[Federal Register Volume 74, Number 165 (Thursday, August 27, 2009)]
[Rules and Regulations]
[Pages 43754-44236]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18663]
[[Page 43753]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, 415, et al.
Medicare Program; Changes to the Hospital Inpatient Prospective Payment
Systems for Acute Care Hospitals and Fiscal Year 2010 Rates; and
Changes to the Long Term Care Hospital Prospective Payment System and
Rate Years 2010 and 2009 Rates; Final Rule
Federal Register / Vol. 74, No. 165 / Thursday, August 27, 2009 /
Rules and Regulations
[[Page 43754]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 415, 485, and 489
[CMS-1406-F and IFC; CMS-1493-F; CMS-1337-F]
RIN 0938-AP33; RIN 0938-AP39; RIN 0938-AP76
Medicare Program; Changes to the Hospital Inpatient Prospective
Payment Systems for Acute Care Hospitals and Fiscal Year 2010 Rates;
and Changes to the Long-Term Care Hospital Prospective Payment System
and Rate Years 2010 and 2009 Rates
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rules and interim final rule with comment period.
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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems, and to implement certain provisions made
by the TMA, Abstinence Education, and QI Program Extension Act of 2007,
the Medicare Improvements for Patients and Providers Act of 2008, and
the American Recovery and Reinvestment Act of 2009. In addition, in the
Addendum to this final rule, we describe the changes to the amounts and
factors used to determine the rates for Medicare acute care hospital
inpatient services for operating costs and capital-related costs. These
changes are applicable to discharges occurring on or after October 1,
2009. We also are setting forth the update to the rate-of-increase
limits for certain hospitals excluded from the IPPS that are paid on a
reasonable cost basis subject to these limits. The updated rate-of-
increase limits are effective for cost reporting periods beginning on
or after October 1, 2009.
Second, we are updating the payment policy and the annual payment
rates for the Medicare prospective payment system (PPS) for inpatient
hospital services provided by long-term care hospitals (LTCHs) for rate
year (RY) 2010, including responding to public comments received on a
June 3, 2009 supplemental proposed rule relating to the proposed RY
2010 Medicare Severity Long-Term Care Diagnosis-Related Groups (MS-LTC-
DRG) relative weights and the proposed RY 2010 high-cost outlier (HCO)
fixed-loss amount. In the Addendum to this final rule, we also set
forth the changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS for RY 2010. These changes are applicable
to discharges occurring on or after October 1, 2009. In addition, we
are responding to public comments received on and finalizing a June 3,
2009 interim final rule with comment period that revised the MS-LTC-DRG
relative weights for payments under the LTCH PPS for the remainder of
FY 2009 (that is, from June 3, 2009, through September 30, 2009).
Third, in this final rule, we are responding to public comments we
received on, and finalizing, two May 2008 interim final rules with
comment period that implemented certain provisions of section 114 of
the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA, Pub. L.
110-173) relating to payments to LTCHs and LTCH satellite facilities,
the establishment of LTCHs and LTCH satellite facilities, and increases
in beds in existing LTCHs and LTCH satellite facilities under the LTCH
PPS.
Fourth, through an interim final rule with comment period as part
of this document, we are implementing those provisions of the ARRA that
amended certain provisions of section 114 of the MMSEA relating to
payments to LTCHs and LTCH satellite facilities and increases in beds
in existing LTCHs and LTCH satellite facilities under the LTCH PPS.
DATES: Effective Dates: These final rules are effective on October 1,
2009, with the following exceptions:
The provisions of Sec. Sec. 412.534(c) through (e) and (h) and
412.536(a)(2) are effective for cost reporting periods beginning on or
after July 1, 2007, or October 1, 2007, as applicable. In accordance
with sections 1871(e)(1)(A)(i) and (ii) of the Social Security Act, the
Secretary has determined that retroactive application of the provisions
of Sec. Sec. 412.534(c) through (e) and (h) and 412.5536(a)(2) is
necessary to comply with the statute and that failure to apply the
changes retroactively would be contrary to public interest.
Comment Period: To be assured consideration, comments on the
interim final rule with comment period (CMS-1406-IFC) that appears as
section XI. of the preamble of this document must be received at one of
the addresses provided below, no later than 5 p.m. E.S.T. on October
26, 2009.
ADDRESSES: When commenting on issues presented in the interim final
rule with comment period, please refer to file code CMS-1406-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation at http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the file code CMS-1406-IFC to
submit comments on this interim final rule.
2. By regular mail. You may mail written comments (one original and
two copies) to the following address only: Centers for Medicare &
Medicaid Services, Department of Health and Human Services, Attention:
CMS-1406-IFC, P.O. Box 8011, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1406-IFC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to either of the following addresses: a.
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.) b. 7500
Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
[[Page 43755]]
FOR FURTHER INFORMATION, CONTACT: Tzvi Hefter, (410) 786-4487, and Ing-
Jye Cheng, (410) 786-4548, Operating Prospective Payment, MS-DRGs, Wage
Index, New Medical Service and Technology Add-On Payments, Hospital
Geographic Reclassifications, Capital Prospective Payment, Excluded
Hospitals, Direct and Indirect Graduate Medical Education Payments,
Disproportionate Share Hospital (DSH), Critical Access Hospital (CAH),
EMTALA Hospital Emergency Services, and Hospital-within-Hospital
Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights for FYs 2009 and 2010 Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Quality Data for Annual Payment Update
Issues.
Lisa Grabert, (410) 786-6827, Hospital-Acquired Conditions.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions at that Web site to
view public comments.
Comments received timely will also be available for public
inspection, generally beginning approximately 3 weeks after publication
of a document, at the headquarters of the Centers for Medicare &
Medicaid Services, 7500 Security Boulevard, Baltimore, Maryland 21244,
Monday through Friday of each week from 8:30 a.m. to 4 p.m. To schedule
an appointment to view public comments, phone 1-800-743-3951.
Electronic Access
This Federal Register document is also available from the Federal
Register online database through GPO Access, a service of the U.S.
Government Printing Office. Free public access is available on a Wide
Area Information Server (WAIS) through the Internet and via
asynchronous dial-in. Internet users can access the database by using
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password required).
Acronyms
3M 3M Health Information System
AAHKS American Association of Hip and Knee Surgeons
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASC Ambulatory surgical center
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CY Calendar year
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
FAH Federation of Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FHA Federal Health Architecture
FIPS Federal information processing standards
FQHC Federally qualified health center
FTE Full-time equivalent
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HACs Hospital-acquired conditions
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
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-a-hospital
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
MA Medicare Advantage
MAC Medicare Administrative Contractor
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MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MCV Major cardiovascular condition
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
MPN Medicare provider number
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NQF National Quality Forum
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991 (Pub.
L. 104-113)
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS'] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1996, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB Executive Office of Management and Budget
OPM U.S. Office of Personnel Management
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PIP Periodic interim payment
PLI Professional liability insurance
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement (System)
QIG Quality Improvement Group, CMS
QIO Quality Improvement Organization
RCE Reasonable compensation equivalent
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSO Short-stay outlier
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law
97-248
TEP Technical expert panel
TMA TMA [Transitional Medical Assistance], Abstinence Education, and
QI [Qualifying Individuals] Programs Extension Act of 2007, Public
Law 110-90
TJA Total joint arthroplasty
UHDDS Uniform hospital discharge data set
Table of Contents
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded From the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
B. Provisions of the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA)
C. Provisions of the American Recovery and Reinvestment Act of
2009 (ARRA)
D. Issuance of a Notice of Proposed Rulemaking
1. Proposed Changes to MS-DRG Classifications and Recalibrations
of Relative Weights
2. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
3. Proposed Rebasing and Revision of the Hospital Market Baskets
for Acute Care Hospitals
4. Other Decisions and Proposed Changes to the IPPS for
Operating Costs and GME Costs
5. FY 2010 Policy Governing the IPPS for Capital-Related Costs
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
7. Proposed Changes to the LTCH PPS
8. Determining Proposed Prospective Payment Operating and
Capital Rates and Rate-of-Increase Limits for Acute Care Hospitals
9. Determining Proposed Prospective Payments Rates for LTCHs
10. Impact Analysis
11. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
12. Discussion of Medicare Payment Advisory Commission
Recommendations
E. Finalization of an Interim Final Rule With Comment Period
That Revised the MS-LTC-DRG Relative Weights for FY 2009 (for June
3, 2009 Through September 30, 2009)
F. Finalization of Two LTCH PPS Interim Final Rules With Comment
Period Issued in May 2008
G. Interim Final Rule With Comment Period That Implements
Certain Provisions of the ARRA Relating to Payments to LTCHs and
LTCH Satellite Facilities
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
1. General
2. Yearly Review for Making MS-DRG Changes
C. Adoption of the MS-DRGs in FY 2008
D. FY 2010 MS-DRG Documentation and Coding Adjustment, Including
the Applicability to the Hospital-Specific Rates and the Puerto
Rico-Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Prospective Adjustment to the Average Standardized Amounts
Required by Section 7(b)(1)(A) of Public Law 110-90
3. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Public Law 110-90
4. Retrospective Evaluation of FY 2008 Claims Data
5. Adjustments for FY 2010 and Subsequent Years Authorized by
Section 7(b)(1)(A) of Public Law 110-90 and Section 1886(d)(3)(vi)
of the Act
6. Additional Adjustment for FY 2010 Authorized by Section
7(b)(1)(B) of Public Law 110-90
7. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
8. Documentation and Coding Adjustment to the Hospital-Specific
Rates for FY 2010 and Subsequent Years
9. Background on the Application of the Documentation and Coding
Adjustment to the Puerto Rico-Specific Standardized Amount
10. Documentation and Coding Adjustment to the Puerto Rico-
Specific Standardized Amount
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
a. Summary of the RTI Study of Charge Compression and CCR
Refinement
b. Summary of the Rand Corporation Study of Alternative Relative
Weight Methodologies
[[Page 43757]]
2. Summary of FY 2009 Changes and Discussion for FY 2010
3. Timeline for Revising the Medicare Cost Report
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Statutory Authority
2. HAC Selection Process
3. Collaborative Process
4. Selected HAC Categories
5. Public Input Regarding Selected and Potential Candidate HACs
6. POA Indicator Reporting
7. Additional Considerations Addressing the HAC and POA Payment
Provision
G. Changes to Specific MS-DRG Classifications
1. MDC 5 (Diseases and Disorders of the Circulatory System):
Intraoperative Fluorescence Vascular Angiography (IFVA)
2. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue): Infected Hip and Knee Replacements
3. Medicare Code Editor (MCE) Changes
a. Diagnoses Allowed for Males Only Edit
b. Manifestation Codes as Principal Diagnosis Edit
c. Invalid Diagnosis or Procedure Code
d. Unacceptable Principal Diagnosis
e. Creation of New Edit Titled ``Wrong Procedure Performed''
f. Procedures Allowed for Females Only Edit
4. Surgical Hierarchies
5. Complication or Comorbidity (CC) Exclusions List
a. Background
b. CC Exclusions List for FY 2010
6. Review of Procedure Codes in MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 to MDCs
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
c. Adding Diagnosis or Procedure Codes to MDCs
7. Changes to the ICD-9-CM Coding System
8. Other Issues Not Addressed in the Proposed Rule
a. Administration of Tissue Plasminogen Activator (tPA) (rtPA)
b. Coronary Artery Bypass Graft (CABG) With Intraoperative
Angiography
c. Insertion of Gastrointestinal Stent
H. Recalibration of MS-DRG Weights
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2010 Status of Technologies Approved for FY 2009 Add-On
Payments
4. FY 2010 Applications for New Technology Add-On Payments
a. The AutoLITT TM System
b. CLOLAR[supreg] (clofarabine) Injection
c. LipiScanTM Coronary Imaging System
d. Spiration[supreg] IBV[supreg] Valve System
e. TherOx Downstream[supreg] System
5. Technical Correction
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Requirements of Section 106 of the MIEA-TRHCA
1. Wage Index Study Required Under the MIEA-TRHCA
a. Legislative Requirement
b. Interim and Final Reports on Results of Acumen's Study
2. FY 2009 Policy Changes in Response to Requirements Under
Section 106(b) of the MIEA-TRHCA
a. Reclassification Average Hourly Wage Comparison Criteria
b. Within-State Budget Neutrality Adjustment for the Rural and
Imputed Floors
C. Core-Based Statistical Areas for the Hospital Wage Index
D. Occupational Mix Adjustment to the FY 2010 Wage Index
1. Development of Data for the FY 2010 Occupational Mix
Adjustment Based on the 2007-2008 Occupational Mix Survey
2. Calculation of the Occupational Mix Adjustment for FY 2010
E. Worksheet S-3 Wage Data for the FY 2010 Wage Index
1. Included Categories of Costs
2. Excluded Categories of Costs
3. Use of Wage Index Data by Providers Other Than Acute Care
Hospitals Under the IPPS
F. Verification of Worksheet S-3 Wage Data
G. Method for Computing the FY 2010 Unadjusted Wage Index
H. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2010 Occupational Mix Adjusted Wage Index
I. Revisions to the Wage Index Based on Hospital Redesignations
1. General
2. Effects of Reclassification/Redesignation
3. FY 2010 MGCRB Reclassifications
4. Redesignations of Hospitals Under Section 1886(d)(8)(B) of
the Act
5. Reclassifications Under Section 1886(d)(8)(B) of the Act
6. Reclassifications Under Section 508 of Public Law 108-173
J. FY 2010 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
K. Process for Requests for Wage Index Data Corrections
IV. Rebasing and Revision 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. Medicare Cost Reports
b. Other Data Sources
2. Final Cost Category Computation
3. Selection of Price Proxies
a. Wages and Salaries
b. Employment Benefits
c. Fuel, Oil, and Gasoline
d. Electricity
e. Water and Sewage
f. Professional Liability Insurance
g. Pharmaceuticals
h. Food: Direct Purchase
i. Food: Contract Services
j. Chemicals
k. Blood and Blood Products
l. Medical Instruments
m. Photographic Supplies
n. Rubber and Plastics
o. Paper and Printing Products
p. Apparel
q. Machinery and Equipment
r. Miscellaneous Products
s. Professional Fees: Labor-Related
t. Administrative and Business Support Services
u. All Other: Labor-Related Services
v. Professional Fees: Nonlabor-Related
w. Financial Services
x. Telephone Services
y. Postage
z. All Other: Nonlabor-Related Services
4. Labor-Related Share
C. Separate 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 and
GME Costs
A. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
1. Background
a. Overview
b. Hospital Quality Data Reporting Under Section 501(b) of
Public Law 108-173
c. Hospital Quality Data Reporting Under Section 5001(a) of
Public Law 109-171
2. Retirement of RHQDAPU Program Measures
3. Quality Measures for the FY 2011 Payment Determination and
Subsequent Years
a. Considerations in Expanding and Updating Quality Measures
Under the RHQDAPU Program
b. RHQDAPU Program Quality Measures for the FY 2011 Payment
Determination
4. Possible New Quality Measures for the FY 2012 Payment
Determination and Subsequent Years
5. Form, Manner, and Timing of Quality Data Submission
a. RHQDAPU Program Procedures for the FY 2011 Payment
Determination
b. RHQDAPU Program Disaster Extensions and Waivers
c. HACHPS Requirements for the FY 2011 Payment Determination
6. Chart Validation Requirements
a. Chart Validation Requirements and Methods for the FY 2011
Payment Determination
b. Chart Validation Requirements and Methods for the FY 2012
Payment Determination and Subsequent Years
c. Possible Supplements to the Chart Validation Process for the
FY 2013 Payment Determination and Subsequent Years
7. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2011 Payment Determination and Subsequent Years
