at which data begin 
to become available reflecting the inpatient hospital code assigned to 
the new service or technology. Our practice has been to begin and end 
new technology add-on payments on the basis of a fiscal year, and we 
have generally followed a guideline that uses a 6-month window before 
and after the start of the fiscal year to determine whether to extend 
the new technology add-on payment for an additional fiscal year. In 
general, we extend add-on payments for an additional year only if the 
3-year anniversary date of the product's entry onto the U.S. market 
occurs in the latter half of the fiscal year (70 FR 47362).
    With regard to the newness criterion for the 
CardioMEMSTM HF Monitoring System, we considered the 
beginning of the newness period to commence when the 
CardioMEMSTM HF Monitoring System was approved by the FDA on 
May 28, 2014. Because the 3-year anniversary date of the entry of the 
CardioMEMSTM HF Monitoring System onto the U.S. market (May 
28, 2017) would occur prior to the beginning of FY 2018, in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19871-19872), we proposed to 
discontinue new technology add-on payments for this technology for FY 
2018. We invited public comments on this proposal.
    Comment: Commenters agreed with our proposal to discontinue new 
technology add-on payments for the CardioMEMSTM HF 
Monitoring System.
    Response: As we proposed, we are discontinuing new technology add-
on payments for the CardioMEMSTM HF Monitoring System for FY 
2018. The 3-year anniversary date of the product's entry onto the U.S. 
market occurred prior to the beginning of FY 2018. Therefore, the 
technology is not eligible for new technology add-on payments for FY 
2018 because the technology will no longer meet the ``newness'' 
criterion.
b. Defitelio[supreg] (Defibrotide)
    Jazz Pharmaceuticals submitted an application for new technology 
add-on payments for FY 2017 for defibrotide (Defitelio[supreg]), a 
treatment for patients diagnosed with hepatic veno-occlusive disease 
(VOD) with evidence of multiorgan dysfunction. VOD, also known as 
sinusoidal obstruction syndrome (SOS), is a potentially life-
threatening complication of hematopoietic stem cell transplantation 
(HSCT), with an incidence rate of 8 percent to 15 percent. Diagnoses of 
VOD range in severity from what has been classically defined as a 
disease limited to the liver (mild) and reversible, to a severe 
syndrome associated with multi-organ dysfunction or failure and death. 
Patients treated with HSCT who develop VOD with multi-organ failure 
face an immediate risk of death, with a mortality rate of more than 80 
percent when only supportive care is used. The applicant asserted that 
Defitelio[supreg] improves the survival rate of patients diagnosed with 
VOD with multi-organ failure by 23 percent.
    Defitelio[supreg] received Orphan Drug Designation for the 
treatment of VOD in 2003 and for the prevention of VOD in 2007. It has 
been available to patients as an investigational drug through an 
expanded access program since 2007. The applicant's New Drug 
Application (NDA) for Defitelio[supreg] received FDA approval on March 
30, 2016. The applicant confirmed that Defitelio[supreg] was not 
available on the U.S. market as of the FDA NDA approval date of March 
30, 2016. According to the applicant, commercial packaging could not be 
completed until the label for Defitelio[supreg] was finalized with FDA 
approval, and that commercial shipments of Defitelio[supreg]

[[Page 38108]]

to hospitals and treatment centers began on April 4, 2016. Therefore, 
we agreed that, based on this information, the newness period for 
Defitelio[supreg] begins on April 4, 2016, the date of its first 
commercial availability.
    The applicant received unique ICD-10-PCS procedure codes to 
describe the use of Defitelio[supreg] that became effective October 1, 
2016. The approved procedure codes are XW03392 (Introduction of 
defibrotide sodium anticoagulant into peripheral vein, percutaneous 
approach) and XW04392 (Introduction of defibrotide sodium anticoagulant 
into central vein, percutaneous approach).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
Defitelio[supreg] and consideration of the public comments we received 
in response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved 
Defitelio[supreg] for new technology add-on payments for FY 2017 (81 FR 
56906). With the new technology add-on payment application, the 
applicant estimated that the average Medicare beneficiary would require 
a dosage of 25 mg/kg/day for a minimum of 21 days of treatment. The 
recommended dose is 6.25 mg/kg given as a 2-hour intravenous infusion 
every 6 hours. Dosing should be based on a patient's baseline body 
weight, which is assumed to be 70 kg for an average adult patient. All 
vials contain 200 mg at a cost of $825 per vial. Therefore, we 
determined that cases involving the use of the Defitelio[supreg] 
technology would incur an average cost per case of $151,800 (70 kg 
adult x 25 mg/kg/day x 21 days = 36,750 mg per patient/200 mg vial = 
184 vials per patient x $825 per vial = $151,800). Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the technology or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment amount for a case involving the 
use of Defitelio[supreg] is $75,900.
    Because the 3-year anniversary date of the entry of 
Defitelio[supreg] onto the U.S. market will occur after FY 2018 (April 
4, 2019), we proposed to continue new technology add-on payments for 
this technology for FY 2018. We proposed that the maximum payment for a 
case involving Defitelio[supreg] would remain at $75,900 for FY 2018. 
In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19872), we invited 
public comments on our proposal to continue new technology add-on 
payments for Defitelio[supreg].
    Comment: One commenter agreed with CMS' proposal to continue new 
technology add-on payments for Defitelio[supreg].
    Response: We appreciate the commenter's support. We are finalizing 
our proposal to continue new technology add-on payments for 
Defitelio[supreg] for FY 2018. The maximum new technology add-on 
payment for a case involving Defitelio[supreg] will remain at $75,900 
for FY 2018.
c. GORE[supreg] EXCLUDER[supreg] Iliac Branch Endoprosthesis (Gore IBE 
Device)
    W. L. Gore and Associates, Inc. submitted an application for new 
technology add-on payments for the GORE[supreg] EXCLUDER[supreg] Iliac 
Branch Endoprosthesis (GORE IBE device) for FY 2017. The device 
consists of two components: The Iliac Branch Component (IBC) and the 
Internal Iliac Component (IIC). The applicant indicated that each 
endoprosthesis is pre-mounted on a customized delivery and deployment 
system allowing for controlled endovascular delivery via bilateral 
femoral access. According to the applicant, the device is designed to 
be used in conjunction with the GORE[supreg] EXCLUDER[supreg] AAA 
Endoprosthesis for the treatment of patients requiring repair of common 
iliac or aortoiliac aneurysms. When deployed, the GORE IBE device 
excludes the common iliac aneurysm from systemic blood flow, while 
preserving blood flow in the external and internal iliac arteries.
    With regard to the newness criterion, the applicant received pre-
market FDA approval of the GORE IBE device on February 29, 2016. The 
applicant submitted a request for an unique ICD-10-PCS procedure code 
and was granted approval for the following procedure codes to describe 
the use of this technology: 04VC0EZ (Restriction of right common iliac 
artery with branched or fenestrated intraluminal device, one or two 
arteries, open approach); 04VC0FZ (Restriction of right common iliac 
artery with branched or fenestrated intraluminal device, three or more 
arteries, open approach); 04VC3EZ (Restriction of right common iliac 
artery with branched or fenestrated intraluminal device, one or two 
arteries, percutaneous approach); 04VC3FZ (Restriction of right common 
iliac artery with branched or fenestrated intraluminal device, three or 
more arteries, percutaneous approach); 04VC4EZ (Restriction of right 
common iliac artery with branched or fenestrated intraluminal device, 
one or two arteries, percutaneous approach); 04VC4FZ (Restriction of 
right common iliac artery with branched or fenestrated intraluminal 
device, three or more arteries, percutaneous endoscopic, approach); 
04VD0EZ (Restriction of left common iliac artery with branched or 
fenestrated intraluminal device, one or two arteries, open approach); 
04VD0FZ (Restriction of left common iliac artery with branched or 
fenestrated, intraluminal device, three or more arteries, open 
approach); 04VD3EZ (Restriction of left common iliac artery with 
branched or fenestrated intraluminal device, one or two arteries, 
percutaneous approach); 04VD3FZ (Restriction of left common iliac 
artery with branched or fenestrated intraluminal device, three or more 
arteries, percutaneous approach); 04VD4EZ (Restriction of left common 
iliac artery with branched or fenestrated intraluminal device, one or 
two arteries, percutaneous endoscopic approach); and 04VD4FZ 
(Restriction of left common iliac artery with branched or fenestrated 
intraluminal device, three or more arteries, percutaneous endoscopic 
approach). These new ICD-10-PCS procedure codes became effective on 
October 1, 2016. After evaluation of the newness, costs, and 
substantial clinical improvement criteria for new technology add-on 
payments for the GORE IBE device and consideration of the public 
comments we received in response to the FY 2017 IPPS/LTCH PPS proposed 
rule, we approved the GORE IBE device for new technology add-on 
payments for FY 2017 (81 FR 56909). With the new technology add-on 
payment application, the applicant indicated that the total operating 
cost of the GORE IBE device is $10,500. Under Sec.  412.88(a)(2), we 
limit new technology add-on payments to the lesser of 50 percent of the 
average cost of the device or 50 percent of the costs in excess of the 
MS-DRG payment for the case. As a result, the maximum new technology 
add-on payment for a case involving the GORE IBE device is $5,250.
    With regard to the newness criterion for the GORE IBE device, we 
considered the beginning of the newness period to commence when the 
GORE IBE device received FDA approval on February 29, 2016. Because the 
3-year anniversary date of the entry of the GORE IBE device onto the 
U.S. market will occur after FY 2018 (February 28, 2019), in the FY 
2018 IPPS/LTCH PPS proposed rule, we proposed to continue new 
technology add-on payments for this technology for FY 2018. We proposed 
that the maximum payment for a case involving the GORE IBE device would 
remain at $5,250 for FY 2018. We invited public comments on our 
proposal to continue

[[Page 38109]]

new technology add-on payments for the GORE IBE device.
    Comment: Some commenters supported CMS' proposal to continue new 
technology add-on payments for the GORE IBE device.
    Response: We appreciate the commenters' support. We are finalizing 
our proposal to continue new technology add-on payments for the GORE 
IBE device for FY 2018. The maximum new technology add-on payment for a 
case involving the GORE IBE device will remain at $5,250 for FY 2018.
d. Praxbind[supreg] Idarucizumab
    Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application 
for new technology add-on payments for FY 2017 for Praxbind[supreg] 
Idarucizumab (Idarucizumab), a product developed as an antidote to 
reverse the effects of PRADAXAR (Dabigatran), which is also 
manufactured by Boehringer Ingelheim Pharmaceuticals, Inc.
    Dabigatran is an oral direct thrombin inhibitor currently 
indicated: (1) To reduce the risk of stroke and systemic embolism in 
patients who have been diagnosed with nonvalvular atrial fibrillation 
(NVAF); (2) for the treatment of deep venous thrombosis (DVT) and 
pulmonary embolism (PE) in patients who have been administered a 
parenteral anticoagulant for 5 to 10 days; (3) to reduce the risk of 
recurrence of DVT and PE in patients who have been previously treated; 
and (4) for the prophylaxis of DVT and PE in patients who have 
undergone hip replacement surgery. Currently, unlike the anticoagulant 
Warfarin, there is no specific way to reverse the anticoagulant effect 
of Dabigatran in the event of a major bleeding episode. Idarucizumab is 
a humanized fragment antigen binding (Fab) molecule, which specifically 
binds to Dabigatran to deactivate the anticoagulant effect, thereby 
allowing thrombin to act in blood clot formation. The applicant stated 
that Idarucizumab represents a new pharmacologic approach to 
neutralizing the specific anticoagulant effect of Dabigatran in 
emergency situations.
    Idarucizumab was approved by the FDA on October 16, 2015. Based on 
the FDA indication for Idarucizumab, the product can be used in the 
treatment of patients who have been diagnosed with NVAF and 
administered Dabigatran to reverse life-threatening bleeding events, or 
who require emergency surgery or medical procedures and rapid reversal 
of the anticoagulant effects of Dabigatran is necessary and desired.
    The applicant received unique ICD-10-PCS procedure codes that 
became effective October 1, 2016, to describe the use of this 
technology. The approved procedure codes are XW03331 (Introduction of 
Idarucizumab, Dabigatran reversal agent into peripheral vein, 
percutaneous approach, New Technology Group 1) and XW04331 
(Introduction of Idarucizumab, Dabigatran reversal agent into central 
vein, percutaneous approach, New Technology Group 1).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
Idarucizumab and consideration of the public comments we received in 
response to the FY 2017 IPPS/LTCH PPS proposed rule, we approved 
Idarucizumab for new technology add-on payments for FY 2017 (81 FR 
56897). With the new technology add-on payment application, the 
applicant indicated that the total operating cost of Idarucizumab is 
$3,500. Under Sec.  412.88(a)(2), we limit new technology add-on 
payments to the lesser of 50 percent of the average cost of the 
technology or 50 percent of the costs in excess of the MS-DRG payment 
for the case. As a result, the maximum new technology add-on payment 
for a case involving Idarucizumab is $1,750.
    With regard to the newness criterion for Idarucizumab, we 
considered the beginning of the newness period to commence when 
Idarucizumab was approved by the FDA on October 16, 2015. Because the 
3-year anniversary date of the entry of Idarucizumab onto the U.S. 
market will occur after FY 2018 (October 15, 2018), in the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19873), we proposed to continue new 
technology add-on payments for this technology for FY 2018. We proposed 
that the maximum payment for a case involving Idarucizumab would remain 
at $1,750 for FY 2018. We invited public comments on our proposal to 
continue new technology add-on payments for Idarucizumab.
    Comment: Several commenters supported CMS' proposal to continue new 
technology add-on payments for Idarucizumab.
    Response: We appreciate the commenters' support. We are finalizing 
our proposal to continue new technology add-on payments for 
Idarucizumab for FY 2018. The maximum new technology add-on payment for 
a case involving Idarucizumab will remain at $1,750 for FY 2018.
e. Lutonix[supreg] Drug Coated Balloon PTA Catheter and 
In.PACTTM AdmiralTM Paclitaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
    Two manufacturers, CR Bard Inc. and Medtronic, submitted 
applications for new technology add-on payments for FY 2016 for 
LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous Transluminal 
Angioplasty (PTA) Catheter (LUTONIX[supreg]) and IN.PACTTM 
AdmiralTM Paclitaxel Coated Percutaneous Transluminal 
Angioplasty (PTA) Balloon Catheter (IN.PACTTM 
AdmiralTM), respectively. Both of these technologies are 
drug-coated balloon angioplasty treatments for patients diagnosed with 
peripheral artery disease (PAD). Typical treatments for patients with 
PAD include angioplasty, stenting, atherectomy and vascular bypass 
surgery. PAD most commonly occurs in the femoropopliteal segment of the 
peripheral arteries, is associated with significant levels of morbidity 
and impairment in quality of life, and requires treatment to reduce 
symptoms and prevent or treat ischemic events.\1\ Treatment options for 
symptomatic PAD include noninvasive treatment such as medication and 
life-style modification (for example, exercise programs, diet, and 
smoking cessation) and invasive options, which include endovascular 
treatment and surgical bypass. The 2013 American College of Cardiology 
and American Heart Association (ACC/AHA) guidelines for the management 
of PAD recommend endovascular therapy as the first-line treatment for 
femoropopliteal artery lesions in patients suffering from claudication 
(Class I, Level A recommendation).\2\
---------------------------------------------------------------------------

    \1\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzwalder U, 
Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U., Local 
delivery of paclitaxel to inhibit restenosis during angioplasty of 
the leg, N Engl J Med 2008, 358: 689-99.
    \2\ Anderson JL, Halperin JL, Albert NM, Bozkurt B, Brindis RG, 
Curtis LH, DeMets D, Guyton RA, Hochman JS, Kovacs RJ, Ohman EM, 
Pressler SJ, Sellke FW, Shen WK., Management of patients with 
peripheral artery disease (compilation of 2005 and 2011 ACCF/AHA 
guideline recommendations): A report of the American College of 
Cardiology Foundation/American Heart Association Task Force on 
Practice Guidelines, J Am Coll Cardiol 2013, 61:1555-70. Available 
at: http://dx.doi.org/10.1016/j.jacc.2013.01.004.
---------------------------------------------------------------------------

    According to both applicants, LUTONIX[supreg] and 
IN.PACTTM AdmiralTM are the first drug coated 
balloons that can be used for treatment of patients who are diagnosed 
with PAD. In the FY 2016 IPPS/LTCH PPS final rule, we stated that 
because cases eligible for the two devices would group to the same MS-
DRGs and we believe that these devices are substantially similar to 
each

[[Page 38110]]

other (that is, they are intended to treat the same or similar disease 
in the same or similar patient population and are purposed to achieve 
the same therapeutic outcome using the same or similar mechanism of 
action), we evaluated both technologies as one application for new 
technology add-on payments under the IPPS. The applicants submitted 
separate cost and clinical data, and we reviewed and discussed each set 
of data separately. However, we made one determination regarding new 
technology add-on payments that applied to both devices. We believe 
that this is consistent with our policy statements in the past 
regarding substantial similarity. Specifically, we have noted that 
approval of new technology add-on payments would extend to all 
technologies that are substantially similar (66 FR 46915), and we 
believe that continuing our current practice of extending a new 
technology add-on payment without a further application from the 
manufacturer of the competing product or a specific finding on cost and 
clinical improvement if we make a finding of substantial similarity 
among two products is the better policy because we avoid--
     Creating manufacturer-specific codes for substantially 
similar products;
     Requiring different manufacturers of substantially similar 
products from having to submit separate new technology add-on payment 
applications;
     Having to compare the merits of competing technologies on 
the basis of substantial clinical improvement; and
     Bestowing an advantage to the first applicant representing 
a particular new technology to receive approval (70 FR 47351).
    CR Bard, Inc. received FDA approval for LUTONIX[supreg] on October 
9, 2014. Commercial sales in the U.S. market began on October 10, 2014. 
Medtronic received FDA approval for IN.PACTTM 
AdmiralTM on December 30, 2014. Commercial sales in the U.S. 
market began on January 29, 2015.
    In accordance with our policy, we stated in the FY 2016 IPPS\LTCH 
PPS final rule (80 FR 49463) that we believe it is appropriate to use 
the earliest market availability date submitted as the beginning of the 
newness period. Accordingly, for both devices, we stated that the 
beginning of the newness period will be October 10, 2014.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies and consideration of the public comments we received in 
response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved the 
LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies for new technology add-on payments for FY 2016 (80 FR 
49469). Cases involving the LUTONIX[supreg] and IN.PACTTM 
AdmiralTM technologies that are eligible for new technology 
add-on payments are identified using one of the ICD-10-PCS procedure 
codes in the following table:

------------------------------------------------------------------------
      ICD-10-PCS code                     Code description
------------------------------------------------------------------------
047K041...................  Dilation of right femoral artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, open approach.
047K0D1...................  Dilation of right femoral artery with
                             intraluminal device using drug-coated
                             balloon, open approach.
047K0Z1...................  Dilation of right femoral artery using drug-
                             coated balloon, open approach.
047K341...................  Dilation of right femoral artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous approach.
047K3D1...................  Dilation of right femoral artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous approach.
047K3Z1...................  Dilation of right femoral artery using drug-
                             coated balloon, percutaneous approach.
047K441...................  Dilation of right femoral artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
047K4D1...................  Dilation of right femoral artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous endoscopic approach.
047K4Z1...................  Dilation of right femoral artery using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
047L041...................  Dilation of left femoral artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, open approach.
047L0D1...................  Dilation of left femoral artery with
                             intraluminal device using drug-coated
                             balloon, open approach.
047L0Z1...................  Dilation of left femoral artery using drug-
                             coated balloon, open approach.
047L341...................  Dilation of left femoral artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous approach.
047L3D1...................  Dilation of left femoral artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous approach.
047L3Z1...................  Dilation of left femoral artery using drug-
                             coated balloon, percutaneous approach.
047L441...................  Dilation of left femoral artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
047L4D1...................  Dilation of left femoral artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous endoscopic approach.
047L4Z1...................  Dilation of left femoral artery using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
047M041...................  Dilation of right popliteal artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, open approach.
047M0D1...................  Dilation of right popliteal artery with
                             intraluminal device using drug-coated
                             balloon, open approach.
047M0Z1...................  Dilation of right popliteal artery using
                             drug-coated balloon, open approach.
047M341...................  Dilation of right popliteal artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous approach.
047M3D1...................  Dilation of right popliteal artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous approach.
047M3Z1...................  Dilation of right popliteal artery using
                             drug-coated balloon, percutaneous approach.
047M441...................  Dilation of right popliteal artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
047M4D1...................  Dilation of right popliteal artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous endoscopic approach.
047M4Z1...................  Dilation of right popliteal artery using
                             drug-coated balloon, percutaneous
                             endoscopic approach.
047N041...................  Dilation of left popliteal artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, open approach.
047N0D1...................  Dilation of left popliteal artery with
                             intraluminal device using drug-coated
                             balloon, open approach.
047N0Z1...................  Dilation of left popliteal artery using drug-
                             coated balloon, open approach.
047N341...................  Dilation of left popliteal artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous approach.
047N3D1...................  Dilation of left popliteal artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous approach.
047N3Z1...................  Dilation of left popliteal artery using drug-
                             coated balloon, percutaneous approach.
047N441...................  Dilation of left popliteal artery with drug-
                             eluting intraluminal device using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
047N4D1...................  Dilation of left popliteal artery with
                             intraluminal device using drug-coated
                             balloon, percutaneous endoscopic approach.
047N4Z1...................  Dilation of left popliteal artery using drug-
                             coated balloon, percutaneous endoscopic
                             approach.
------------------------------------------------------------------------


[[Page 38111]]

    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49469), 
each of the applicants submitted operating costs for its DCB. The 
manufacturer of the LUTONIX[supreg] stated that a mean of 1.37 drug-
coated balloons was used during the LEVANT 2 clinical trial. The 
acquisition price for the hospital will be $1,900 per drug-coated 
balloon, or $2,603 per case (1.37 x $1,900). The applicant projected 
that approximately 8,875 cases will involve use of the LUTONIX[supreg] 
for FY 2016. The manufacturer for the IN.PACTTM 
AdmiralTM stated that a mean of 1.4 drug-coated balloons was 
used during the IN.PACTTM AdmiralTM DCB arm. The 
acquisition price for the hospital will be $1,350 per drug-coated 
balloon, or $1,890 per case (1.4 x $1,350). The applicant projected 
that approximately 26,000 cases will involve use of the 
IN.PACTTM AdmiralTM for FY 2016.
    For FY 2016, we based the new technology add-on payment for cases 
involving these technologies on the weighted average cost of the two 
DCBs described by the ICD-10-PCS procedure codes listed above (which 
are not manufacturer specific). Because ICD-10 codes are not 
manufacturer specific, we cannot set one new technology add-on payment 
amount for IN.PACTTM AdmiralTM and a different 
new technology add-on payment amount for LUTONIX[supreg]; both 
technologies will be captured by using the same ICD-10-PCS procedure 
code. As such, we stated that we believe that the use of a weighted 
average of the cost of the standard DCBs based on the projected number 
of cases involving each technology to determine the maximum new 
technology add-on payment would be most appropriate. To compute the 
weighted cost average, we summed the total number of projected cases 
for each of the applicants, which equaled 34,875 cases (26,000 plus 
8,875). We then divided the number of projected cases for each of the 
applicants by the total number of cases, which resulted in the 
following case-weighted percentages: 25 percent for the LUTONIX[supreg] 
and 75 percent for the IN.PACTTM AdmiralTM. We 
then multiplied the cost per case for the manufacturer specific DCB by 
the case-weighted percentage (0.25 * $2,603 = $662.41 for 
LUTONIX[supreg] and 0.75 * $1,890 = $1,409.03 for the 
IN.PACTTM AdmiralTM). This resulted in a case-
weighted average cost of $2,071.45 for DCBs. Under Sec.  412.88(a)(2), 
we limit new technology add-on payments to the lesser of 50 percent of 
the average cost of the device or 50 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum payment for a 
case involving the LUTONIX[supreg] or IN.PACTTM 
AdmiralTM DCBs is $1,035.72.
    With regard to the newness criterion for the LUTONIX[supreg] and 
IN.PACTTM AdmiralTM technologies, we considered 
the beginning of the newness period to commence when LUTONIX[supreg] 
gained entry onto the U.S. market on October 10, 2014. As discussed 
previously in this section, in general, we extend new technology add-on 
payments for an additional year only if the 3-year anniversary date of 
the product's entry onto the U.S. market occurs in the latter half of 
the upcoming fiscal year. Because the 3-year anniversary date of the 
entry of LUTONIX[supreg] onto the U.S. market (October 10, 2017) will 
occur in the first half of FY 2018, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19875), we proposed to discontinue new technology 
add-on payments for both the LUTONIX[supreg] and IN.PACTTM 
AdmiralTM technologies for FY 2018. We invited public 
comments on this proposal.
    Comment: Some commenters supported CMS' proposal to discontinue new 
technology add-on payments for both the LUTONIX[supreg] and 
IN.PACTTM AdmiralTM technologies for FY 2018.
    Response: We appreciate the commenters' support. As we proposed, we 
are discontinuing new technology add-on payments for both the 
LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies for FY 2018. The 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the first half of FY 2018. 
Therefore, the technology is not eligible for new technology add-on 
payments for FY 2018 because the technology will no longer meet the 
``newness'' criterion.
f. MAGEC[supreg] Spinal Bracing and Distraction System (MAGEC[supreg] 
Spine)
    Ellipse Technologies, Inc. submitted an application for new 
technology add-on payments for FY 2017 for the MAGEC[supreg] Spine. 
According to the applicant, the MAGEC[supreg] Spine has been developed 
for use in the treatment of children diagnosed with severe spinal 
deformities, such as scoliosis. The system can be used in the treatment 
of skeletally immature patients less than 10 years of age who have been 
diagnosed with severe progressive spinal deformities associated with or 
at risk of Thoracic Insufficiency Syndrome (TIS).
    The MAGEC[supreg] Spine consists of a (spinal growth) rod that can 
be lengthened through the use of magnets that are controlled by an 
external remote controller (ERC). The rod(s) can be implanted into 
children as young as 2 years of age. According to the applicant, use of 
the MAGEC[supreg] Spine has proven to be successfully used in the 
treatment of patients diagnosed with scoliosis who have not been 
responsive to other treatments.
    The MAGEC[supreg] Spine initially received FDA clearance for use of 
the predicate device, which used a Harrington Rod on February 27, 2014. 
The applicant verified that, due to manufacturing delays, the 
MAGEC[supreg] Spine was not available for implant until April 1, 2014. 
Specifically, the complete MAGEC[supreg] Spine system was produced and 
available for shipment for the first implant on April 1, 2014. 
Therefore, the newness period for the MAGEC[supreg] Spine began on 
April 1, 2014. Subsequent FDA clearance was granted for use of the 
modified device, which uses a shorter 70 mm rod on September 18, 2014. 
After minor modification of the product, the MAGEC[supreg] Spine 
received FDA clearances on March 24, 2015, and May 29, 2015, 
respectively.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
MAGEC[supreg] Spine and consideration of the public comments we 
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we 
approved the MAGEC[supreg] Spine for new technology add-on payments for 
FY 2017 (81 FR 56891). Cases involving the MAGEC[supreg] Spine that are 
eligible for new technology add-on payments are identified by ICD-10-
PCS procedure codes XNS0032 (Reposition of lumbar vertebra using 
magnetically controlled growth rod(s), open approach); XNS0432 
(Reposition of lumbar vertebra using magnetically controlled growth 
rod(s), percutaneous endoscopic approach); XNS3032 (Reposition of 
cervical vertebra using magnetically controlled growth rod(s), open 
approach); XNS3432 (Reposition of cervical vertebra using magnetically 
controlled growth rod(s), percutaneous endoscopic approach); XNS4032 
(Reposition of thoracic vertebra using magnetically controlled growth 
rod(s), open approach); and XNS4432 (Reposition of thoracic vertebra 
using magnetically controlled growth rod(s).
    With the new technology add-on payment application, the applicant 
stated that the total operating cost of the MAGEC[supreg] Spine was 
$17,500 for a single rod and $35,000 for a dual rod. It is historical 
practice for CMS to make the new technology add-on payment based on the 
average cost of the technology and not the maximum. For example, in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53358), we approved new 
technology add-on payments for