8. Public Display Requirements for the FY 2011 Payment
Determination and Subsequent Years
[[Page 43758]]
9. Reconsideration and Appeal Procedures for the FY 2010 Payment
Determination
10. RHQDAPU Program Withdrawal Deadlines
11. Electronic Health Records
a. Background
b. EHR Testing of Quality Measures Submission
c. HITECH Act EHR Provisions
B. Medicare-Dependent, Small Rural Hospitals (MDHs): Budget
Neutrality Adjustment Factors for FY 2002-Based Hospital-Specific
Rate
1. Background
2. FY 2002-Based Hospital-Specific Rate
C. Rural Referral Centers (RRCs)
1. Case-Mix Index
2. Discharges
D. Indirect Medical Education (IME) Adjustment
1. Background
2. IME Adjustment Factor for FY 2010
3. IME-Related Changes in Other Sections of this Final Rule
E. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs)
1. Background
2. Policy Change Relating to the Inclusion of Labor and Delivery
Patient Days in the Medicare DSH Calculation
a. Background
b. Proposed and Final Policy Change
3. Policy Change Relating to Calculation of Inpatient Days in
the Medicaid Fraction in the Medicare DSH Calculation
a. Background
b. Proposed and Final Policy Change
4. Policy Change Relating to the Exclusion of Observation Beds
and Patient Days from the Medicare DSH Calculation
a. Background
b. Proposed and Final Policy Change
5. Public Comments Received Out of the Scope of the Proposed
Rule
F. Technical Correction to Regulations on Payments for
Anesthesia Services Furnished by Hospital or CAH Employed
Nonphysician Anesthetists or Obtained Under Arrangements
G. Payments for Direct Graduate Medical Education (GME) Costs
1. Background
2. Clarification of Definition of New Medical Residency Training
Program
3. Participation of New Teaching Hospitals in Medicare GME
Affiliated Groups
4. Technical Corrections to Regulations
H. Hospital Emergency Services Under EMTALA
1. Background
2. Changes Relating to Applicability of Sanctions Under EMTALA
I. Rural Community Hospital Demonstration Program
J. Technical Correction to Regulations Relating to Calculation
of the Federal Rate Under the IPPS
VI. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Exception Payments
C. New Hospitals
D. Hospitals Located in Puerto Rico
E. Proposed and Final Changes
1. FY 2010 MS-DRG Documentation and Coding Adjustment
a. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009
b. Prospective MS-DRG Documentation and Coding Adjustment to the
National Capital Federal Rate for FY 2010 and Subsequent Years
c. Documentation and Coding Adjustment to the Puerto Rico-
Specific Capital Rate
2. Revision to the FY 2009 IME Adjustment Factor
3. Other Changes for FY 2010
VII. Changes for Hospitals Excluded From the IPPS
A. Excluded Hospitals
B. Criteria for Satellite Facilities of Hospitals
C. Critical Access Hospitals (CAHs)
1. Background
2. Payment for Clinical Diagnostic Laboratory Tests Furnished by
CAHs
3. CAH Optional Method of Payment for Outpatient Services
4. Continued Participation by CAHs in Counties Redesignated as
Urban
D. Provider-Based Status of Facilities and Organizations: Policy
Changes
1. Background
2. Changes to the Scope of the Provider-Based Status Regulations
for CAHs
a. CAH-Based Clinical Diagnostic Laboratory Facilities
b. CAH-Based Ambulance Services
3. Technical Correction to Regulations
E. Report of Adjustment (Exceptions) Payments
VIII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for RY 2010
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
2. Criteria for Classification as a LTCH
a. Classification as a LTCH
b. Hospitals Excluded From the LTCH PPS
3. Limitation on Charges to Beneficiaries
4. Administrative Simplification Compliance Act (ASCA) and
Health Insurance Portability and Accountability Act (HIPAA)
Compliance
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-
LTC-DRG) Classifications and Relative Weights
1. Background
2. Patient Classifications Into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for RY 2010
3. Development of the RY 2010 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Data
c. Hospital-Specific Relative Value (HSRV) Methodology
d. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
e. Low-Volume MS-LTC-DRGs
f. Steps for Determining the RY 2010 MS-LTC-DRG Relative Weights
C. Changes to the LTCH Payment Rates and Other Changes to the RY
2010 LTCH PPS
1. Overview of Development of the LTCH Payment Rates
2. Market Basket for LTCHs Reimbursed Under the LTCH PPS
a. Overview
b. Market Basket Under the LTCH PPS for RY 2010
c. Market Basket Update for LTCHs for RY 2010
d. Labor-Related Share Under the LTCH PPS for RY 2010
3. Adjustment for Changes in LTCHs' Case-Mix Due to Changes in
Documentation and Coding Practices That Occurred in a Prior Period
a. Background
b. Evaluation of FY 2007 Claims Data
c. Evaluation of FY 2008 Claims Data
d. RY 2010 Documentation and Coding Adjustment
D. Technical Corrections of LTCH PPS Regulations
IX. Revisions to the FY 2009 Medicare Severity Long-Term Care
Diagnosis-Related Group (MS-LTC-DRG) Relative Weights: Finalization
of an Interim Final Rule With Comment Period
A. Overview
B. Changes to the FY 2009 MS-LTC-DRG Relative Weights
C. Summary of Public Comments Received on the June 3, 2009
Interim Final Rule With Comment Period and Our Responses
D. Finalization of the June 3, 2009 Interim Final Rule With
Comment Period
E. Regulatory Impact Analysis for the June 3, 2009 Interim Final
Rule With Comment Period
X. Finalization of Two Interim Final Rules With Comment Period That
Implemented Certain Provisions of Section 114 of the Medicare,
Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 110-173) Relating
to Payments to LTCHs and LTCH Satellite Facilities
A. Background
B. May 6, 2008 Interim Final Rule With Comment Period Provisions
Implementing Section 114(c)(3) of the MMSEA Regarding Certain Short-
Stay Outlier Cases
1. Background
2. Public Comments Received on the May 6, 2008 Interim Final
Rule With Comment Period Provisions Implementing Section 114(c)(3)
of the MMSEA
C. May 6, 2008 Interim Final Rule With Comment Period Provisions
Implementing Sections 114(e)(1) and (e)(2) of the MMSEA Regarding
the Standard Federal Rate for the 2008 LTCH PPS Rate Year
1. Background
2. Public Comments Received on the May 6, 2008 Interim Final
Rule With Comment Period Provisions Implementing Sections 114(e)(1)
and (e)(2) of the MMSEA
D. May 22, 2008 Interim Final Rule With Comment Period Provision
Implementing Sections 114(c)(1) and (c)(2) of the MMSEA Regarding
Payment Adjustment to LTCHs and LTCH Satellite Facilities
1. Background
[[Page 43759]]
2. Payment Adjustment to LTCHs and LTCH Satellite Facilities
Specified by Section 114(c) of the MMSEA
3. Public Comments Received on the May 22, 2008 Interim Final
Rule With Comment Period Implementing Section 114(c)(1) and (c)(2)
of the MMSEA Regarding Payment Adjustment to LTCHs and LTCH
Satellite Facilities
E. May 22, 2008 Interim Final Rule With Comment Period
Provisions Implementing Section 114(b) of the MMSEA Regarding
Moratorium on the Establishment of LTCHs, LTCH Satellite Facilities
and on the Increase in Number of Beds in Existing LTCHs or LTCH
Satellite Facilities
1. Background
2. Provisions of the May 22, 2008 Interim Final Rule With
Comment Period Implementing Section 114(d) of the MMSEA That
Established Moratoria on New LTCHs and LTCH Satellite Facilities and
on Bed Increases in Existing LTCHs and LTCH Satellite Facilities
3. Public Comments Received on the on the May 22, 2008 Interim
Final Rule With Comment Period Provisions Implementing the Exception
to the Moratorium on the Increase in Number of LTCHs Beds in
Existing LTCHs and LTCH Satellite Facilities
XI. Interim Final Rule with Comment Period Implementing Section 4302
of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111-
5) Relating to Payments to LTCHs and LTCH Satellite Facilities
A. Background
B. Amendments Relating to Payment Adjustment to LTCHs and LTCH
Satellite Facilities Made by Section 4302 of the ARRA
C. Amendments to the Moratorium on the Increase in Number of
Beds in Existing LTCHs or LTCH Satellite Facilities Made by Section
4302 of the ARRA
D. Response to Comments
E. Waiver of Proposed Rulemaking
F. Collection of Information Requirements
G. Regulatory Impact Analysis
XII. MedPAC Recommendations
XIII. Other Required Information
A. Requests for Data From the Public
B. Collection of Information Requirements
C. Additional Information Collection Requirements
1. Present on Admission (POA) Indicator Reporting
2. Add-On Payments for New Services and Technologies
3. Reporting of Hospital Quality Data for Annual Hospital
Payment Update
4. Occupational Mix Adjustment to the FY 2010 Index (Hospital
Wage Index Occupational Mix Survey)
5. Hospital Applications for Geographic Reclassifications by the
MGCRB
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, 2009
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2010
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. MS-DRG Relative Weights
D. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2010
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2010
C. Capital Input Price Index
IV. Changes to Payment Rates for Certain Excluded Hospitals: Rate-
of-Increase Percentages
V. Changes to the Payment Rates for the LTCH PPS for RY 2010
A. LTCH PPS Standard Federal Rate for RY 2010
B. Adjustment for Area Wage Levels Under the LTCH PPS for RY
2010
C. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
D. Computing the Adjusted LTCH PPS Federal Prospective Payments
for RY 2010
VI. Tables
Table 1A.--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (68.8 Percent Labor Share/31.2 Percent Nonlabor Share
If Wage Index Is Greater Than 1)
Table 1B.--National Adjusted Operating Standardized Amounts,
Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share If
Wage Index Is Less Than or Equal to 1)
Table 1C.--Adjusted Operating Standardized Amounts for Puerto
Rico, Labor/Nonlabor
Table 1D.--Capital Standard Federal Payment Rate
Table 1E.--LTCH Standard Federal Prospective Payment Rate
Table 2.--Acute Care Hospitals Case-Mix Indexes for Discharges
Occurring in Federal Fiscal Year 2008; Hospital Wage Indexes for
Federal Fiscal Year 2010; Hospital Average Hourly Wages for Federal
Fiscal Years 2008 (2004 Wage Data), 2009 (2005 Wage Data), and 2010
(2006 Wage Data); and 3-Year Average of Hospital Average Hourly
Wages
Table 3A.--FY 2010 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Urban Areas by CBSA
Table 3B.--FY 2010 and 3-Year Average Hourly Wage for Acute Care
Hospitals in Rural Areas by CBSA
Table 4A.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Urban Areas by CBSA and by State--
FY 2010
Table 4B.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals in Rural Areas by CBSA and by State--
FY 2010
Table 4C.--Wage Index and Capital Geographic Adjustment Factor
(GAF) for Acute Care Hospitals That Are Reclassified by CBSA and by
State--FY 2010
Table 4D-1.--Rural Floor Budget Neutrality Factors for Acute
Care Hospitals--FY 2010
Table 4D-2.--Urban Areas With Acute Care Hospitals Receiving the
Statewide Rural Floor or Imputed Floor Wage Index--FY 2010
Table 4E.--Urban CBSAs and Constituent Counties for Acute Care
Hospitals--FY 2010
Table 4F.--Puerto Rico Wage Index and Capital Geographic
Adjustment Factor (GAF) for Acute Care Hospitals by CBSA--FY 2010
Table 4J.--Out-Migration Adjustment for Acute Care Hospitals--FY
2010
Table 5.--List of Medicare Severity Diagnosis-Related Groups
(MS-DRGs), Relative Weighting Factors, and Geometric and Arithmetic
Mean Length of Stay--FY 2010
Table 6A.--New Diagnosis Codes
Table 6B.--New Procedure Codes
Table 6C.--Invalid Diagnosis Codes
Table 6D.--Invalid Procedure Codes
Table 6E.--Revised Diagnosis Code Titles
Table 6F.--Revised Procedure Code Titles
Table 6G.--Additions to the CC Exclusions List (Available
Through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6H.--Deletions from the CC Exclusions List (Available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6I.--Complete List of Complication and Comorbidity (CC)
Exclusions (Available only through the Internet on the CMS Web site
at: http:/www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6J.--Major Complication and Comorbidity (MCC) List
(Available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 6K.--Complication and Comorbidity (CC) List (Available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/)
Table 7A.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2008 MedPAR Update--March 2009
GROUPER V26.0 MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected
Percentile Lengths of Stay: FY 2008 MedPAR Update--March 2009
GROUPER V27.0 MS-DRGs
Table 8A.--Statewide Average Operating Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals--July 2009
Table 8B.--Statewide Average Capital Cost-to-Charge Ratios
(CCRs) for Acute Care Hospitals--July 2009
[[Page 43760]]
Table 8C.--Statewide Average Total Cost-to-Charge Ratios (CCRs)
for LTCHs--July 2009
Table 9A.--Hospital Reclassifications and Redesignations--FY
2010
Table 9C.--Hospitals Redesignated as Rural Under Section
1886(d)(8)(E) of the Act--FY 2010
Table 10.--Geometric Mean Plus the Lesser of .75 of the National
Adjusted Operating Standardized Payment Amount (Increased to Reflect
the Difference Between Costs and Charges) or .75 of One Standard
Deviation of Mean Charges by Medicare Severity Diagnosis-Related
Groups (MS-DRGs)--July 2009
Table 11.--MS-LTC-DRGs, Relative Weights, Geometric Average
Length of Stay, and Short-Stay Outlier Threshold for Discharges
Occurring From October 1, 2009 Through September 30, 2010 under the
LTCH PPS
Table 12A.--LTCH PPS Wage Index for Urban Areas for Discharges
Occurring From October 1, 2009 Through September 30, 2010
Table 12B.--LTCH PPS Wage Index for Rural Ares for Discharges
Occurring From October 1, 2009 Through September 30, 2010
Appendix A--Regulatory Impact Analysis
I. Overall Impact
II. Objectives of the IPPS
III. Limitations of Our Analysis
IV. Hospitals Included in and Excluded From the IPPS
V. Effects on Hospitals Excluded From the IPPS
VI. Quantitative Effects of the Policy Changes Under the IPPS for
Operating Costs
A. Basis and Methodology of Estimates
B. Analysis of Table I
C. Effects of the Changes to the MS-DRG Reclassifications and
Relative Cost-Based Weights (Column 1)
D. Effects of the Application of Recalibration Budget Neutrality
(Column 2)
E. Effects of Wage Index Changes (Column 3)
F. Application of the Wage Budget Neutrality Factor (Column 4)
G. Combined Effects of MS-DRG and Wage Index Changes (Column 5)
H. Effects of MGCRB Reclassifications (Column 6)
I. Effects of the Rural Floor and Imputed Floor, Including the
Transition to Apply Budget Neutrality at the State Level (Column 7)
J. Effects of the Wage Index Adjustment for Out-Migration
(Column 8)
K. Effects of All Changes (Column 9)
L. Effects of Policy on Payment Adjustments for Low-Volume
Hospitals
M. Impact Analysis of Table II
VII. Effects of Other Policy Changes
A. Effects of Policy on HACs, Including Infections
B. Effects of Policy Changes Relating to New Medical Service and
Technology Add-On Payments
C. Effects of Requirements for Hospital Reporting of Quality
Data for Annual Hospital Payment Update
D. Effects of Correcting the FY 2002-Based Hospital-Specific
Rates for MDHs
E. Effects of Policy Changes Relating to the Payment Adjustment
to Disproportionate Share Hospitals
F. Effects of Policy Revisions Related to Payments to Hospitals
for Direct GME
G. Effects of Policy Changes Relating to Hospital Emergency
Services under EMTALA
H. Effects of Implementation of Rural Community Hospital
Demonstration Program
I. Effects of Policy Changes Relating to Payments to Satellite
Facilities
J. Effects of Policy Changes Relating to Payments to CAHs
K. Effects of Policy Changes Relating to Provider-Based Status
of Facilities and Organizations
VIII. Effects of Changes in the Capital IPPS
A. General Considerations
B. Results
IX. Effects of Payment Rate Changes and Policy Changes Under the
LTCH PPS
A. Introduction and General Considerations
B. Impact on Rural Hospitals
C. Anticipated Effects of LTCH PPS Payment Rate Change and
Policy Changes
D. Effect on the Medicare Program
E. Effect on Medicare Beneficiaries
X. Alternatives Considered
XI. Overall Conclusion
A. Acute Care Hospitals
B. LTCHs
XII. Accounting Statements
A. Acute Care Hospitals
B. LTCHs
XIII. 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 2010
III. Secretary's Final Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
I. Background
A. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to pay for the capital-related costs of hospital inpatient
stays under a prospective payment system (PPS). Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of low-income patients, it
receives a percentage add-on payment applied to the DRG-adjusted base
payment rate. This add-on payment, known as the disproportionate share
hospital (DSH) adjustment, provides for a percentage increase in
Medicare payments to hospitals that qualify under either of two
statutory formulas designed to identify hospitals that serve a
disproportionate share of low-income patients. For qualifying
hospitals, the amount of this adjustment may vary based on the outcome
of the statutory calculations.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate based on
their costs in a base year. For example, sole community hospitals
(SCHs) receive the higher of a hospital-specific rate based on their
costs in a base year (the highest of FY 1982, FY 1987, FY 1996, or FY
2006) or the IPPS Federal rate based on the
[[Page 43761]]
standardized amount. Through and including FY 2006, a Medicare-
dependent, small rural hospital (MDH) received the higher of the
Federal rate or the Federal rate plus 50 percent of the amount by which
the Federal rate is exceeded by the higher of its FY 1982 or FY 1987
hospital-specific rate. As discussed below, for discharges occurring on
or after October 1, 2007, but before October 1, 2011, an MDH will
receive the higher of the Federal rate or the Federal rate plus 75
percent of the amount by which the Federal rate is exceeded by the
highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate.