[[Page 38112]]

DIFICIDTM based on the average dosage of 6.2 days, rather 
than the maximum 10-day dosage. The applicant noted that 20 percent of 
cases use a single rod, while 80 percent of cases use a dual rod. As a 
result, the weighted average cost for a single and dual MAGEC[supreg] 
Spine is $31,500 (((0.2 * $17,500) + (0.8 * $35,000))). Under Sec.  
412.88(a)(2), we limit new technology add-on payments to the lesser of 
50 percent of the average cost of the device or 50 percent of the costs 
in excess of the MS-DRG payment for the case. As a result, the maximum 
new technology add-on payment for a case involving the MAGEC[supreg] 
Spine is $15,750. We refer the reader to the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 56888) for complete details on the MAGEC[supreg] 
Spine.
    With regard to the newness criterion for the MAGEC[supreg] Spine, 
we considered the beginning of the newness period to commence when the 
MAGEC[supreg] Spine was produced and available for shipment for the 
first implant on April 1, 2014. As discussed previously in this 
section, in general, we extend new technology add-on payments for an 
additional year only if the 3-year anniversary date of the product's 
entry onto the U.S. market occurs in the latter half of the upcoming 
fiscal year. Because the 3-year anniversary date of the entry of the 
MAGEC[supreg] Spine onto the U.S. market (April 1, 2017) would occur 
prior to the beginning of FY 2018, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19876), we proposed to discontinue new technology 
add-on payments for this technology for FY 2018. We invited public 
comments on this proposal.
    Comment: Some commenters supported CMS' proposal to discontinue new 
technology add-on payments for the MAGEC[supreg] Spine for FY 2018. 
Some commenters supported the continuation of the new technology add-on 
payments for MAGEC[supreg] Spine for FY 2018. The manufacturer also 
requested that CMS extend new technology add-on payments for 
MAGEC[supreg] Spine. The manufacturer provided the following reasons to 
extend the new technology add-on payment:
     Based on internal data, there have not been enough cases 
to provide the stimulus that the new technology add-on payments program 
intended.
     The patient population for which the new technology add-on 
payment applies is very small, estimated at less than or equal to 10 
percent of the total annual cases.
     The new technology add-on payment has been available for 
approximately 9 months. Given the small number of patients, providers 
have not had enough cases yet to utilize the new technology add-on 
payments in the way the program intended.
     Extension of the new technology add-on payment for FY 2018 
would allow more patients to gain access to MAGEC[supreg] rods. The 
manufacturer stated that this has clinical benefits as noted in the 
literature, but also ultimately helps payers, including CMS. The 
manufacturer stated that payer costs of treatment are reduced over the 
course of care when MAGEC[supreg] rods are used vs. traditional growth 
rods.
     Extending the new technology add-on payment for 
MAGEC[supreg] Spine has minimal budgetary impact due again to the small 
patient population.
    The manufacturer cited the importance of the new technology add-on 
payments to MAGEC[supreg] Spine and stated that extending the new 
technology add-on payment would help make the technology more 
accessible.
    Response: We thank the commenters for their comments. With regard 
to the technology's newness, the timeframe that a new technology can be 
eligible to receive new technology add-on payments ends when data 
documenting the use and cost of the procedures become available. 
Section 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 ICD-9-CM code (or, as 
finalized earlier in this section, the inpatient hospital 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, 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 applicable 
criteria. Therefore, as discussed in the FY 2005 IPPS final rule (69 FR 
49003), if the costs of the technology are included in the charge data, 
and the MS-DRGs have been recalibrated using that data, the technology 
can no longer be considered ``new'' for the purposes of this provision.
    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 and our implementing regulations, 
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. 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.
    Therefore, based on all of the reasons stated above, the 
MAGEC[supreg] Spine is no longer considered ``new'' for purposes of new 
technology add-on payments for FY 2018. Therefore, we are finalizing 
our proposal to discontinue making new technology add-on payments for 
the MAGEC[supreg] Spine for FY 2018.
g. Vistogard\TM\ (Uridine Triacetate)
    BTG International Inc., submitted an application for new technology 
add-on payments for the VistogardTM for FY 2017. 
VistogardTM was developed as an emergency treatment for 
Fluorouracil toxicity.
    Chemotherapeutic agent 5-fluorouracil (5-FU) is used to treat 
specific solid tumors. It acts upon deoxyribonucleic acid (DNA) and 
ribonucleic acid (RNA) in the body, as uracil is a naturally occurring 
building block for genetic material. Fluorouracil is a fluorinated 
pyrimidine. As a chemotherapy agent, Fluorouracil is absorbed by cells 
and causes the cell to metabolize into byproducts that are toxic and 
used to destroy cancerous cells. According to the applicant, the 
byproducts fluorodoxyuridine monophosphate (F-dUMP) and floxuridine 
triphosphate (FUTP) are believed to do the following: (1) Reduce DNA 
synthesis; (2) lead to DNA fragmentation; and (3) disrupt RNA 
synthesis. Fluorouracil is used to treat a variety of solid tumors such 
as colorectal, head and neck, breast, and ovarian cancer. With 
different tumor treatments, different dosages, and different dosing 
schedules, there is a risk for toxicity in these patients. Patients may 
suffer from fluorouracil toxicity/death if 5-FU is delivered in slight 
excess or at faster infusion rates than prescribed. The cause of 
overdose can happen for a variety of reasons including: Pump 
malfunction, incorrect pump programming or miscalculated doses, and 
accidental or intentional ingestion.
    VistogardTM is an emergency treatment for Fluorouracil 
toxicity and is a prodrug of uridine. Once the drug is metabolized into 
uridine, it competes with the toxic byproduct FUTP in binding to RNA, 
thereby reducing the impact FUTP has on cell death.
    The VistogardTM received FDA approval on December 11, 
2015. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56910), we stated 
that we agreed with the manufacturer that, due to the

[[Page 38113]]

delay in availability, the date the newness period begins for 
VistogardTM is March 2, 2016, instead of December 11, 2015.
    The applicant noted that the VistogardTM is the first 
FDA-approved antidote used to reverse fluorouracil toxicity. The 
applicant received a unique ICD-10-PCS procedure code that became 
effective October 1, 2016, to describe the use of this technology. The 
approved procedure code is XW0DX82 (Introduction of Uridine Triacetate 
into Mouth and Pharynx, External Approach, New Technology Group 2).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
VistogardTM and consideration of the public comments we 
received in response to the FY 2017 IPPS/LTCH PPS proposed rule, we 
approved VistogardTM for new technology add-on payments for 
FY 2017 (81 FR 56912). With the new technology add-on payment 
application, the applicant stated that the total operating cost of 
VistogardTM is $75,000. Under Sec.  412.88(a)(2), we limit 
new technology add-on payments to the lesser of 50 percent of the 
average cost of the technology or 50 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment for a case involving VistogardTM 
is $37,500.
    As noted previously, with regard to the newness criterion for the 
VistogardTM, we considered the beginning of the newness 
period to commence on March 2, 2016. Because the 3-year anniversary 
date of the entry of the VistogardTM onto the U.S. market 
(March 2, 2019) will occur after FY 2018, in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19876), we proposed to continue new technology 
add-on payments for this technology for FY 2018. We proposed that the 
maximum payment for a case involving the VistogardTM would 
remain at $37,500 for FY 2018. We invited public comments on our 
proposal to continue new technology add-on payments for the 
VistogardTM.
    Comment: The manufacturer commented that, as of April 1, 2017, 
pricing for VistogardTM has changed. The manufacturer noted 
that the wholesale acquisition cost (WAC) for VistogardTM is 
now $80,260 for a 20-dose pack (or $4,013.00 per each 10g packet of 
oral granules). Given the current price for VistogardTM, the 
manufacturer requested that CMS revise the maximum payment per case to 
$40,130, or 50 percent of the revised WAC.
    Response: According to the manufacturer, as noted in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56912), the WAC of 
VistogardTM was $3,750.00 per each 10g packet of oral 
granules. The recommended adult dosing per the VistogardTM 
label is 10g (one packet every 6 hours for a minimum of 20 doses over 5 
days). The total cost was 20 packets x WAC of $3,750.00 per packet, 
which equaled $75,000 per patient.
    Using the updated WAC provided by the manufacturer, we performed an 
additional cost analysis to determine if Vistogard would meet the cost 
criterion. We determined that the price increase would increase the 
amount that the inflated average standardized case-weighted charge per 
case exceeds the average case-weighted threshold amount. Therefore, 
VistogardTM would still meet the cost criterion.
    We are finalizing our proposal to continue new technology add-on 
payments for VistogardTM for FY 2018. Using the revised 
pricing, the maximum new technology add-on payment for a case involving 
VistogardTM is $40,130 for FY 2018.
h. Blinatumomab (BLINCYTO[supreg])
    Amgen, Inc. submitted an application for new technology add-on 
payments for FY 2016 for Blinatumomab (BLINCYTO[supreg]), a bi-specific 
T-cell engager (BiTE) used for the treatment of Philadelphia 
chromosome-negative (Ph-) relapsed or refractory (R/R) B-cell precursor 
acute-lymphoblastic leukemia (ALL), which is a rare aggressive cancer 
of the blood and bone marrow. Approximately 6,050 individuals are 
diagnosed with Ph- R/R B-cell precursor ALL in the United States each 
year, and approximately 2,400 individuals, representing 30 percent of 
all new cases, are adults. Ph- R/R B-cell precursor ALL occurs when 
there are malignant transformations of B-cell or T-cell progenitor 
cells, causing an accumulation of lymphoblasts in the blood, bone 
marrow, and occasionally throughout the body. As a bi-specific T-cell 
engager, the BLINCYTO [supreg] technology attaches to a molecule on the 
surface of the tumorous cell, as well as to a molecule on the surface 
of normal T-cells, bringing the two into closer proximity and allowing 
the normal T-cell to destroy the tumorous cell. Specifically, the 
BLINCYTO[supreg] technology attaches to a cell identified as CD19, 
which is present on all of the cells of the malignant transformations 
that cause Ph- R/R B-cell precursor ALL and helps attract the cell into 
close proximity of the T-cell CD3 with the intent of getting close 
enough to allow the T-cell to inject toxins that destroy the cancerous 
cell. According to the applicant, the BLINCYTO[supreg] technology is 
the first, and the only, bi-specific CD19-directed CD3 T-cell engager 
single-agent immunotherapy approved by the FDA.
    BLINCYTO[supreg] is administered as a continuous IV infusion 
delivered at a constant flow rate using an infusion pump. A single 
cycle of treatment consists of 28 days of continuous infusion, and each 
treatment cycle is followed by 2 weeks without treatment prior to 
administering any further treatments. A course of treatment would 
consist of two phases. Phase 1 consists of initial inductions or 
treatments intended to achieve remission followed by additional 
inductions and treatments to maintain consolidation; or treatments 
given after remission has been achieved to prolong the duration. During 
Phase 1 of a single treatment course, up to two cycles of 
BLINCYTO[supreg] are administered, and up to three additional cycles 
are administered during consolidation. The recommended dosage of 
BLINCYTO[supreg] administered during the first cycle of treatment is 9 
mcg per day for the first 7 days of treatment. The dosage is then 
increased to 28 mcg per day for 3 weeks until completion. During Phase 
2 of the treatment course, all subsequent doses are administered as 28 
mcg per day throughout the entire duration of the 28-day treatment 
period.
    With regard to the newness criterion, the BLINCYTO[supreg] 
technology received FDA approval on December 3, 2014, for the treatment 
of patients diagnosed with Ph- R/R B-cell precursor ALL, and the 
product gained entry onto the U.S. market on December 17, 2014.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for 
BLINCYTO[supreg] and consideration of the public comments we received 
in response to the FY 2016 IPPS/LTCH PPS proposed rule, we approved 
BLINCYTO[supreg] for new technology add-on payments for FY 2016 (80 FR 
49449). Cases involving BLINCYTO[supreg] that are eligible for new 
technology add-on payments are identified using one of the following 
ICD-10-PCS procedure codes: XW03351 (Introduction of Blinatumomab 
antineoplastic immunotherapy into peripheral vein, percutaneous 
approach, New Technology Group 1), or XW04351 (Introduction of 
Blinatumomab antineoplastic immunotherapy into central vein, 
percutaneous approach, New Technology Group 1).
    As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49449), 
the

[[Page 38114]]

applicant recommended that CMS consider and use the cost of the full 
28-day inpatient treatment cycle as the expected length of treatment 
when determining the maximum new technology add-on payment for cases 
involving the BLINCYTO[supreg], rather than the average cost of lesser 
number of days used as other variables. For the reasons discussed, we 
disagreed with the applicant and established the maximum new technology 
add-on payment amount for a case involving the BLINCYTO[supreg] 
technology for FY 2016 using the weighted average of the cycle 1 and 
cycle 2 observed treatment length. Specifically, in the Phase II trial, 
the most recent data available, 92 patients received cycle 1 treatment 
for an average length of 21.2 days, and 52 patients received cycle 2 
treatment for an average length of 10.2 days. The weighted average of 
cycle 1 and cycle 2 treatment length is 17 days. We noted that a small 
number of patients also received 3 to 5 treatment cycles. However, 
based on the data provided, these cases do not appear to be typical at 
this point and we excluded them from this calculation. We noted that, 
if we included all treatment cycles in this calculation, the weighted 
average number of days of treatment is much lower, 10 days. Using the 
clinical data provided by the applicant, we stated that we believe 
setting the maximum new technology add-on payment amount for a case 
involving the BLINCYTO[supreg] technology for FY 2016 based on a 17-day 
length of treatment cycle is representative of historical and current 
practice. We also stated that, for FY 2017, if new data on length of 
treatment are available, we would consider any such data in evaluating 
the maximum new technology add-on payment amount. However, we did not 
receive any new data from the applicant to evaluate for FY 2017.
    In the application, the applicant estimated that the average 
Medicare beneficiary would require a dosage of 9mcg/day for the first 7 
days under the first treatment cycle, followed by a dosage of 28mcg/day 
for the duration of the treatment cycle, as well as all days included 
in subsequent cycles. All vials contain 35mcg at a cost of $3,178.57 
per vial. The applicant noted that all vials are single-use. Therefore, 
we determined that cases involving the use of the BLINCYTO[supreg] 
technology would incur an average cost per case of $54,035.69 (1 vial/
day x 17 days x $3,178.57/vial). Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 50 percent of the average 
cost of the technology or 50 percent of the costs in excess of the MS-
DRG payment for the case. As a result, the maximum new technology add-
on payment amount for a case involving the use of the BLINCYTO[supreg] 
is $27,017.85.
    With regard to the newness criterion for BLINCYTO[supreg], we 
consider the beginning of the newness period to commence when the 
product gained entry onto the U.S. market on December 17, 2014. As 
discussed previously in this section, in general, we extend new 
technology add-on payments for an additional year only if the 3-year 
anniversary date of the product's entry onto the U.S. market occurs in 
the latter half of the upcoming fiscal year. Because the 3-year 
anniversary date of the entry of the BLINCYTO[supreg] onto the U.S. 
market will occur in the first half of FY 2018 (December 17, 2017), in 
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19877), we proposed to 
discontinue new technology add-on payments for this technology for FY 
2018. We invited public comments on this proposal.
    Comment: Some commenters supported CMS' proposal to discontinue new 
technology add-on payments for BLINCYTO[supreg]. The applicant (the 
manufacturer) disagreed with the proposal to discontinue new technology 
add-on payments for BLINCYTO[supreg]. The manufacturer stated that CMS 
is discontinuing the new technology add-on payment in advance of the 3-
year statutory limit. The manufacturer requested that CMS reconsider 
and extend the new technology add-on payments for FY 2018.
    The manufacturer explained that the continuation of new technology 
add-on payments for BLINCYTO[supreg] in FY 2018 is well within CMS' 
statutory authority and would permit CMS to bolster its claims data for 
rate-setting to ensure that it can meaningfully recalibrate the MS-DRG 
weights to reflect the costs of BLINCYTO[supreg] in accordance with the 
policy objectives of the statute. The manufacturer stated that section 
1886(d)(5)(K) of the Act gives CMS authority to grant new technology 
add-on payments to new technologies to ``provide for the collection of 
data with respect to the costs of a new medical service or technology 
[. . .] for a period of not less than 2 years and not more than 3 years 
beginning on the date on which an inpatient hospital code is issued 
with respect to the service or technology.'' The manufacturer also 
stated that the regulation at 42 CFR 412.87(b)(2) is phrased similarly 
and reads that ``A medical service or technology may be considered new 
within 2 or 3 years after the point at which data begin to become 
available reflecting the ICD-9-CM code assigned to the new service or 
technology (depending on when a new code is assigned and data on the 
new service or technology become available for DRG recalibration). 
After CMS has recalibrated the DRGs, based on available data, to 
reflect the costs of an otherwise new medical service or technology, 
the medical service or technology will no longer be considered `new' 
under the criterion of this section.''
    The manufacturer stated that BLINCYTO[supreg] received FDA approval 
on December 3, 2014, gained entry onto the U.S. market on December 17, 
2014, and was issued an inpatient hospital code (ICD-10-PCS code) on 
October 1, 2015. Therefore, the manufacturer asserted that, as of 
October 1, 2017, BLINCYTO[supreg] will have received the new technology 
add-on payment for the minimum permitted duration of 2 years, and is 
eligible, by statute and regulation, for an additional year new 
technology add-on payments.
    The manufacturer also stated that CMS explained in the FY 2017 
IPPS/LTCH PPS final rule (81 FR 56877) that ``a specific medical 
service or technology will be considered `new' for purposes of new 
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'' and that only once the MS-DRGs have 
been recalibrated to reflect the costs of a new medical technology 
should new technology add-on payments cease. The manufacturer believed 
that the above quoted regulation likewise links the termination of new 
technology add-on payments to having data to incorporate the item into 
the calibration of the inpatient payment groupings. The manufacturer 
also cited the FY 2011 IPPS final rule (75 FR 50138) and stated that 
CMS has acknowledged in previous rulemaking that, in some cases, there 
may be valid reasons to extend new technology add-on payment status, 
including, for example, when ``there may be few to no Medicare data 
available for the new service or technology following FDA approval'' to 
achieve the objective of appropriately recalibrating MS-DRG weights. 
The manufacturer believed that if insufficient data are collected on 
the technology to ``fully reflect the cost of the technology'' in the 
MS-DRG weights, there would be a valid reason to continue the new 
technology add-on payment.
    The manufacturer stated that claims of BLINCYTO[supreg] in the FY 
2016

[[Page 38115]]

MedPAR, which is used for FY 2018 MS-DRG recalibration, are 
insufficient in number and do not fully reflect the cost of 
BLINCYTO[supreg] in the MS-DRG recalibration. The applicant stated 
that, in the FY 2016 MedPAR claims, there were a total of 145 
BLINCYTO[supreg] claims eligible for the new technology add-on payment, 
111 of which were distributed across 6 MS-DRGs that the technology most 
frequently mapped to. The manufacturer noted that this claims volume 
represents less than 1 percent of the over 10,000 patient discharge 
claims for these 6 MS-DRGs. As a result of this low claims volume, both 
objectively and relative to the frequency of the relevant MS-DRGs on 
patient discharge claims, the manufacturer believed it is very unlikely 
that the fundamental objective of the new technology add-on payment to 
provide time to collect sufficient data to recalibrate MS-DRG weights 
to ``fully reflect the cost of the technology'' can be achieved by 
discontinuing the new technology add-on payment status for 
BLINCYTO[supreg].
    The manufacturer stated that it recognizes that CMS has a general 
practice (not set forth in its regulations) for technologies that have 
had new technology add-on payments for 2 fiscal years to only provide 
an additional year of new technology add-on payment if the 3-year 
anniversary of the product's FDA approval is during the second half of 
the fiscal year unless CMS receives evidence of a documented delay in 
making the product available on the market. The manufacturer believed 
that this general practice should not be followed here because of the 
paucity of data on BLINCYTO[supreg]. The manufacturer noted that CMS 
does not apply the general practice when there is a delay in market 
availability, ostensibly because that delay has an impact on the 
availability of data for use in inpatient hospital payment rate 
setting. The manufacturer asserted that when there is a paucity of data 
from the first of the 2 years of the new technology add-on payment, CMS 
should continue making new technology add-on payments for a third year 
to ensure that when it incorporates the item into the inpatient payment 
system, it has enough data to do so.
    Further, the manufacturer noted that BLINCYTO[supreg] demonstrated 
significant improvements in overall survival, complete remission, and 
event-free survival in comparison to standard of care chemotherapy in 
adult patients with Ph-R/R B-cell precursor ALL. The manufacturer 
stated that extending new technology add-on payments for 
BLINCYTO[supreg] would continue to support access to this novel 
therapy.
    Response: We thank the commenters for their comments. 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. As the manufacturer noted in its comments, Sec.  
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 (or, as finalized 
earlier in this section, the inpatient hospital 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 specifies 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 
the section. 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. As the manufacturer noted, we considered 
the newness period for BLINCYTO[supreg] to commence when the product 
gained entry onto the U.S. market on December 17, 2014. We have 
consistently applied this standard, and believe that it is most 
consistent with the purpose of new technology add-on payments.
    While CMS may consider a documented delay in a technology's 
availability on the U.S. market in determining when the newness period 
begins, its policy for determining whether to extend new technology 
add-on payments for a third year generally applies regardless of the 
claims volume for the technology after the start of the newness period. 
Similar to our discussion earlier and 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.
    Based on the reasons stated above, BLINCYTO[supreg] is no longer 
considered ``new'' for purposes of new technology add-on payments for 
FY 2018. We are finalizing our proposal to discontinue making new 
technology add-on payments for BLINCYTO[supreg] for FY 2018.
6. FY 2018 Applications for New Technology Add-On Payments
    We received nine applications for new technology add-on payments 
for FY 2018. Three applicants withdrew their applications prior to the 
issuance of the FY 2018 IPPS/LTCH PPS proposed rule. Two applicants, 
Kite Pharma and IsoRay Medical, Inc., in conjunction with GammaTile 
LLC, withdrew their applications for KTE-C19 (axicabtagene ciloleucel) 
and GammaTileTM, respectively, prior to the issuance of this 
FY 2018 IPPS/LTCH PPS final rule.
    In addition, in accordance with the regulations under Sec.  
412.87(c), applicants for new technology add-on payments must have FDA 
approval or clearance by July 1 of each year prior to the beginning of 
the fiscal year that the application is being considered. One 
applicant, Celator Pharmaceuticals, Inc. for VYXEOSTM, did 
not receive FDA approval for its technology by July 1, 2017. Therefore, 
VYXEOSTM is not eligible for consideration for new 
technology add-on payments for FY 2018. We are not including in this 
final rule the descriptions and discussions of this application which 
was included in the FY 2018 IPPS/LTCH PPS proposed rule. We note that 
we did receive public comments on this application. However, because 
VYXEOSTM is ineligible for new technology add-on payments 
for FY 2018 because it did not receive FDA approval by July 1, 2017, we 
are not summarizing nor responding to public comments regarding the new 
technology criteria for this application in this final rule. We note 
that the applicant did request that we make an exception to the July 1 
deadline if it were to receive FDA approval prior to the beginning of 
FY 2018. However, we did not propose any changes to the regulations at 
Sec.  412.87(c), and we believe the request is out of scope for this 
final rule.
    A discussion of the three remaining applications is presented 
below.
a. Bezlotoxumab (ZINPLAVATM)
    Merck & Co., Inc. submitted an application for new technology add-
on payments for ZINPLAVATM for FY 2018. 
ZINPLAVATM is indicated to reduce

[[Page 38116]]

recurrence of Clostridium difficile infection (CDI) in adult patients 
who are receiving antibacterial drug treatment for a diagnosis of CDI 
who are at high risk for CDI recurrence. ZINPLAVATM is not 
indicated for the treatment of the presenting episode of CDI and is not 
an antibacterial drug.
    Clostridium difficile (C-diff) is a disease-causing anaerobic, 
spore forming bacteria that can affect the gastrointestinal (GI) tract. 
Some people carry the C-diff bacterium in their intestines, but never 
develop symptoms of an infection. The difference between asymptomatic 
colonization and pathogenicity is caused primarily by the production of 
an enterotoxin (Toxin A) and/or a cytotoxin (Toxin B). The presence of 
either or both toxins can lead to symptomatic CDI, which is defined as 
the acute onset of diarrhea with a documented infection with toxigenic 
C-diff, or the presence of either toxin A or B. The GI tract contains 
millions of bacteria, commonly referred to as ``normal flora'' or 
``good bacteria,'' which play a role in protecting the body from 
infection. Antibiotics can kill these good bacteria and allow the C-
diff bacteria to multiply and release toxins that damage the cells 
lining the intestinal wall, resulting in a CDI. CDI is a leading cause 
of hospital-associated gastrointestinal illnesses. Persons at increased 
risk for CDI include people who are treated with current or recent 
antibiotic use, people who have encountered current or recent 
hospitalization, people who are older than 65 years, immunocompromised 
patients, and people who have recently had a diagnosis of CDI. CDI 
symptoms include, but are not limited to, diarrhea, abdominal pain, and 
fever. CDI symptoms range in severity from mild (abdominal discomfort, 
loose stools) to severe (profuse, watery diarrhea, severe pain, and 
high fevers). Severe CDI can be life-threatening and, in rare cases, 
can cause bowel rupture, sepsis and organ failure. CDI is responsible 
for 14,000 deaths per year in the United States.
    C-diff produces two virulent, pro-inflammatory toxins, Toxin A and 
Toxin B, which target host colonocytes (that is, large intestine 
endothelial cells) by binding to endothelial cell surface receptors via 
combined repetitive oligopeptide (CROP) domains. These toxins cause the 
release of inflammatory cytokines leading to intestinal fluid secretion 
and intestinal inflammation. The applicant asserted that 
ZINPLAVATM targets Toxin B sites within the CROP domain 
rather than the C-diff organism itself. According to the applicant, by 
targeting C-diff Toxin B, ZINPLAVATM neutralizes Toxin B, 
prevents large intestine endothelial cell inflammation, symptoms 
associated with CDI, and reduces the recurrence of CDI. 
ZINPLAVATM binds to sites within the CROP domain, which 
prevents Toxin B from binding to the host cell, thereby preventing the 
inflammation and symptoms associated with CDI. ZINPLAVATM is 
used concomitantly with standard of care (SOC) antibiotics. Typical 
treatment of CDI includes antibiotic therapy using vancomycin, 
metronidazole, fidaxomicin, or other antibiotics. Alternative therapies 
include fecal microbiota transplant (FMT) and the use of probiotics.
    The primary goal of CDI treatment is resolving the infection. 
Antibacterial drug treatment remains the cornerstone of treatment of 
CDI. However, this treatment option alone may not be adequate for 
patients diagnosed with recurrent CDI. A major concern with respect to 
a CDI is that even when treatment with an antibacterial drug of a 
primary infection is successful, generally, 25 percent to 30 percent of 
patients experience a recurrence of the infection within days or weeks 
of the presenting episode's symptom resolution. The risk of recurrence 
increases to 65 percent with subsequent CDI episodes. Disease 
recurrence results from continued disruption of the intestinal 
microbiota by SOC CDI antibiotics (or use of other antibiotics used to 
treat non-gastrointestinal conditions), combined with persistence of 
resistant C-diff spores (relapse) or acquisition of new spores from the 
environment (reinfection).
    Antibacterial drug use may inhibit the intestinal microbiota from 
reestablishing itself, allowing C-diff spores potentially to germinate 
and colonize the intestines when the antibacterial drug is 
discontinued. If regrowth of C-diff overtakes the reestablishment of 
the intestinal microbiota, then spore germination and toxin production 
from vegetative C-diff may restart the cycle of CDI and the need for 
subsequent treatment. These challenges highlight the need for 
nonantibiotic therapies. ZINPLAVATM targets Toxin B rather 
than the C-diff bacteria itself. According to the applicant, unlike 
antibacterial drugs, ZINPLAVATM is a human monoclonal 
antibody and does not affect the microbiota. According to the 
applicant, ZINPLAVATM neutralizes C-diff Toxin B and reduces 
recurrence of CDI. ZINPLAVATM is given concomitantly during 
the course of SOC antibacterial treatment of a CDI..
    With respect to the newness criterion, ZINPLAVATM 
received FDA approval on October 21, 2016, for reduction of recurrence 
of CDI in patients receiving antibacterial drug treatment for CDI and 
who are at high risk of CDI recurrence. ZINPLAVATM became 
commercially available on February 10, 2017. Therefore, the newness 
period for ZINPLAVATM began on February 10, 2017.
    The applicant submitted a request for a unique ICD-10-PCS procedure 
code and was granted approval for the following procedure codes: 
XW033A3 (Introduction of bezlotoxumab monoclonal antibody, into 
peripheral vein, percutaneous approach, New Technology Group 3) and 
XW043A3 (Introduction of bezlotoxumab monoclonal antibody, into central 
vein, percutaneous approach, New Technology Group 3).
    As discussed above, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, 
according to the applicant, ZINPLAVATM is a human monoclonal 
antibody with an innovative mechanism of action. The applicant asserted 
that ZINPLAVATM is a novel treatment, with a unique 
mechanism of action relative to SOC CDI antibiotics that target C-diff. 
The applicant explained that ZINPLAVATM is the first human 
monoclonal antibody that targets and neutralizes C. diff Toxin B 
because the technology specifically binds to and neutralizes C-diff 
Toxin B (which is an exotoxin that contributes to intestinal tissue 
damage and immune system effects that underlie the symptoms of CDI) and 
inhibits binding of the toxin to mammalian cells. The applicant further 
asserted that the administration of ZINPLAVATM, in addition 
to standard of care antibacterial drug treatment, reduces CDI 
recurrence by providing passive immunity against Toxin B resulting from 
persistent or newly acquired C-diff spores. According to the applicant, 
ZINPLAVATM is the only FDA-approved treatment indicated for 
reducing CDI recurrence as adjunctive therapy in adult patients who are 
receiving antibacterial drug treatment for CDI and who are at high risk 
for CDI recurrence.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant maintained that 
patients who may be eligible to receive treatment using 
ZINPLAVATM could be in an acute-care hospital setting for a 
wide

[[Page 38117]]

variety of reasons and may develop a secondary CDI as a hospital-
acquired infection and, therefore, cases representing patients that may 
be eligible for treatment using the technology can map to a wide range 
of MS-DRGs. ZINPLAVATM is indicated for patients receiving 
SOC treatment for CDI and who are at a high risk for CDI recurrence. In 
order to identify the range of MS-DRGs for which cases representing 
patients that may be eligible for treatment using ZINPLAVATM 
may map to, the applicant identified all MS-DRGs containing cases that 
represent patients presenting with CDI as a primary or secondary 
diagnosis. The applicant used FY 2015 MedPAR data to map the identified 
cases to 543 MS-DRGs, with 12 MS-DRGs accounting for approximately 40 
percent of all cases. The applicant segmented these cases based on age 
because patients 65 years and older are at higher risk for CDI 
recurrence. Based on the FY 2015 MedPAR data, MS-DRG distribution was 
found to be similar, irrespective of CDI status (primary or secondary), 
for patients over 65 years of age and those under 65 years of age. The 
top 7 MS-DRGs across both age groups account for nearly 54 percent 
(over 65 years of age) and 49 percent (under 65 years of age). The 
applicant further segmented these cases to determine if status of CDI 
as a primary or secondary diagnosis influenced MS-DRG mapping. 
Regardless of age, when CDI is the primary diagnosis, approximately 98 
percent of patient cases map to the same 3 MS-DRGs: MS-DRG 371 (Major 
Gastrointestinal Disorders and Peritoneal Infections with MCC); MS-DRG 
372 (Major Gastrointestinal Disorders and Peritoneal Infections with 
CC); and MS-DRG 373 (Major Gastrointestinal Disorders and Peritoneal 
Infections without CC/MCC), respectively. Potential cases representing 
patients who may be eligible for treatment with ZINPLAVATM 
would be assigned to the same MS-DRGs as cases representing patients 
who receive SOC treatment for a diagnosis of CDI.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, according to the 
applicant, ZINPLAVATM is administered concomitantly or as 
adjunctive therapy with SOC antibacterial treatment for recurrent CDI. 
The applicant stated that ZINPLAVATM is indicated to reduce 
recurrence of CDI in adult patients at high risk of CDI recurrence who 
are receiving antibacterial drug treatment for CDI. According to the 
applicant, the addition of ZINPLAVATM to SOC antibacterial 
drug treatment reduces CDI recurrence by providing passive immunity 
against Toxin B resulting from persistent or newly acquired C-diff 
spores. ZINPLAVATM is used to reduce recurrence of the same 
or similar type of disease (CDI) and to treat a similar patient 
population receiving SOC therapy for the treatment of recurrent CDI.
    We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19879) 
that, based on the applicant's statements presented above, because 
ZINPLAVATM has a unique mechanism of action, we did not 
believe that the technology is substantially similar to existing 
technologies and, therefore, meets the newness criterion. We invited 
public comments on whether ZINPLAVATM meets the newness 
criterion.
    Comment: The applicant submitted comments in agreement with CMS' 
belief that ZINPLAVATM meets the newness criterion for new 
technology add-on payments. The applicant reiterated that 
ZINPLAVATM is the only FDA approved treatment indicated for 
reducing CDI recurrence as adjunctive therapy in adult patients who are 
receiving antibacterial drug treatment for CDI and who are at risk for 
CDI recurrence. The applicant agreed that ZINPLAVATM is not 
substantially similar to existing technologies and, therefore, meets 
the newness criterion.
    Response: We appreciate the comments submitted by the applicant on 
whether ZINPLAVATM meets the newness criterion. After review 
of the information provided by the applicant and consideration of its 
comments, we believe that ZINPLAVATM meets the newness 
criterion and we consider the technology to be ``new'' as of February 
10, 2017, when the technology became commercially available.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that the technology meets the cost 
criterion. In order to identify the range of MS-DRGs that cases 
representing potential patients who may be eligible for treatment using 
ZINPLAVATM may map to, the applicant identified all MS-DRGs 
for patients diagnosed with CDI as a primary or secondary diagnosis. 
Specifically, the applicant searched the FY 2015 MedPAR file for claims 
that included target patients over 65 years of age and identified cases 
reporting diagnoses of CDI by ICD-9-CM diagnosis code 008.45 
(Intestinal infection due to Clostridium difficile) as a primary or 
secondary diagnosis. This resulted in 139,135 cases across 543 MS-DRGs, 
with approximately 40 percent of all cases mapping to the following 12 
MS-DRGs: MS-DRG 177 (Respiratory Infections and Inflammations with 
MCC); MS-DRG 193 (Simple Pneumonia and Pleurisy with MCC); MS-DRG 
291(Heart Failure and Shock with MCC); MS-DRGs 371, 372, and 373 (Major 
Gastrointestinal Disorders and Peritoneal Infections with MCC, with CC, 
and without CC/MCC, respectively); MS-DRGs 682 and 683 (Renal Failure 
with MCC and with CC, respectively); MS-DRG 853 (Infectious and 
Parasitic Diseases with O.R. Procedure with MCC); MS-DRGs 870, 871, and 
872 (Septicemia or Severe Sepsis with Mechanical Ventilation >96 Hours, 
with MCC, and without MCC, respectively).
    Using the 139,135 identified cases, the average unstandardized 
case-weighted charge per case was $80,677. The applicant then 
standardized the charges. The applicant did not remove charges for the 
current treatment because, as discussed above, ZINPLAVATM 
will be used concomitantly with SOC antibacterial treatments for the 
treatment of CDI as an additive, or adjunctive treatment option, to 
reduce the recurrence of CDI infection. The applicant then applied the 
2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57286) to inflate the charges from FY 2015 to FY 
2017. The applicant noted that the anticipated price for 
ZINPLAVATM has yet to be determined; therefore, no charges 
for ZINPLAVATM were added in the analysis. Based on the FY 
2017 IPPS/LTCH PPS Table 10 thresholds, the average case-weighted 
threshold amount was $56,871. The inflated average case-weighted 
standardized charge per case was $78,929. Because the inflated average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount, the applicant maintained that the technology 
meets the cost criterion. The applicant noted that the inflated average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount without the average per patient cost of the 
technology. As such, the applicant anticipated that the inclusion of 
the cost of ZINPLAVATM, at any price point, will further 
increase charges above the average case-weighted threshold amount. In 
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19879), we invited 
public comments on whether ZINPLAVATM meets the cost 
criterion.
    Comment: The applicant submitted comments reiterating its cost 
analysis

[[Page 38118]]

results. Specifically, the applicant stated that as indicated in the FY 
2015 MedPAR data analysis summarized above, the average case-weighted 
standardized charge per case exceeded the average case-weighted 
threshold amount. As noted in the proposed rule, at the time the 
applicant submitted its application, the applicant indicated that the 
price of ZINPLAVATM had not yet been determined. However, 
because the inflated average case-weighted standardized charge per case 
exceeded the average case-weighted threshold amount without the average 
per-patient cost of the technology, the applicant contended that the 
inclusion of the cost of ZINPLAVA , at any price point, would further 
increase charges above the average case-weighted threshold amount.
    The applicant noted, in supplemental information submitted to CMS, 
the wholesale acquisition cost (WAC) of ZINPLAVATM (which is 
supplied as a 1000 mg/40 mL (25 mg/mL) solution in a single-dose vial) 
is $3,800 per vial. The recommended dosage of ZINPLAVATM is 
a single 10 mg/kg dose administered as an IV infusion based on patient 
body weight. Because each vial contains 1,000 mg of 
ZINPLAVATM, a single vial provides the complete recommended 
dose for a single patient who weighs 100 kg or less.
    As noted in the applicant's supplemental submission, to estimate 
the anticipated average charge submitted by hospitals for 
ZINPLAVATM, the applicant assumed that hospitals will mark 
up the cost for ZINPLAVATM by 200 percent. A 200 percent 
mark-up of the $3,800 WAC results in a total charge of $7,600 for 
ZINPLAVATM. The applicant added the anticipated charge for 
ZINPLAVATM of $7,600 to the previously determined inflated 
average case-weighted standardized charge per case of $78,929. This 
resulted in a revised inflated average case-weighted standardized 
charge per case of $86,529, which still exceeds the average case-
weighted threshold amount of $56,871.
    Response: After consideration of the comments we received, we agree 
that ZINPLAVATM meets the cost criterion.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the addition of ZINPLAVATM to SOC 
antibacterial drug treatment reduces CDI recurrence because it provides 
passive immunity against Toxin B resulting from persistent or newly 
acquired C-diff spores.
    The applicant conducted two Phase III studies, MODIFY I and MODIFY 
II. The primary endpoint of the studies was recurrent CDI within 12 
weeks after completion of treatment with ZINPLAVATM. The 
first study design initially included actoxumab, an antitoxin A 
monoclonal antibody treatment arm that was later discontinued due to a 
high failure rate and increase in mortality compared to other treatment 
arms.\3\ Clinical data on ZINPLAVATM is provided exclusively 
from the FDA briefing document available on the FDA Web site at: http://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/Anti-InfectiveDrugsAdvisoryCommittee. Information is also provided in the 
package insert by the manufacturer, Merck & Company, Inc. The FDA 
briefing provided data on the safety and efficacy of 
ZINPLAVATM. The FDA considered sustained clinical responses 
defined as clinical cure of the initial CDI episode and the absence of 
CDI recurrence as an appropriate endpoint to assess the efficacy of 
ZINPLAVA\TM\ in the prevention of CDI recurrences.
---------------------------------------------------------------------------

    \3\ Wilcox MH et al. Bezlotoxumab for Prevention of Recurrent 
Clostridium difficile Infection. N Engl J Med. 2017 Jan 
26;376(4):305-317.
---------------------------------------------------------------------------

    In MODIFY I trial, the clinical cure rate of the presenting CDI 
episode was lower in the ZINPLAVA\TM\ arm as compared to the placebo 
arm, whereas in MODIFY II trial the clinical cure rate was lower in the 
placebo arm as compared to the ZINPLAVA\TM\ arm. Additional analyses 
showed that, by 3 weeks post study drug infusion, the clinical cure 
rates of the presenting CDI episode were similar between treatment 
arms.
    In MODIFY I, the rate of sustained clinical response was 
numerically in favor of ZINPLAVA\TM\ (60.1 percent) in comparison to 
placebo (55.2 percent) with an adjusted difference and 95 percent CI of 
4.8 percent (-2.1 percent; 11.7 percent). In MODIFY II, the proportion 
of subjects with sustained clinical response in the ZINPLAVA\TM\ arm 
(66.8 percent) was also higher than in the placebo arm (52.1 percent) 
with an adjusted difference of 14.6 percent and 95 percent CI (7.8 
percent; 21.4 percent). The treatment did not significantly decrease 
mortality. Recurrence rates, including CDI-related hospital readmission 
rates, reportedly were between 10 and 25 percent. No clinically 
meaningful differences in the exposure of bezlotoxumab were found 
between patients 65 years of age and older and patients under 65 years 
of age.
    In the Phase III trials, the safety profile of 
ZINPLAVATM was similar overall to that of placebo. However, 
heart failure was reported more commonly in the two Phase III clinical 
trials of ZINPLAVATM-treated patients compared to placebo-
treated patients. These adverse reactions occurred primarily in 
patients with underlying congestive heart failure (CHF). In patients 
with a history of CHF, 12.7 percent (15/118) of ZINPLAVATM-
treated patients and 4.8 percent (5/104) of placebo-treated patients 
had the serious adverse reaction of heart failure during the 12-week 
study period. In addition, in patients with a history of CHF, there 
were more deaths in ZINPLAVATM-treated patients (19.5 
percent (23/118)) than in placebo-treated patients (12.5 percent (13/
104)) during the 12-week study period. We stated in the proposed rule 
that we were concerned regarding the safety of ZINPLAVATM in 
patients diagnosed with CHF. In regards to safety, data from the MODIFY 
I and MODIFY II studies suggest few adverse events associated with 
ZINPLAVATM, with no significant differences in the number of 
serious adverse events, deaths or discontinuations of study drug that 
occurred between the ZINPLAVATM and the placebo groups. 
However, both the ZINPLAVATM and the ZINPLAVATM 
plus actoxumab treatment groups experienced more episodes of cardiac 
failure (defined as acute or chronic cardiac failure) then compared to 
the placebo group (2.2 percent versus 1 percent). We stated in the 
proposed rule that we were unsure if the cardiac failure reported in 
the studies may be the result of a higher number of baseline patients 
with heart failure in the treatment arms or the result of an adverse 
effect to ZINPLAVATM. Therefore, we stated that we were 
concerned with regard to the adverse event of cardiac failure of 
ZINPLAVATM.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19880), we 
invited public comments on whether ZINPLAVATM meets the 
substantial clinical improvement criterion. We noted that we did not 
receive any written public comments in response to the New Technology 
Town Hall meeting notice regarding the application of 
ZINPLAVATM for new technology add-on payments.
    Comment: The applicant submitted comments regarding the substantial 
clinical improvement criterion. The applicant reiterated that the 
addition of ZINPLAVATM to standard of care antibacterial 
drug treatment reduces the risk of CDI recurrence in adult patients who 
are at high risk for CDI recurrence because it provides passive 
immunity against Toxin B resulting from persistent or newly acquired C. 
difficile spores. The applicant noted CMS'

[[Page 38119]]

concern, as described in the proposed rule, regarding the reported 
adverse event of cardiac failure with ZINPLAVATM. The 
applicant provided additional information concerning serious adverse 
events (SAEs) observed in the Phase III trials, and also included a 
series of analyses performed in the 41 subjects with an SAE of cardiac 
failure, as well as a discussion of analyses performed in a subset of 
patients with a baseline history of CHF..
    The applicant noted that SAEs were collected for the full 12-week 
follow-up period in the both Phase III trials (P001 + P002). Amongst 
the 2344 Phase III trial subjects, 29.8 percent of subjects experienced 
an SAE during the 12-week follow-up period. According to the applicant, 
the proportion of subjects with a SAE was lower in the active treatment 
groups compared with placebo (bezlotoxumab, 29.4 percent; actoxumab + 
bezlotoxumab, 27.3 percent; and placebo, 32.7 percent). The most 
frequently reported SAEs across all treatment groups were CDI (4.7 
percent), pneumonia (2.0 percent), sepsis (1.8 percent), cardiac 
failure (1.7 percent), diarrhea (1.6 percent), and urinary tract 
infection (1.5 percent). A higher percentage of subjects in the active 
treatment groups reported SAEs of cardiac failure compared with placebo 
(bezlotoxumab, 2.2 percent; actoxumab + bezlotoxumab, 2.2 percent; and 
placebo, 0.9 percent), whereas a higher percentage of subjects reported 
SAEs of CDI, pneumonia, and sepsis in the placebo group compared with 
the bezlotoxumab and actoxumab + bezlotoxumab groups. The incidence for 
other frequently reported SAEs was similar across groups. SAEs 
generally reflected the underlying comorbidities and advanced age of 
the subjects enrolled.
    The applicant also further characterized the observed numerical 
imbalance of subjects experiencing cardiac failure SAEs in 
bezlotoxumab-containing versus placebo treatment groups, by performing 
a series of analyses in the 41 subjects with an SAE of cardiac failure. 
The applicant noted the baseline characteristics of the 41 subjects who 
experienced an SAE of cardiac failure. As compared with the All 
patients as treated (APaT) population for the integrated Phase III 
trials (P001 + P002) dataset, the 41 subjects were older, almost all 
were inpatients at the time of enrollment, had a higher incidence of 
comorbid conditions (as evidenced by Charlson Comorbidity Index and 
Horn's Index), and a higher incidence of severe CDI. Across the 
treatment groups, nearly 90 percent had a medical history of including 
at least one cardiac condition and approximately 70 percent had a 
history of cardiac failure and/or cardiomyopathy. Therefore, the 
applicant believed that any assessment of the safety profile of this 
morbidly ill patient population must be interpreted with caution.
    The applicant provided an analysis of the safety profile of the 41 
subjects with cardiac failure SAEs with respect to timing to cardiac 
failure SAE and death. In the placebo group, 5 of 7 subjects 
experienced an SAE of cardiac failure before Week 4, while in the 
bezlotoxumab and actoxumab + bezlotoxumab groups, the majority of such 
events occurred after Week 4. None of the cardiac failure SAEs was 
deemed drug related by the investigator. Among subjects with a cardiac 
failure SAE, a higher proportion of subjects in the placebo group than 
in the bezlotoxumab group died before Week 4. The applicant noted that 
the events were often associated with concurrent conditions such as 
infection and/or worsening CDI that are known to exacerbate CHF, 
thereby further supporting the assessments that these events were not 
drug related. Overall, according to the applicant, these findings do 
not support a clear association between cardiac failure and 
bezlotoxumab, especially recognizing the severe baseline morbidity of 
the subjects and the lack of a temporal association of the event and 
any associated death.
    The applicant reiterated that heart failure is listed in the 
warnings and precautions section of the prescribing information for 
ZINPLAVATM to describe the higher incidence of heart failure 
reported in the two Phase III trials in subjects who received 
ZINPLAVATM compared with those who received placebo, 
primarily in patients with underlying CHF. The warnings and precautions 
section of the ZINPLAVATM label states, in part, that in 
patients with a history of CHF, ZINPLAVATM ``should be 
reserved for use when the benefit outweighs the risk.'' Although the 
overall safety profile of ZINPLAVATM was found to be 
acceptable, the FDA considered that this information was clinically 
relevant. Furthermore, the applicant stated that ZINPLAVATM 
has also recently been authorized for use by the European Medicines 
Agency (EMA) and that there is no heart failure warning in the EU 
prescribing information.
    Response: We appreciate the additional information and analysis 
provided by the applicant in response to our concerns regarding the 
adverse event of cardiac failure. We are satisfied that the warnings 
and precautions section of the drug's label clearly state that 
``ZINPLAVATM should be reserved for use when the benefit 
outweighs the risk'' for patients with a history of congestive heart 
failure (CHF). We agree that ZINPLAVATM represents a 
substantial clinical improvement over existing technologies because, 
based on the studies provided by the applicant, it reduces CDI 
recurrence by providing passive immunity against Toxin B resulting from 
persistent or newly acquired C-diff spores. After consideration of the 
public comments we received, we have determined that 
ZINPLAVATM meets all of the criteria for approval of new 
technology add-on payments. Therefore, we are approving new technology 
add-on payments for ZINPLAVATM for FY 2018. Cases involving 
ZINPLAVATM that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure codes XW033A3 and 
XW043A3.
    In its application, the applicant estimated that the average 
Medicare beneficiary would require a dosage of 10 mg/kg administered as 
an IV infusion over 60 minutes as a single dose. According to the 
applicant, the WAC for one dose is $3,800. Under 42 CFR 412.88(a)(2), 
we limit new technology add-on payments to the lesser of 50 percent of 
the average cost of the technology or 50 percent of the costs in excess 
of the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment amount for a case involving the use of 
ZINPLAVATM is $1,900 for FY 2018. In keeping with the 
current ZINPLAVATM label, CMS expects ZINPLAVATM 
will be prescribed for adult patients who are receiving antibacterial 
drug treatment for a diagnosis of CDI who are at high risk for CDI 
recurrence, and after consideration of its current warnings and 
precautions section which indicates for patients with a history of CHF, 
ZINPLAVATM should be reserved for use when the benefit 
outweighs the risk.
b. EDWARDS INTUITY EliteTM Valve System (INTUITY) and 
LivaNova Perceval Valve (Perceval)
    Two manufacturers, Edwards Lifesciences and LivaNova, submitted 
applications for new technology add-on payments for FY 2018 for the 
INTUITY EliteTM Valve System (INTUITY) and the Perceval 
Valve (Perceval), respectively. Both of these technologies are 
prosthetic aortic valves inserted using surgical aortic valve 
replacement (AVR). We note that, while Edwards Lifesciences submitted 
an application for new technology add-on payments for

[[Page 38120]]

FY 2017 for the INTUITY valve, FDA approval was not received by July 1, 
2016, and, therefore, the device was not eligible for consideration for 
new technology add-on payments for FY 2017.
    Aortic valvular disease is relatively common, primarily manifested 
by aortic stenosis. Most aortic stenosis is due to calcification of the 
valve, either on a normal tri-leaflet valve or on a congenitally 
bicuspid valve. The resistance to outflow of blood is progressive over 
time, and as the size of the aortic orifice narrows, the heart must 
generate increasingly elevated pressures to maintain blood flow. 
Symptoms such as angina, heart failure, and syncope eventually develop, 
and portend a very serious prognosis. There is no effective medical 
therapy for aortic stenosis, so the diseased valve must be replaced or, 
less commonly, repaired.
    The INTUITY valve incorporates the expansion feature of a catheter 
implanted valve, but is designed to be placed during cardiac surgery. 
The manufacturer explained that the INTUITY valve requires fewer 
stitches to hold the device in place because of the balloon expanded 
design and, therefore, can be inserted more quickly than a standard 
valve, and also facilitates minimally invasive cardiac surgery; that 
is, use of a smaller incision to allow faster recovery. The 
manufacturer of the INTUITY valve indicated that the device is 
comprised of: (1) A bovine pericardial aortic bioprosthetic valve; (2) 
a balloon expandable stainless steel frame; and (3) a textured sealing 
cloth. The manufacturer of the Perceval valve indicated that the 
Perceval valve device is comprised of: (1) Sizers used to determine the 
correct size of the prosthesis; (2) a dual holder used for positioning 
and deployment (available in two models, one for sternal approaches and 
one for MIS); (3) a ``smart clip'' to assist during assembly of the 
valve on the dual holder to prevent release during positioning; (4) a 
dual collapser used to evenly reduce the diameter of the prosthesis 
allowing it to mount onto the holder prior to implantation; (5) a dual 
collapser base used to allow proper positioning; and (6) a postdilation 
catheter used for in situ dilation of the prosthesis after implantation 
(available in two models, one for sternal approaches and one for MIS). 
According to both applicants, the INTUITY valve and the Perceval valve 
are the first sutureless, rapid deployment aortic valves that can be 
used for the treatment of patients who are candidates for surgical AVR. 
The applicants indicated that the two new device innovations facilitate 
MIS approaches through: (1) The device rapid deployment mechanisms; and 
(2) the design of the prosthetic valve that allows for markedly fewer 
to no sutures to securely fasten the prosthetic valve to the aortic 
orifice. The applicants explained that both of these aspects of their 
devices are credited with the reduction of operating time.
    As noted, according to both applicants, the INTUITY valve and the 
Perceval valve are the first sutureless, rapid deployment aortic valves 
that can be used for the treatment of patients who are candidates for 
surgical AVR. Because potential cases representing patients who are 
eligible for treatment using the INTUITY and the Perceval aortic valve 
devices would group to the same MS-DRGs, and we believe that these 
devices are intended to treat the same or similar disease in the same 
or similar patient population, and are purposed to achieve the same 
therapeutic outcome using the same or similar mechanism of action, we 
believe these two devices are substantially similar to each other and 
that it is appropriate to evaluate both technologies as one application 
for new technology add-on payments under the IPPS.
    With respect to the newness criterion, the INTUITY valve received 
FDA approval on August 12, 2016, and was commercially available on the 
U.S. market on August 19, 2016. The Perceval valve received FDA 
approval on January 8, 2016, and was commercially available on the U.S. 
market on February 29, 2016. We believe that, in accordance with our 
policy, it is appropriate to use the earliest market availability date 
submitted as the beginning of the newness period. Therefore, we stated 
in the proposed rule that based on our policy, with regard to both 
devices, if the technologies are approved for new technology add-on 
payments, we believe that the beginning of the newness period would be 
February 29, 2016. In addition, both applicants indicated that ICD-10-
PCS code X2RF032 (Replacement of Aortic Valve using Zooplastic Tissue, 
Rapid Deployment Technique, Open Approach, New Technology Group 2) 
would identify procedures involving the use of the devices when 
surgically implanted.
    We previously stated that, because we believe these two devices are 
substantially similar to each other, we believe it is appropriate to 
evaluate both technologies as one application for new technology add-on 
payment under the IPPS. The applicants submitted separate cost and 
clinical data, and we reviewed and discuss each set of data separately. 
However, we stated in the proposed rule that we intend to make one 
determination regarding new technology add-on payments that will apply 
to both devices. We believe that this is consistent with our policy 
statements in the past regarding substantial similarity. Specifically, 
we have noted that approval of new technology add-on payments would 
extend to all technologies that are substantially similar (66 FR 
46915), and we believe that continuing our current practice of 
extending new technology add-on payments without a further application 
from the manufacturer of the competing product, or a specific finding 
on cost and clinical improvement if we make a finding of substantial 
similarity among two products is the better policy because we avoid--
     Creating manufacturer-specific codes for substantially 
similar products;
     Requiring different manufacturers of substantially similar 
products to submit separate new technology applications;
     Having to compare the merits of competing technologies on 
the basis of substantial clinical improvement; and
     Bestowing an advantage to the first applicant representing 
a particular new technology to receive approval (70 FR 47351).
    We explained in the proposed rule that if these substantially 
similar technologies were submitted for review in different (and 
subsequent) years, rather than the same year, we would evaluate and 
make a determination on the first application and apply that same 
determination to the second application. However, because the 
technologies have been submitted for review in the same year, we 
believe that it is appropriate to consider both sets of cost data and 
clinical data in making a determination and we do not believe that it 
is possible to choose one set of data over another set of data in an 
objective manner.
    As stated above, we believe that the INTUITY valve and the Perceval 
valve are substantially similar to each other for purposes of analyzing 
these two applications as one application. As we stated in the proposed 
rule, we also need to determine whether the INTUITY valve and the 
Perceval valve are substantially similar to existing technologies prior 
to their approval by the FDA and their release on the market. As 
discussed earlier, if a technology meets all three of the substantial 
similarity criteria, it would be considered substantially similar to an 
existing technology and would not be