SCHs are the sole source of care in their areas, and MDHs are a major
source of care for Medicare beneficiaries in their areas. Specifically,
section 1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that
is located more than 35 road miles from another hospital or that, by
reason of factors such as isolated location, weather conditions, travel
conditions, or absence of other like hospitals (as determined by the
Secretary), is the sole source of hospital inpatient services
reasonably available to Medicare beneficiaries. In addition, certain
rural hospitals previously designated by the Secretary as essential
access community hospitals are considered SCHs. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area, has not more than 100 beds, is not an SCH, and
has a high percentage of Medicare discharges (not less than 60 percent
of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). Both of these categories of hospitals
are afforded this special payment protection in order to maintain
access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document (for RY 2010, in this final rule).
Updates to the IRF PPS and IPF PPS are issued as separate documents.)
Children's hospitals, cancer hospitals, and RNHCIs continue to be paid
solely under a reasonable cost-based system subject to a rate-of-
increase ceiling on inpatient operating costs per discharge.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) effective for cost
reporting periods beginning on or after October 1, 2002. The LTCH PPS
was established under the authority of sections 123(a) and (c) of
Public Law 106-113 and section 307(b)(1) of Public Law 106-554. During
the 5-year (optional) transition period, a LTCH's payment under the PPS
was based on an increasing proportion of the LTCH Federal rate with a
corresponding decreasing proportion based on reasonable cost
principles. Effective for cost reporting periods beginning on or after
October 1, 2006, all LTCHs are paid 100 percent of the Federal rate.
The existing regulations governing payment under the LTCH PPS are
located in 42 CFR part 412, subpart O. Beginning with RY 2010, we are
issuing the annual updates to the LTCH PPS in the same documents that
update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments are
made to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(1)(A) of the Act and existing regulations under 42 CFR parts
413 and 415.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413.
B. Provisions of the Medicare Improvements for Patients and Providers
Act of 2008 (MIPPA)
Section 148 of the MIPPA (Pub. L. 110-275) changes the payment
rules regarding outpatient clinical diagnostic laboratory tests
furnished by a CAH. The statutory change applies to services furnished
on or after July 1, 2009. In section VII.C.2. of the preamble of the
proposed rule, we discussed our proposal to codify policies in the
Medicare regulations to implement this provision. In section VII.C.2.
of this final rule, we finalize our policies in the Medicare
regulations to implement this provision.
C. Provisions of the American Recovery and Reinvestment Act of 2009
(ARRA)
Section 4301(b) of the American Recovery and Reinvestment Act of
2009 (AARA), Pub. Law 111-5, enacted on February 17, 2009, requires
that the phase-out of the capital IPPS teaching adjustment at Sec.
412.322(c) (that is, the 50-percent reduction for FY 2009) shall be
applied, as if such paragraph had not been in effect. That is,
discharges occurring on or after October 1, 2008,
[[Page 43762]]
through September 30, 2009, receive the full capital IPPS teaching
adjustment as determined under Sec. 412.322(b) of the regulations. We
note that, in this final rule, in response to public comments on our
proposed implementation of section 4301(b) of the ARRA, we are deleting
Sec. 412.322(d) of the existing regulations which currently eliminates
the teaching adjustment beginning in FY 2010. We discuss the
implementation of these provisions in sections VI.A. and E.2. of the
preamble of this final rule.
Section 4302 of the ARRA included several amendments to provisions
of section 114 of the MMSEA relating to: (1) The 3-year delay in the
application of certain provisions of the payment adjustments for short-
stay outliers and revision to the RY 2008 standard Federal rate for
LTCHs; and (2) the 3-year moratorium on the establishment of new LTCHs
and LTCH satellite facilities and on increases in beds in existing
LTCHs and LTCH satellite facilities. We discuss the final
implementation of these provisions in sections I.E., VIII., and XI. of
the preamble of this final rule.
D. Issuance of a Notice of Proposed Rulemaking
On May 22, 2009, we published in the Federal Register (74 FR 24080)
a proposed rule that set forth proposed changes to the Medicare IPPS
for operating costs and for capital-related costs of acute care
hospitals in FY 2010. We also set forth proposed changes relating to
payments for IME costs and payments to certain hospitals and units that
continue to be excluded from the IPPS and paid on a reasonable cost
basis. In addition, we set forth proposed changes to the payment rates,
factors, and other payment rate policies under the LTCH PPS for RY
2010. On June 3, 2009, we published in the Federal Register (74 FR
26600) a supplemental proposed rule (hereafter referred to as the ``RY
2010 LTCH PPS supplemental proposed rule'') that presented both
proposed RY 2010 MS-LTC-DRG relative weights and a proposed RY 2010
high-cost outlier (HCO) fixed-loss amount based on the revised FY 2009
MS-LTC-DRG relative weights presented in an interim final rule with
comment period published also on June 3, 2009 in the Federal Register
(74 FR 26546).
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 this final rule, we included--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment to hospital-specific rates for FY 2010 resulting from
implementation of the MS-DRG system.
A discussion of the Research Triangle International, Inc.
(RTI) and RAND Corporation reports and recommendations relating to
charge compression, including a solicitation of public comments on the
``over'' standardization of hospital charges.
Proposed recalibrations of the MS-DRG relative weights.
We also presented a listing and discussion of hospital-acquired
conditions (HACs), including infections, that are subject to the
statutorily required quality adjustment in MS-DRG payments for FY 2010.
We presented our evaluation and analysis of the FY 2010 applicants
for add-on payments for high-cost new medical services and technologies
(including public input, as directed by Pub. L. 108-173, obtained in a
town hall meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble to the proposed rule, we proposed
revisions to the wage index for acute care hospitals and the annual
update of the wage data. Specific issues addressed include the
following:
Second year of the 3-year transition from national to
within-State budget neutrality for the rural floor and imputed floor.
Final year of the 2-year transition for changes in the
average hourly wage criterion for geographic reclassifications.
Changes to the CBSA designations.
The proposed FY 2010 wage index update using wage data
from cost reporting periods that began during FY 2007.
Analysis and implementation of the proposed FY 2010
occupational mix adjustment to the wage index for acute care hospitals,
including the use of data from the 2007-2008 occupational mix survey.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2010 based on commuting patterns of hospital employees
who reside in a county and work in a different area with a higher wage
index.
The timetable for reviewing and verifying the wage data
used to compute the proposed FY 2010 wage index for acute care
hospitals.
3. Proposed Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals
In section IV. of the preamble of the proposed rule, we proposed to
rebase and revise the acute care hospital operating and capital market
baskets to be used in developing the FY 2010 update factor for the
operating and capital prospective payment rates and the FY 2010 update
factor for the excluded hospital rate-of-increase limits. We also set
forth the data sources used to determine the proposed revised market
basket relative weights.
4. Other Decisions and Proposed Changes to the IPPS for Operating Costs
and GME Costs
In section V. of the preamble of the proposed rule, we discussed a
number of the provisions of the regulations in 42 CFR parts 412, 413,
and 489, including the following:
The reporting of hospital quality data as a condition for
receiving the full annual payment update increase.
Discussion of applying the correct budget neutrality
adjustment for the FY 2002-based hospital-specific rates for MDHs.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
The statutorily-required IME adjustment factor for FY
2010.
Proposed changes to the policies governing payments to
Medicare disproportionate share hospitals, including proposed policies
relating to the inclusion of labor and delivery patient days in the
calculation of the DSH payment adjustment, calculation of inpatient
days in the Medicaid fraction for the Medicare DSH calculation, and
exclusion of observation beds and patient days from the Medicare DSH
calculation and from the bed count for the IME adjustment.
Proposed changes to the policies governing payment for
direct GME.
Proposed changes to policies on hospital emergency
services under EMTALA relating to the applicability of sanctions under
EMTALA.
Discussion of the implementation of the Rural Community
Hospital Demonstration Program in FY 2010.
Proposed technical correction to the regulations governing
the calculation of the Federal rate under the IPPS.
[[Page 43763]]
5. FY 2010 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to the proposed rule, we discussed
the payment policy requirements for capital-related costs and capital
payments to hospitals for FY 2010. We also proposed to remove a section
of the regulations relating to the phase-out of the capital IME
adjustment for FY 2009 to implement the provisions of section 4301(b)
of the ARRA.
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 excluded hospitals.
Proposed changes to the regulations governing satellite
facilities of hospitals.
Proposed changes relating to payments to CAHs, including
payment for clinical laboratory tests furnished by CAHs and payment for
outpatient facility services when a CAH elects the optional payment
method.
Proposed changes to the rules governing provider-based
status of facilities and a proposed technical correction to the
regulations governing provider-based entities.
7. Proposed Changes to the LTCH PPS
In section VIII.A. through C. and F. of the preamble of the
proposed rule, we set forth proposed changes to the payment rates,
factors, and other payment rate policies under the LTCH PPS for RY
2010, including the annual update of the MS-LTC-DRG classifications and
relative weights for use under the LTCH PPS for RY 2010, the proposed
use of the FY 2002-based RPL market basket for LTCHs, and proposed
technical corrections to the LTCH PPS regulations.
In section VIII.D. of the preamble of the proposed rule, we
discussed our ongoing monitoring protocols under the LTCH PPS. In
section VIII.E. of the preamble of the proposed rule, we discussed the
Research Triangle Institute, International (RTI) Phase III Report on
its evaluation of the feasibility of establishing facility and patient
criteria for LTCHs, as recommended by MedPAC in its June 2004 Report to
Congress.
We note that, because we did not propose any policy changes
relating to our present activities in monitoring and updates on the RTI
contract, we are not republishing these section discussions in this
final rule. We did receive several public comments on specific aspects
of the summary of RTI's most recent work. These commenters urged CMS
not to finalize any proposals based on RTI's Phase III report until the
public has had the opportunity to review the report and comment on its
findings. We regret that RTI's Phase III report was not posted on the
CMS Web site, as we had indicated in our proposed rule. The report will
be available in the near future at http://www.cms.hhs.gov/LongTermCareHopitalPPS/02a_RTIReports.asp#TopOfPage. Although we did
not propose any policies based on that report, we can assure the
readers that any policies that we believe are appropriate for
implementation would be subject to the notice-and-comment rulemaking
process.
8. Determining Proposed Prospective Payment Operating and Capital Rates
and Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2010
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We also established the proposed threshold
amounts for outlier cases. In addition, we addressed the proposed
update factors for determining the rate-of-increase limits for cost
reporting periods beginning in FY 2010 for hospitals excluded from the
IPPS.
9. Determining Proposed Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed RY 2010
prospective standard Federal rate. We also established the proposed
adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
10. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected acute care
hospitals and LTCHs.
11. 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 2010 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
12. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 1 of each year, in which MedPAC
reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2008 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs under the IPPS, for hospitals
and distinct part hospital units excluded from the IPPS, and for LTCHs.
We addressed these recommendations in Appendix B of the proposed rule.
For further information relating specifically to the MedPAC March 2008
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.
We received approximately 525 timely pieces of correspondence from
the public in response to the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule and the supplemental proposed rule. We summarize these public
comments and present our responses under the specific subject areas of
this final rule.
E. Finalization of Interim Final Rule With Comment Period That Revised
the FY 2009 MS-LTC-DRG Relative Weights
On June 3, 2009, we issued in the Federal Register an interim final
rule with comment period that revised the MS-LTC-DRG relative weights
for payments under the LTCH PPS. We revised the MS-LTC-DRG relative
weights for FY 2009 due to the misapplication of our established
methodology in the calculation of the budget neutrality factor. The
revised relative weights are effective for the remainder of FY 2009
(that is, from June 3, 2009 through September 30, 2009). We received 11
timely pieces of correspondence from the public in response to this
interim final rule with comment period. In section IX. of the preamble
of this final rule, we summarize these public comments, present our
responses, and finalize the
[[Page 43764]]
provisions of the interim final rule with comment period.
F. Finalization of Two LTCH PPS Interim Final Rules With Comment Period
Issued in May 2008
On May 6, 2008 and May 22, 2008, we issued in the Federal Register
two interim final rules with comment period relating to the LTCH PPS
(73 FR 24871 and 73 FR 29699, respectively), which implement section
114 of Public Law 110-173 (MMSEA). The May 6, 2008 interim final rule
with comment period implemented provisions of section 114 of Public Law
110-173 relating to a 3-year delay in the application of certain
provisions of the payment adjustment for short-stay outliers and
revisions to the RY 2008 standard Federal rate for LTCHs. The May 22,
2008 interim final rule with comment period implemented certain
provisions of section 114 of Public Law 110-173 relating to a 3-year
moratorium on the establishment of new LTCHs and LTCH satellite
facilities and on increases in beds in existing LTCHs and LTCH
satellite facilities. The May 22, 2008 interim final rule with comment
period also implemented a 3-year delay in the application of certain
payment policies that apply to payment adjustments for discharges from
LTCHs and LTCH satellite facilities that were admitted from certain
referring hospitals in excess of various percentage thresholds.
We received six timely pieces of correspondence from the public in
response to the May 6, 2008 interim final rule with comment period. We
received 30 timely pieces of correspondence from the public in response
to the May 22, 2008 interim final rule with comment period. In section
X. of the preamble of this final rule, we summarize these public
comments, present our responses, and finalize the provisions of both
interim final rules with comment period, as appropriate.
G. Interim Final Rule With Comment Period That Implements Certain
Provisions of the ARRA Relating to Payments to LTCHs and LTCH Satellite
Facilities
Section 4302 of the American Recovery and Reinvestment Act of 2009
(ARRA, Pub. L. 111-5) included several amendments to section 114 of
Public Law 110-173 (MMSEA) relating to payments to LTCHs and LTCH
satellite facilities that are discussed under section X. of the
preamble of this final rule. These amendments are effective as if they
were enacted as part of section 114 of Public Law 110-173 (MMSEA). We
issued instructions to the fiscal intermediaries and Medicare
administrative contractors (MACs) to interpret these amendments (Change
Request 6444). In section XI. of this document, we implement the
provisions of section 4302 of Public Law 111-5 through an interim final
rule with comment period. Comments on this interim final rule with
comment period may be submitted as specified in the DATES and Comment
Period sections of this document.
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as DRGs) for inpatient
discharges and adjust payments under the IPPS based on appropriate
weighting factors assigned to each DRG. Therefore, under the IPPS, we
pay for inpatient hospital services on a rate per discharge basis that
varies according to the DRG to which a beneficiary's stay is assigned.
The formula used to calculate payment for a specific case multiplies an
individual hospital's payment rate per case by the weight of the DRG to
which the case is assigned. Each DRG weight represents the average
resources required to care for cases in that particular DRG, relative
to the average resources used to treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.
B. MS-DRG Reclassifications
1. General
As discussed in the preamble to the FY 2008 IPPS final rule with
comment period (72 FR 47138), we focused our efforts in FY 2008 on
making significant reforms to the IPPS consistent with the
recommendations made by MedPAC in its ``Report to the Congress,
Physician-Owned Specialty Hospitals'' in March 2005. MedPAC recommended
that the Secretary refine the entire DRG system by taking severity of
illness into account and applying hospital-specific relative value
(HSRV) weights to DRGs.\1\ We began this reform process by adopting
cost-based weights over a 3-year transition period beginning in FY 2007
and making interim changes to the DRG system for FY 2007 by creating 20
new CMS DRGs and modifying 32 other DRGs across 13 different clinical
areas involving nearly 1.7 million cases. As described in more detail
below, these refinements were intermediate steps towards comprehensive
reform of both the relative weights and the DRG system as we undertook
further study. For FY 2008, we adopted 745 new Medicare Severity DRGs
(MS-DRGs) to replace the CMS DRGs. We refer readers to section II.D. of
the FY 2008 IPPS final rule with comment period for a full detailed
discussion of how the MS-DRG system, based on severity levels of
illness, was established (72 FR 47141).
---------------------------------------------------------------------------
\1\ Medicare Payment Advisory Commission: Report to the
Congress, Physician-Owned Specialty Hospitals, March 2005, page
viii.
---------------------------------------------------------------------------
Currently, cases are classified into MS-DRGs for payment under the
IPPS based on the following information reported by the hospital: the
principal diagnosis, up to eight additional diagnoses, and up to six
procedures performed during the stay. In a small number of MS-DRGs,
classification is also based on the age, sex, and discharge status of
the patient. The diagnosis and procedure information is reported by the
hospital using codes from the International Classification of Diseases,
Ninth Revision, Clinical Modification (ICD-9-CM).
The process of developing the MS-DRGs was begun by dividing all
possible principal diagnoses into mutually exclusive principal
diagnosis areas, referred to as Major Diagnostic Categories (MDCs). The
MDCs were formulated by physician panels to ensure that the DRGs would
be clinically coherent. The diagnoses in each MDC correspond to a
single organ system or etiology and, in general, are associated with a
particular medical specialty. Thus, in order to maintain the
requirement of clinical coherence, no final MS-DRG could contain
patients in different MDCs. For example, MDC 6 is Diseases and
Disorders of the Digestive System. This approach is used because
clinical care is generally organized in accordance with the organ
system affected. However, some MDCs are not constructed on this basis
because they involve multiple organ systems (for example, MDC 22
(Burns)). For FY 2009, cases are assigned to one of 746 MS-DRGs in 25
MDCs. The table below lists the 25 MDCs.
[[Page 43765]]
Major Diagnostic Categories (MDCs)
------------------------------------------------------------------------
------------------------------------------------------------------------
1..................................... Diseases and Disorders of the
Nervous System.
2..................................... Diseases and Disorders of the
Eye.
3..................................... Diseases and Disorders of the
Ear, Nose, Mouth, and Throat.
4..................................... Diseases and Disorders of the
Respiratory System.
5..................................... Diseases and Disorders of the
Circulatory System.
6..................................... Diseases and Disorders of the
Digestive System.
7..................................... Diseases and Disorders of the
Hepatobiliary System and
Pancreas.
8..................................... Diseases and Disorders of the
Musculoskeletal System and
Connective Tissue.
9..................................... Diseases and Disorders of the
Skin, Subcutaneous Tissue and
Breast.
10..................................... Endocrine, Nutritional and
Metabolic Diseases and
Disorders.
11..................................... Diseases and Disorders of the
Kidney and Urinary Tract.
12..................................... Diseases and Disorders of the
Male Reproductive System.
13..................................... Diseases and Disorders of the
Female Reproductive System.
14..................................... Pregnancy, Childbirth, and the
Puerperium.
15..................................... Newborns and Other Neonates
with Conditions Originating in
the Perinatal Period.
16..................................... Diseases and Disorders of the
Blood and Blood Forming Organs
and Immunological Disorders.
17..................................... Myeloproliferative Diseases and
Disorders and Poorly
Differentiated Neoplasms.
18..................................... Infectious and Parasitic
Diseases (Systemic or
Unspecified Sites).
19..................................... Mental Diseases and Disorders.
20..................................... Alcohol/Drug Use and Alcohol/
Drug Induced Organic Mental
Disorders.
21..................................... Injuries, Poisonings, and Toxic
Effects of Drugs.
22..................................... Burns.
23..................................... Factors Influencing Health
Status and Other Contacts with
Health Services.
24..................................... Multiple Significant Trauma.
25..................................... Human Immunodeficiency Virus
Infections.
------------------------------------------------------------------------
In general, cases are assigned to an MDC based on the patient's
principal diagnosis before assignment to an MS-DRG. However, under the
most recent version of the Medicare GROUPER (Version 26.0), there are
13 MS-DRGs to which cases are directly assigned on the basis of ICD-9-
CM procedure codes. These MS-DRGs are for heart transplant or implant
of heart assist systems; liver and/or intestinal transplants; bone
marrow transplants; lung transplants; simultaneous pancreas/kidney
transplants; pancreas transplants; and tracheostomies. Cases are
assigned to these MS-DRGs before they are classified to an MDC. The
table below lists the 13 current pre-MDCs.
Pre-Major Diagnostic Categories (Pre-MDCs)
------------------------------------------------------------------------
------------------------------------------------------------------------
MS-DRG 001............................ Heart Transplant or Implant of
Heart Assist System with MCC.
MS-DRG 002............................ Heart Transplant or Implant of
Heart Assist System without
MCC.
MS-DRG 003............................ ECMO or Tracheostomy with
Mechanical Ventilation 96+
Hours or Principal Diagnosis
Except for Face, Mouth, and
Neck Diagnosis with Major O.R.
MS-DRG 004............................ Tracheostomy with Mechanical
Ventilation 96+ Hours or
Principal Diagnosis Except for
Face, Mouth, and Neck Diagnosis
with Major O.R.
MS-DRG 005............................ Liver Transplant with MCC or
Intestinal Transplant.
MS-DRG 006............................ Liver Transplant without MCC.
MS-DRG 007............................ Lung Transplant.
MS-DRG 008............................ Simultaneous Pancreas/Kidney
Transplant.
MS-DRG 009............................ Bone Marrow Transplant.
MS-DRG 010............................ Pancreas Transplant.
MS-DRG 011............................ Tracheostomy for Face, Mouth,
and Neck Diagnoses with MCC.
MS-DRG 012............................ Tracheostomy for Face, Mouth,
and Neck Diagnoses with CC.
MS-DRG 013............................ Tracheostomy for Face, Mouth,
and Neck Diagnoses without CC/
MCC.
------------------------------------------------------------------------
Once the MDCs were defined, each MDC was evaluated to identify
those additional patient characteristics that would have a consistent
effect on hospital resource consumption. Because the presence of a
surgical procedure that required the use of the operating room would
have a significant effect on the type of hospital resources used by a
patient, most MDCs were initially divided into surgical DRGs and
medical DRGs. Surgical DRGs are based on a hierarchy that orders
operating room (O.R.) procedures or groups of O.R. procedures by
resource intensity. Medical DRGs generally are differentiated on the
basis of diagnosis and age (0 to 17 years of age or greater than 17
years of age). Some surgical and medical DRGs are further
differentiated based on the presence or absence of a complication or
comorbidity (CC) or a major complication or comorbidity (MCC).
Generally, nonsurgical procedures and minor surgical procedures
that are not usually performed in an operating room are not treated as
O.R. procedures. However, there are a few non-O.R. procedures that do
affect MS-DRG assignment for certain principal diagnoses. An example is
extracorporeal shock wave lithotripsy for patients with a principal
diagnosis of urinary stones. Lithotripsy procedures are not routinely
performed in an operating room. Therefore, lithotripsy codes are not
classified as O.R. procedures. However, our clinical advisors believe
that patients with urinary stones who undergo extracorporeal shock wave
lithotripsy should be considered similar to other patients who undergo
O.R. procedures. Therefore, we treat this group of patients similar to
patients undergoing O.R. procedures.
Once the medical and surgical classes for an MDC were formed, each
diagnosis class was evaluated to determine if complications or
comorbidities would consistently affect hospital resource consumption.
Each diagnosis was categorized into one of three severity levels. These
three levels include a major complication or comorbidity (MCC), a
complication or comorbidity (CC), or a non-CC. Physician panels
classified each diagnosis code based on a highly iterative process
involving a combination of statistical results from test data as well
as clinical judgment. As stated earlier, we refer readers to section
II.D. of the FY 2008 IPPS final rule with comment period for a full
detailed discussion of how the MS-DRG system was established based on
severity levels of illness (72 FR 47141).
A patient's diagnosis, procedure, discharge status, and demographic
information is entered into the Medicare claims processing systems and
subjected to a series of automated screens called
[[Page 43766]]
the Medicare Code Editor (MCE). The MCE screens are designed to
identify cases that require further review before classification into
an MS-DRG.
After patient information is screened through the MCE and any
further development of the claim is conducted, the cases are classified
into the appropriate MS-DRG by the Medicare GROUPER software program.
The GROUPER program was developed as a means of classifying each case
into an MS-DRG on the basis of the diagnosis and procedure codes and,
for a limited number of MS-DRGs, demographic information (that is, sex,
age, and discharge status).
After cases are screened through the MCE and assigned to an MS-DRG
by the GROUPER, the PRICER software calculates a base MS-DRG payment.
The PRICER calculates the payment for each case covered by the IPPS
based on the MS-DRG relative weight and additional factors associated
with each hospital, such as IME and DSH payment adjustments. These
additional factors increase the payment amount to hospitals above the
base MS-DRG payment.
The records for all Medicare hospital inpatient discharges are
maintained in the Medicare Provider Analysis and Review (MedPAR) file.
The data in this file are used to evaluate possible MS-DRG
classification changes and to recalibrate the MS-DRG weights. However,
in the FY 2000 IPPS final rule (64 FR 41500), we discussed a process
for considering non-MedPAR data in the recalibration process. In order
for us to consider using particular non-MedPAR data, we must have
sufficient time to evaluate and test the data. The time necessary to do
so depends upon the nature and quality of the non-MedPAR data
submitted. Generally, however, a significant sample of the non-MedPAR
data should be submitted by mid-October for consideration in
conjunction with the next year's proposed rule. This date allows us
time to test the data and make a preliminary assessment as to the
feasibility of using the data. Subsequently, a complete database should
be submitted by early December for consideration in conjunction with
the next year's proposed rule.