[[Page 38121]]

considered ``new'' for purposes of new technology add-on payments.
    With respect to the first criterion, whether a product uses the 
same or a similar mechanism of action to achieve a therapeutic outcome, 
the applicant for the INTUITY valve asserted that its unique design, 
which utilizes features that were not previously included in 
conventional aortic valves, constitutes a new mechanism of action. The 
deployment mechanism allows for rapid deployment. The expandable frame 
can reshape the native valve's orifice, creating a larger and more 
efficiently shaped effective orifice area. In addition, the expandable 
skirt allows for structural differentiation upon fixation of the valve 
requiring 3 permanent, guiding sutures rather than the 12 to 18 
permanent sutures used to fasten standard prosthetic aortic valves. The 
applicant for the Perceval valve described the Perceval valve's 
mechanism of action as including: (a) No permanent sutures; (b) a 
dedicated delivery system that increases the surgeon's visibility; (c) 
an enabler of minimally invasive approach; (d) a complexity reduction 
and reproducibility of the procedure; and (e) a unique device assembly 
and delivery systems.
    With respect to the second and third criteria, whether a product is 
assigned to the same or a different MS-DRG and whether the new use of 
the technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, the applicant for 
the INTUITY valve indicated that the technology is used in the 
treatment of the same patient population and potential cases 
representing patients that may be eligible for treatment using the 
INTUITY valve would be assigned to the same MS-DRGs as cases involving 
the use of other prosthetic aortic valves (that is, MS-DRGs 216 
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac 
Catheterization with MCC), 217 (Cardiac Valve & Other Major 
Cardiothoracic Procedures with Cardiac Catheterization with CC), 218 
(Cardiac Valve & Other Major Cardiothoracic Procedures with Cardiac 
Catheterization without CC/MCC), 219 (Cardiac Valve & Other Major 
Cardiothoracic Procedures without Cardiac Catheterization with MCC), 
220 (Cardiac Valve & Other Major Cardiothoracic Procedures without 
Cardiac Catheterization with CC), and 221 (Cardiac Valve & Other Major 
Cardiothoracic Procedures without Cardiac Catheterization without CC/
MCC).
    The applicant for the Perceval valve also indicated that the 
Perceval valve device is used in the treatment of the same patient 
population and potential cases representing patients that may be 
eligible for treatment using the technology would be assigned to the 
same MS-DRGs (MS-DRGs 216 through 221) as cases involving the use of 
other prosthetic aortic valves.
    We stated in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19881) 
that after considering the materials included with both applications, 
we remained concerned as to whether the mechanism of action described 
by the applicants represents an improvement to an existing surgical 
technique and technology or a new technology. While the INTUITY and 
Perceval valves address some of the challenges posed by implantation of 
existing valves, including improving the visibility of the orifice and 
the physiological function of the valves, we stated that we did not 
believe that their mechanisms of action are fundamentally different 
from that of other aortic valves. As one of the applicants stated in 
its application, the goal of the prosthetic aortic valve is to mimic 
the native valve that it has replaced via the incorporation of three 
leaflets that open and close in response to pressure gradients 
developed during the cardiac cycle. We stated that we believe that the 
INTUITY and Perceval valves are the same or similar to other prosthetic 
aortic valves used to treat the same or similar diagnoses.
    In the proposed rule, we invited public comments on whether the 
mechanism of action of the sutureless, rapid deployment of the INTUITY 
and Perceval valves differs from the mechanism of action of standard 
AVR valves and whether the technologies meet the newness criterion.
    Comment: The applicant for the INTUITY valve, as well as several 
physicians that have performed surgeries implanting the INTUITY, stated 
that the mechanism of action differs from that of standard aortic 
valves because of the expeditious implantation, rapid deployment, and 
improved hemodynamics. The applicant also emphasized innovative aspects 
about the INTUITY that were described in its application, such as the 
flexible delivery system, the ability to reshape the native valve's 
orifice, and the balloon expandable stented frame and subannular skirt. 
The applicant emphasized that minimally invasive aortic valve 
replacement has not been widely adopted because of greater technical 
challenge and longer cross-clamp times, but that the INTUITY 
facilitates minimally invasive surgery by addressing both of these 
challenges.
    One commenter, who also manufactures heart valves, indicated that 
it shared CMS' concern about whether the mechanism of action 
constitutes a new technology. This commenter indicated that prosthetic 
aortic valves fall into two categories: Traditional, open surgical and 
minimally invasive, and that differences in design of the valves are 
intended to address challenges in surgical valve replacement, including 
surgical technique, reduction in complications, improvement in 
hemodynamics, or resistance to calcification. The commenter stated that 
all prosthetic aortic valves are substantially similar to each other. 
The commenter described the steps involved in placing surgical valves, 
and indicated that the applicants' devices introduce a new technique 
for securing a surgically implanted bioprosthetic heart valve to the 
annulus and surrounding structures, but that the mechanism of action is 
unchanged. The commenter also noted that rapid deployment surgical 
aortic valves were introduced into clinical practice in 1963.
    Response: We thank the commenters for the details and input on 
whether INTUITY and Perceval meet the newness criterion. While we 
appreciate the additional information provided by the commenter that 
did not believe these valves represented a new technology, we believe 
that based on comments from the manufacturer and physicians who have 
used the INTUITY device, the mechanism of action for the INTUITY and 
Perceval is different from other aortic valves. Specifically, as the 
manufacturer and other physicians emphasized in their comments, the 
technical features of the valve provide the ability to improve clinical 
function beyond the opening and closing of the valve leaflets and allow 
it to perform more efficiently than a standard valve. Thus, as these 
commenters noted, a prosthetic aortic valve inserted using surgical AVR 
with its insertion process improves the physiologic function of the 
outflow track of the new valve. After further review of the information 
provided by the applicant and consideration of the public comments we 
received, we believe that INTUITY and Perceval meet the newness 
criterion. Therefore, we consider the technology to be ``new'' as of 
February 29, 2016, when the Perceval valve became commercially 
available.
    As we stated above, each applicant submitted separate analyses 
regarding the cost criterion for each of their devices, and both 
applicants maintained that their device meets the cost criterion. We 
summarize each analysis below.

[[Page 38122]]

    With regard to the cost criterion, the INTUITY valve's applicant 
researched the FY 2015 MedPAR claims data file to identify cases 
representing patients who may be potential recipients of treatment 
using the INTUITY valve. The applicant identified claims that reported 
an ICD-9-CM diagnosis code of 424.1 (Aortic valve disorder), in 
combination with an ICD-9-CM procedure code of 35.21 (Replacement of 
aortic valve with tissue) or 35.22 (Open and other replacement of 
aortic valve). The applicant also identified cases with or without a 
coronary artery bypass graft (CABG) using the ICD-9-CM procedure codes 
in the table below.

------------------------------------------------------------------------
       ICD-9-CM code                      Code description
------------------------------------------------------------------------
36.10.....................  Aortocoronary bypass for heart
                             revascularization, not otherwise specified
36.11.....................  (Aorto)coronary bypass of one coronary
                             artery.
36.12.....................  (Aorto)coronary bypass of two coronary
                             arteries.
36.13.....................  (Aorto)coronary bypass of three coronary
                             arteries.
36.14.....................  (Aorto)coronary bypass of four or more
                             coronary arteries.
36.15.....................  Single internal mammary-coronary artery
                             bypass.
36.16.....................  Double internal mammary-coronary artery
                             bypass.
36.17.....................  Abdominal-coronary artery bypass.
------------------------------------------------------------------------

    The applicant identified a total of 25,173 cases that mapped to MS-
DRGs 216 through 221. Of these cases, the applicant identified 10,251 
CABG cases and 14,922 non-CABG cases. According to the applicant, 
patients that undergo a procedure without need of a concomitant CABG 
are more likely to receive treatment with the INTUITY valve than 
patients in need of a concomitant CABG. Therefore, the applicant 
weighted the non-CABG cases at 90 percent of total cases and the CABG 
cases at 10 percent of total cases under each of the six MS-DRGs. The 
final case count is a weighted average of 14,455 cases.
    The applicant calculated an average unstandardized charge per case 
of $192,506 for all cases. The applicant then removed 100 percent of 
the charges for pacemakers, investigational devices, and other implants 
that would not be required for patients receiving treatment using the 
INTUITY valve. The applicant standardized the charges and then applied 
an inflation factor of 1.098446, which is the 2-year inflation factor 
in the FY 2017 IPPS/LTCH PPS final rule (81 FR 57286), to update the 
charges from FY 2015 to FY 2017. The applicant calculated the average 
expected charge for the INTUITY valve based on the current list price 
of the device. Although the applicant submitted data related to the 
cost of the INTUITY valve, the applicant noted that the cost of the 
device is proprietary information. To add charges for the device, the 
applicant assumed a hospital mark-up of approximately 300 percent, 
based on the current average CCR for implantable devices (0.331) as 
reported in the FY 2017 IPPS/LTCH PPS final rule (81 FR 56876). Based 
on the FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $170,321. The applicant computed an 
inflated average case-weighted standardized charge per case of 
$194,291, which is $23,970 above the average case-weighted threshold 
amount. Because the inflated average case-weighted standardized charge 
per case exceeds the average case-weighted threshold amount, the 
applicant maintained that the technology meets the cost criterion.
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19882), we 
thanked the applicant for the analysis above. However, we indicated 
that we would like more information from the applicant regarding how it 
decided upon which cases to include in the sensitivity analysis, as 
well as further details about how and on what basis the applicant 
weighted CABG and non-CABG cases. We invited public comments on whether 
the INTUITY valve meets the cost criterion. We summarize the public 
comment we received from the applicant regarding its cost analysis 
later in this section.
    With regard to the cost criterion in reference to the Perceval 
valve, the applicant conducted the following analysis. The applicant 
examined FY 2015 MedPAR claims data that included cases reporting an 
ICD-9 procedure code of 35.21 or 35.22, in combination with diagnosis 
code: 424.1. Noting that MS-DRGs 216 through 221 contained 97 percent 
of these cases, the applicant limited its analysis to these 6 MS-DRGs. 
The applicant identified 25,193 cases across these MS-DRGs, resulting 
in an average case-weighted unstandardized charge per case of $173,477. 
The applicant then standardized charges using FY 2015 standardization 
factors and applied an inflation factor of 1.089846 from the FY 2017 
IPPS/LTCH PPS proposed rule (81 FR 25271). The applicant indicated that 
the technology meets the cost criterion by applying the inflation 
factor from the proposed rule and, therefore, would meet the cost 
criterion by applying the higher inflation factor from the final rule.
    Included in the average case-weighted standardized charge per case 
were charges for the current valve prosthesis. Therefore, the applicant 
removed all charges associated with revenue center 0278, and calculated 
the adjusted average case-weighted standardized charge per case by 
subtracting these charges from the standardized charge per case. The 
applicant then added the charge for the new technology by taking the 
anticipated hospital cost of the new technology and dividing it by the 
national average implantable devices CCR of 0.331. The applicant then 
added the charge for the new technology to the inflated average case-
weighted standardized charges per case to arrive at the final inflated 
average case-weighted standardized charge per case, which was then 
case-weighted based on the distribution of cases within the six MS-
DRGs. This resulted in an inflated average case-weighted standardized 
charge per case of $206,109. Using the FY 2017 IPPS Table 10 
thresholds, the average case-weighted threshold amount was $173,477. 
Because the inflated average case-weighted standardized charge per case 
exceeds the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion. In the FY 2018 
IPPS/LTCH PPS proposed rule (82 FR 19882), we invited public comments 
on whether the Perceval technology meets the cost criterion. We did not 
receive any public comments concerning the costs for the Perceval 
technology.
    Comment: The applicant for the INTUITY valve stated that it based 
its initial sensitivity analysis on 14,455 cases that reflected the 
weighted mix of CABG and non-CABG cases, as the findings in European 
trials indicated that INTUITY was predominantly performed on patients 
who did not have a concomitant CABG during their inpatient stay. The 
applicant stated that

[[Page 38123]]

because the INTUITY is intended for use in all surgical aortic valve 
replacement procedures, regardless of whether the patient also receives 
CABG, it reran the cost threshold analysis including all 25,173 target 
cases in the FY 2015 MedPAR with an ICD-9-CM diagnosis code of 424.1 
(Aortic valve disorder), in combination with an ICD-9-CM procedure code 
of 35.21 (Replacement of aortic valve with tissue) or 35.22 (Open and 
other replacement of aortic valve) that mapped to MS-DRGs 216 through 
221. The applicant presented a summary table, which indicated that the 
case weighted threshold was $173,463, the final inflated case weighted 
standardized charge per case was $206,329, and the difference is 
$32,866.
    Response: We appreciate the applicant's submission of this 
additional information. Based on review of the sensitivity analysis 
included in the original application and subsequent analysis included 
in the INTUITY applicant's public comment, as well as the cost analyses 
set forth in both applicants' original applications as set forth above, 
we have determined that both the INTUITY and the Perceval valve meet 
the cost criterion.
    With regard to substantial clinical improvement for the INTUITY 
valve, the applicant asserted that several aspects of the valve system 
represent a substantial clinical improvement over existing 
technologies. The applicant believed that the flexible deployment arm 
allows improved surgical access and visualization, making the surgery 
less challenging for the surgeon, improving the likelihood that the 
surgeon can use a minimally invasive approach. According to the 
applicant, the assembly of the device only allows the correct valve 
size to be fitted, which ensures that the valve does not slip or 
migrate, which prevents paravalvular leaks and patient prosthetic 
mismatch. The applicant indicated that the device improves clinical 
outcomes for patients undergoing minimally invasive AVR and full-
sternotomy AVR. The applicant stated that the rapid deployment 
technology enables reduced operative time, specifically cross-clamp 
time, thereby reducing the period of myocardial ischemia. In addition, 
the applicant indicated that the device offers a reduction in operative 
time for full-sternotomy AVR. The applicant noted that clinical results 
document significant patient outcome and utilization improvements, 
including improved patient satisfaction, faster return to normal 
activity, decreased post-operative pain, reduced mortality and 
decreased complications, including need for reoperation due to 
bleeding, reduced recovery time, reduced length of stay (both ICU and 
overall), more access to minimally invasive surgery, and improved 
hemodynamics.
    The INTUITY valve has been tested clinically in several trials. In 
the TRITON trial (Kocher et al., 2013 \4\), 287 patients diagnosed with 
aortic stenosis underwent surgery in 1 of 6 European centers. The first 
149 patients received the first generation Model 8300A valve, and the 
next 138 patients received the second generation Model 8300AB. The 
average age of the patients was 75.7 years. Early, 30-day mortality was 
1.7 percent (5/287), the post-op valve gradient was low, and 75 percent 
of the patients improved functionally. A total of 4 valves were 
explanted in the final 30 days due to bleeding, and 3 were explanted 
later for paravalvular leak, endocarditis, and aortic root aneurysms. 
Follow-up extended to 3 years (mean 1.8 years).
---------------------------------------------------------------------------

    \4\ Kocher AA, Laufer G, Haverich A, et al. One-year outcomes of 
the surgical treatment of aortic stenosis with a next generation 
surgical aortic valve (TRITON) trial: A prospective multicenter 
study of rapid-deployment aortic valve replacement with the EDWARDS 
INTUITY valve system. J Thorac Cardiovasc Surg 2013;145:110-116.
---------------------------------------------------------------------------

    Implantation of the INTUITY valve using minimally invasive surgery 
was compared with conventional aortic valve replacement via full 
sternotomy in the CADENCE-MIS randomized trial (Borger et al., 2015 
\5\) of 100 patients treated in 1 of 5 centers in Germany. The authors 
found no significant difference in 30-day mortality, the need for 
pacemaker implantation, significant paravalvular regurgitation, and 
quality of life scores at 3 months. Aortic cross-clamp time was 
significantly reduced from 54.0 to 41.3 minutes (p < 0.0001), and 
cardiopulmonary bypass time was reduced from 74.4 to 68.8 minutes (p = 
0.21). Early clinical outcomes were similar: No significant differences 
in mortality, reoperation, or other clinical outcomes. The aortic valve 
gradient was significantly lower in the MIS group: 8.5 versus 10.3 
mmHg.
---------------------------------------------------------------------------

    \5\ Borger MA, Moustafine V, Conradi L, et al. A randomized 
multicenter trial of minimally invasive rapid deployment versus 
conventional full sternotomy aortic valve replacement. Ann Thorac 
Surg 2015; 99:17-25.
---------------------------------------------------------------------------

    The TRANSFORM trial (Barnhart et al. 2017 \6\) was a single-arm, 
non-randomized, multicenter trial, in which 839 patients underwent 
rapid deployment AVR surgery. The average age of the patients was 73.5 
years. The mean cross-clamp time and cardiopulmonary bypass times for 
full sternotomy were 49.3  26.9 min and 69.2  
34.7 min, respectively, and for MIS, 63.1  25.4 min and 
84.6  33.5 min, respectively. The authors compared these 
times to STS database comparators: For full sternotomy, 76.3 minutes 
and 104.2 minutes, respectively, and for MIS, 82.9 minutes and 111.4 
minutes, respectively. All cause early mortality was 0.8 percent, mean 
EOA at 1 year was 1.7 cm\2\; mean gradient, 10.3 mmHg; and moderate and 
severe PVL, 1.2 percent and 0.4 percent, respectively. The authors 
indicated that the INTUITY valve ``. . . may lead to a relative 
reduction in aortic cross-clamp time and cardiopulmonary bypass time'' 
and ``may confer benefits to patients, such as decreased mortality and 
morbidity.'' The authors noted the possibility of potential bias 
resulting from the level of experience of the study surgeons relative 
to typical cardiac surgeons. In addition, long-term follow-up is not 
available, and study comparators from the Society of Thoracic Surgeons 
(STS) database were not matched.
---------------------------------------------------------------------------

    \6\ Barnhart, G.A. et al. (2017). TRANSFORM (Multicenter 
Experience with Rapid Deployment Edwards INTUITY Valve System for 
Aortic Valve Replacement) US clinical trial: Performance of a rapid 
deployment aortic valve. The Journal of Thoracic and Cardiovascular 
Surgery, 153, 241-251.
---------------------------------------------------------------------------

    In the FY 2017 IPPS/LTCH PPS proposed rule (81 FR 25057), after 
reviewing the studies provided by the applicant with its application 
for FY 2017, we expressed some specific concerns. We indicated that we 
were concerned that the INTUITY valve does not have sufficient 
advantages over alternative surgically implanted valves to constitute a 
substantial clinical improvement. We noted that, while some of the 
studies included with the application demonstrate reduced aortic cross-
clamp time, conventional aortic valve replacement was used in the 
comparison group. Therefore, it is unclear whether the reduced aortic 
cross-clamp time is associated with the use of the INTUITY valve or as 
a result of the MIS surgery in general.
    In response to these concerns, the INTUITY valve's applicant stated 
that the INTUITY valve is associated with significant clinical benefits 
outside of the benefits achieved by use of an MIS approach. The 
applicant referenced the sub-study of the TRANSFORM trial, which 
compared the MISAVR with the INTUITY valve to MISAVR with a 
conventional valve, stating that the results indicated reduced cross-
clamp time and other benefits that are not simply a function of the MIS 
approach. The applicant also referenced trials that indicated that the 
INTUITY valve had excellent hemodynamic performance

[[Page 38124]]

(Haverich et al.,\7\ Borger et al.,\8\ Barnhart et al.,\9\) one of 
which found a significant improvement in functional status (Haverich et 
al.).
---------------------------------------------------------------------------

    \7\ Haverich, A, et al. (2014), Three-year hemodynamic 
performance, left ventricular mass regression, and prosthetic-
patient mismatch after rapid deployment aortic valve replacement in 
287 patients. J Thorac Cardiovasc Surg, 148(6), 2854-60.
    \8\ Borger MA, Moustafine V, Concadi L, et al. A randomized 
multicenter trial of minimally invasive rapid deployment versus 
conventional full sternotomy aortic valve replacement. Ann Thorac 
Surg 2015; 99:17-25.
    \9\ Barnhart, G.A. et al. (2017). TRANSFORM (Multicenter 
Experience with Rapid Deployment Edwards INTUITY Valve System for 
Aortic Valve Replacement) US clinical trial: Performance of a rapid 
deployment aortic valve. The Journal of Thoracic and Cardiovascular 
Surgery, 153, 241-251.
---------------------------------------------------------------------------

    After considering the studies provided by the INTUITY valve 
applicant, in the proposed rule, we stated that we were concerned about 
the possibility of potential bias resulting from the level of 
experience of the study surgeons relative to typical cardiac surgeons, 
as well as the lack of long-term follow-up in these studies.
    Comment: The applicant stated that there are three key points to 
support the improved clinical performance of the INTUITY. First, there 
is a sufficient body of evidence across multiple clinical studies 
demonstrating improved clinical and hemodynamic performance versus 
traditionally implanted surgical valves. Second, these improvements are 
not simply a result of a minimally invasive surgical approach. Third, 
collectively, these points validate the premise that the technical 
features of the INTUITY are the primary contributor of the improved 
clinical outcomes, and that non-INTUITY procedures done with a 
minimally invasive surgical approach generally have longer cross-clamp 
and operative times. Physicians that have implanted the INTUITY valve 
also indicated that the INTUITY valve reduces cardiopulmonary bypass 
time and cross-clamp time, both of which have been shown to reduce 
complications.
    The applicant also stated that its studies included surgeons with 
varied degrees of experience, and that over 62 physicians participated 
in the US INTUITY trials, which reduces the impact of surgeon bias and 
allows for greater generalizability of results. The applicant stated 
that while no study is free of bias, the INTUITY has been shown to have 
consistent results in both clinical trials and the real-world setting. 
The applicant further supplemented its application with recently 
published 5-year follow-up data (Laufer et al., 2017),\10\ which found 
sustained benefits, including effective orifice area (EOA) 
improvements, low pressure gradients, and reductions in left 
ventricular mass, as well as excellent survival rates.
---------------------------------------------------------------------------

    \10\ Laufer, G et al. (2017). Long-term outcomes of a rapid 
deployment aortic valve: Data up to 5 years. European Journal of 
Cardiothorac Surgery, 2017 Apr 26.
---------------------------------------------------------------------------

    A manufacturer that also manufactures heart valves stated that the 
studies cited by the INTUITY applicant have potential bias resulting 
from the level of experience of the study surgeons relative to typical 
cardiac surgeons, as well as a lack of long-term follow-up. This 
commenter noted that, in the CADENCE-MIS trial, key outcome measures 
did not differ statistically significantly at 3 months between the 
randomized arms of the study, but that the rate of pacemaker implants 
was higher in the INTUITY group. This commenter noted that while 
transaortic valve gradients are reported as significantly lower, the 
study population was small, and that the comparator devices are not all 
representative of best in class gradients. This commenter also pointed 
to the high rate of pacemaker implants in the TRANSFORM trial, and 
mentioned a recent manuscript that reported that early pacemaker 
implantation after aortic valve replacement was associated with an 
increased risk of death.\11\
---------------------------------------------------------------------------

    \11\ Greason et al. (2017). Long-Term Mortality Effect of Early 
Pacemaker Implantation after Surgical Aortic Valve Replacement. The 
Society of Thoracic Surgeons.
---------------------------------------------------------------------------

    Response: While we appreciate the concerns raised by one commenter 
regarding the studies that examined the INTUITY valve, we believe the 
manufacturer addresses our concerns.
    With regard to substantial clinical improvement for the Perceval 
valve, the applicant submitted several studies examining the Perceval 
valve. The following discussion summarizes some of these studies.
    Pollari and colleagues \12\ (2014) utilized a propensity score 
analysis to examine 82 matched pairs as part of a larger trial that 
included 566 patients treated with bioprosthetic aortic valve 
replacement, 166 of which received treatment using the Perceval 
sutureless valve and 400 of which received treatment using a stented 
valve. Aortic cross-clamp, cardiopulmonary bypass, and operation times 
were significantly shorter in the group that received treatment using 
the Perceval sutureless valve. The Perceval sutureless group also had 
shorter ICU stays, hospital stays, and intubation times, and lower 
incidence of postoperative atrial fibrillation and respiratory 
insufficiency. The authors noted that, despite the promising 
preliminary results, longer follow-up is warranted before drawing 
definite conclusions.
---------------------------------------------------------------------------

    \12\ Pollari, F. (2014), Better short-term outcome by using 
sutureless valves: A propensity-matched score analysis, Ann Thorac 
Surg, 98; 611-6.
---------------------------------------------------------------------------

    In a nonrandomized trial of 100 patients in a German hospital, 
Santarpino and colleagues \13\ (2013) found that procedures completed 
using the Perceval valve were associated with significantly shorter 
cross-clamp and cardiopulmonary bypass times (40  13.8 and 
69  19.1 versus 66  20.4 and 105  
34.8) relative to conventional stented bioprosthetic valves, as well as 
less frequent use of blood transfusions, shorter ICU stays and shorter 
use of intubation. In contrast, Gilmanov and colleagues \14\ (2013) 
found that a MIS approach resulted in improved outcomes, albeit longer 
aortic cross-clamp times. A meta-analysis by Hurley and colleagues \15\ 
(2015) found reduced cross-clamp and cardiopulmonary bypass times, but 
found a significantly higher permanent pacemaker rate with the use of 
Perceval sutureless valves.
---------------------------------------------------------------------------

    \13\ Santarpino, G. et al. (2013), The Perceval S aortic valve 
has the potential of shortening surgical time: Does it also result 
in improved outcome?, Ann Thorac Surg, 96, 77-81.
    \14\ Gilmanov, D. (2013), Minimally invasive and conventional 
aortic valve replacement: a propensity score analysis, Ann Thorac 
Surg, 96, 837-843.
    \15\ Hurley et al., ``A Meta-Analysis Examining Differences in 
Short-Term Outcomes Between Sutureless and Conventional Aortic Valve 
Prostheses,'' Innovations 2015; 10:375-382.
---------------------------------------------------------------------------

    A study conducted by Dalen and colleagues \16\ (2015) used 
propensity score matching to examine early post-operative outcomes and 
2-year survival between 171 pairs of patients who underwent 
ministernotomy using the Perceval device or a full sternotomy with 
stented prosthesis. There were no differences in 30-day mortality or 2-
year survival between the groups. The aortic cross-clamp time and 
cardiopulmonary bypass time were shorter, and there were fewer blood 
transfusions in the group that received treatment using the Perceval 
device. However, this group was also at higher risk for post-operative 
permanent pacemaker implantation.
---------------------------------------------------------------------------

    \16\ Dale[aacute]n, M. (2015), Aortic valve replacement through 
full sternotomy with a stented bioprosthesis versus minimally 
invasive sternotomy with a sutureless bioprosthesis, Eur J 
Cardiothorac Surg 2015; doi:10.1093/ejcts/ezv014.
---------------------------------------------------------------------------

    We stated in the proposed rule that, after reviewing the 
publications submitted by the applicant, we are concerned that the lack 
of randomization and blinded investigators may have influenced the 
outcomes in many of the studies provided. For example, in the 
discussion following

[[Page 38125]]