As we indicated above, for FY 2008, we made significant
improvements in the DRG system to recognize severity of illness and
resource usage by adopting MS-DRGs that were reflected in the FY 2008
GROUPER, Version 25.0, and were effective for discharges occurring on
or after October 1, 2007. Our MS-DRG analysis for the FY 2009 final
rule was based on data from the March 2008 update of the FY 2007 MedPAR
file, which contained hospital bills received through March 31, 2008,
for discharges occurring through September 30, 2007. For this final
rule, for FY 2010, our MS-DRG analysis is based on data from the March
2009 update of the FY 2008 MedPAR file, which contains hospital bills
received through September 30, 2008, for discharges occurring through
September 30, 2008.
2. Yearly Review for Making MS-DRG Changes
Many of the changes to the MS-DRG classifications we make annually
are the result of specific issues brought to our attention by
interested parties. We encourage individuals with comments about MS-DRG
classifications to submit these comments no later than early December
of each year so they can be carefully considered for possible inclusion
in the annual proposed rule and, if included, may be subjected to
public review and comment. Therefore, similar to the timetable for
interested parties to submit non-MedPAR data for consideration in the
MS-DRG recalibration process, comments about MS-DRG classification
issues should be submitted no later than early December in order to be
considered and possibly included in the next annual proposed rule
updating the IPPS.
The actual process of forming the MS-DRGs was, and will likely
continue to be, highly iterative, involving a combination of
statistical results from test data combined with clinical judgment. In
the FY 2008 IPPS final rule (72 FR 47140 through 47189), we described
in detail the process we used to develop the MS-DRGs that we adopted
for FY 2008. In addition, in deciding whether to make further
modification to the MS-DRGs for particular circumstances brought to our
attention, we considered whether the resource consumption and clinical
characteristics of the patients with a given set of conditions are
significantly different than the remaining patients in the MS-DRG. We
evaluated patient care costs using average charges and lengths of stay
as proxies for costs and relied on the judgment of our medical advisors
to decide whether patients are clinically distinct or similar to other
patients in the MS-DRG. In evaluating resource costs, we considered
both the absolute and percentage differences in average charges between
the cases we selected for review and the remainder of cases in the MS-
DRG. We also considered variation in charges within these groups; that
is, whether observed average differences were consistent across
patients or attributable to cases that were extreme in terms of charges
or length of stay, or both. Further, we considered the number of
patients who will have a given set of characteristics and generally
preferred not to create a new MS-DRG unless it would include a
substantial number of cases.
C. Adoption of the MS-DRGs in FY 2008
In the FY 2006, FY 2007, and FY 2008 IPPS final rules, we discussed
a number of recommendations made by MedPAC regarding revisions to the
DRG system used under the IPPS (70 FR 47473 through 47482; 71 FR 47881
through 47939; and 72 FR 47140 through 47189). As we noted in the FY
2006 IPPS final rule, we had insufficient time to complete a thorough
evaluation of these recommendations for full implementation in FY 2006.
However, we did adopt severity-weighted cardiac DRGs in FY 2006 to
address public comments on this issue and the specific concerns of
MedPAC regarding cardiac surgery DRGs. We also indicated that we
planned to further consider all of MedPAC's recommendations and
thoroughly analyze options and their impacts on the various types of
hospitals in the FY 2007 IPPS proposed rule.
For FY 2007, we began this process. In the FY 2007 IPPS proposed
rule, we proposed to adopt Consolidated Severity DRGs (CS DRGs) for FY
2008 (if not earlier). Based on public comments received on the FY 2007
IPPS proposed rule, we decided not to adopt the CS DRGs. In the FY 2007
IPPS final rule (71 FR 47906 through 47912), we discussed several
concerns raised by commenters regarding the proposal to adopt CS DRGs.
We acknowledged the many comments suggesting the logic of Medicare's
DRG system should continue to remain in the public domain as it has
since the inception of the PPS. We also acknowledged concerns about the
impact on hospitals and software vendors of moving to a proprietary
system. Several commenters suggested that CMS refine the existing DRG
classification system to preserve the many policy decisions that were
made over the last 20 years and were already incorporated into the DRG
system, such as complexity of services and new device technologies.
Consistent with the concerns expressed in the public comments, this
option had the advantage of using the existing DRGs as a starting point
(which was already familiar to the public) and retained the benefit of
many DRG decisions that were made in recent years. We stated our belief
that the suggested approach of incorporating severity measures into the
[[Page 43767]]
existing DRG system was a viable option that would be evaluated.
Therefore, we decided to make interim changes to the existing DRGs
for FY 2007 by creating 20 new DRGs involving 13 different clinical
areas that would significantly improve the CMS DRG system's recognition
of severity of illness. We also modified 32 DRGs to better capture
differences in severity. The new and revised DRGs were selected from 40
existing CMS DRGs that contained 1,666,476 cases and represented a
number of body systems. In creating these 20 new DRGs, we deleted 8
existing DRGs and modified 32 existing DRGs. We indicated that these
interim steps for FY 2007 were being taken as a prelude to more
comprehensive changes to better account for severity in the DRG system
by FY 2008.
In the FY 2007 IPPS final rule (71 FR 47898), we indicated our
intent to pursue further DRG reform through two initiatives. First, we
announced that we were in the process of engaging a contractor to
assist us with evaluating alternative DRG systems that were raised as
potential alternatives to the CMS DRGs in the public comments. Second,
we indicated our intent to review over 13,000 ICD-9-CM diagnosis codes
as part of making further refinements to the current CMS DRGs to better
recognize severity of illness based on the work that CMS (then HCFA)
did in the mid-1990's in connection with adopting severity DRGs. We
describe below the progress we have made on these two initiatives and
our actions for FYs 2008, 2009, and 2010 based on our continued
analysis of reform of the DRG system. We note that the adoption of the
MS-DRGs to better recognize severity of illness has implications for
the outlier threshold, the application of the postacute care transfer
policy, the measurement of real case-mix versus apparent case-mix, and
the IME and DSH payment adjustments. We discuss these implications for
FY 2010 in other sections of this preamble and in the Addendum to this
final rule.
In the FY 2007 IPPS proposed rule, we discussed MedPAC's
recommendations to move to a cost-based HSRV weighting methodology
using HSRVs beginning with the FY 2007 IPPS proposed rule for
determining the DRG relative weights. Although we proposed to adopt the
HSRV weighting methodology for FY 2007, we decided not to adopt the
proposed methodology in the final rule after considering the public
comments we received on the proposal. Instead, in the FY 2007 IPPS
final rule, we adopted a cost-based weighting methodology without the
HSRV portion of the proposed methodology. The cost-based weights were
adopted over a 3-year transition period in \1/3\ increments between FY
2007 and FY 2009. In addition, in the FY 2007 IPPS final rule, we
indicated our intent to further study the HSRV-based methodology as
well as other issues brought to our attention related to the cost-based
weighting methodology adopted in the FY 2007 final rule. There was
significant concern in the public comments that our cost-based
weighting methodology does not adequately account for charge
compression--the practice of applying a higher percentage charge markup
over costs to lower cost items and services and a lower percentage
charge markup over costs to higher cost items and services. Further,
public commenters expressed concern about potential inconsistencies
between how costs and charges are reported on the Medicare cost reports
and charges on the Medicare claims. In the FY 2007 IPPS final rule, we
used costs and charges from the cost report to determine departmental
level cost-to-charge ratios (CCRs) which we then applied to charges on
the Medicare claims to determine the cost-based weights. The commenters
were concerned about potential distortions to the cost-based weights
that would result from inconsistent reporting between the cost reports
and the Medicare claims. After publication of the FY 2007 IPPS final
rule, we entered into a contract with RTI International (RTI) to study
both charge compression and to what extent our methodology for
calculating DRG relative weights is affected by inconsistencies between
how hospitals report costs and charges on the cost reports and how
hospitals report charges on individual claims. Further, as part of its
study of alternative DRG systems, the RAND Corporation analyzed the
HSRV cost-weighting methodology. We refer readers to section II.E. of
the preamble of this final rule for discussion of the issue of charge
compression and the cost-weighting methodology for FY 2010.
We believe that revisions to the DRG system to better recognize
severity of illness and changes to the relative weights based on costs
rather than charges are improving the accuracy of the payment rates in
the IPPS. We agree with MedPAC that these refinements should be
pursued. Although we continue to caution that any prospective payment
system based on grouping cases will always present some opportunities
for providers to specialize in cases they believe have higher margins,
we believe that the changes we have adopted and the continuing reforms
we are adoptimg in this final rule for FY 2010 will improve payment
accuracy and reduce financial incentives to create specialty hospitals.
We refer readers to section II.D. of the FY 2008 IPPS final rule
with comment period for a full discussion of how the MS-DRG system was
established based on severity levels of illness (72 FR 47141).
D. FY 2010 MS-DRG Documentation and Coding Adjustment, Including the
Applicability to the Hospital-Specific Rates and the Puerto Rico-
Specific Standardized Amount
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
As we discussed earlier in this preamble, we adopted the MS-DRG
patient classification system for the IPPS, effective October 1, 2007,
to better recognize severity of illness in Medicare payment rates for
acute care hospitals. The adoption of the MS-DRG system resulted in the
expansion of the number of DRGs from 538 in FY 2007 to 745 in FY 2008
(currently, 746 DRGs, which include 1 additional MS-DRG created in FY
2009). By increasing the number of DRGs and more fully taking into
account patients' severity of illness in Medicare payment rates for
acute care hospitals, the use of 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 we believe the adoption of the MS-DRGs had the potential
to lead to increases in aggregate payments without a corresponding
increase in actual patient severity of illness due to the incentives
for additional documentation and coding. In that final rule with
comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percent to
the national standardized amount. We phased in this -4.8 percent
adjustment over 3 years. Specifically, we established prospective
documentation and coding adjustments of -1.2 percent for FY 2008, -1.8
percent for FY 2009, and -1.8 percent for FY 2010.
[[Page 43768]]
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007, Public Law 110-90. Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008
and -0.9 percent for FY 2009. Section 7(a) of Public Law 110-90 did not
adjust the FY 2010 -1.8 percent documentation and coding adjustment
promulgated in the FY 2008 IPPS final rule with comment period. To
comply with section 7(a) of Public Law 110-90, we promulgated a final
rule on November 27, 2007 (72 FR 66886) that modified the IPPS
documentation and coding adjustment for FY 2008 to -0.6 percent, and
revised the FY 2008 payment rates, factors, and thresholds accordingly.
These revisions were effective on October 1, 2007.
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent instead of the -1.8
percent adjustment established in the FY 2008 IPPS final rule with
comment period. As discussed in the FY 2009 IPPS final rule (73 FR
48447) and required by statute, we applied a documentation and coding
adjustment of -0.9 percent to the FY 2009 IPPS national standardized
amount. The documentation and coding adjustments established in the FY
2008 IPPS final rule with comment period, as amended by Public Law 110-
90, are cumulative. As a result, the -0.9 percent documentation and
coding adjustment for FY 2009 was in addition to the -0.6 percent
adjustment for FY 2008, yielding a combined effect of -1.5 percent.
2. Prospective Adjustment to the Average Standardized Amounts Required
by Section 7(b)(1)(A) of Public Law 110-90
Section 7(b)(1)(A) of Public Law 110-90 requires that if the
Secretary determines that implementation of the MS-DRG system resulted
in changes in documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2008 or FY 2009
that are different than the prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90, the
Secretary shall make an appropriate adjustment under section
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act
authorizes adjustments to the average standardized amounts for
subsequent fiscal years in order to eliminate the effect of such coding
or classification changes. These adjustments are intended to ensure
that future annual aggregate IPPS payments are the same as the payments
that otherwise would have been made had the prospective adjustments for
documentation and coding applied in FY 2008 and FY 2009 reflected the
change that occurred in those years.
3. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Public Law 110-90
If, based on a retroactive evaluation of claims data, the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different from the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of
Public Law 110-90 requires the Secretary to make an additional
adjustment to the standardized amounts under section 1886(d) of the
Act. This adjustment must offset the estimated increase or decrease in
aggregate payments for FYs 2008 and 2009 (including interest) resulting
from the difference between the estimated actual documentation and
coding effect and the documentation and coding adjustment applied under
section 7(a) of Public Law 110-90. This adjustment is in addition to
making an appropriate adjustment to the standardized amounts under
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A)
of Public Law 110-90. That is, these adjustments are intended to recoup
(or repay) spending in excess of (or less than) spending that would
have occurred had the prospective adjustments for changes in
documentation and coding applied in FY 2008 and FY 2009 precisely
matched the changes that occurred in those years. Public Law 110-90
requires that the Secretary make these recoupment or repayment
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
4. Retrospective Evaluation of FY 2008 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we indicated in the FY 2009 IPPS final rule (73 FR 48450) that
we planned a thorough retrospective evaluation of our claims data. We
stated that the results of this evaluation would be used by our
actuaries to determine any necessary payment adjustments to the
standardized amounts under section 1886(d) of the Act beginning in FY
2010 to ensure the budget neutrality of the MS-DRGs implementation for
FY 2008 and FY 2009, as required by law. In the FY 2009 IPPS proposed
rule (73 FR 23541 through 23542), we described our preliminary plan for
a retrospective analysis of inpatient hospital claims data and invited
public input on our proposed methodology.
In that proposed rule, we indicated that we intended to measure and
corroborate the extent of the overall national average changes in case-
mix for FY 2008 and FY 2009. We expected that the two largest parts of
this overall national average change would be attributable to
underlying changes in actual patient severity and to documentation and
coding improvements under the MS-DRG system. In order to separate the
two effects, we planned to isolate the effect of shifts in cases among
base DRGs from the effect of shifts in the types of cases within base
DRGs.
The MS-DRGs divide the base DRGs into three severity levels (with
MCC, with CC and without CC); the previously used CMS DRGs had only two
severity levels (with CC and without CC). Under the CMS DRG system, the
majority of hospital discharges had a secondary diagnosis which was on
the CC list, which led to the higher severity level. The MS-DRGs
significantly changed the code lists of what was classified as an MCC
or a CC. Many codes that were previously classified as a CC are no
longer included on the MS-DRG CC list because the data and clinical
review showed these conditions did not lead to a significant increase
in resource use. The addition of a new level of high severity
conditions, the MCC list, also provided a new incentive to code more
precisely in order to increase the severity level. We anticipated that
hospitals would examine the MS-DRG MCC and CC code lists and then work
with physicians and coders on documentation and coding practices so
that coders could appropriately assign codes from the highest possible
severity level. We note that there have been numerous seminars and
training sessions on this particular coding issue. The topic of
improving documentation practices in order to code conditions on the
MCC list was also discussed extensively by participants at the March
11-12, 2009 ICD-9-CM Coordination and Maintenance Committee meeting.
Participants discussed their hospitals' efforts to encourage physicians
to provide more precise documentation so that coders could
appropriately assign codes that would lead to a higher
[[Page 43769]]
severity level. Because we expected most of the documentation and
coding changes under the MS-DRG system would occur in the secondary
diagnoses, we believed that the shifts among base DRGs were less likely
to be the result of the MS-DRG system and the shifts within base DRGs
were more likely to be the result of the MS-DRG system. We also
anticipated evaluating data to identify the specific MS-DRGs and
diagnoses that contributed significantly to the documentation and
coding payment effect and to quantify their impact. This step entailed
analysis of the secondary diagnoses driving the shifts in severity
within specific base DRGs.
In that same proposed rule, we also stated that, while we believe
that the data analysis plan described previously will produce an
appropriate estimate of the extent of case-mix changes resulting from
documentation and coding changes, we might decide, if feasible, to use
historical data from our Hospital Payment Monitoring Program (HPMP) to
corroborate the within-base DRG shift analysis. The HPMP is supported
by the Medicare Clinical Data Abstraction Center (CDAC).
In the FY 2009 IPPS proposed rule, we solicited public comments on
the analysis plans described above, as well as suggestions on other
possible approaches for performing a retrospective analysis to identify
the amount of case-mix changes that occurred in FY 2008 and FY 2009
that did not reflect real increases in patients' severity of illness.
A few commenters, including MedPAC, expressed support for the
analytic approach described in the FY 2009 IPPS proposed rule. A number
of other commenters expressed concerns about certain aspects of the
approach and/or suggested alternate analyses or study designs. In
addition, one commenter recommended that any determination or
retrospective evaluation by the actuaries of the impact of the MS-DRGs
on case-mix be open to public scrutiny prior to the implementation of
the payment adjustments beginning in FY 2010.
We took these comments into consideration as we developed our
proposed analysis plan (described in greater detail below) and in the
FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24092 through 24101)
solicited public comment on our methodology and analysis. For the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule, we performed a retrospective
evaluation of the FY 2008 data for claims paid through December 2008.
Based on this evaluation, our actuaries determined that implementation
of the MS-DRG system resulted in a 2.5 percent change due to
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2008. In the FY 2010 IPPS/RY 2010
LTCH proposed rule, we also stated that we would update the results
from the proposed analysis plan with data extracted from FY 2008
Medicare claims that were paid through March 2008 [sic] for the FY 2010
IPPS final rule. (We note that the March 2008 date for the updated data
that appeared in the proposed rule should have been March 2009.)
In performing the analysis for the proposed rule, we first divided
the case-mix index (CMI) obtained by grouping the FY 2008 claims data
through the FY 2008 GROUPER (Version 25.0) by the CMI obtained by
grouping these same FY 2008 claims through the FY 2007 GROUPER (Version
24.0). This resulted in a value of 1.028. Because these cases are the
same FY 2008 cases grouped using Versions 24.0 and 25.0 of the GROUPER,
we attribute this increase primarily to two factors: (1) The effect of
changes in documentation and coding under the MS-DRG system; and (2)
the measurement effect from the calibration of the GROUPER. We
estimated the measurement effect from the calibration of the GROUPER by
dividing the CMI obtained by grouping cases in the FY 2007 claims data
through the FY 2008 GROUPER by the CMI obtained by grouping cases in
these same claims through the FY 2007 GROUPER. This resulted in a value
of 1.003. In order to isolate the documentation and coding effect, we
then divided the combined effect of the changes in documentation and
coding and measurement (1.028) by the measurement effect (1.003) to
yield 1.025. Therefore, our estimate of the documentation and coding
increase was 2.5 percent.
We then sought to corroborate this 2.5 percent estimate by
examining the increases in the within-base DRGs as compared to the
increases in the across base DRGs as described earlier in our analysis
plan. In other words, we looked for improvements in code selection that
would lead to a secondary diagnosis increasing the severity level to
either a CC or an MCC level.
In the analysis of data for the proposed rule, we found that the
within-base DRG increases were almost entirely responsible for the
case-mix change, supporting our conclusion that the 2.5 percent
estimate was an accurate reflection of the FY 2008 effect of changes in
documentation and coding under the MS-DRG system. In fact, almost every
base DRG that was split into different severity levels under the MS-DRG
system experienced increases in the within-base DRGs.
We then further analyzed the changes in the within-base DRGs to
determine which MS-DRGs had the highest contributions to this increase.
Consistent with the expectations of our medical coding experts
concerning areas with potential for documentation and coding
improvements, the top contributors were heart failure, chronic
obstructive pulmonary disease, and simple pneumonia and pleurisy. In
fact, the coding of heart failure was discussed extensively at the
March 11-12, 2009 ICD-9-CM Coordination and Maintenance Committee
meeting. Heart failure is a very common secondary diagnosis among
Medicare hospital admissions. The heart failure codes are assigned to
all three severity levels. Some codes are classified as non-CCs, while
other codes are on the CC and MCC lists. By changing physician
documentation to more precisely identify the type of heart failure,
coders are able to appropriately change the severity level of cases
from the lowest level (non-CC) to a higher severity level (CC or MCC).
This point was stressed repeatedly at the March 11-12, 2009 ICD-9-CM
Coordination and Maintenance Committee meeting as coders discussed
their work with physicians on this coding issue. Many of the
participants indicated that additional work was still needed with their
physicians in order to document conditions in the medical record more
precisely.
The results of the analysis for the proposed rule provided
additional support for our conclusion that the proposed 2.5 percent
estimate accurately reflected the FY 2008 increases in documentation
and coding under the MS-DRG system.
While we attempted to use the CDAC data to distinguish real
increase in case-mix growth from documentation and coding in the
overall case-mix number, we found aberrant data and significant
variation across the FY 1999-FY 2007 analysis period. It was not
possible to distinguish changes in documentation and coding from
changes in real case-mix in the CDAC data. Therefore, we concluded that
the CDAC data would not support analysis of real case-mix growth that
could be used in our retrospective evaluation of the FY 2008 claims
data.
Although we could not use the CDAC data, we did examine the overall
growth in case-mix using the FY 2007 claims data in which we grouped
cases using the FY 2007 GROUPER and the FY 2008 data in which we
grouped cases using
[[Page 43770]]
the FY 2008 GROUPER. We found the overall growth in case-mix was 1.9
percent. The implication of overall FY 2008 case-mix growth of 1.9
percent relative to our estimate of the FY 2008 documentation and
coding effect and the GROUPER measurement effect is that real case-mix
declined between FY 2007 and FY 2008. After additional data analysis,
our actuaries determined that the 1.9 percent growth in overall case-
mix was consistent with our 2.5 percent estimate of the FY 2008
documentation and coding effect for reasons that included: (1) Our
mathematical model for determining the 2.5 percent documentation and
coding effect was corroborated by the amount of case-mix growth
attributed to within-DRG improvements in secondary coding of MCCs and
CCs; (2) our data analysis confirmed the substitution of specified
diagnosis for unspecified diagnoses for such common conditions as heart
failure and chronic obstructive pulmonary disease; and (3) there was a
relative decline in above average cost short-stay surgical cases that
can be performed on an outpatient basis, such as certain high volume
pacemaker procedures.
We also examined the differences in case-mix between the FY 2008
claims data in which cases were grouped through the FY 2008 GROUPER
(Version 25.0) and the FY 2009 GROUPER (Version 26.0). This was to help
inform analysis of the potential for increase in the documentation and
coding effect in FY 2009. In FY 2008, we were transitioning to the
fully implemented MS-DRG relative weights and the fully implemented
cost-based weights. We found that the use of the transition weights
mitigated the FY 2008 documentation and coding effect on expenditures.
Using the FY 2009 relative weights, the documentation and coding effect
would have been an estimated 3.2 percent in FY 2008 instead of our
estimated 2.5 percent. Even assuming no continued improvement in
documentation and coding in FY 2009, we estimated that the use of the
FY 2009 relative weights would result in an additional 0.7 percent
documentation and coding effect in FY 2009. After taking into account
the results of our FY 2008 analysis and the expertise of our coding
staff, our actuaries continue to estimate that the cumulative overall
effect of documentation and coding improvements under the MS-DRG system
will be 4.8 percent. However, our actuaries estimate that these
improvements will be substantially complete by the end of FY 2009.
Therefore, our estimate of the FY 2009 MS-DRG documentation and coding
effect for the proposed rule was 2.3 percent.
As in prior years, the FY 2008 MedPAR files were available to the
public to allow independent analysis of the FY 2008 documentation and
coding effect. Interested individuals may still order these files by
going to the Web site at http://www.cms.hhs.gov/LimitedDataSets/ and
clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web
page describes the file and provides directions and further detailed
instructions for how to order.
Persons placing an order must send the following: a Letter of
Request, the LDS Data Use Agreement and Research Protocol (refer to the
Web site for further instructions), the LDS Form, and a check for
$3,655 to:
Mailing address if using the U.S. Postal Service: Centers for Medicare
& Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520,
Baltimore, MD 21207-0520.
Mailing address if using express mail: Centers for Medicare & Medicaid
Services, OFM/Division of Accounting--RDDC, 7500 Security Boulevard,
C3-07-11, Baltimore, MD 21244-1850.
Comment: MedPAC commented that its analysis of 2008 claims
confirmed the CMS finding that documentation and coding improvements
increased case-mix by 2.5 percent in 2008, which resulted in
overpayments of 1.9 percent. With regard to CMS' projection that by the
end of 2009, hospitals' documentation and coding improvements will have
increased case-mix by a cumulative total of 4.8 percent, MedPAC stated
that, while all documentation and coding improvement projections are
subject to uncertainty, 4.8 percent appears to be a reasonable
estimate, given MedPAC's own examination of recent experience in
Maryland.
Response: We agree with MedPAC's comment that changes in
documentation and coding increased case-mix by 2.5 percent in FY 2008.
Using more recent FY 2008 claims data updated through March 2009, our
actuaries' estimate of the effect of changes in documentation and
coding continues to be 2.5 percent. Our actuaries also continue to
estimate that by the end of FY 2009, changes in documentation and
coding will have increased case-mix by 4.8 percent, consistent with
MedPAC's comment.
Comment: Most commenters questioned CMS' methodology for the
retrospective evaluation of FY 2008 claims data and CMS' finding that
real case-mix growth in FY 2008 was negative. These comments were
generally similar to the comments from the AHA, which read:
``In its analysis of documentation and coding changes, CMS
concludes that from FY 2007 to FY 2008, there was a decline in real
case mix; in contrast, our analysis found that there is a historical
pattern of steady annual increases of 1.2 to 1.3 percent in real case
mix and we are concerned that CMS' conclusion is incorrect. Further,
because CMS' conclusion that real case-mix declined is an inference
based on its analysis of documentation and coding-related increases, we
are concerned that the 1.9 percent proposed cut also is inaccurate and
overstated.''
The commenters also raised concerns that CMS' estimate did not
fully consider other potential causes of increased case-mix, such as
patients requiring less complex services receiving care in other
settings and ``healthier'' patients enrolling in Medicare Advantage
plans in increasing numbers. Other commenters indicated that factors
such as the changes in the CC/MCC definitions, limitations on the
number of codes used by CMS for payment and ratesetting, resequencing
of secondary diagnoses, the transition to the cost-based weights, less
use of ``not otherwise specified'' codes, and increases in real case-
mix due to health reform efforts also resulted in an inaccurate
documentation and coding analysis. One commenter indicated that, of the
overall case-mix increase, 1.0 percent to 1.5 percent is ``real'' case-
mix increase, while 1.0 percent to 1.5 percent is due to documentation
and coding or other increases.
Response: The assertion that there is a historical pattern of
steady annual increases of 1.2 to 1.3 percent in real case-mix is
predicated on the assumption that there was little documentation and
coding effect in those historical years. In considering these comments
concerning historical real case-mix, we calculated overall increases in
case-mix for the period from FY 2000 to FY 2007 using the cases from
each year and the GROUPER and relative weights applicable for each
year. The results are shown in the following chart:
[[Page 43771]]
Overall Case-Mix Increases for FY 2000 to FY 2007
------------------------------------------------------------------------
Overall case-
mix change
Year from prior
year (in
percent)
------------------------------------------------------------------------
FY 2000................................................. -0.7
FY 2001................................................. -0.4
FY 2002................................................. 1.0
FY 2003................................................. 1.4
FY 2004................................................. 1.0
FY 2005................................................. 0.9
FY 2006................................................. 1.2
FY 2007................................................. -0.2
------------------------------------------------------------------------
Overall case-mix growth is predominately comprised of three
factors: real case-mix growth; a documentation and coding effect; and a
measurement effect. Under the reasonable assumption that there has been
a relatively small measurement effect in those years, the assertion
that there is a historical pattern of steady annual increases of 1.2 to
1.3 percent in real case-mix implies that the documentation and coding
effect in many of those years was negative. For example, as described
earlier, we estimated a recent measurement effect of +0.3 percent. The
overall case-mix growth of -0.2 percent in FY 2007 net of a measurement
effect of +0.3 percent results in growth of +0.1 percent. A real case-
mix growth of +1.2 percent in FY 2007, therefore, implies a negative
documentation and coding effect of approximately -1.1 percent. It is
not obvious why documentation and coding would have had such a large
negative effect in FY 2007, or in any other year where the overall
case-mix change is significantly less than the commenter's claimed
average annual trend, calling into question the assertion that real
case-mix growth is a steady 1.2 to 1.3 percent per year.
Our current estimate of the overall case-mix growth for FY 2008
based on more recent data than the data used in the proposed rule is
2.0 percent, still less than our actuaries' estimate of a 2.5 percent
documentation and coding increase. With respect to the concerns raised
by commenters about our finding of negative real case-mix growth in FY
2008, a finding of negative real case-mix growth is consistent with the
fact that, in some years, overall case-mix growth has been negative, as
shown in the chart presented above in this response. Some commenters
were particularly focused on our statement in the proposed rule
regarding a relative decline in above average cost short-stay surgical
cases. We did not state that the decline in real case-mix was entirely
attributable to the relative decline in above average cost short-stay
outliers. We stated that--
``After additional data analysis, our actuaries determined that the
1.9 percent growth in overall case-mix was consistent with our 2.5
percent estimate of the FY 2008 documentation and coding effect for
reasons that included: (1) Our mathematical model for determining the
2.5 percent documentation and coding effect was corroborated by the
amount of case-mix growth attributed to within-DRG improvements in
secondary coding of MCCs and CCs; (2) our data analysis confirmed the
substitution of specified diagnosis for unspecified diagnoses for such
common conditions as heart failure and chronic obstructive pulmonary
disease; and (3) there was a relative decline in above average cost
short-stay surgical cases that can be performed on an outpatient basis,
such as certain high-volume pacemaker procedures.''