Santarpino et al.'s 2013 study, one of the participants suggested that 
medical decision-making regarding ventilation times, ICU times, and 
blood transfusions may be affected by the knowledge of investigators as 
to which valve the patient received treatment using. Also, as indicated 
above with respect to the INTUITY valve, the experience of the surgeons 
in these studies may be confounding factors that may have influenced 
the length of surgical procedures and/or surgical outcomes.
    Comment: One manufacturer that produces heart valves stated that 
the evidence for the Perceval device suffers from lack of randomization 
and blinding of investigators. This commenter cited a brief by the 
Health Technology Assessment Information Services of ECRI summarizing 
the most recent evidence about the LivaNova Perceval valve. The brief 
cited a range of values for clinical outcomes, suggesting the 
importance in variation in technique. This commenter also compiled a 
table of gradients for aortic heart valves, including those of the 
applicants, and stated that the gradients are comparable to 
conventional surgical devices but are not best-in-class.
    Response: While we acknowledge the concerns raised by one commenter 
regarding the Perceval valve, we recognize that studies in general may 
have some limitations. We also note that the studies submitted by the 
manufacturer indicate that the Perceval valve is associated with fewer 
blood transfusions and significantly shorter aortic cross-clamp, 
cardiopulmonary bypass, and operation times. The Perceval sutureless 
group also had shorter ICU stays, hospital stays, and intubation times, 
and lower incidence of postoperative atrial fibrillation and 
respiratory insufficiency.
    In the proposed rule, we invited public comments on whether rapid 
deployment valves, specifically the INTUITY and Perceval valves, meet 
the substantial clinical improvement criterion. We noted that we did 
not receive any written public comments regarding the INTUITY and 
Perceval valves in response to the New Technology Town Hall meeting 
notice.
    We agree with the manufacturers that the INTUITY and Perceval 
valves represent a substantial clinical improvement for the following 
reasons: The rapid deployment technology enables reduced operative time 
for minimally invasive AVR and full-sternotomy AVR. Additionally, the 
device improves cross-clamp time, thereby reducing the period of 
myocardial ischemia. The improved patient outcomes were also reflected 
in improved patient satisfaction, faster return to normal activity, 
decreased postoperative pain, reduced mortality and decreased 
complications, including need for reoperation due to bleeding, reduced 
recovery time, reduced length of stay (both ICU and overall), and 
improved hemodynamics. In addition, the newly published 5-year data 
further support the substantial clinical improvement of this 
technology.
    For the reasons described above and after consideration of the 
public comments we received, we have determined that the INTUITY and 
Perceval valve meet all of the criteria for approval of new technology 
add-on payments for FY 2018. Each of the applicants submitted cost 
information for its valve. The manufacturer of the INTUITY valve stated 
that the cost of the valve is $12,500. The applicant projected that 
1,750 cases will involve the use of INTUITY in FY 2018. The 
manufacturer of the Perceval valve stated that the cost of the valve is 
$11,500. The applicant projected that 679 cases will involve the use of 
the Perceval valve in FY 2018.
    New technology add-on payments for cases involving these 
technologies will be based on the weighted average cost of the two 
valves described by the ICD-10-PCS procedure code X2RF032 (Replacement 
of Aortic Valve using Zooplastic Tissue, Rapid Deployment Technique, 
Open Approach, New Technology Group 2). Because ICD-10 codes are not 
manufacturer specific, we cannot set one new technology add-on payment 
amount for INTUITY and a different new technology add-on payment amount 
for the Perceval valve; both technologies will be captured by using the 
same ICD-10-PCS procedure code. As such, we believe that the use of a 
weighted average of the cost of the standard valves based on the 
projected number of cases involving each technology to determine the 
maximum new technology add-on payment would be most appropriate. To 
compute the weighted cost average, we summed the total number of 
projected cases for each of the applicants, which equaled 2,429 cases 
(1,750 plus 679). We then divided the number of projected cases for 
each of the applicants by the total number of cases, which resulted in 
the following case-weighted percentages: 72 percent for the INTUITY and 
28 percent for the Perceval valve. We then multiplied the cost per case 
for the manufacturer specific valve by the case-weighted percentage 
(0.72 * $12,500 = $9,005.76 for INTUITY and 0.28 * $11,500 = $3,214.70 
for the Perceval valve). This resulted in a case-weighted average cost 
of $12,220.46 for the valves. Under Sec.  412.88(a)(2), we limit new 
technology add-on payments to the lesser of 50 percent of the average 
cost of the device or 50 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, the maximum new technology add-on 
payment for a case involving the INTUITY or Perceval valves is 
$6,110.23 for FY 2018.
c. Ustekinumab (Stelara[supreg])
    Janssen Biotech submitted an application for new technology add-on 
payments for the Stelara[supreg] induction therapy for FY 2018. 
Stelara[supreg] received FDA approval as an intravenous (IV) infusion 
treatment of Crohn's disease (CD) on September 23, 2016, which added a 
new indication for the use of Stelara[supreg] and route of 
administration for this monoclonal antibody. IV infusion of 
Stelara[supreg] is indicated for the treatment of adult patients (18 
years and older) diagnosed with moderately to severely active CD who 
have: (1) Failed or were intolerant to treatment using immunomodulators 
or corticosteroids, but never failed a tumor necrosis factor (TNF) 
blocker; or (2) failed or were intolerant to treatment using one or 
more TNF blockers. Stelara[supreg] for IV infusion has only one 
purpose, induction therapy. Stelara[supreg] must be administered 
intravenously by a health care professional in either an inpatient 
hospital setting or an outpatient hospital setting.
    Stelara[supreg] for IV infusion is packaged in single 130mg vials. 
Induction therapy consists of a single IV infusion dose using the 
following weight-based dosing regimen: patients weighing less than (<) 
55kg are administered 260mg of Stelara[supreg] (2 vials); patients 
weighing more than (>) 55kg, but less than (<) 85kg are administered 
390mg of Stelara[supreg] (3 vials); and patients weighing more than (>) 
85kg are administered 520mg of Stelara[supreg] (4 vials). An average 
dose of Stelara[supreg] administered through IV infusion is 390mg (3 
vials). Maintenance doses of Stelara[supreg] are administered at 90mg, 
subcutaneously, at 8-week intervals and may occur in the outpatient 
hospital setting.
    CD is an inflammatory bowel disease of unknown etiology, 
characterized by transmural inflammation of the gastrointestinal (GI) 
tract. Symptoms of CD may include fatigue, prolonged diarrhea with or 
without bleeding, abdominal pain, weight loss and fever. CD can affect 
any part of the GI tract including the mouth, esophagus, stomach, small 
intestine, and large intestine.
    Conventional pharmacologic treatments of CD include antibiotics, 
mesalamines, corticosteroids,

[[Page 38126]]

immunomodulators, tumor necrosis alpha (TNF[alpha]) inhibitors, and 
anti-integrin agents. Surgery may be necessary for some patients 
diagnosed with CD in which conventional therapies have failed. The 
applicant asserted that use of Stelara[supreg] offers an alternative to 
conventional pharmacologic treatments, and has been shown to be 
successful in the treatment of patients who have failed treatment using 
the conventional agents currently being used for a diagnosis of CD, 
including TNF[alpha] inhibitors.
    Although the precise cause of CD is unknown, the environment, 
genetics, and the patient's immune system are thought to play a role in 
this form of inflammatory bowel disease (IBD). Conventional 
pharmacologic therapy is directed against many different inflammatory 
mediators that produce inflammation and ultimately lead to 
gastrointestinal damage. The applicant asserted that it is of paramount 
importance to have a variety of pharmacologic agents that can address 
the proper inflammatory mediator for a particular patient. The 
applicant also asserted that, while the currently available anti-
inflammatory agents used in the treatment of a diagnosis of CD are 
excellent medications, these agents do not successfully treat all 
patients diagnosed with CD, nor do they reliably sustain disease 
remission once a response has been achieved. The applicant believed 
that the use of Stelara[supreg] offers an alternative to currently 
available treatment options.
    With regard to the newness criterion, Stelara[supreg] is not a 
newly formulated drug. Stelara[supreg], administered subcutaneously, 
received FDA approval in 2009 (September 25, 2009) for the treatment of 
moderate to severe plaque psoriasis in adults. Its IV use for the 
treatment of patients diagnosed with CD was approved by the FDA in 2016 
(September 23, 2016). With regard to the new use of an existing 
technology, in the September 1, 2001 final rule (66 FR 46915), we 
stated that if the new use of an existing technology was for treating 
patients not expected to be assigned to the same MS-DRG as the patients 
receiving the existing technology, it may be considered for approval, 
but it must also meet the cost and substantial clinical improvement 
criteria in order to qualify for the new technology add-on payment. We 
do not believe that potential cases representing patients that may be 
eligible for treatment with the new use of the Stelara[supreg] for IV 
treatment of a diagnosis of CD would be assigned to the same MS-DRGs as 
cases treated using the prior indications.
    As discussed above, if a technology meets all three of the 
substantial similarity criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
    With regard to the first criterion, whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome, we 
stated in the proposed rule that we were concerned that 
Stelara[supreg]'s mechanism of action does not appear to differ from 
the mechanism of action of other monoclonal antibodies, which also 
target unique gastrointestinal-selective cytokines. The applicant 
believed that the Stelara[supreg] uses a different mechanism of action 
than other medications currently available for the treatment of 
patients diagnosed with CD. However, we stated that we believe that the 
mechanism of action for the new use of the Stelara[supreg] may be 
similar to the mechanism of action of other cytokine-selective 
monoclonal antibodies that disrupt cytokine mediated signals crucial to 
the inflammatory process in patients diagnosed with CD.
    The applicant stated that the Stelara[supreg] is a human IgG1 
monoclonal antibody that binds with specificity to the p40 protein 
subunit, which is common to both the interleukin-12 (IL-12) and 
interleukin (IL-23) cytokines. IL-12 and IL-23 are naturally occurring 
cytokines that are involved in inflammatory and immune responses, such 
as natural killer cell activation and CD4+ T-cell differentiation and 
activation. In in vitro models, the Stelara[supreg] was shown to 
disrupt IL-12 and IL-23 mediated signaling and cytokine cascades by 
blocking the interaction of these cytokines with a shared cell-surface 
receptor chain, IL-12R[beta]1. The cytokines IL-12 and IL-23 have been 
implicated as important contributors to chronic inflammation. According 
to the applicant, IV induction therapy quickly achieves optimal blood 
levels of Stelara[supreg] so that blockade of IL-12 and IL-23 is most 
effective. This level of blockade is not achieved with subcutaneous 
administration.
    The applicant further stated that other available CD anti-
inflammatory or immune modulator therapies do not target the IL-12/IL-
23p40 substrate. Rather, these therapies may target other integrin 
pairs such as the alpha4- beta7 integrins. Therefore, the applicant 
believed that the Stelara[supreg] drug is not substantially similar to 
any other approved drug for the treatment of moderately to severely 
active CD. As previously noted, the applicant asserted that, while the 
currently available agents are excellent medications, these agents do 
not successfully treat all patients diagnosed with CD, nor do these 
agents reliably sustain remission once a clinical response has been 
achieved. According to the applicant, the new use of the 
Stelara[supreg] offers an alternative to currently available treatment 
options, and has been shown to be successful in the treatment of 
patients who have failed treatment with the conventional agents 
currently being used for a diagnosis of CD, including TNF blockers. In 
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19885), we stated that 
we are concerned that the Stelara[supreg]'s mechanism of action is 
similar to that of other immune system suppressors used in the 
treatment of patients diagnosed with moderately to severely active CD 
because other cytokine-selective monoclonal antibodies also disrupt 
cytokine mediated signals crucial to the inflammatory process in 
patients diagnosed with CD.
    With respect to the second criterion, whether a product is assigned 
to the same or a different MS-DRG, the applicant maintained that MS-
DRGs 386, 387, and 385 (Inflammatory Bowel Disease with CC, without CC/
MCC, and with MCC, respectively) and MS-DRGs 330, 329 and 331 (Major 
Small and Large Bowel Procedures with CC, without CC/MCC, and with MCC, 
respectively) are used to identify cases representing patients who may 
potentially be eligible for treatment using the Stelara[supreg]. The 
applicant researched claims data from the FY 2015 MedPAR file and found 
10,344 cases. About 85 percent of potentially eligible cases mapped to 
MS-DRGs for inflammatory bowel disease and most of the remainder of 
cases mapped to MS-DRGs for bowel surgery. In the proposed rule, we 
stated that we believe that potential cases involving Stelara[supreg] 
induction therapy may be assigned to the same MS-DRGs as cases 
representing patients who have been treated using currently available 
treatment options.
    With respect to the third criterion, whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population, according to the 
applicant, currently available pharmacologic treatments include 
antibiotics, mesalamines, corticosteroids, immunomodulators, tumor 
necrosis alfa (TNF[alpha]) inhibitors and anti-integrins. The applicant 
stated that the new use of the Stelara[supreg] for IV infusion is 
indicated for the treatment of adults (18 years and older) diagnosed 
with moderately to severely active CD

[[Page 38127]]

who have: (1) Failed or were intolerant to treatment with 
immunomodulators or corticosteroids, but never failed treatment using a 
TNF blocker; or (2) failed or were intolerant to treatment with one or 
more TNF blockers. The applicant asserted that Stelara[supreg] for 
induction therapy is not substantially similar to other treatment 
options because it does not involve the treatment of the same or 
similar type of patient population. Patients who are eligible for 
treatment using the Stelara[supreg] induction therapy have failed other 
CD treatment modalities. The applicant believed that the subset of 
primary and secondary nonresponder patients to TNF inhibitor treatments 
is a patient population unresponsive to, or ineligible for, currently 
available treatments for diagnoses of moderate to severe CD. Based on 
the indications for the use of Stelara[supreg], there is a class of 
patients who failed, or were intolerant to, treatment using 
immunomodulators or corticosteroids, but never failed treatment using a 
TNF blocker. The applicant indicated that, for those patients who never 
failed treatment with a TNF blocker, this class of patients can be 
recognized as two separate patient populations: One population of 
patients who have never received treatment using a TNF blocker, or the 
other population of patients who have received and responded to 
treatment using a TNF blocker. In the FY 2018 IPPS/LTCH PPS proposed 
rule (82 FR 19885), we stated that we believe that, if the new use of 
the Stelara[supreg] has the same mechanism of action as other immune 
system suppressors such as TNF blockers, the patient population that 
did not receive treatment using a TNF blocker may not be a new patient 
population because those patients may be able to receive treatment 
using, and would successfully respond to treatment using, a TNF 
blocker. Moreover, if the mechanism of action is the same as other 
immune system suppressors, we stated that we believe that the new use 
of the Stelara[supreg] may be targeted at a new patient population in 
some circumstances and instances, but we are concerned that it may not 
be targeted at a new patient population in all circumstances and 
instances.
    In the proposed rule, we invited public comments on whether the 
Stelara[supreg] meets the newness criterion.
    Comment: Several commenters stated that Stelara[supreg] has a 
different mechanism of action than other immune system suppressors. The 
applicant also submitted comments acknowledging that CMS accurately 
noted that other monoclonal antibodies targeting unique 
gastrointestinal-selective cytokines are currently marketed for the 
treatment of CD. The applicant noted that a critical differentiator is 
that Stelara[supreg] targets the IL-12 and IL-23 regulatory cytokines 
while other monoclonal antibodies used to treat Crohn's disease are 
either TNF inhibitors or anti-integrin monoclonal antibodies. The 
applicant stated that, as a result, Stelara[supreg] has a different 
mechanism of action for reducing the inflammatory response in CD than 
other monoclonal antibodies used to treat the disease. Furthermore, the 
applicant stated that while many patients respond to TNF inhibition, 20 
to 25 percent of them will not respond, regardless of the TNF inhibitor 
employed or the dose provided. By targeting the IL-12 and IL-23 
regulatory cytokines that may be responsible for the inflammation 
producing the patient's symptoms, the applicant stated that 
Stelara[supreg] has a different mechanism of action designed to treat 
patients that failed other Crohn's disease treatments. The applicant 
believed that this distinction makes Stelara[supreg] new and different 
for treating some patients with Crohn's disease. The applicant provided 
comments reflecting that clinicians have learned that different 
patients with Crohn's disease require different types of cytokine 
inhibition to target the inflammatory process in each particular 
patient. The applicant believed that this is an example of personalized 
medicine--choosing the right biologic for the right patient at the 
right time. Therefore, according to the applicant, Stelara[supreg]'s 
mechanism of action provides a treatment option for patients with CD 
where others have been unsuccessful.
    Response: We appreciate the comments we received from the applicant 
on whether or not Stelara[supreg] meets the newness criterion.
    After consideration of the public comments we received, we believe 
that Stelara[supreg] has a unique mechanism of action because it is 
unique from other immune system suppressors in that it targets the IL-
12 and IL-23 regulatory cytokines. Therefore, Stelara[supreg] meets the 
newness criterion for new technology add-on payments.
    With regard to the cost criterion, the applicant conducted the 
following analysis to demonstrate that Stelara[supreg] meets the cost 
criterion. The applicant searched claims from the FY 2015 MedPAR file 
for cases with a principal ICD-9-CM diagnosis of 555.x (Regional 
Enteritis), which are cases of a diagnosis of Crohn's Disease that may 
be eligible for treatment using Stelara[supreg].
    The applicant identified 10,344 cases that mapped to 35 MS-DRGs. 
Approximately 85 percent of cases mapped to the following Inflammatory 
Bowel MS-DRGs: MS-DRGs 385 (Inflammatory Bowel Disease with MCC), 386 
(Inflammatory Bowel Disease with CC), and 387 (Inflammatory Bowel 
Disease without CC/MCC). Similarly, 11 percent of the cases mapped to 
the following MS-DRGs for bowel surgery: MS-DRGs 329 (Major Small and 
Large Bowel Procedures with MCC), 330 (Major Small and Large Bowel 
Procedures with CC), and 331 (Major Small and Large Bowel Procedures 
without CC/MCC). The remaining cases (4 percent) represented all other 
digestive system disorders.
    Using the 10,344 identified cases, the average unstandardized case-
weighted charge per case was $39,935. The applicant then standardized 
the charges. The applicant did not remove charges for the current 
treatment because as discussed above Stelara[supreg] is indicated for 
use in patients who fail other treatments. The applicant then applied 
the 2-year inflation factor of 1.098446 from the FY 2017 IPPS/LTCH PPS 
final rule (81 FR 57286) to inflate the charges from FY 2015 to FY 
2017. The applicant then added charges for the Stelara[supreg] 
technology. Specifically, the applicant assumed that hospitals would 
mark up Stelara[supreg] IV to the same extent that they currently mark-
up Stelara[supreg] SC (J3357, ustekinumab, 1 mg). The applicant used 
the actual hospital mark-up based on charges in the CY 2017 OPPS/ASC 
proposed rule file (OPPS claims incurred and paid in CY 2015). Based on 
the FY 2017 IPPS/LTCH PPS Table 10 thresholds, the average case-
weighted threshold amount was $55,023. The inflated average case-
weighted standardized charge per case was $69,826. Because the inflated 
average case-weighted standardized charge per case exceeds the average 
case-weighted threshold amount, the applicant maintained that the 
technology meets the cost criterion. In the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19886), we invited public comments on whether 
Stelara[supreg] meets the cost criterion.
    Comment: The applicant submitted public comments reiterating its 
cost analysis results. According to the applicant, the inflated average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount. The applicant maintained that the technology 
meets the cost criterion.
    Response: After consideration of the public comments we received, 
we agree that Stelara[supreg] meets the cost criterion.
    With regard to the third criterion, whether a technology represents 
a substantial clinical improvement over existing technologies, 
according to the

[[Page 38128]]

applicant, the new use of the Stelara[supreg] has been shown to produce 
clinical response and remission in patients diagnosed with moderate to 
severe CD who have failed treatment using conventional therapies, 
including antibiotics, mesalamine, corticosteroids, immunomodulators, 
and TNF[alpha] inhibitors. Stelara[supreg] has been commercially 
available on the U.S. market for the treatment of patients diagnosed 
with psoriasis (PsO) since 2009 and the treatment of patients diagnosed 
with psoriatic arthritis (PsA) since 2013, and the applicant has 
maintained a safety registry, which enrolled over 12,000 patients since 
2007. According to the applicant, the drug has been extremely well-
tolerated, and the safety profile in patients diagnosed with CD has 
been consistent with that experienced in cases representing patients 
diagnosed with PsO and PsA.
    The applicant presented the results of three pivotal trials 
involving over 1,300 patients diagnosed with moderate to severe CD. All 
three trials utilized a multicenter, double-blind, placebo controlled 
study design. There were two single-dose IV induction trials, which 
included patients who had failed treatment using one or more TNF[alpha] 
inhibitors (UNITI-1) (N = 741), and patients who had failed treatment 
using corticosteroids and/or immunomodulators (UNITI-2) (N = 628). 
Responders to the single IV induction dose were then eligible to be 
enrolled in a maintenance trial (IM-UNITI) (N = 397), which began 8 
weeks after administration of the single IV induction dose. IM-UNITI 
patients were given subcutaneous Stelara[supreg] and were treated for 
44 weeks. Over half of the patients treated with 90 mg of 
Stelara[supreg] every 12 weeks were able to achieve remission; a highly 
significant response compared to placebo, according to the applicant. 
The results of these trials have been published by the New England 
Journal of Medicine and the applicant provided the published 
studies.\17\ The published study supported the applicant's assertion 
that Stelara[supreg] single IV dose induces response and remission in 
patients diagnosed with moderately to severely active CD that is 
refractory to either TNF antagonists or conventional therapy. Of the 
patients in the IM-UNITI trial receiving subcutaneous Stelara[supreg] 
at 8 weeks or 12 weeks, 53.1 percent and 48 percent, respectively, were 
in remission at week 44 as compared with 35.9 percent of those patients 
receiving treatment using placebo.
---------------------------------------------------------------------------

    \17\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and 
Maintenance Therapy for Crohn' Disease. The New England Journal of 
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------

    The applicant submitted published results of a multicenter, double-
blind, placebo controlled Phase III study of Stelara[supreg].\18\ In 
the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19886), we indicated 
that we were concerned that the study did not effectively establish the 
need for Stelara[supreg] induction therapy. Also, the median age of 
patients in the study was 37 years, and we stated that we were 
concerned that the study did not include a significant amount of older 
patients.
---------------------------------------------------------------------------

    \18\ Ibid.
---------------------------------------------------------------------------

    We also indicated that we were concerned that we do not have enough 
information to determine that the new use of the Stelara[supreg] is a 
substantial clinical improvement over existing technologies for the 
treatment of moderate to severe CD. We noted that the UNITI-1, UNITI-2, 
and IMUNITI trials were completed to evaluate efficacy and safety of 
Stelara[supreg], not superiority of Stelara[supreg] to current 
conventional therapy. Our concerns were based on a lack of head-to-head 
trials comparing IV induction and maintenance Stelara[supreg] therapy 
with conventional therapy in patients diagnosed with moderate to severe 
CD that are also primary and secondary nonresponders to treatment using 
TNF alpha inhibitor \19\ therapy. We recognized the subset of primary 
and secondary nonresponder patients to TNF inhibitor treatments as a 
patient population unresponsive to, or ineligible for, currently 
available treatments for diagnoses of moderate to severe CD. However, 
we stated that we believe that this primary and secondary TNF alpha 
inhibitor non-responder patient population represents patients that 
experience a gap in treatment for diagnoses of moderate to severe CD. 
Specifically, we recognized the nonresponder patient population as 
described by Simon et al.\20\ as those patients who are TNF inhibitor 
immunogenicity failures, pharmacokinetic failures, and/or 
pharmacodynamics failures. We also noted the supplement data in Feagan 
et al.'s publication \21\ summarized the primary and secondary 
nonresponders in UNITI-1. However, we stated that we were not clear how 
the inclusion of the TNF alpha inhibitor intolerant patients with 
primary and secondary TNF alpha inhibitor failure patients impacts the 
final comparison of the placebo and treatment arms. In addition, we 
noted that, in the UNITI-1, UNITI-2, and IMUNITI studies, all treatment 
arms were allowed to continue conventional treatments for diagnoses of 
CD throughout the study. We stated that we were concerned that it is 
difficult to determine whether the new use of the Stelara[supreg] 
represents a substantial clinical improvement over existing 
technologies with the concomitant use of other conventional CD 
medications throughout the duration of the UNITI-1, UNITI-2, and 
IMUNITI studies.
---------------------------------------------------------------------------

    \19\ Ibid.
    \20\ Simon E.G., et al., (2016) Ustekinumab for the treatment of 
Crohn's disease: can it find its niche? Therapeutic Advances in 
Gastroenterology. 2016 Jan; 9(1):26-36.
    \21\ Feagan, W.J., et al. (2016) Ustekinumab as Induction and 
Maintenance Therapy for Crohn' Disease. The New England Journal of 
Medicine. 2016 Nov 17; 3745(20):1946-60.
---------------------------------------------------------------------------

    Also, as mentioned earlier, based on the indications for the use of 
the Stelara[supreg], there is a class of patients who failed, or were 
intolerant to, treatment with immunomodulators or corticosteroids, but 
never failed treatment using a TNF blocker. According to the applicant, 
for those patients who never failed treatment using a TNF blocker, this 
patient population can be recognized as two separate patient 
populations: One patient population representing patients who never 
received treatment using a TNF blocker; or the other patient population 
representing patients who received and responded to treatment using a 
TNF blocker. In the patient population that did not receive treatment 
using a TNF blocker, we stated that we were unsure if the new use of 
the Stelara[supreg] represents a substantial clinical improvement 
because it is possible that some patients will have a positive response 
to treatment using a TNF blocker and will not respond successfully to 
treatment using Stelara[supreg], or some patients may have a positive 
response to both treatment using a TNF blocker and using 
Stelara[supreg], or some patients may not respond to treatment using a 
TNF blocker, but will have a positive response to treatment using 
Stelara[supreg].
    In the proposed rule, we invited public comments on whether the 
Stelara[supreg] meets the substantial clinical improvement criterion. 
We noted that we did not receive any written public comments in 
response to the New Technology Town Hall meeting notice regarding the 
application of Stelara[supreg] for new technology add-on payments.
    Comment: The applicant submitted public comments addressing CMS' 
concerns. The applicant stated that the first dose of any therapy may 
be considered induction therapy. The applicant reiterated the results 
of its early trials which demonstrated that

[[Page 38129]]

intravenous induction therapy was superior to subcutaneous 
administration and that higher intravenous doses appeared to be more 
efficacious than lower subcutaneous doses. The applicant noted that IBD 
experts are generally in agreement that higher doses of biologics are 
required at the outset to induce remission, while lower and less 
frequent doses may be adequate to maintain remission in a maintenance 
setting.
    The applicant also submitted comments addressing CMS' concerns with 
regards to the lack of head-to-head clinical trials comparing IV 
induction and maintenance Stelara[supreg] therapy with conventional 
therapy in patients diagnosed with moderate to severe CD that are also 
primary and secondary nonresponders to treatment using TNF alpha 
inhibitor therapy. The applicant stated that the UNITI trials were, in 
fact, head-to-head trials--the placebo group was receiving active 
treatment and was not truly a placebo group. Those patients continued 
the conventional therapies they were taking prior to study entry. The 
applicant noted that the UNITI induction trials covered the breadth of 
CD patients and that the UNITI-2 population had failed either 
corticosteroids and/or immunomodulators--these drugs are both 
recognized as standard conventional therapy for CD according to the 
applicant. The UNITI-1 population had failed at least one TNF 
inhibitor; in fact, approximately 50 percent had failed greater than 
one. This patient population, according to the applicant, is considered 
to be the most difficult group to treat in that they had, in most 
cases, already failed not only non-biologic therapy with 
corticosteroids and/or immunomodulators, but TNF inhibitors as well. 
The applicant summarized that the trials should be considered head-to-
head comparing Stelara[supreg] to conventional therapies.
    Response: We appreciate the comments submitted by the applicant in 
response to our concerns. After consideration of the public comments we 
received, which clarify the placebo group as having received 
conventional therapies and, therefore, the clinical trials did compare 
Stelara[supreg] to existing therapies, we believe Stelara[supreg] meets 
the substantial clinical improvement criterion because, according to 
the studies provided by the applicant, Stelara[supreg] produced a 
clinical response and remission in patients with moderate to severe 
Crohn's Disease who have failed conventional therapies, including 
antibiotics, mesalamines, corticosteroids, immunomodulators, and 
TNF[alpha] inhibitors as outlined in their label. Specifically, 
Stelara[supreg] targets cytokines IL-12 and IL-23 which are responsible 
for inflammation in CD, offering a treatment option, otherwise not 
available, for a specific patient population. Stelara[supreg] provides 
a treatment option for this difficult-to-treat patient population.
    We have determined that Stelara[supreg] meets all of the criteria 
for approval of new technology add-on payments. Therefore, we are 
approving new technology add-on payments for Stelara[supreg] for FY 
2018. We expect that Stelara[supreg] will be administered for the 
treatment of adult patients (18 years and older) diagnosed with 
moderately to severely active CD who have: (1) Failed or were 
intolerant to treatment using immunomodulators or corticosteroids, but 
never failed a tumor necrosis factor (TNF) blocker; or (2) failed or 
were intolerant to treatment using one or more TNF blockers. Cases 
involving Stelara[supreg] that are eligible for new technology add-on 
payments will be identified by ICD-10-PCS procedure code XW033F3 
(Introduction of other New Technology therapeutic substance into 
peripheral vein, percutaneous approach, New Technology Group 3). In its 
application, the applicant estimated that the average dose of 
Stelara[supreg] administered through IV infusion is 390 mg which would 
require 3 vials of Stelara IV at a hospital acquisition cost of $1,600 
per vial (for a total of $4,800). Under 42 CFR 412.88(a)(2), we limit 
new technology add-on payments to the lesser of 50 percent of the 
average cost of the technology or 50 percent of the costs in excess of 
the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment amount for a case involving the use of 
STELARATM is $2,400 for FY 2018.