The decline in above average cost short-stay surgical cases was one
factor in our actuaries' determination that the 1.9 percent growth in
overall case-mix was consistent with our 2.5 percent documentation and
coding estimate. It was not the only factor. Our current estimate of
the overall case-mix growth between FY 2007 and FY 2008 based on more
recent data than the data used in the proposed rule is 2.0 percent. We
observed numerous small changes for a number of base DRGs that drive
the difference between this overall case mix growth estimate of 2.0
percent and our documentation and coding estimate of 2.5 percent,
including the relative decline in above average cost surgical stay
cases that can be performed on an outpatient basis that we cited in the
proposed rule. These other base DRGs include MS-DRGs 193, 194, and 195
(Simple Pneumonia and Pleurisy with MCC, with CC, and without CC or
MCC, respectively); MS-DRGs 246 and 247 (Percutaneous Cardiovascular
Procedure with Drug-Eluting Stent with MCC or Four or More (4+)
Vessels/Stents and without MCC, respectively); MS-DRGs 233 and 234
(Coronary Bypass with Cardiac Catheterization with MCC and without MCC,
respectively); MS-DRGs 235 and 236 (Coronary Bypass without Cardiac
Catheterization with MCC and without MCC, respectively); MS-DRGs 252,
253, and 254 (Other Vascular Procedures with MCC, with CC, and without
CC or MCC, respectively); MS-DRGs 291, 292, and 293 (Heart Failure and
Shock with MCC, with CC, and without CC or MCC, respectively); MS-DRG
313 (Chest Pain); and MS-DRGs 391 and 392 (Esophagitis, Gastroenteritis
and Miscellaneous Digestive Disorders with MCC and without MCC,
respectively). It is reasonable that the cumulative impact of small
changes across a number of base DRGs could result in a difference of
0.5 percentage points between the overall growth in case-mix and our
documentation and coding estimate.
With respect to the commenters who raised concerns that our
estimate did not fully consider other potential causes of increased
real case-mix, such as patients requiring less-complex services
receiving care in other settings, ``healthier'' patients enrolling in
MA plans in increasing numbers, and health reform efforts, we note that
our methodology for estimating documentation and coding does not, by
definition, include real case-mix, regardless of the actual real case-
mix level. As MedPAC stated in its comment:
``Our analysis of hospital claims for fiscal year 2008 confirms
CMS's findings. To see how much the aggregate CMI and payments
increased in 2008 due solely to hospitals' DCI, we used fiscal year
2008 claims--from the December 2008 update of the 2008 MedPAR file--to
calculate the national aggregate CMI based on the 2008 MS-DRGs and
weights. Using the same claims, we also calculated the aggregate CMI
based on the 2007 DRGs and weights. The difference between the two CMIs
is 2.8 percent. By definition, this change in reported case mix is not
real because the cases are the same.''
The question is how much of the 2.8 percent increase is due to a
documentation and coding effect and how much is due to a measurement
effect. Both MedPAC and our actuaries, based on prior year data,
estimate the measurement effect to be 0.3 percent, yielding our 2.5
percent FY 2008 documentation and coding effect.
With respect to the commenter who indicated that real case-mix
growth was 1.0 percent to 1.5 percent, the primary reason cited was the
interaction of the resequencing of secondary diagnoses, changes in MS-
DRG definitions, and limitations on the number of codes used by CMS for
payment and ratesetting. There is a yearly review for making MS-DRG
changes. As we note in section II.B.2. of this preamble, the actual
process of forming MS-DRGs is highly iterative and involves statistical
results from test data and clinical judgment. In addition, while
hospitals may submit up to 25 diagnosis codes and 25 procedure codes on
the claim, our payment system uses only the first 9 diagnosis code
positions and the first 6 procedure code positions for payment
purposes. The commenter observed that the
[[Page 43772]]
combination of this system limitation with the yearly review of MS-DRGs
has a sequencing effect. The commenter did not believe that the
resequencing of secondary diagnoses was a documentation and coding
effect. We disagree. Resequencing is merely a change in the hospital's
ordering of the codes that will be used for payment purposes. It causes
a payment change unrelated to any change in the underlying condition of
a patient. As we have stated on numerous occasions, we do not believe
that these types of documentation and coding changes are the result of
inappropriate behavior on the part of hospitals. However, to the extent
resequencing occurs, it is appropriately included in our documentation
and coding increase.
Comment: Multiple commenters were disappointed that CMS was unable
to obtain relevant findings based on CDAC data to quantify real case-
mix change.
Response: As we stated in the proposed rule, when we attempted to
use the CDAC data to distinguish increase in real case-mix growth from
increases due to documentation and coding in the overall case-mix
number, we found aberrant data and significant inconsistency across the
FY 1999-FY 2007 analysis period. It was not possible to distinguish
changes in documentation and coding from changes in real case-mix in
the CDAC data. Therefore, we concluded that the CDAC data would not
support analysis of real case-mix growth that could be used in our
retrospective evaluation of the FY 2008 claims data. While we
acknowledge the disappointment of the commenters, we note that we did
not receive any alternative analysis directly measuring real case-mix
growth that did not rely on assumptions with respect to the other
factors that influence overall case-mix growth.
Comment: Some commenters suggested that rural providers are
typically presented with less complex cases and have fewer
opportunities to benefit from improved coding opportunities.
Response: As MedPAC stated in its comment, ``In addition, we
estimated the 2008 DCI effect using the same methods for various
subgroups of hospitals. Although the DCI estimates varied somewhat
among the groups, the variation was generally small. Thus, the DCI
response appears to be widely consistent among all types of
hospitals.'' Our own analyses confirm MedPAC's finding that the
documentation and coding response appears to be generally consistent
among different types of hospitals, including urban and rural
hospitals. Using the same methodology described earlier, the difference
in the DCI response between urban and rural hospitals was not
significant, similar to our findings discussed elsewhere that the
differences for MDHs and SCHs were not significant.
We also note that we discussed the issue of a uniform adjustment
for DCI response in the FY 2008 IPPS final rule (72 FR 47184),
published prior to the TMA, Abstinence Education, and QI Programs
Extension Act of 2007. In that discussion, we noted that ``While
improvements in documentation and coding that increase case mix may be
variable, section 1886(d)(3)(A)(vi) of the Act only allows us to apply
the adjustments that are a result of changes in the coding or
classification of discharges that do not reflect real changes in case
mix to the standardized amounts.''
Section 7 of the TMA, Abstinence Education, and QI Programs
Extension Act of 2007 specifically references section
1886(d)(3)(A)(vi), stating that the Secretary shall ``make an
appropriate adjustment under paragraph (3)(A)(vi) of such section
1886(d).'' Section 1886(d)(3)(A)(iv)(II) of the Act directed CMS to
eliminate separate standardized amounts for large urban areas and other
areas beginning in FY 2004, creating the current uniform standardized
amount that is applicable to all hospitals. Therefore, even if the data
did indicate a different DCI response for urban and rural hospitals,
the law continues to only allow us to apply the prospective adjustments
that are a result of changes in the coding or classification of
discharges that do not reflect real changes in case-mix to the
standardized amount.
5. Adjustments for FY 2010 and Subsequent Years Authorized by Section
7(b)(1)(A) of Public Law 110-90 and Section 1886(d)(3)(vi) of the Act
Based on our most current evaluation of FY 2008 Medicare claims
data, the estimated 2.5 percent change in FY 2008 case-mix due to
changes in documentation and coding that did not reflect real changes
in case-mix for discharges occurring during FY 2008 exceeds the -0.6
percent prospective documentation and coding adjustment applied under
section 7(a) of Public Law 110-90 by 1.9 percentage points. Under
section 7(b)(1)(A) of Public Law 119-90, the Secretary is required to
make an appropriate adjustment under section 1886(d)(3)(A)(vi) of the
Act to the average standardized amounts for subsequent fiscal years in
order to eliminate the full effect of the documentation and coding
changes on future payments. In addition, we note that the Secretary has
the authority to make this prospective adjustment in FY 2010 under
section 1886(d)(3)(A)(vi) of the Act. As we have consistently stated
since the initial implementation of the MS-DRG system, we do not
believe it is appropriate for expenditures to increase due to MS-DRG-
related changes in documentation and coding that do not reflect real
changes in case-mix.
We also estimate that the additional change in case-mix due to
changes in documentation and coding that do not reflect real changes in
case-mix for discharges occurring during FY 2009 will be 2.3 percent,
which would exceed by 1.4 percentage points the -0.9 percent
prospective documentation and coding adjustment for FY 2009 applied
under section 7(a) of Public Law 100-90. We have the statutory
authority to adjust the FY 2010 rates for this estimated 1.4 percentage
point increase. However, given that Public Law 100-90 requires a
retrospective claims evaluation for the additional adjustments
described in section II.D.6. of this preamble, we stated in the
proposed rule that we believed our evaluation of the extent of the
overall national average changes in case-mix for FY 2009 should also be
based on a retrospective evaluation of all FY 2009 claims data. Because
we do not receive all FY 2009 claims data prior to publication of this
final rule, we indicated we would address any difference between the
additional increase in FY 2009 case-mix due to changes in documentation
and coding that did not reflect real changes in case-mix for discharges
occurring during FY 2009 and the -0.9 percent prospective documentation
and coding adjustment applied under section 7(a) of Public Law 110-90
in the FY 2011 rulemaking cycle.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24096),
we solicited public comment on the proposed -1.9 percent prospective
adjustment to the standardized amounts under section 1886(d) of the Act
to address the effects of documentation and coding changes unrelated to
changes in real case-mix in FY 2008. In addition, we solicited public
comments on addressing in the FY 2011 rulemaking cycle any differences
between the increase in FY 2009 case-mix due to changes in
documentation and coding changes that do not reflect real changes in
case-mix for discharges occurring during FY 2009 and the -0.9 percent
prospective documentation and coding adjustment applied under section
7(a) of Public Law 110-90. We present below a summation of the
[[Page 43773]]
public comments we received on these issues and our responses.
Comment: MedPAC summarized its comments on when CMS should reduce
payment rates to prevent further overpayments and to recover
overpayments occurring in 2008 and 2009 as follows: ``We support CMS's
proposal to reduce IPPS payments in 2010 by 1.9 percent to prevent
further overpayments. While we and the CMS actuaries believe that a 1.9
percent reduction will not fully prevent overpayments from continuing
in 2010, this is a reasonable first step toward reducing
overpayments.''
Response: While we agree with MedPAC's comment that our proposed -
1.9 percent adjustment would be a reasonable first step with respect to
the documentation and coding increases associated with the
implementation of the MS-DRGs, nevertheless, as discussed below, we
believe that it would be more prudent to delay implementation of the
documentation and coding adjustment to allow for a more complete
analysis of FY 2009 claims data. If the estimated documentation and
coding effect determined based on a full analysis of FY 2009 claims
data is more or less than our current estimates, it would change,
possibly lessen, the anticipated cumulative adjustments that we
currently estimate we would have to make for FY 2008 and FY 2009
combined adjustment.
Comment: Most commenters opposed the proposed -1.9 percent
prospective FY 2010 adjustment for FY 2008 documentation and coding
increases, but supported the proposal not to apply a FY 2010
prospective adjustment for estimated FY 2009 documentation and coding
increases. The commenters expressed concern over the financial impact
of the proposed -1.9 percent adjustment and the methodology for
calculating the adjustment. The comments on the financial impact were
generally similar to those contained in the comment from the AHA, which
stated that ``The proposed rule includes a 1.9 percent cut to both
operating and capital payments in FY 2010 and beyond--$23 billion over
10 years--to correct the base rate for payments made in FY 2008 that
CMS claims are the effect of documentation and coding changes that do
not reflect real changes in case mix. In combination with other policy
changes, this cut results in hospitals being paid $1 billion less in FY
2010 than in FY 2009 * * * We recognize that CMS could have taken
action to reduce payments more than proposed in this rule. We
appreciate that CMS did not propose cuts for documentation and coding
changes in FY 2009 or cuts to recoup the estimated documentation and
coding overpayments in FY 2008. However, given the severity of the 1.9
percent proposed cut, and in light of the fact that our analysis shows
real increases in patient severity, we ask that the agency
significantly mitigate its proposed documentation and coding cut.''
Other commenters recommended that CMS seek to extend the timeframe
beyond 2 years to phase in the estimated -6.6 percent adjustment to the
standardized amount.
Response: Our actuaries have determined, and MedPAC has confirmed,
that the implementation of the MS-DRG system resulted in changes in
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2008. The impact of these changes
exceeds the -0.6 percent prospective documentation and coding
adjustments applied under section 7(a) of Public Law 110-90. As
described earlier, analysis of more recent claims data confirms that
the difference is -1.9 percent. We addressed the comments on our
methodology in the section II.D.4. of this preamble.
We fully understand that our proposed adjustment of -1.9 percent
would reduce the increase in payments that affected hospitals would
have received in FY 2009 in the absence of the adjustment. Although we
are required to make a prospective adjustment to eliminate the full
effect of coding or classification changes that did not reflect real
changes in case-mix for discharges occurring during FY 2008, we believe
we have some discretion regarding when to implement this adjustment.
Section 7(b)(1)(A) of Public Law 110-90 requires that if the Secretary
determines that implementation of the MS-DRG system resulted in changes
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are
different than the prospective documentation and coding adjustments
applied under section 7(a) of Public Law 110-90, the Secretary shall
make an ``appropriate'' adjustment under section 1886(d)(3)(A)(vi) of
the Act.
After consideration of the public comments we received on these
issues, we have determined that it would be appropriate to postpone
adopting documentation and coding adjustments as authorized under
section 7(a) of Public Law 110-90 and section 1886(d)(3)(A)(vi) of the
Act until a full analysis of case-mix changes can be completed. While
we have the statutory authority to make this 1.9 percent prospective
adjustment entirely in FY 2010, we believe it would be prudent to wait
until we have complete data on the magnitude of the documentation and
coding effect in FY 2009. If the documentation and coding effect were
less in FY 2009 than our current estimates, it could lessen the
anticipated adjustment that we currently estimate we would have to make
for FY 2008 and FY 2009 combined. In future rulemaking, we will
consider applying a prospective adjustment based upon a complete
analysis of FY 2008 and FY 2009 claims data over an extended time
period, such as 5 years, beginning in FY 2011. During this phase-in
period, we intend to address any difference between the increase in FY
2009 case-mix due to changes in documentation and coding that did not
reflect real changes in case-mix for discharges occurring during FY
2009 and the -0.9 percent prospective documentation and coding
adjustment applied under section 7(a) of Public Law 110-90 in the FY
2011 rulemaking cycle.
We appreciate the commenters' support of our decision not to apply
a FY 2010 prospective adjustment for estimated FY 2009 documentation
and coding increases until we have performed a retrospective evaluation
of the FY 2009 claims data.