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

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the FY 2018 hospital wage index based on the 
statistical areas appears under section III.A.2. 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. (CMS collects 
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, and IV. The OMB control number for approved 
collection of this information is 0938-0050.) This provision also 
requires that any updates or adjustments to the wage index be made in a 
manner that ensures that aggregate payments to hospitals are not 
affected by the change in the wage index. The adjustment for FY 2018 is 
discussed in section II.B. of the Addendum to this final rule.
    As discussed in section III.I. 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 2018 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 2018 wage index appears under sections III.E.3. and F. of the 
preamble of this final rule.
2. Core-Based Statistical Areas (CBSAs) for the FY 2018 Hospital Wage 
Index
    The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on OMB-established Core-Based 
Statistical Areas (CBSAs). The current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
OMB Bulletin No.

[[Page 38130]]

13-01 established revised delineations for Metropolitan Statistical 
Areas, Micropolitan Statistical Areas, and Combined Statistical Areas 
in the United States and Puerto Rico based on the 2010 Census, and 
provided guidance on the use of the delineations of these statistical 
areas using standards published on June 28, 2010 in the Federal 
Register (75 FR 37246 through 37252). We refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for a full 
discussion of our implementation of the OMB labor market area 
delineations beginning with the FY 2015 wage index.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. However, OMB 
occasionally issues minor updates and revisions to statistical areas in 
the years between the decennial censuses through OMB Bulletins. On July 
15, 2015, OMB issued OMB Bulletin No. 15-01, which provides updates to 
and supersedes OMB Bulletin No. 13-01 that was issued on February 28, 
2013. The attachment to OMB Bulletin No. 15-01 provides detailed 
information on the update to statistical areas since February 28, 2013. 
The updates provided in OMB Bulletin No. 15-01 are based on the 
application of the 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas to Census Bureau population estimates 
for July 1, 2012 and July 1, 2013. In the FY 2017 IPPS/LTCH PPS final 
rule (81 FR 56913), we adopted the updates set forth in OMB Bulletin 
No. 15-01 effective October 1, 2016, beginning with the FY 2017 wage 
index. For a complete discussion of the adoption of the updates set 
forth in OMB Bulletin No. 15-01, we refer readers to the FY 2017 IPPS/
LTCH PPS final rule.
    For FY 2018, we are continuing to use the OMB delineations that we 
adopted beginning with FY 2015 to calculate the area wage indexes, with 
updates as reflected in OMB Bulletin No. 15-01 specified in the FY 2017 
IPPS/LTCH PPS final rule.
3. Codes for Constituent Counties in CBSAs
    CBSAs are made up of one or more constituent counties. Each CBSA 
and constituent county has its own unique identifying codes. There are 
two different lists of codes associated with counties: Social Security 
Administration (SSA) codes and Federal Information Processing Standard 
(FIPS) codes. Historically, CMS has listed and used SSA and FIPS county 
codes to identify and crosswalk counties to CBSA codes for purposes of 
the hospital wage index. We have learned that SSA county codes are no 
longer being maintained and updated. However, the FIPS codes continue 
to be maintained by the U.S. Census Bureau. The Census Bureau's most 
current statistical area information is derived from ongoing census 
data received since 2010; the most recent data are from 2015. For the 
purposes of crosswalking counties to CBSAs, in the FY 2018 IPPS/LTCH 
PPS proposed rule (82 FR 19898 through 19899), we proposed to 
discontinue the use of SSA county codes and begin using only the FIPS 
county codes.
    The Census Bureau maintains a complete list of changes to counties 
or county equivalent entities on the Web site at: https://www.census.gov/geo/reference/county-changes.html. In our proposed 
transition to using only FIPS codes for counties for the hospital wage 
index, we proposed to update the FIPS codes used for crosswalking 
counties to CBSAs for the hospital wage index to incorporate changes to 
the counties or county equivalent entities included in the Census 
Bureau's most recent list. Based on information included in the Census 
Bureau's Web site, since 2010, the Census Bureau has made the following 
updates to the FIPS codes for counties or county equivalent entities:
     Petersburg Borough, AK (FIPS State County Code 02-195), 
CBSA 02, was created from part of former Petersburg Census Area (02-
195) and part of Hoonah-Angoon Census Area (02-105). The CBSA code 
remains 02.
     The name of La Salle Parish, LA (FIPS State County Code 
22-059), CBSA 14, is now LaSalle Parish, LA (FIPS State County Code 22-
059). The CBSA code remains as 14.
     The name of Shannon County, SD (FIPS State County Code 46-
113), CBSA 43, is now Oglala Lakota County, SD (FIPS State County Code 
46-102). The CBSA code remains as 43.
    We believe that it is important to use the latest counties or 
county equivalent entities in order to properly crosswalk hospitals 
from a county to a CBSA for purposes of the hospital wage index used 
under the IPPS. In addition, we believe that using the latest FIPS 
codes will allow us to maintain a more accurate and up-to-date payment 
system that reflects the reality of population shifts and labor market 
conditions. Therefore, in the FY 2018 IPPS/LTCH PPS proposed rule (82 
FR 19898 through 19899), we proposed to implement these FIPS code 
updates, effective October 1, 2017, beginning with the FY 2018 wage 
indexes. We proposed to use these update changes to calculate area wage 
indexes in a manner that is generally consistent with the CBSA-based 
methodologies finalized in the FY 2005 IPPS final rule and the FY 2015 
IPPS/LTCH PPS final rule. We note that while the county update changes 
listed earlier changed the county names, the CBSAs to which these 
counties map did not change from the prior counties. Therefore, there 
is no impact or change to hospitals in these counties; they continue to 
be considered rural for the hospital wage index under these changes. We 
invited public comments on our proposals.
    We did not receive any public comments on our proposals. Therefore, 
for the reasons discussed earlier, we are finalizing our proposal, 
without modification, to discontinue the use of the SSA county codes 
and begin using only the FIPS county codes for purposes of crosswalking 
counties to CBSAs. In addition, we are finalizing our proposal, without 
modification, to implement the latest FIPS code updates, as discussed 
earlier, effective October 1, 2017, beginning with the FY 2018 wage 
indexes. As we proposed, we will use these update changes to calculate 
the wage indexes in a manner that is generally consistent with the 
CBSA-based methodologies finalized in the FY 2005 IPPS final rule and 
the FY 2015 IPPS/LTCH PPS final rule. For FY 2018, Tables 2 and 3 
associated with this final rule and the County to CBSA Crosswalk File 
and Urban CBSAs and Constituent Counties for Acute Care Hospitals File 
posted on the CMS Web site reflect these county changes.

B. Worksheet S-3 Wage Data for the FY 2018 Wage Index

    The FY 2018 wage index values are based on the data collected from 
the Medicare cost reports submitted by hospitals for cost reporting 
periods beginning in FY 2014 (the FY 2017 wage indexes were based on 
data from cost reporting periods beginning during FY 2013).
1. Included Categories of Costs
    The FY 2018 wage index includes all of the following categories of 
data associated with costs paid under the IPPS (as well as outpatient 
costs):
     Salaries and hours from short-term, acute care hospitals 
(including paid lunch hours and hours associated with military leave 
and jury duty);
     Home office costs and hours;
     Certain contract labor costs and hours, which include 
direct patient care, certain top management, pharmacy, laboratory, and 
nonteaching physician Part A services, and certain contract indirect 
patient care services (as discussed in the FY 2008 final rule

[[Page 38131]]

with comment period (72 FR 47315 through 47317)); and
     Wage-related costs, including pension costs (based on 
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
    Consistent with the wage index methodology for FY 2017, the wage 
index for FY 2018 also excludes the direct and overhead salaries and 
hours for services not subject to IPPS payment, such as skilled nursing 
facility (SNF) services, home health services, costs related to GME 
(teaching physicians and residents) and certified registered nurse 
anesthetists (CRNAs), and other subprovider components that are not 
paid under the IPPS. The FY 2018 wage index also excludes the salaries, 
hours, and wage-related costs of hospital-based rural health clinics 
(RHCs), and Federally qualified health centers (FQHCs) because Medicare 
pays for these costs outside of the IPPS (68 FR 45395). In addition, 
salaries, hours, and wage-related costs of CAHs are excluded from the 
wage index for the reasons explained in the FY 2004 IPPS final rule (68 
FR 45397 through 45398).
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers.

C. Verification of Worksheet S-3 Wage Data

    The wage data for the FY 2018 wage index were obtained from 
Worksheet S-3, Parts II and III of the Medicare cost report (Form CMS-
2552-10) for cost reporting periods beginning on or after October 1, 
2013, and before October 1, 2014. For wage index purposes, we refer to 
cost reports during this period as the ``FY 2014 cost report,'' the 
``FY 2014 wage data,'' or the ``FY 2014 data.'' Instructions for 
completing the wage index sections of Worksheet S-3 are included in the 
Provider Reimbursement Manual (PRM), Part 2 (Pub.15-2), Chapter 40, 
Sections 4005.2 through 4005.4. The data file used to construct the FY 
2018 wage index includes FY 2014 data submitted to us as of June 14, 
2017. As in past years, we performed an extensive review of the wage 
data, mostly through the use of edits designed to identify aberrant 
data.
    We asked our MACs to revise or verify data elements that result in 
specific edit failures. For the proposed FY 2018 wage index, we 
identified and excluded 51 providers with aberrant data that should not 
be included in the wage index, although we stated in the FY 2018 IPPS/
LTCH PPS proposed rule that if data elements for some of these 
providers are corrected, we intend to include data from those providers 
in the final FY 2018 wage index (82 FR 19899). We note that of the 51 
hospitals that we excluded from the proposed wage index, some hospitals 
had data that we did not expect to change or improve (for example, 
among the reasons these providers were excluded are: They are low 
Medicare utilization providers; they closed and failed edits for 
reasonableness; or they have extremely high or low average hourly wages 
that are atypical for their CBSAs). We also adjusted certain aberrant 
data and included these data in the proposed wage index. For example, 
in situations where a hospital did not have documentable salaries, 
wages, and hours for housekeeping and dietary services, we imputed 
estimates, in accordance with policies established in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49965 through 49967). We instructed MACs to 
complete their data verification of questionable data elements and to 
transmit any changes to the wage data no later than March 24, 2017. In 
addition, as a result of the April and May appeals processes, and 
posting of the April 28, 2017 PUF, we have made additional revisions to 
the FY 2018 wage data, as described further below. The revised data are 
reflected in this FY 2018 IPPS/LTCH PPS final rule.
    In constructing the proposed FY 2018 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2014, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believed that including the wage data for 
these hospitals is, in general, appropriate to reflect the economic 
conditions in the various labor market areas during the relevant past 
period and to ensure that the current wage index represents the labor 
market area's current wages as compared to the national average of 
wages. However, we excluded the wage data for CAHs as discussed in the 
FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed 
rule, we removed 7 hospitals that converted to CAH status on or after 
January 22, 2016, the cut-off date for CAH exclusion from the FY 2017 
wage index, and through and including January 23, 2017, the cut-off 
date for CAH exclusion from the FY 2018 wage index. After excluding 
CAHs and hospitals with aberrant data, we calculated the proposed wage 
index using the Worksheet S-3, Parts II and III wage data of 3,325 
hospitals.
    Since the development of the FY 2018 proposed wage index, as a 
result of further review by the MACs and the April and May appeals 
processes, we received improved data for 15 hospitals and are including 
the wage data of these 15 hospitals in the final wage index. However, 
during our review of the wage data in preparation of the April 28, 2017 
PUF, we identified and deleted the data of 2 additional hospitals whose 
data we determined to be aberrant (unusually low average hourly wages) 
relative to their CBSAs, and there was insufficient documentation 
provided to explain their wage data. Finally, we learned that in the 
proposed wage index, we inadvertently deleted the data of one hospital 
when we should have deleted the data of a different hospital. We have 
corrected this error, although because we were including one hospital 
while deleting another, there was no effect on the number of hospitals 
in the wage index. With regard to CAHs, we have since learned of 2 
additional hospitals that converted to CAH status on or after January 
22, 2016, the cut-off date for CAH exclusion from the FY 2017 wage 
index, and through and including January 23, 2017, the cut-off date for 
CAH exclusion from the FY 2018 wage index. Accordingly, we have removed 
9 hospitals that converted to CAH status from the FY 2018 wage index. 
The final FY 2018 wage index is based on the wage index of 3,336 
hospitals (3,325 + 15-2-1 + 1-2 = 3,336).
    For the final FY 2018 wage index, we allotted the wages and hours 
data for a multicampus hospital among the different labor market areas 
where its campuses are located in the same manner that we allotted such 
hospitals' data in the FY 2017 wage index (81 FR 56915). Table 2, which 
contains the final FY 2018 wage index associated with this final rule 
(available via the Internet on the CMS Web site), includes separate 
wage data for the campuses of 9 multicampus hospitals.

[[Page 38132]]

D. Method for Computing the FY 2018 Unadjusted Wage Index

1. Methodology for FY 2018
    The method used to compute the FY 2018 wage index without an 
occupational mix adjustment follows the same methodology that we used 
to compute the wage indexes without an occupational mix adjustment 
since FY 2012 (76 FR 51591 through 51593).
    Comment: One commenter requested that CMS consider developing a 
process for determining a wage index that would reward hospitals that 
invest in the workforce and raise the wages of the lowest paid workers, 
rather than relying primarily on the average hourly wages of the labor 
market area as a whole.
    Response: Section 1886(d)(3)(E) of the Act requires the Secretary 
to adjust for area differences in hospital wage levels by a factor 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. The 
statute does not direct the Secretary to develop a wage index that 
rewards hospitals for workforce investment or other labor initiatives.
    Comment: One commenter requested that CMS establish a floor wage 
index for providers in Puerto Rico that is not lower than the ratio of 
Puerto Rico nonhealth care wages to U.S. nonhealth care wages, using 
data from the Occupational Employment Statistics (OES) of the U.S. 
Bureau of Labor Statistics (BLS).
    Response: We appreciate this comment. However, we consider it to be 
outside the scope of the FY 2018 IPPS/LTCH PPS proposed rule. 
Therefore, we are not responding to this comment at this time.
    As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step 
5,'' for each hospital, we adjust the total salaries plus wage-related 
costs to a common period to determine total adjusted salaries plus 
wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the employment cost index (ECI) for compensation 
for each 30-day increment from October 14, 2013, through April 15, 
2015, for private industry hospital workers from the BLS' Compensation 
and Working Conditions. We have consistently used the ECI as the data 
source for our wages and salaries and other price proxies in the IPPS 
market basket, and we did not propose any changes to the usage of the 
ECI for FY 2018. The factors used to adjust the hospital's data were 
based on the midpoint of the cost reporting period, as indicated in the 
following table.

                    Midpoint of Cost Reporting Period
------------------------------------------------------------------------
                                                              Adjustment
               After                         Before             factor
------------------------------------------------------------------------
10/14/2013.........................  11/15/2013............      1.02310
11/14/2013.........................  12/15/2013............      1.02155
12/14/2013.........................  01/15/2014............      1.02004
01/14/2014.........................  02/15/2014............      1.01866
02/14/2014.........................  03/15/2014............      1.01740
03/14/2014.........................  04/15/2014............      1.01615
04/14/2014.........................  05/15/2014............      1.01482
05/14/2014.........................  06/15/2014............      1.01339
06/14/2014.........................  07/15/2014............      1.01193
07/14/2014.........................  08/15/2014............      1.01048
08/14/2014.........................  09/15/2014............      1.00905
09/14/2014.........................  10/15/2014............      1.00761
10/14/2014.........................  11/15/2014............      1.00614
11/14/2014.........................  12/15/2014............      1.00463
12/14/2014.........................  01/15/2015............      1.00309
01/14/2015.........................  02/15/2015............      1.00155
02/14/2015.........................  03/15/2015............      1.00000
03/14/2015.........................  04/15/2015............      0.99845
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 2014, and ending December 31, 2014, is June 30, 2014. An 
adjustment factor of 1.01193 would be applied to the wages of a 
hospital with such a cost reporting period. Using the data as 
previously described, the FY 2018 national average hourly wage 
(unadjusted for occupational mix) is $42.1027.
    Previously, we also would provide a Puerto Rico overall average 
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid 
based on 75 percent of the national standardized amount and 25 percent 
of the Puerto Rico-specific standardized amount. As a result, we 
calculated a Puerto Rico-specific wage index that was applied to the 
labor share of the Puerto Rico-specific standardized amount. Section 
601 of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113) 
amended section 1886(d)(9)(E) of the Act to specify that the payment 
calculation with respect to operating costs of inpatient hospital 
services of a subsection (d) Puerto Rico hospital for inpatient 
hospital discharges on or after January 1, 2016, shall use 100 percent 
of the national standardized amount. As we stated in the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56915 through 56916), because Puerto Rico 
hospitals are no longer paid with a Puerto Rico-specific standardized 
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act, 
as amended by section 601 of the Consolidated Appropriations Act, 2016, 
there is no longer a need to calculate a Puerto Rico-specific average 
hourly wage and wage index. Hospitals in Puerto Rico are now paid 100 
percent of the national standardized amount and, therefore, are subject 
to the national average hourly wage (unadjusted for occupational mix) 
(which is $42.1027 for this FY 2018 final rule) and the national wage 
index, which is applied to the national labor share of the national 
standardized amount. Therefore, for FY 2018, we did not propose a 
Puerto Rico-specific overall average hourly wage or wage index.
2. Clarification of Other Wage Related Costs in the Wage Index
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index based on a survey of hospitals' costs that are 
attributable to wages and wage-related costs. In the September 1, 1994 
IPPS final rule (59 FR 45356), we developed a list of ``core'' wage-
related costs that hospitals may report on Worksheet S-3, Part II of 
the Medicare hospital cost report in order to include those costs in 
the wage index. Core wage-related costs include categories of 
retirement cost, plan administrative costs, health and insurance costs, 
taxes, and other specified costs such as tuition reimbursement. In 
addition to these categories of core wage-related costs, we allow 
hospitals to report wage-related costs other than those on the core 
list if the other wage-related costs meet certain criteria. The 
criteria for including other wage-related costs in the wage index are 
discussed in the September 1, 1994 IPPS final rule (59 FR 45357) and 
also are listed in the Provider Reimbursement Manual (PRM), Part II, 
Chapter 40, Sections 4005.2 through 4005.4, Line 18 of the Medicare 
cost report (Form CMS-2552-10, OMB control number 0938-0050). 
Specifically, ``other'' wage-related costs are allowable for the wage 
index if the cost for employees whose services are paid under the IPPS 
exceeds 1 percent of the total adjusted salaries net of excluded area 
salaries, is a fringe benefit as defined by the IRS and has been 
reported to the IRS (as income to the employees or contractors), is not 
being furnished for the convenience of the provider, and is not listed 
on Worksheet S-3, Part IV.
    We note that other wage-related costs are not to include benefits 
already included in Line 1 salaries on Worksheet S-3, Part II (refer to 
the cost report instructions for Worksheet S-3, Part II, Line 18, which 
state, `` `Other' wage-related costs do not include wage-related costs 
reported on line 1 of this worksheet.''). We also note that the 1-
percent test is conducted by dividing each individual category of the 
other wage-related cost (that is, the

[[Page 38133]]

numerator) by the sum of the following lines on the Medicare hospital 
cost report (Form CMS-2552-10): Worksheet S-3, Part II, Lines 11, 12, 
13, and 14, Column 4, and Worksheet S-3, Part III, Line 3, Column 4 
(that is, the denominator). The other wage-related costs associated 
with contract labor and home office/related organization personnel are 
included in the numerator because these other wage-related costs are 
allowed in the wage index (in addition to other wage-related costs for 
direct employees), assuming the requirements for inclusion in the wage 
index are met. For example, if a hospital is trying to include a 
parking garage as an other-wage related cost that is reported on the W-
2 or 1099 form, when running the 1-percent test, include in the 
numerator all the parking garage other wage-related cost for direct 
salary employees, contracted employees, and home office employees and 
divide by the sum of Worksheet S-3, Part II, Lines 11, 12, 13, and 14, 
Column 4, and Worksheet S-3, Part III, Line 3, Column 4. For the 
category of parking other wage-related costs, the 1-percent test would 
be run only one time, inclusive of other wage-related costs for 
employee salaries, contracted employees, and home office employees. We 
intend to clarify the hospital cost report instructions to reflect that 
contract labor and home office/related organization salaries should be 
added to the subtotal of salaries on Worksheet S-3, Part III, Line 3, 
Column 4 (Line 3 is the difference of net salaries minus excluded area 
salaries) for purposes of performing the 1-percent test. If a hospital 
has more than one other wage-related cost, the 1-percent test must be 
conducted separately for each other wage-related cost (for example, 
parking and cafeteria separately; do not sum all the different types of 
other wage-related costs together and then run the 1-percent test). If 
the 1-percent test is met for a particular type of other wage-related 
costs, and the other criteria listed earlier are met as well, the other 
wage-related cost may be reported on Worksheet S-3, Part II, Line 18 of 
the hospital cost report.
    We originally allowed for the inclusion of wage-related costs other 
than those on the core list because we were concerned that individual 
hospitals might incur unusually large wage-related costs that are not 
reflected on the core list but that may represent a significant wage-
related cost. However, as we discussed in the FY 2018 IPPS/LTCH PPS 
proposed rule (82 FR 19900 through 19902), we are reconsidering 
allowing other wage-related costs to be included in the wage index 
because recent internal reviews of the FY 2018 wage data show that only 
a small minority of hospitals are reporting other wage-related costs 
that meet the 1-percent test described earlier. In the calculation of 
the proposed FY 2018 wage index, for each hospital reporting other 
wage-related costs on Line 18 of Worksheet S-3, we performed the 1-
percent test. We then made internal edits removing other wage-related 
costs on Line 18 where hospitals reported data that failed to meet the 
mathematical requirement that other wage-related costs must exceed 1 
percent of total adjusted salaries net of excluded area salaries. After 
this review, only approximately 80 hospitals of approximately 3,320 
hospitals had other wage-related costs on Line 18 meeting the 1-percent 
test. We believe that such a limited number of hospitals nationally 
reporting and meeting the 1-percent test may indicate that other wage-
related costs might not constitute an appropriate part of a relative 
measure of wage costs in a particular labor market area, a longstanding 
tenet of the wage index. In other words, while other wage-related costs 
may represent costs that may have an impact on an individual hospital's 
average hourly wage, we do not believe that costs reported by only a 
very small minority of hospitals accurately reflect the economic 
conditions of the labor market areas in which those hospitals are 
located. Therefore, it is possible that inclusion of other wage-related 
costs in the wage index in such a limited manner may distort the 
average hourly wage of a particular labor market area so that its wage 
index does not accurately represent that labor market area's current 
wages relative to national wages.
    Furthermore, the open-ended nature of the types of other wage-
related costs that may be included on Line 18 of Worksheet S-3, in 
contrast to the concrete list of core wage-related costs, may hinder 
consistent and proper reporting of fringe benefits. Our internal review 
indicates widely divergent types of costs that hospitals are reporting 
as other wage-related costs on Line 18. We are concerned that 
inconsistent reporting of other wage-related costs on Line 18 further 
compromises the accuracy of the wage index as a representation of the 
relative average hourly wage for each labor market area. Our intent in 
creating a core list of wage-related costs in the September 1, 1994 
IPPS final rule was to promote consistent reporting of fringe benefits, 
and we are increasingly concerned that inconsistent reporting of wage-
related costs on Line 18 of Worksheet S-3 undermines this effort. 
Specifically, we expressed in the September 1, 1994 IPPS final rule 
that, since we began including fringe benefits in the wage index, we 
have been concerned with the inconsistent reporting of fringe benefits, 
whether because of a lack of provider proficiency in identifying fringe 
benefit costs or varying interpretations across fiscal intermediaries 
of the definition for fringe benefits in PRM-I, Section 2144.1 (59 FR 
45356).
    We believe that the limited and inconsistent use of Line 18 of 
Worksheet S-3 for reporting wage-related costs other than the core list 
might indicate that including other wage-related costs in the wage 
index compromises the accuracy of the wage index as a relative measure 
of wages in a given labor market area. Therefore, in the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19901), we sought public comments on 
whether we should, in future rulemaking, propose to only include the 
wage-related costs on the core list in the calculation of the wage 
index and not to include any other wage-related costs in the 
calculation of the wage index.
    Meanwhile, in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19901 
through 19902), we clarified that, under our current policy, an other 
wage-related cost (which we define as the value of a benefit) must be a 
fringe benefit as described by the IRS (refer to IRS Publication 15-B) 
and must be reported to the IRS on employees' or contractors' W-2 or 
1099 forms as taxable income in order to be considered an other wage-
related cost on Line 18 of Worksheet S-3 and for the wage index. That 
is, other wage-related costs that are not reported to the IRS on 
employees' or contractors' W-2 or 1099 forms as taxable income, even if 
not required to be reported to the IRS according to IRS requirements, 
will not be included in the wage index. This is consistent with current 
cost report instructions for Line 18 of Worksheet S-3, Part II of the 
Medicare cost report, Form 2552-10, which state that, to be considered 
an allowable other wage-related cost, the cost ``has been reported to 
the IRS.'' We will apply this policy to the process for calculating the 
wage index for FY 2019, including the FY 2019 desk reviews beginning in 
September 2017.
    As we stated in the FY 2018 proposed rule, we believe this 
clarification is necessary because some hospitals have incorrectly 
interpreted prior manual and existing preamble language to mean that a 
cost could be considered an other wage-related cost if the provider's 
reporting (or not reporting) of the cost

[[Page 38134]]

was in accordance with IRS requirements, rather than if the cost was 
actually reported on an employee's or contractor's W-2 or 1099 form as 
taxable income. We believe that such an interpretation of our policy 
would require an analysis of whether the reporting or not reporting of 
the cost to the IRS was done properly in accordance with IRS 
regulations and guidance in order to allow the cost as an other wage-
related cost. We believe that the determinations regarding the proper 
or improper reporting of certain other wage-related costs to the IRS 
for the purpose of inclusion in the Medicare wage index are impractical 
for CMS and the MACs because we do not have the expertise and fluency 
in IRS regulations and tax law sufficient to perform such technical 
reviews of hospital wage-related costs. In contrast, our current policy 
of including an amount as an other wage-related cost for wage index 
purposes only if the amount was actually reported to the IRS on 
employees' or contractors' W-2 or 1099 forms as taxable income is a 
straightforward policy that we believe provides clarity to all involved 
parties. The brightline test of allowing an other wage-related cost to 
be included in the wage index only if it has been reported on an 
employee's or contractor's W-2 or 1099 form as taxable income helps 
ensure consistent treatment of other wage-related costs for all 
hospitals. Considering the variety of types of costs that may be 
included on Line 18 of Worksheet S-3 of the cost report for other wage-
related costs (assuming the 1-percent test is met and other criteria 
are met), we believe that a straightforward policy that is simple for 
hospitals and CMS to apply is particularly important.
    In addition, we believe the policy we are clarifying that an other 
wage-related cost can be included in the wage index only if it was 
reported to the IRS as taxable income on the employee's or contractor's 
W-2 or 1099, is consistent with CMS' longstanding position that a 
fringe benefit is not furnished for the convenience of the employer or 
otherwise excludable from income as a fringe benefit (such as a working 
condition fringe) and that inappropriate types of costs may not be 
included in the wage index. In response to a comment when we finalized 
the criteria for other wage-related costs in the September 1, 1994 IPPS 
final rule (59 FR 45359), we stated that ``items such as the 
unrecovered cost of employee meals, tuition reimbursement, and auto 
allowances will only be allowed as a wage-related cost for purposes of 
the wage index if properly reported to the IRS on an employee's W-2 
form as a fringe benefit.'' (We note that the September 1, 1994 IPPS 
final rule does not mention the 1099 form for contractors, as contract 
labor was not allowed at that time in the wage index. Consistent with 
our treatment of costs for contract labor similar to that of employees 
for the wage index, we are clarifying that the requirement that a cost 
be reported to the IRS to be allowed as a wage-related cost for the 
wage index also applies to contract labor, which must be reported on 
the contractor's 1099 to be allowed as a wage-related cost for the wage 
index.) We believe that requiring other wage-related costs to be 
reported on employees' or contractors' W-2 or 1099 forms to be 
allowable for Line 18 of Worksheet S-3 of the Medicare cost report is 
consistent with the requirement that the cost is not being furnished 
for the convenience of the employer. A cost reported on an employee's 
or contractor's W-2 or 1099 form as taxable income is clearly a wage-
related cost that is provided solely for the benefit of the employee. 
We believe that the requirement that other wage-related costs be a 
benefit to the employee also guarantees that administrative costs such 
as overhead and capitalized costs are excluded from other wage-related 
costs in the wage index.
    Therefore, for the reasons discussed above, as we discussed in the 
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19901 through 19902), we are 
clarifying that a cost must be a fringe benefit as described by the IRS 
and must be reported to the IRS on employees' or contractors' W-2 or 
1099 forms as taxable income in order to be considered an other wage-
related cost on Line 18 of Worksheet S-3 and for the wage index. In 
addition, as discussed earlier, in the proposed rule, we requested 
public comments on whether we should consider in future rulemaking 
removing other wage-related costs from the wage index.
    Because some hospitals have incorrectly interpreted prior manual 
and existing preamble language, as stated earlier, in the proposed rule 
we restated the criteria from the September 1, 1994 IPPS final rule (59 
FR 45357) for allowing other wage-related costs for the wage index, 
with clarifications. The criteria follow below, and as stated in the 
proposed rule, we intend to update the manual with these 
clarifications: Other Wage-Related Costs. A hospital may be able to 
report a wage-related cost (defined as the value of the benefit) that 
does not appear on the core list if it meets all of the following 
criteria:
     The wage-related cost is provided at a significant 
financial cost to the employer. To meet this test, the individual wage-
related cost must be greater than 1 percent of total salaries after the 
direct excluded salaries are removed (the sum of Worksheet S-3, Part 
II, Lines 11, 12, 13, 14, column 4, and Worksheet S-3, Part III, Line 
3, Column 4).
     The wage-related cost is a fringe benefit as described by 
the IRS and is reported to the IRS on an employee's or contractor's W-2 
or 1099 form as taxable income.
     The wage-related cost is not furnished for the convenience 
of the provider or otherwise excludable from income as a fringe benefit 
(such as a working condition fringe).
    We note that those wage-related costs reported as salaries on Line 
1 (for example, loan forgiveness and sick pay accruals) should not be 
included as other wage-related costs on Line 18.
    Comment: One commenter fully supported CMS proposing in future 
rulemaking to only include the wage-related costs on the core list in 
the calculation of the wage index and not to include any other wage-
related costs in the calculation of the wage index. The commenter 
reiterated CMS' observation that only a small minority of hospitals 
benefit from the reporting of other wage-related costs, emphasizing 
that the inclusion of other wage-related costs in the wage index in 
such a limited manner distorts the average hourly wage of a particular 
labor market area so that its wage index does not accurately represent 
that labor market area's current wages relative to national wages. 
Several commenters did not oppose CMS proposing in future rulemaking to 
only include wage-related costs on the core list but requested that CMS 
first consider convening stakeholders for additional input prior to the 
removal of the item. Similarly, one commenter requested that CMS be as 
transparent as possible and provide complete information on the impact 
on the wage index for all areas of the country in future rulemaking if 
CMS proposes to exclude other wage-related costs from the wage index 
calculation.
    Response: We appreciate the commenter's support for our proposing 
in future rulemaking to consider only including the wage-related costs 
on the core list in the calculation of the wage index and not to 
include any other wage-related costs in the calculation of the wage 
index. In response to the commenters who requested that CMS first 
consider convening stakeholders

[[Page 38135]]

for additional input prior to the removal of other wage-related costs 
(on Line 18 of Worksheet S-3) from the wage index, we are reassuring 
the commenters that we would engage in notice-and-comment rulemaking in 
order to solicit stakeholder input before removing Line 18 of Worksheet 
S-3 from the wage index calculation. Similarly, we endeavor to be as 
transparent as possible and, if appropriate, may consider providing 
information on the impact on the wage index for all areas of the 
country in future rulemaking if we propose to exclude other wage-
related costs from the wage index calculation.
    Comment: Two commenters applauded CMS' goals of achieving a more 
equitable and accurate wage index, but suggested that CMS address the 
inadequacies in the current reporting requirements for noncore other 
wage-related costs rather than consider eliminating Line 18 of 
Worksheet S-3 of the Medicare cost report from the wage index. These 
commenters asserted that all hospitals have noncore benefits. However, 
the commenters added, the limited guidance and ``significant threshold 
limitations'' in the current instructions prevent hospitals from 
capturing these noncore benefits. Furthermore, the commenters 
maintained that benefits are rapidly evolving into more nontraditional 
structures and, therefore, a mechanism to capture these evolving 
benefits is necessary for CMS to ensure an equitable survey. The 
commenters submitted several suggestions to ensure open and transparent 
reporting of other wage-related costs and to remove the onus from CMS 
and the MAC to make determinations regarding the acceptability of other 
wage-related costs. The commenters believed that clear and consistent 
reporting guidelines create an equitable playing field for all 
providers and stated that addressing the inadequacies in the current 
reporting requirements for Line 18 is prudent. However, the commenters 
suggested an approach different than CMS' clarifications of current 
policy to more accurately identify and capture other wage-related 
costs.
    Response: We appreciate the feedback from commenters in favor of 
our improving the current reporting requirements for noncore other 
wage-related costs rather than considering eliminating Line 18 of 
Worksheet S-3 from the wage index calculation. We are not eliminating 
Line 18 from the wage index calculation at this time. Rather, in line 
with the commenters' recommendation, we are clarifying the requirements 
for Line 18 in this final rule to facilitate consistent and accurate 
reporting of other wage-related costs for the wage index. We share the 
commenters' interests in reporting guidelines that are clear, 
consistent, and equitable. The commenters' specific suggestions and our 
responses follow below:
    Comment: Commenters suggested that CMS, with input from providers, 
define a specific list of noncore benefits commonly shared by a large 
number of providers for inclusion in the wage index, such as employee 
parking and transit costs, uniform costs, and meal allowances. The 
commenters suggested that CMS approach the identification of noncore 
benefits with the same specificity as it does with core benefits in 
order to ensure an equitable wage index, more easily address tax 
issues, and allow more direct application of the employer convenience 
test.
    Response: We appreciate the commenters' suggestion and agree that 
defined lists of allowable costs are generally helpful to support 
consistent and equitable reporting. In fact, our intent in creating a 
core list of wage-related costs in the September 1, 1994 IPPS final 
rule was to promote ``more equitable and consistent reporting of wage-
related costs for all hospitals'' (59 FR 45356). When developing the 
list of core wage-related costs, we stated that one or more of the 
following criteria must be met to be considered a core wage-related 
cost: The wage-related cost is provided at a significant financial cost 
to the employer; the wage-related cost is of a type and nature that 
would generally be offered as a fringe benefit by most employers; the 
perceived value of this wage-related cost is of such importance that it 
would influence an individual's employment decisions; and the wage-
related cost is a mandatory requirement under Federal or State law (for 
example FICA, Federal and State unemployment, among others) (59 FR 
45356).
    If there are noncore benefits that are of a type and nature that 
would generally be offered as a fringe benefit by most employers, as 
the commenters suggested, we believe that perhaps these costs should be 
added to the core list rather than defined separately as a list of 
other wage-related costs. In future rulemaking, we may consider this 
suggestion in the form of seeking hospitals' input on expanding the 
core list of wage-related costs to include common wage-related costs 
(such as parking) that are currently considered other wage-related 
costs.
    Comment: Commenters suggested that the taxable or nontaxable nature 
of the benefit should not be a determinant for inclusion as a noncore 
benefit. In the commenters' opinion, CMS made too broad a connection 
between taxable reporting and the employer convenience test; 
specifically, many employee benefits are not taxable due to dollar 
threshold exclusions and public policy considerations by Congress and 
the IRS. Furthermore, the commenters pointed out that evolving tax law 
could cause volatility in the wage index because what is considered a 
taxable benefit one year may not be taxable in the next year.
    Rather, the commenters suggested that, in order for other wage-
related costs to be included in the wage index, CMS require other wage-
related costs to be reported to the IRS on the W-2, regardless of 
whether the benefit is taxable or not (the W-2 allows for reporting of 
both taxable and nontaxable benefits), and that CMS could then include 
other wage-related costs in the wage index as long as those costs, 
whether taxable or nontaxable, are reported on the W-2. The commenters 
maintained that it should not be the responsibility of CMS or the MACs 
to prove that the benefit has been handled appropriately for tax 
purposes, and this requirement to include all taxable and nontaxable 
costs on the W-2 in order to have those costs included in the wage 
index would ensure that the benefit has been handled correctly for tax 
purposes.
    Response: In the proposed rule (82 FR 19902), we stated that 
requiring other wage-related costs to be reported on employees' or 
contractors' W-2 or 1099 forms to be allowable for Line 18 is 
consistent with the requirement that the cost is not being furnished 
for the convenience of the employer because, typically, a cost that is 
for the convenience of the employer is not taxable as income to the 
employee. This is not to say that all costs that are a benefit to the 
employee are taxable. Indeed, in our clarification of the criteria for 
allowing a cost as an other wage-related costs on Line 18 in the wage 
index, we specifically stated that ``The wage-related cost is not 
furnished for the convenience of the provider or otherwise excludable 
from income as a fringe benefit (such as a working condition fringe)'' 
(emphasis added). That is, we recognize that being furnished for the 
convenience of the provider is only one of many reasons that a cost may 
be excludable from income as a fringe benefit.
    While we understand that many employee benefits are not taxable due 
to dollar threshold exclusions and public policy considerations by 
Congress and the IRS, and thereby excluded from Line 18, we continue to 
believe that a brightline test is necessary for consistent

[[Page 38136]]

treatment of other wage-related costs for all hospitals. Taken with the 
commenter's suggestion that CMS allow taxable and nontaxable other 
wage-related costs (assuming other criteria are met) as long as the 
costs are reported on W-2s or 1099s, we understand that the commenter 
is suggesting a different brightline test: That the cost be listed on 
the W-2, regardless of whether the cost is taxable or tax-exempt. We 
continue to believe that our clarification in the proposed rule is a 
more straightforward policy than the commenter's suggestion for two 
reasons. First, not all employers report nontaxable costs on an 
employee's W-2, nor are they required to do so. Therefore, to allow 
nontaxable costs so long as those costs are on an employee's W-2 would 
create an uneven playing field with inconsistent treatment of 
nontaxable costs. Second, a taxable benefit is typically income-related 
and a benefit to the employee. While we understand that there may be 
benefits to the employee that are tax-exempt due to a variety of public 
policy considerations, we believe that costs should be taxable in order 
to be incorporated as part of the wage index because the wage index is 
a relative measure of salaries and wages.
    Furthermore, we agree with the commenters' assertion that it should 
not be the responsibility of CMS or the MACs to prove that the benefit 
has been handled appropriately for tax purposes. Indeed, it is for that 
reason that we clarified our current policy of allowing an amount as an 
other wage-related cost for wage index purposes only if the amount was 
actually reported to the IRS on employees' or contractors' W-2 or 1099 
forms as taxable income. We stated in the proposed rule (82 FR 19901 
through 19902) that other wage-related costs that are not reported to 
the IRS on employees' or contractors' W-2 or 1099 forms as taxable 
income, even if not required to be reported to the IRS according to IRS 
requirements, will not be included in the wage index. We explained that 
determinations regarding the proper or improper reporting of certain 
other wage-related costs to the IRS for the purpose of inclusion in the 
Medicare wage index are impractical for CMS and the MACs because we do 
not have the expertise and fluency in IRS regulations and tax law 
sufficient to perform such technical reviews of hospital wage-related 
costs.
    Comment: Commenters suggested that CMS change the 1-percent test to 
a test in aggregate for the items on their recommended noncore list. 
For benefits not specifically listed by CMS as noncore, the commenters 
suggested that CMS continue using the current methodology, which 
requires each individual benefit to meet the 1-percent test.
    Response: We appreciate the commenters' suggestion. However, as we 
stated earlier, if there are noncore benefits that are of a type and 
nature that would generally be offered as a fringe benefit by most 
employers, we believe that perhaps these costs should be added to the 
core list rather than defined separately as a list of other wage-
related costs. In future rulemaking, we may consider this suggestion in 
the form of seeking hospitals' input on expanding the core list of 
wage-related costs to include common wage-related costs (such as 
parking) that are currently considered other wage-related costs.
    We continue to believe that it is appropriate for the 1-percent 
test to be performed on individual, rather than aggregate, other wage-
related costs. In response to a public comment, in the September 1, 
1994 IPPS final rule (59 FR 45358), we stated that ``[t]he provision to 
include wage-related costs other than those reflected on the core list 
is intended to recognize only those limited circumstances where a 
hospital incurs any additional wage-related cost items that truly 
represent a significant financial burden to the hospital, but that also 
meet the current definition of a fringe benefit cost. We believe the 1-
percent threshold is an appropriate measure of significance, and that 
the exclusion of any cost representing less than 1 percent of total 
salaries would not significantly affect the hospital's overall average 
hourly wage. We consider the 1-percent test critical in ensuring that 
providers only include other wage-related costs that contribute 
significantly to their wage costs and that are not accounted for in the 
core list.'' We continue to believe that the 1-percent test performed 
on individual costs ensures that the wage-related cost is provided at a 
significant financial cost to the employer.
    Furthermore, we believe that allowing the 1-percent test to be 
performed on aggregate other wage-related costs (even on a limited list 
of other wage-related costs, as the commenter suggests) would lead to 
inequitable treatment of other wage-related costs. Hospitals with an 
other wage-related cost comprising an identical percentage of total 
adjusted salaries net of excluded area salaries could be treated 
differently, depending on the presence or absence of additional other 
wage-related costs to collectively ``pass'' the 1-percent test. For 
example, parking costs totaling .08 percent of total salaries for one 
hospital could be allowed (assuming the other criteria were met) if the 
hospital also has additional noncore wage-related costs that combine to 
exceed 1 percent, while another hospital with parking costs totaling 
the identical .08 percentage of total salaries could have those costs 
disallowed in absence of additional noncore wage-related costs to add 
to the parking costs to exceed 1 percent of salaries.
    We appreciate all of the comments submitted on this issue. We will 
take these comments into consideration in determining whether to 
propose in future rulemaking to remove other wage-related costs from 
the wage index calculation. Meanwhile, as discussed earlier and in the 
FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19900 through 19902), we are 
again clarifying that a cost must be a fringe benefit as described by 
the IRS and must be reported to the IRS on employees' or contractors' 
W-2 or 1099 forms as taxable income in order to be considered an other 
wage-related cost on Line 18 of Worksheet S-3 and for the wage index.

E. Occupational Mix Adjustment to the FY 2018 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, in order to construct an occupational mix adjustment 
to the wage index, for application beginning October 1, 2004 (the FY 
2005 wage index). The purpose of the occupational mix adjustment is to 
control for the effect of hospitals' employment choices on the wage 
index. For example, hospitals may choose to employ different 
combinations of registered nurses, licensed practical nurses, nursing 
aides, and medical assistants for the purpose of providing nursing care 
to their patients. The varying labor costs associated with these 
choices reflect hospital management decisions rather than geographic 
differences in the costs of labor.
1. Use of 2013 Occupational Mix Survey for the FY 2018 Wage Index
    Section 304(c) of the Consolidated Appropriations Act, 2001 (Pub. 
L. 106-554) amended section 1886(d)(3)(E) of the Act to require CMS to 
collect data every 3 years on the occupational mix of employees for 
each short-term, acute care hospital participating in the Medicare 
program. We collected data in 2013 to compute the occupational mix 
adjustment for the FY 2016, FY 2017, and FY 2018 wage indexes. A new

[[Page 38137]]

measurement of occupational mix is required for FY 2019.
    The 2013 survey included the same data elements and definitions as 
the previous 2010 survey and provided for the collection of hospital-
specific wages and hours data for nursing employees for calendar year 
2013 (that is, payroll periods ending between January 1, 2013 and 
December 31, 2013). We published the 2013 survey in the Federal 
Register on February 28, 2013 (78 FR 13679 through 13680). This survey 
was approved by OMB on May 14, 2013, and is available on the CMS Web 
site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. The 2013 Occupational Mix Survey 
Hospital Reporting Form CMS-10079 for the Wage Index Beginning FY 2016 
(in Excel format) is available on the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html. Hospitals were required to submit 
their completed 2013 surveys to their MACs by July 1, 2014. The 
preliminary, unaudited 2013 survey data were posted on the CMS Web site 
on July 11, 2014. As with the Worksheet S-3, Parts II and III cost 
report wage data, we asked our MACs to revise or verify data elements 
in hospitals' occupational mix surveys that result in certain edit 
failures.
2. Use of the 2016 Medicare Wage Index Occupational Mix Survey for the 
FY 2019 Wage Index
    As stated earlier, a new measurement of occupational mix is 
required for FY 2019. The FY 2019 occupational mix adjustment will be 
based on a new calendar year (CY) 2016 survey. The CY 2016 survey (CMS 
Form CMS-10079) received OMB approval on September 27, 2016. The final 
CY 2016 Occupational Mix Survey Hospital Reporting Form is available on 
the CMS Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/2016-Occupational-Mix-Survey-Hospital-Reporting-Form-CMS-10079-for-the-Wage-Index-Beginning-FY-2019.html. Hospitals were required to submit their 
completed 2016 surveys to their MACs by July 3, 2017. The preliminary, 
unaudited CY 2016 survey data were posted on the CMS Web site on July 
12, 2017. As with the Worksheet S-3, Parts II and III cost report wage 
data, as part of the FY 2019 desk review process, the MACs will revise 
or verify data elements in hospitals' occupational mix surveys that 
result in certain edit failures.
3. Calculation of the Occupational Mix Adjustment for FY 2018
    In the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19903), for FY 
2018, we proposed to calculate the occupational mix adjustment factor 
using the same methodology that we have used since the FY 2012 wage 
index (76 FR 51582 through 51586) and to apply the occupational mix 
adjustment to 100 percent of the FY 2018 wage index. Because the 
statute requires that the Secretary measure the earnings and paid hours 
of employment by occupational category not less than once every 3 
years, all hospitals that are subject to payments under the IPPS, or 
any hospital that would be subject to the IPPS if not granted a waiver, 
must complete the occupational mix survey, unless the hospital has no 
associated cost report wage data that are included in the FY 2018 wage 
index. For the proposed FY 2018 wage index, we used the Worksheet S-3, 
Parts II and III wage data of 3,325 hospitals, and we used the 
occupational mix surveys of 3,128 hospitals for which we also have 
Worksheet S-3 wage data, which represented a ``response'' rate of 94 
percent (3,128/3,325). For the proposed FY 2018 wage index, we 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).
    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 suggested that a penalty be instituted for nonsubmitters. 
This commenter also requested that, pending CMS' analysis of the 
Commuting Based Wage Index and given the Institute of Medicine's study 
on geographic variation in hospital wage costs, CMS eliminate the 
occupational mix survey and the significant reporting burden it 
creates.
    Response: We appreciate the commenter's concern about the accuracy 
of the wage index. We have continually requested that all hospitals 
complete and submit the occupational mix surveys. We did not establish 
a penalty for hospitals that did not submit the 2013 surveys. However, 
we are continuing to consider for future rulemaking various options for 
ensuring full compliance with future occupational mix surveys. 
Regarding the commenter's request that CMS eliminate the occupational 
mix survey, this survey is necessary to meet the provisions of section 
1886(d)(3)(E) of the Act, which requires us to measure the earnings and 
paid hours of employment by occupational category.
    After consideration of the public comments we received, for FY 
2018, we are adopting as final our proposal to calculate the 
occupational mix adjustment factor using the same methodology that we 
have used since the FY 2012 wage index. For the final FY 2018 wage 
index, we are using the Worksheet S-3, Parts II and III wage data of 
3,336 hospitals, and we are using the occupational mix surveys of 3,138 
hospitals for which we also have Worksheet S-3 wage data, which 
represents a ``response rate'' of 94 percent (3,138/3,336). We note 
that, in the proposed rule (82 FR 19903), we stated that we used the 
occupational mix survey of 3,128 hospitals. The reason for the increase 
in the number of hospitals from 3,128 to 3,138 is that 10 hospitals 
that had been deleted from the proposed rule wage index and that are 
now included in the final rule wage index had acceptable occupational 
mix surveys to use for the final rule. Therefore, we have included the 
occupational mix surveys of these 10 additional hospitals to calculate 
the wage index for this final rule. For the final FY 2018 wage index, 
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). As a result of applying this 
methodology, the FY 2018 occupational mix adjusted national average 
hourly wage is $42.0564.

F. Analysis and Implementation of the Occupational Mix Adjustment and 
the FY 2018 Occupational Mix Adjusted Wage Index

    As discussed in section III.E. of the preamble of this final rule, 
for FY 2018, we are applying the occupational mix adjustment to 100 
percent of the FY 2018 wage index. We calculated the occupational mix 
adjustment using data from the 2013 occupational mix survey data, using 
the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51582 through 51586). Using the occupational mix survey data and 
applying the occupational mix adjustment to 100 percent of the FY 2018 
wage index results in a national average hourly wage of $42.0564.

[[Page 38138]]

    The FY 2018 national average hourly wages for each occupational mix 
nursing subcategory as calculated in Step 2 of the occupational mix 
calculation are as follows:

------------------------------------------------------------------------
                                                              Average
          Occupational mix nursing subcategory              hourly wage
------------------------------------------------------------------------
National RN.............................................    $38.86637039
National LPN and Surgical Technician....................     22.73227683
National Nurse Aide, Orderly, and Attendant.............     15.95002569
National Medical Assistant..............................     17.96799473
National Nurse Category.................................       32.856948
------------------------------------------------------------------------

    The national average hourly wage for the entire nurse category as 
computed in Step 5 of the occupational mix calculation is $32.856948. 
Hospitals with a nurse category average hourly wage (as calculated in 
Step 4) of greater than the national nurse category average hourly wage 
receive an occupational mix adjustment factor (as calculated in Step 6) 
of less than 1.0. Hospitals with a nurse category average hourly wage 
(as calculated in Step 4) of less than the national nurse category 
average hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6) of greater than 1.0.
    Based on the 2013 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) that the national 
percentage of hospital employees in the nurse category is 42.6 percent, 
and the national percentage of hospital employees in the all other 
occupations category is 57.4 percent. At the CBSA level, the percentage 
of hospital employees in the nurse category ranged from a low of 25.7 
percent in one CBSA to a high of 73.5 percent in another CBSA.
    We compared the FY 2018 occupational mix adjusted wage indexes for 
each CBSA to the unadjusted wage indexes for each CBSA. As a result of 
applying the occupational mix adjustment to the wage data, the final 
wage index values for 222 (54.4 percent) urban areas and 23 (48.9 
percent) rural areas will increase. The final wage index values for 110 
(27.0 percent) urban areas will increase by greater than or equal to 1 
percent but less than 5 percent, and the final wage index values for 6 
(1.5 percent) urban areas will increase by 5 percent or more. The final 
wage index values for 10 (21.3 percent) rural areas will increase by 
greater than or equal to 1 percent but less than 5 percent, and no 
rural areas' final wage index values will increase by 5 percent or 
more. However, the final wage index values for 184 (45.1 percent) urban 
areas and 24 (51.1 percent) rural areas will decrease. The final wage 
index values for 85 (20.8 percent) urban areas will decrease by greater 
than or equal to 1 percent but less than 5 percent, and no urban areas' 
final wage index value will decrease by 5 percent or more. The final 
wage index values of 8 (17.0 percent) rural areas will decrease by 
greater than or equal to 1 percent and less than 5 percent, and no 
rural areas' final wage index values will decrease by 5 percent or 
more. The largest final positive impacts will be 17.4 percent for an 
urban area and 2.9 percent for a rural area. The largest final negative 
impacts will be 4.9 percent for an urban area and 2.4 percent for a 
rural area. Two urban areas' final wage index, but no rural area wage 
indexes, will remain unchanged by application of the occupational mix 
adjustment. These results indicate that a larger percentage of urban 
areas (54.4 percent) will benefit from the occupational mix adjustment 
than will rural areas (48.9 percent).

G. Application of the Rural, Imputed, and Frontier Floors

1. Rural Floor
    Section 4410(a) of Public Law 105-33 provides that, for discharges 
on or after October 1, 1997, the area wage index applicable to any 
hospital that is located in an urban area of a State may not be less 
than the area wage index applicable to hospitals located in rural areas 
in that State. This provision is referred to as the ``rural floor.'' 
Section 3141 of Public Law 111-148 also requires that a national budget 
neutrality adjustment be applied in implementing the rural floor. Based 
on the FY 2018 wage index associated with this final rule (which is 
available via the Internet on the CMS Web site), we estimate that 366 
hospitals will receive an increase in their FY 2018 wage index due to 
the application of the rural floor.
2. Expiration of the Imputed Floor Policy
    In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we 
adopted the ``imputed floor'' policy as a temporary 3-year regulatory 
measure to address concerns from hospitals in all-urban States that 
have argued that they are disadvantaged by the absence of rural 
hospitals to set a wage index floor for those States. Since its initial 
implementation, we have extended the imputed floor policy seven times, 
the last of which was adopted in the FY 2017 IPPS/LTCH PPS final rule 
and is set to expire on September 30, 2017. (We refer readers to 
further discussions of the imputed floor in the FY 2014, FY 2015, FY 
2016, and FY 2017 IPPS/LTCH PPS final rules (78 FR 50589 through 50590, 
79 FR 49969 through 49970, 80 FR 49497 through 49498, and 81 FR 56921 
through 56922, respectively) and to the regulations at 42 CFR 
412.64(h)(4).) Currently, there are three all-urban States--Delaware, 
New Jersey, and Rhode Island--with a range of wage indexes assigned to 
hospitals in these States, including through reclassification or 
redesignation. (We refer readers to discussions of geographic 
reclassifications and redesignations in section III.I. of the preamble 
of this final rule.) In computing the imputed floor for an all-urban 
State under the original methodology, which was established beginning 
in FY 2005, we calculated the ratio of the lowest-to-highest CBSA wage 
index for each all-urban State as well as the average of the ratios of 
lowest-to-highest CBSA wage indexes of those all-urban States. We then 
compared the State's own ratio to the average ratio for all-urban 
States and whichever is higher is multiplied by the highest CBSA wage 
index value in the State--the product of which established the imputed 
floor for the State. As of FY 2012, there were only two all-urban 
States--New Jersey and Rhode Island--and only New Jersey benefitted 
under this methodology. Under the previous OMB labor market area 
delineations, Rhode Island had only one CBSA (Providence-New Bedford-
Fall River, RI-MA) and New Jersey had 10 CBSAs. Therefore, under the 
original methodology, Rhode Island's own ratio equaled 1.0, and its 
imputed floor was equal to its original CBSA wage index value. However, 
because the average ratio of New Jersey and Rhode Island was higher 
than New Jersey's own ratio, this methodology provided a benefit for 
New Jersey, but not for Rhode Island.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 
53369), we retained the imputed floor calculated under the original 
methodology as discussed above, and established an alternative 
methodology for computing the imputed floor wage index to address the 
concern that the original imputed floor methodology guaranteed a 
benefit for one all-urban State with multiple wage indexes (New Jersey) 
but could not benefit the other all-urban State (Rhode Island). The 
alternative methodology for calculating the imputed floor was 
established using data from the application of the rural floor policy 
for FY 2013. Under the alternative methodology, we first determined the 
average percentage difference between the post-reclassified, pre-floor 
area wage index and the post-reclassified, rural floor wage index 
(without rural floor

[[Page 38139]]

budget neutrality applied) for all CBSAs receiving the rural floor. 
(Table 4D associated with the FY 2013 IPPS/LTCH PPS final rule (which 
is available via the Internet on the CMS Web site) included the CBSAs 
receiving a State's rural floor wage index.) The lowest 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 under the original methodology.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through 
50590), we extended the imputed floor policy (both the original 
methodology and the alternative methodology) for 1 additional year, 
through September 30, 2014, while we continued to explore potential 
wage index reforms.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49969 through 
49970), for FY 2015, we adopted a policy to extend the imputed floor 
policy (both the original methodology and alternative methodology) for 
another year, through September 30, 2015, as we continued to explore 
potential wage index reforms. In that final rule, we revised the 
regulations at Sec.  412.64(h)(4) and (h)(4)(vi) to reflect the 1-year 
extension of the imputed floor. As discussed in section III.B. of the 
preamble of that FY 2015 final rule, we adopted the new OMB labor 
market area delineations beginning in FY 2015. Under the new OMB 
delineations, Delaware became an all-urban State, along with New Jersey 
and Rhode Island. Under the new OMB delineations, Delaware has three 
CBSAs, New Jersey has seven CBSAs, and Rhode Island continues to have 
only one CBSA (Providence-Warwick, RI- MA). We refer readers to a 
detailed discussion of our adoption of the new OMB labor market area 
delineations in section III.B. of the preamble of the FY 2015 IPPS/LTCH 
PPS final rule. Therefore, under the adopted new OMB delineations 
discussed in section III.B. of the preamble of the FY 2015 IPPS/LTCH 
PPS final rule, Delaware became an all-urban State and was subject to 
an imputed floor as well for FY 2015.
    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49497 through 
49498), for FY 2016, we extended the imputed floor policy (under both 
the original methodology and the alternative methodology) for 1 
additional year, through September 30, 2016. In that final rule, we 
revised the regulations at Sec.  412.64(h)(4) and (h)(4)(vi) to reflect 
this additional 1-year extension. Similarly, in the FY 2017 IPPS/LTCH 
PPS final rule (81 FR 56921 through 56922), for FY 2017, we extended 
the imputed floor policy (under both the original methodology and the 
alternative methodology) for 1 additional year, through September 30, 
2017. In that final rule, we revised the regulations at Sec.  
412.64(h)(4) and (h)(4)(vi) to reflect this additional 1-year 
extension.
    The imputed floor is set to expire effective October 1, 2017, and 
in the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 19905), we did not 
propose to extend the imputed floor policy. In the FY 2005 IPPS final 
rule (69 FR 49110), we adopted the imputed floor policy for all-urban 
States under the authority of section 1886(d)(3)(E) of the Act, which 
gives the Secretary broad authority to adjust the proportion (as 
estimated by the Secretary from time to time) of hospitals' costs which 
are attributable to wages and wage-related costs of the DRG prospective 
payment rates for area differences in hospital wage levels by a factor 
(established by the Secretary). However, we have expressed reservations 
about establishment of an imputed floor, considering that the imputed 
rural floor methodology creates a disadvantage in the application of 
the wage index to hospitals in States with rural hospitals but no urban 
hospitals receiving the rural floor (72 FR 24786 and 72 FR 47322). As 
we discussed in the FY 2008 IPPS final rule (72 FR 47322), the 
application of the rural and imputed floors requires transfer of 
payments from hospitals in States with rural hospitals but where the 
rural floor is not applied to hospitals in States where the rural or 
imputed floor is applied. For this reason, in the FY 2018 IPPS/LTCH PPS 
proposed rule, we proposed not to apply an imputed floor to wage index 
calculations and payments for hospitals in all-urban States for FY 2018 
and subsequent years. That is, we proposed that hospitals in New 
Jersey, Delaware, and Rhode Island (and in any other all-urban State) 
would receive a wage index that is calculated without applying an 
imputed floor for FY 2018 and subsequent years. Therefore, under our 
proposal, only States containing both rural areas and hospitals located 
in such areas (including any hospital reclassified as rural under the 
provisions of Sec.  412.103 of the regulations) would benefit from the 
rural floor, in accordance with section 4410 of Public Law 105-33. In 
addition, we proposed to no longer include the imputed floor as a 
factor in the national budget neutrality adjustment. Therefore, the 
proposed wage index and impact tables associated with the FY 2018 IPPS/
LTCH PPS proposed rule (which are available via the Internet on the CMS 
Web site) did not reflect the imputed floor policy, and there was no 
proposed national budget neutrality adjustment for the imputed floor 
for FY 2018. We invited public comments on our proposal not to extend 
the imputed floor for FY 2018 and subsequent years.
    We are presenting below summaries of the public comments we 
received and our responses.
    Comment: Several commenters supported CMS' proposal to allow the 
imputed floor policy to expire. One commenter stated that the imputed 
floor policy only benefited two States at the expense of other States 
due to national budget neutrality. Another commenter stated the imputed 
floor policy should only apply when required by statute.
    Response: We appreciate the positions of commenters that support 
the proposal not to extend the imputed floor. In the FY 2005 IPPS final 
rule (69 FR 49110), we adopted the imputed floor policy for all-urban 
States under the authority of section 1886(d)(3)(E) of the Act, which 
gives the Secretary broad authority to adjust the proportion (as 
estimated by the Secretary from time to time) of hospitals' costs which 
are attributable to wages and wage-related costs, of the DRG 
prospective payment rates for area differences in hospital wage levels 
by a factor (established by the Secretary). Therefore, we believe that 
we have the discretion to adopt a policy that would adjust wage indexes 
in the stated manner. We adopted the imputed floor policy to address 
concerns from hospitals in all-urban States and subsequently extended 
it through notice-and-comment rulemaking. While we understand the 
commenters' concerns that the application of the imputed floors 
requires transfer of payments from hospitals in States with rural 
hospitals but where the rural floor is not applied to hospitals in 
States where the rural or imputed floor is applied, we also received 
many comments expressing concern about discontinuing the imputed floor 
(as further discussed below). As explained further below, we have 
decided to

[[Page 38140]]

temporarily extend the imputed floor for 1 year while we continue to 
consider the comments we received and assess whether to continue or 
discontinue the imputed floor policy for the long term.
    Comment: Several commenters disagreed with the proposal to allow 
the imputed floor to expire, and stated that CMS should maintain the 
status quo and continue to extend the imputed floor in 1-year 
increments until the entirety of Medicare wage index reform is 
complete. The commenters stated that, by eliminating the imputed floor 
wage index, CMS is alleviating only a fraction of the combined payment 
transfer from the application of the rural and imputed floors. The 
commenters pointed out that, combined, hospitals in the three all-urban 
States (New Jersey, Rhode Island, and Delaware) accounted for less than 
10 percent of the 397 hospitals nationally that received either the 
rural or imputed floor last year. The commenters conveyed that CMS 
indicated in the FY 2014 and FY 2015 IPPS/LTCH PPS final rules, both of 
which extended the imputed floor for an additional year, that CMS would 
continue to explore potential wage index reform, and that, as of the FY 
2018 IPPS/LTCH PPS proposed rule, such reform has not occurred.
    Multiple commenters indicated that eliminating the imputed floor 
would create the same uneven playing field that existed prior to 2005, 
in response to which CMS initially established the policy. The 
commenters stated that the anomaly originally cited by CMS (that is, 
that hospitals in all-urban States with predominant labor market areas 
do not have any type of protection, or ``floor,'' from declines in 
their wage index) would exist again if the imputed floor policy were 
discontinued.
    One commenter indicated that the imputed floor is an equitable 
measure established by CMS which provides relief to hospitals in all-
urban States. The commenter stated that this longstanding policy has 
reduced volatility and increased the equitability of the wage index 
system. The commenter believed that CMS should not remove the imputed 
floor from all-urban States. Regarding CMS' concern with the payment 
impact of the existing imputed floor policy on States with rural 
hospitals that do not have urban hospitals that benefit from a rural 
floor, the commenter believed this should be reviewed as part of a 
comprehensive Medicare wage index reform. The commenter suggested that 
CMS consider all recommended changes to the imputed floor as part of 
wage index reform, and that the public have a chance to provide input 
to CMS prior to finalizing any decisions regarding elimination of the 
imputed rural floor. The commenter further suggested that if there is a 
decision made to eliminate the imputed rural floor, the decision should 
include a 2-year notification period to allow impacted hospitals 
appropriate planning time. The commenter stated that CMS has extended 
such advance notice, including changes concerning the wage index, for 
this purpose in the past.
    Several commenters stated they would like to make the imputed floor 
wage index provision permanent in the FY 2018 IPPS/LTCH PPS final rule. 
The commenters pointed out that CMS has upheld the imputed floor for 
the past 12 years as a valuable method of maintaining equitable wage 
index protections for all-urban States, consistent with those that 
exist for States with rural areas. The commenters referenced CMS' 
explanation from the FY 2005 IPPS final rule (69 FR 49110) for adopting 
the imputed floor, such as: ``because there is no `floor' to protect 
those hospitals not located in the predominant labor market area from 
facing continued declines in their wage index, it becomes increasingly 
difficult for those hospitals to continue to compete for labor.'' The 
commenters stated it is imperative that the imputed floor policy be 
made permanent to ensure that its State's hospitals are not 
artificially disadvantaged simply because of geography and population.
    In addition, the commenters stated that there are many Medicare 
payment programs that redirect scarce Medicare funding to a class of 
unique hospitals. Not all States have hospitals that benefit from these 
programs. For example, the commenters stated that CMS makes payments to 
CAHs at a rate of 101 percent of their cost. The commenters noted that 
some States do not have any hospitals that qualify as a CAH and do not 
benefit from this program. The commenters further stated that while 
CAHs are paid outside the IPPS program, the dollars continue to come 
from a finite Medicare trust fund. The commenters believed that this 
represents a transfer of payments from hospitals in States without any 
CAHs, such as all-urban States, into States with CAHs, similar to the 
transfer of payments CMS cites as its rationale to discontinue the 
imputed floor. The commenters indicated that there is precedent for CMS 
to restore, in the final rule, policies or provisions that were 
scheduled for elimination or discontinuation in the proposed rule. The 
commenters pointed out that, in the FY 2012 IPPS/LTCH PPS proposed 
rule, CMS stated that the imputed floor would expire on September 30, 
2011. However, in the final rule, CMS announced that the imputed floor 
provision was extended for 2 additional years, through FY 2013 
(September 30, 2013).
    One commenter supported the alternative methodology for calculating 
the imputed rural floor in Rhode Island. According to the commenter, 
the methodology has been used since FY 2013 and has been key for the 
State's hospitals and maintaining access to care for residents of Rhode 
Island. The commenter stated that the alternative methodology for 
calculating the imputed floor appropriately addresses a hospital wage 
index reclassification system that does not reflect Rhode Island's 
characteristics. The commenter further expressed that the alternative 
methodology for calculating the imputed rural floor protects its 
hospitals from falling to some of the lowest reimbursement rates in the 
country, at the same time while competing with some of the most highly 
reimbursed urban hospitals. The commenter referenced FY 2013, where a 
majority of hospitals in Rhode Island reported operating losses and a 
cumulative operating margin of negative 2.0 percent. The commenter 
pointed out that since implementing the alternative methodology for 
calculating the imputed floor, there has been improvement in the 
overall fiscal condition of Rhode Island's health care system. 
According to the commenter, the alternative methodology provided nearly 
$29 million to hospitals in Rhode Island last year. The commenter was 
concerned that any discontinuation of this policy would be devastating 
for a State still facing challenging economic conditions.
    Response: While the commenters raised concerns that, if the imputed 
floor were discontinued, hospitals in all-urban States would again be 
disadvantaged by the absence of rural hospitals to set a wage index 
floor for those States, as well as concerns about the fiscal impacts of 
discontinuing the rural floor, we also have expressed concerns about 
continuing the imputed floor policy. As we discussed in the FY 2008 
IPPS/LTCH PPS final rule (72 FR 47322), the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51593), and the FY 2018 IPPS/LTCH PPS proposed rule (82 FR 
19905), the application of the rural and imputed floors requires 
transfer of payments from hospitals in States with rural hospitals but 
where the rural floor is not applied to hospitals in States where the 
rural or imputed floor is applied. While the three all-urban States may 
count for a fraction of all States that

[[Page 38141]]

received the rural and imputed floor last year, the imputed rural floor 
methodology still creates a disadvantage in the application of the wage 
index to hospitals in States with rural hospitals but no urban 
hospitals receiving the rural floor. As discussed below, given the many 
comments we received both in support of and against our proposal to 
discontinue the imputed floor, we believe it would be appropriate to 
temporarily extend the imputed floor for an additional year, while we 
continue to consider these comments and further assess the effects of 
this policy and whether to continue or discontinue the policy for the 
long term.
    In response to the comment suggesting that we maintain the status 
quo and continue to extend the imputed floor until wage index reform is 
complete, we note that section 3137(b) of the Affordable Care Act 
required the Secretary to submit to Congress a report that includes a 
plan to reform the Medicare wage index applied under the IPPS. We 
submitted the report to Congress on April 11, 2012, and have posted the 
report and other information regarding wage index reform on the CMS Web 
site at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html. While in past years we have 
stated that we continue to explore wage index reforms while extending 
the imputed floor in increments (for example, 78 FR 50589 through 50590 
and 79 FR 49969 through 49970), we note that it has already been many 
years since our Report to Congress was issued with no new legislation 
from Congress to comprehensively reform the wage index. Therefore, we 
do not agree with the commenter that the imputed floor should continue 
until such time as comprehensive wage index reform may be implemented.
    In addition, we note that the imputed floor was originally 
authorized for only 3 years. In the FY 2005 IPPS final rule (69 FR 
49110), we indicated that during the 3 years that the policy is in 
effect, we would determine whether to make additional changes to the 
policy or eliminate it. Given that we had indicated in the FY 2005 IPPS 
final rule that the provision was set to expire after 3 years, and that 
we have temporarily extended the provision in increments for several 
subsequent years due to the reasons discussed earlier, we believe that 
hospitals in all-urban States should not rely on the policy to continue 
permanently or until wage index reform is implemented. Furthermore, 
because the policy has been temporarily extended in increments for 
several years, we believe that hospitals have had ample notice that the 
policy could ultimately expire, and thus should not rely on a 
notification period as requested by the commenter. However, we would 
provide the public a chance to provide input to CMS through the 
rulemaking process prior to finalizing any decisions regarding 
elimination of the imputed rural floor.
    Finally, regarding the comparison made by commenters between the 
CAH payment methodology and the imputed floor methodology with respect 
to the transfer of payments, we disagree with this comparison. Because 
there is no national budget neutrality requirement relating to CAH 
payments (as there is with the imputed floor methodology), there is no 
transfer of payments from hospitals in States without any CAHs to 
hospitals in States with CAHs, similar to that which exists as a result 
of the application of the imputed floor. Under sections 1814(l) and 
1834(g) of the Act, payments made to CAHs for inpatient and outpatient 
services are generally based on 101 percent of the reasonable costs of 
the CAH in providing such services. Reasonable cost is defined in 
section 1861(v)(1)(A) of the Act and determined in accordance with the 
regulations under 42 CFR part 413.
    Comment: One commenter stated that, in more recent years, the rural 
floor wage index adjustment has been a cause for concern nationally 
because urban hospitals in certain States have had their wage indexes 
set equal to the highest wage index of any rural hospital in their 
respective State. As a result, the commenter pointed out, hospitals in 
such States draw Medicare money away from hospitals in other States. 
The commenter reemphasized its previous recommendations, which were 
also included in the MedPAC's 2007 Report to Congress, that Congress 
repeal the existing hospital wage index. The commenter appeared to be 
requesting support for legislation which would include: Removing the 
more than 900 individual hospital reclassifications, and other 
exceptions that occur each year, which are either stipulated in law or 
implemented through regulation, and also giving the Secretary authority 
to establish a new wage index system, using compensation data from all 
employees, together with hospital industry-specific occupational 
weights, and adjusting at the county level to smooth large differences 
between counties; and a transition period to mitigate large changes in 
wage index values. The commenter indicated that the system it proposed 
is similar to recommendations made by the Institute of Medicine and 
that its sets of recommendations would eliminate the need for the 
system of geographic reclassification and exceptions that is currently 
in place.
    Response: We thank the commenter for its comments and its 
recommendations regarding modifications to the hospital wage index. 
However, we note that we do not have authority to repeal or revise the 
existing wage index statutory provisions, including the rural floor 
statutory provisions at section 4410(b) of the BBA and section 3141 of 
the Affordable Care Act.
    Comment: One commenter opposed the continued application of the 
nationwide rural floor budget neutrality adjustment as described in the 
proposed rule. The commenter recognized that the impetus for the policy 
is a Federal statute, not regulation. The commenter discussed section 
3141 of the Affordable Care Act which established a policy of national 
budget neutrality for the application of the rural and imputed floors 
to the Medicare wage index. The commenter conveyed that, coupled with 
the orchestrated conversion of a single facility in Massachusetts--
Nantucket Cottage Hospital--from a CAH to an IPPS hospital, section 
3141 of the Affordable Care Act allows hospitals to unfairly manipulate 
the Medicare payment system and reward hospitals in Massachusetts and a 
few other States at the expense of most other hospitals across the 
nation. The commenter stated that the adverse consequences of 
nationwide rural floor budget neutrality have been recognized and 
commented upon by CMS, MedPAC, and many others over the past several 
years. Until this policy is corrected, the commenter stated that the 
Medicare wage index system cannot possibly accomplish its objective of 
ensuring that payments for the wage component of labor accurately 
reflect actual wage costs.
    Other commenters stated ``that the current application of the rural 
floor is broken'' and referenced how a single hospital can shift such a 
large amount of payments and have it paid for by many other States in 
the nation. The commenters explained that section 4410 of the BBA 
established a rural floor. The commenters noted that, by careful 
selection of specific hospitals converting from CAHs to hospitals paid 
under the IPPS, States could game the system and exploit this 
provision, shifting millions of dollars into that State. These 
commenters stated that the most notable example of such gaming is a 
hospital located on Nantucket Island off the coast of Massachusetts. 
This single hospital sets the wage index for all hospitals in 
Massachusetts. The commenters stated that, according to

[[Page 38142]]

rural floor impact statements provided by CMS in the annual IPPS final 
rule from FY 2012 through FY 2017, this one hospital will bring a 
projected $1.3 billion into the commonwealth of Massachusetts. The 
commenter pointed out that the inequity of this provision recently was 
highlighted in a March 2017 Office of Inspector General (OIG) report 
showing how a single hospital overreported dollars and underreported 
hours, driving up the average hourly wage. According to the commenter, 
the OIG estimated that this error resulted in more than $133 million in 
Medicare overpayments to be paid to Massachusetts hospitals. The 
commenters ``urged CMS to establish a national wage index ceiling (for 
example, 1.33) that can be used to increase the national wage index 
floor to a reasonable level (for example, .874)''. In addition, the 
commenters opposed the application of a nationwide rural floor budget 
neutrality adjustment and requested that CMS overturn section 3141 of 
the Affordable Care Act and restore integrity to the hospital wage 
index system.
    Response: We thank the commenters for their comments and 
suggestions. Because there is no national wage index floor, we are not 
clear what the commenter meant with respect to its request to establish 
a national wage index ceiling that can be used to increase the national 
wage index floor to a reasonable level. Therefore, we are unable to 
respond to this suggestion made by the commenter. As we stated earlier, 
section 4410 of the BBA requires the application of the rural floor and 
section 3141 of the Affordable Care Act requires a uniform, national 
budget neutrality adjustment for the rural floor. We do not have 
authority to repeal or revise these laws.
    Comment: One commenter suggested that CMS use its authority to 
establish a temporary wage index floor for Puerto Rico in the interest 
of preventing a decrease in Medicare payments due to Puerto Rico's 
lower than national average wages.
    Response: We appreciate the suggestions provided by the commenter 
regarding a temporary wage index floor for Puerto Rico. However, this 
comment is outside the scope of the proposed rule.
    We appreciate the positions of commenters that both supported and 
opposed the proposal to allow the imputed floor policy to expire. After 
consideration of public comments we received, we believe extending the 
imputed floor policy for 1 more year through FY 2018 is appropriate 
while we continue to consider the many comments we received and whether 
to continue or discontinue the imputed floor for the long term. 
Therefore, we are extending the imputed floor policy under both the 
original methodology and the alternative methodology for an additional 
year, through September 30, 2018, and will address this issue again in 
our FY 2019 rulemaking. We also are revising the regulations at 
Sec. Sec.  412.64(h)(4) and (h)(4)(vi) to reflect the 1-year extension 
of the imputed floor, through September 30, 2018.
    The wage index and impact tables associated with this FY 2018 IPPS/
LTCH PPS final rule (which are available on the Internet via 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 2018. There are 17 hospitals in New Jersey 
that will receive an increase in their FY 2018 wage index due to the 
continued application of the imputed floor policy under the original 
methodology, and 10 hospitals in Rhode Island and 6 hospitals in 
Delaware that will benefit under the alternative methodology.
3. State Frontier Floor for FY 2018
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000. 
(We refer readers to the regulations at 42 CFR 412.64(m) and to a 
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) In the FY 2018 IPPS/
LTCH PPS proposed rule (82 FR 19905), we did not propose any changes to 
the frontier floor policy for FY 2018. We stated in the proposed rule 
that 52 hospitals would receive the frontier floor value of 1.0000 for 
their FY 2018 wage index. These hospitals are located in Montana, 
Nevada, North Dakota, South Dakota, and Wyoming.
    We did not receive any public comments on the application of the 
State frontier floor for 2018. In this final rule, 49 hospitals will 
receive the frontier floor value of 1.0000 for their FY 2018 wage 
index. These hospitals are located in Montana, Nevada, North Dakota, 
South Dakota, and Wyoming.
    The areas affected by the final rural and frontier floor policies 
for the FY 2018 wage index are identified in Table 2 associated with 
this final rule, which is available via the Internet on the CMS Web 
site.

H. FY 2018 Wage Index Tables

    In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49498 and 49807 
through 49808), we finalized a proposal to streamline and consolidate 
the wage index tables associated with the IPPS proposed and final rules 
for FY 2016 and subsequent fiscal years. Prior to FY 2016, the wage 
index tables had consisted of 12 tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 
4D, 4E, 4F, 4J, 9A, and 9C) that were made available via the Internet 
on the CMS Web site. Effective beginning FY 2016, with the exception of 
Table 4E, we streamlined and consolidated 11 tables (Tables 2, 3A, 3B, 
4A, 4B, 4C, 4D, 4F, 4J, 9A, and 9C) into 2 tables (Tables 2 and 3). We 
refer readers to section VI. of the Addendum to this final rule for a 
discussion of the final wage index tables for FY 2018.

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

1. General Policies and Effects of Reclassification and Redesignation
    Under section 1886(d)(10) of the Act, the Medicare Geographic 
Classification Review Board (MGCRB) considers applications by hospitals 
for geographic reclassification for purposes of payment under the IPPS. 
Hospitals must apply to the MGCRB to reclassify not later than 13 
months prior to the start of the fiscal year for which reclassification 
is sought (usually by September 1). Generally, hospitals must be 
proximate to the labor market area to which they are seeking 
reclassification and must demonstrate characteristics similar to 
hospitals located in that area. The MGCRB issues its decisions by the 
end of February for reclassifications that become effective for the 
following fiscal year (beginning October 1). The regulations applicable 
to reclassifications by the MGCRB are located in 42 CFR 412.230 through 
412.280. (We refer readers to a discussion in the FY 2002 IPPS final 
rule (66 FR 39874 and 39875) regarding how the MGCRB defines mileage 
for purposes of the proximity requirements.) The general policies for 
reclassifications and redesignations and the policies for the effects 
of hospitals' reclassifications and redesignations on the wage index 
are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012 
final wage index (76 FR 51595 and 51596). In addition, in the FY 2012 
IPPS/LTCH PPS final rule, we discussed the effects on the wage index of 
urban hospitals reclassifying to rural areas under 42 CFR 412.103. 
Hospitals that are geographically located in States without any rural 
areas are ineligible to apply for rural reclassification in accordance 
with the provisions of 42 CFR 412.103.
    On April 21, 2016, we published an interim final rule with comment 
period

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(IFC) in the Federal Register (81 FR 23428 through 23438) that included 
provisions amending our regulations to allow hospitals nationwide to 
have simultaneous Sec.  412.103 and MGCRB reclassifications. For 
reclassifications effective beginning FY 2018, a hospital may acquire 
rural status under Sec.  412.103 and subsequently apply for a 
reclassification under the MGCRB using distance and average hourly wage 
criteria designated for rural hospitals. In addition, we provided that 
a hospital that has an active MGCRB reclassification and is then 
approved for redesignation under Sec.  412.103 will not lose its MGCRB 
reclassification; such a hospital receives a reclassified urban wage 
index during the years of its active MGCRB reclassification and is 
still considered rural under section 1886(d) of the Act and for other 
purposes.
    We discussed that when there is both a Sec.  412.103 redesignation 
and an MGCRB reclassification, the MGCRB reclassification controls for 
wage index calculation and payment purposes. We exclude hospitals with 
Sec.  412.103 redesignations from the calculation of the reclassified 
rural wage index if they also have an active MGCRB reclassification to 
another area. That is, if an application for urban reclassification 
through the MGCRB is approved, and is not withdrawn or terminated by 
the hospital within the established timelines, we consider the 
hospital's geographic CBSA and the urban CBSA to which the hospital is 
reclassified under the MGCRB for the wage index calculation. We refer 
readers to the April 21, 2016 IFC (81 FR 23428 through 23438) and the 
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930) for a full 
discussion of the effect of simultaneous reclassifications under both 
the Sec.  412.103 and the MGCRB processes on wage index calculations.
2. MGCRB Reclassification and Redesignation Issues for FY 2018
a. FY 2018 Reclassification Requirements and Approvals
    As previously stated, under section 1886(d)(10) of the Act, the 
MGCRB considers applications by hospitals for geographic 
reclassification for purposes of payment under the IPPS. The specific 
procedures and rules that apply to the geographic reclassification 
process are outlined in regulations under 42 CFR 412.230 through 
412.280.
    At the time this final rule was constructed, the MGCRB had 
completed its review of FY 2018 reclassification requests. Based on 
such reviews, there are 374 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2018. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2018, 
hospitals reclassified beginning in FY 2016 or FY 2017 are eligible to 
continue to be reclassified to a particular labor market area based on 
such prior reclassifications for the remainder of their 3-year period. 
There were 245 hospitals approved for wage index reclassifications in 
FY 2016 that will continue for FY 2018, and 246 hospitals approved for 
wage index reclassifications in FY 2017 that will continue for FY 2018. 
Of all the hospitals approved for reclassification for FY 2016, FY 
2017, and FY 2018, based upon the review at the time of this final 
rule, 865 hospitals are in a MGCRB reclassification status for FY 2018.
    Under the regulations at 42 CFR 412.273, hospitals that have been 
reclassified by the MGCRB are permitted to withdraw their applications 
if the request for withdrawal is received by the MGCRB within 45 days 
of the publication of CMS' annual notice of proposed rulemaking 
concerning changes to the inpatient hospital prospective payment system 
and proposed payment rates for the fiscal year for which the 
application has been filed. (We note that in section III.I.4. of the 
preamble of this final rule, we did not finalize our proposal to revise 
the above described regulation text to specify that written notice to 
the MGCRB must be provided within 45 days from the date of public 
display of the proposed rule at the Office of the Federal Register.) 
For information about withdrawing, terminating, or canceling a previous 
withdrawal or termination of a 3-year reclassification for wage index 
purposes, we refer readers to Sec.  412.273, as well as the FY 2002 
IPPS final rule (66 FR 39887 through 39888) and the FY 2003 IPPS final 
rule (67 FR 50065 through 50066). Additional discussion on withdrawals 
and terminations, and clarifications regarding reinstating 
reclassifications and ``fallback'' reclassifications were included in 
the FY 2008 IPPS final rule (72 FR 47333).
    Changes to the wage index that result from withdrawals of requests 
for reclassification, terminations, wage index corrections, appeals, 
and the Administrator's review process for FY 2018 are incorporated 
into the wage index values published in this FY 2018 IPPS/LTCH PPS 
final rule. These changes affect not only the wage index value for 
specific geographic areas, but also the wage index value that 
redesignated/reclassified hospitals receive; that is, whether they 
receive the wage index that includes the data for both the hospitals 
already in the area and the redesignated/reclassified hospitals. 
Further, the wage index value for the area from which the hospitals are 
redesignated/reclassified may be affected.
    Comment: MedPAC and other commenters stated that the increasing