6. Additional Adjustment for FY 2010 Authorized by Section 7(b)(1)(B)
of Public Law 110-90
As indicated above, the estimated 2.5 percent change (estimated
from analysis of more recent data than the data used for the proposed
rule) due to documentation and coding that did not reflect real changes
in case-mix for discharges occurring during FY 2008 exceeds the -0.6
percent prospective documentation and coding adjustment applied under
section 7(a) of Public Law 110-90 by 1.9 percentage points. Our
actuaries currently estimate that this 1.9 percentage point increase
resulted in an increase in aggregate payments of approximately $2.2
billion. As described earlier, section 7(b)(1)(B) of Public Law 110-90
requires an additional adjustment for discharges occurring in FYs 2010,
2011, and/or 2012 to offset the estimated amount of this increase in
aggregate payments (including interest).
Although section 7(b)(1)(B) of Public Law 110-90 requires us to
make this adjustment in FYs 2010, 2011, and/or 2012, we have discretion
as to when during this 3 year period we will apply the adjustment. For
example, we could make adjustments to the standardized amounts under
section 1886(d) of the
[[Page 43774]]
Act in FY 2010, 2011, and 2012. Alternatively, we could delay
offsetting the increase in FY 2008 aggregate payments by applying the
adjustment required under section 7(b)(1)(B) of Public Law 110-90 only
to FYs 2011 and 2012.
We did not propose to make an adjustment to the FY 2010 average
standardized amounts to offset, in whole or in part, the estimated
increase in aggregate payments for discharges occurring in FY 2008, but
stated in the proposed rule that we intended to address this issue in
future rulemaking for FYs 2011 and 2012. That is, we stated we would
address recouping the additional expenditures that occurred in FY 2008
as a result of the 1.9 percentage point difference between the actual
changes in documentation and coding that do not reflect real changes in
case-mix, or 2.5 percent, and the -0.6 percent adjustment applied under
Public Law 110-90 in FY 2011 and/or FY 2012, as required by law. We
indicated that, while we have the statutory authority to make this -1.9
percent recoupment adjustment entirely in FY 2010, we are delaying the
adjustment until FY 2011 and FY 2012 because we do not have any data
yet on the magnitude of the documentation and coding effect in FY 2009.
If the documentation and coding effect were less in FY 2009 than our
current estimates, it could lessen the anticipated recoupment
adjustment that we currently estimate we would have to make for FY 2008
and FY 2009 combined. As we have the authority to recoup the aggregate
effect of this 1.9 percentage point difference in FY 2008 IPPS payments
in FY 2011 or FY 2012 (with interest), delaying this adjustment would
have no effect on Federal budget outlays. In the proposed rule, we
indicated that we intended to wait until we have a complete year of
data on the FY 2009 documentation and coding effect before applying a
recoupment adjustment for IPPS spending that occurred in FY 2008 or we
estimate will occur in FY 2009.
As discussed above, section 7(b)(1)(B) of Public Law 110-90
requires the Secretary to make an additional adjustment to the
standardized amounts under section 1886(d) of the Act to offset the
estimated increase or decrease in aggregate payments for FY 2009
(including interest) resulting from the difference between the
estimated actual documentation and coding effect and the documentation
and coding adjustments applied under section 7(a) of Public Law 110-90.
This determination must be based on a retrospective evaluation of
claims data. Because we will not receive all FY 2009 claims data prior
to publication of this final rule, as we indicate in the proposed rule,
we intend to address any increase or decrease in FY 2009 payments in
future rulemaking for FY 2011 and 2012 after we perform a retrospective
evaluation of the FY 2009 claims data. Our actuaries currently estimate
that this adjustment will be approximately -3.3 percent. This reflects
the difference between the estimated 4.8 percent cumulative actual
documentation and coding changes for FY 2009 (2.5 percent for FY 2008
and an additional 2.3 percent for FY 2009) and the cumulative -1.5
percent documentation and coding adjustments applied under section 7(a)
of Public Law 110-90 (-0.6 percent in FY 2008 and -0.9 percent in FY
2009). We note that the actual adjustments are multiplicative and not
additive. This more recent estimated 4.8 percent cumulative actual
documentation and coding changes for FY 2009 includes the impact of the
changes in documentation and coding first occurring in FY 2008 because
we believe hospitals will continue these changes in documentation and
coding in subsequent fiscal years. Consequently, these documentation
and coding changes will continue to impact payments under the IPPS
absent a prospective adjustment to account for the effect of these
changes.
We note that, unlike the -1.9 adjustment to the standardized
amounts under section 7(b)(1)(A) of Public Law 110-90 described
earlier, any adjustment to the standardized amounts under section
7(b)(1)(B) of Public Law 110-90 would not be cumulative, but would be
removed for subsequent fiscal years once we have offset the increase in
aggregate payments for discharges for FY 2008 expenditures and FY 2009
expenditures, if any.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24096),
we solicited public comment on our proposal not to offset the 1.9
percent increase in aggregate payments (including interest) for
discharges occurring in FY 2008 resulting from the adoption of the MS-
DRGs, but to instead address this issue in future rulemaking for FYs
2011 and 2012.
Comment: MedPAC stated in its comments on the adjustment to the
standardized amounts under section 7(b)(1)(B) of Public Law 110-90:
``In addition, it would be desirable for CMS to minimize year-to-year
changes in payment adjustments it must make to recover overpayments
that were made in 2008 and 2009. To achieve this goal, CMS should
consider spreading the recovery of 2008 overpayments over 3 years,
beginning in 2010.''
Response: We appreciate MedPAC's comment that it would be desirable
to minimize year-to-year changes in payment adjustments due to the
recoupment adjustments. However, as we stated in the proposed rule, we
continue to believe it would be more appropriate to examine the FY 2009
claims data fully before making a determination as to the appropriate
timing of the FY 2008 recoupment adjustment. Postponing this adjustment
until a retrospective evaluation of the claims data from both FY 2008
and FY 2009 are available would allow us to make annual adjustments
more appropriately in FY 2011 and FY 2012.
Comment: As noted above, some commenters recommended that CMS seek
to extend the timeframe beyond 2 years to phase in the estimated -6.6
percent adjustment to the standardized amount. The commenters asked CMS
to seek necessary legislative action to accommodate such a policy.
Response: As discussed in the proposed rule, we are required under
section 7(b)(1)(B) of Public Law 110-90 to recapture the difference of
actual documentation and coding effect in FY 2008 and FY 2009 that is
greater than the prior adjustments. This retrospective recoupment
process must be completed by the end of FY 2012. The large majority of
the remaining adjustment to the standardized amount reflects
retrospective adjustment. At this time, we have no plans to seek
legislative action to change the time period for this adjustment.
Comment: Most commenters expressed concern with the significant
negative financial impacts that would be incurred by providers if CMS
adopted that proposed -1.9 percent documentation and coding adjustment
in FY 2010. The commenters cited providers' already small or negative
margins for Medicare payments, and requested that CMS not further
reduce payments during the current period of economic instability and
reduced State funding. Other commenters indicated that it would be
appropriate to delay any adjustment to the standardized amounts under
section 7(b)(1)(B) of Public Law 110-90 until after CMS has the
opportunity to fully examine the FY 2009 claims data.
Response: We recognize that any adjustment to account for the
documentation and coding effect observed in the FY 2008 and FY 2009
claims data may result in significant future payment reduction for
providers. However, as discussed in the proposed rule, we are required
under section
[[Page 43775]]
7(b)(1)(B) of Public Law 110-90 to recapture the difference of actual
documentation and coding effect in FY 2008 and FY 2009 that is greater
than the prior adjustments. We agree with the commenters who requested
that CMS delay any adjustment and, for the reasons stated above, expect
to address this issue through the FY 2011 rulemaking.
7. Background on the Application of the Documentation and Coding
Adjustment to the Hospital-Specific Rates
Under section 1886(d)(5)(D)(i) of the Act, SCHs are paid based on
whichever of the following rates yields the greatest aggregate payment:
The Federal rate; the updated hospital-specific rate based on FY 1982
costs per discharge; the updated hospital-specific rate based on FY
1987 costs per discharge; the updated hospital-specific rate based on
FY 1996 costs per discharge; or the updated hospital-specific rate
based on FY 2006 costs per discharge. Under section 1886(d)(5)(G) of
the Act, MDHs are paid based on the Federal national rate or, if
higher, the Federal national rate plus 75 percent of the difference
between the Federal national rate and the updated hospital-specific
rate based on the greatest of the FY 1982, FY 1987, or FY 2002 costs
per discharge. In the FY 2008 IPPS final rule with comment period (72
FR 47152 through 47188), we established a policy of applying the
documentation and coding adjustment to the hospital-specific rates. In
that final rule with comment period, we indicated that because SCHs and
MDHs use the same DRG system as all other hospitals, we believe they
should be equally subject to the budget neutrality adjustment that we
are applying for adoption of the MS-DRGs to all other hospitals. In
establishing this policy, we relied on section 1886(d)(3)(A)(vi) of the
Act, which provides us with the authority to adjust ``the standardized
amount'' to eliminate the effect of changes in coding or classification
that do not reflect real change in case-mix.
However, in the final rule that appeared in the Federal Register on
November 27, 2007 (72 FR 66886), we rescinded the application of the
documentation and coding adjustment to the hospital-specific rates
retroactive to October 1, 2007. In that final rule, we indicated that,
while we still believe it would be appropriate to apply the
documentation and coding adjustment to the hospital-specific rates,
upon further review, we decided that the application of the
documentation and coding adjustment to the hospital-specific rates is
not consistent with the plain meaning of section 1886(d)(3)(A)(vi) of
the Act, which only mentions adjusting ``the standardized amount''
under section 1886(d) of the Act and does not mention adjusting the
hospital-specific rates.
In the FY 2009 IPPS proposed rule (73 FR 23540), we indicated that
we continued to have concerns about this issue. Because hospitals paid
based on the hospital-specific rate use the same MS-DRG system as other
hospitals, we believe they have the potential to realize increased
payments from documentation and coding changes that do not reflect real
increases in patients' severity of illness. In section
1886(d)(3)(A)(vi) of the Act, Congress stipulated that hospitals paid
based on the standardized amount should not receive additional payments
based on the effect of documentation and coding changes that do not
reflect real changes in case-mix. Similarly, we believe that hospitals
paid based on the hospital-specific rates should not have the potential
to realize increased payments due to documentation and coding changes
that do not reflect real increases in patients' severity of illness.
While we continue to believe that section 1886(d)(3)(A)(vi) of the Act
does not provide explicit authority for application of the
documentation and coding adjustment to the hospital-specific rates, we
believe that we have the authority to apply the documentation and
coding adjustment to the hospital-specific rates using our special
exceptions and adjustment authority under section 1886(d)(5)(I)(i) of
the Act. The special exceptions and adjustment provision authorizes us
to provide ``for such other exceptions and adjustments to [IPPS]
payment amounts * * * as the Secretary deems appropriate.'' In the FY
2009 IPPS final rule (73 FR 48448 through 48449), we indicated that,
for the FY 2010 rulemaking, we planned to examine our FY 2008 claims
data for hospitals paid based on the hospital-specific rate. We further
indicated that if we found evidence of significant increases in case-
mix for patients treated in these hospitals that do not reflect real
changes in case-mix, we would consider proposing application of the
documentation and coding adjustments to the FY 2010 hospital-specific
rates under our authority in section 1886(d)(5)(I)(i) of the Act.
In response to public comments received on the FY 2009 IPPS
proposed rule, we stated in the FY 2009 IPPS final rule that we would
consider whether such a proposal is warranted for FY 2010. To gather
information to evaluate these considerations, we indicated that we
planned to perform analyses on FY 2008 claims data to examine whether
there has been a significant increase in case-mix for hospitals paid
based on the hospital-specific rate. If we found that application of
the documentation and coding adjustment to the hospital-specific rates
for FY 2010 is warranted, we indicated that we would include a proposal
to do so in the FY 2010 IPPS proposed rule.
8. Documentation and Coding Adjustment to the Hospital-Specific Rates
for FY 2010 and Subsequent Fiscal Years
In the FY 2010 IPPS/RY 2010 LTCH proposed rule (74 FR 24098 through
24100), we discussed our performance of a retrospective evaluation of
the FY 2008 claims data for SCHs and MDHs using the same methodology
described earlier for other IPPS hospitals. We found that,
independently for both SCHs and MDHs, the change due to documentation
and coding that did not reflect real changes in case-mix for discharges
occurring during FY 2008 slightly exceeded the proposed 2.5 percent
result discussed earlier, but did not significantly differ from that
result.
Again, for the proposed rule, we found that the within-base DRG
increases were almost entirely responsible for the case-mix change. In
the proposed rule, we presented two Figures to display our results.
Therefore, consistent with our statements in prior IPPS rules, we
proposed to use our authority under section 1886(d)(5)(I)(i) of the Act
to prospectively adjust the hospital-specific rates by the proposed -
2.5 percent in FY 2010 to account for our estimated documentation and
coding effect in FY 2008 that does not reflect real changes in case-
mix. We proposed to leave this adjustment in place for subsequent
fiscal years in order to ensure that changes in documentation and
coding resulting from the adoption of the MS-DRGs do not lead to an
increase in aggregate payments for SCHs and MDHs not reflective of an
increase in real case-mix. The proposed -2.5 percent adjustment to the
hospital-specific rates exceeded the -1.9 percent adjustment to the
national standardized amount under section 7(b)(1)(A) of Public Law
110-90 because, unlike the national standardized rates, the FY 2008
hospital-specific rates were not previously reduced in order to account
for anticipated changes in documentation and coding that do not reflect
real changes in case-mix resulting from the adoption of the MS-DRGs.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24100),
we
[[Page 43776]]
solicited public comment on the proposed -2.5 percent prospective
adjustment to the hospital-specific rates under section
1886(d)(5)(I)(i) of the Act and our proposal to address in the FY 2011
rulemaking cycle any changes in FY 2009 case-mix due to changes in
documentation and coding that do not reflect real changes in case-mix
for discharges occurring during FY 2009. We also indicated that we
intended to update our analysis with FY 2008 data on claims paid
through March 2008 [sic] for the FY 2010 IPPS final rule. (We note that
the March 2008 update claims paid data date in the proposed rule should
have been March 2009.)
Consistent with our approach for IPPS hospitals discussed earlier,
we are also delaying adoption of a documentation and coding adjustment
to the hospital-specific rate until FY 2011. Similar to our approach
for IPPS hospitals, we will consider, through future rulemaking,
phasing in the documentation and coding adjustment over an appropriate
period. As we indicated earlier, we also will address, through future
rulemaking, any changes in documentation and coding that do not reflect
real changes in case-mix for discharges occurring during FY 2009. We
noted that, unlike the national standardized rates, the FY 2009
hospital-specific rates were not previously reduced in order to account
for anticipated changes in documentation and coding that do not reflect
real changes in case-mix resulting from the adoption of the MS-DRGs.
However, as we note earlier with regard to IPPS hospitals, if the
estimated documentation and coding effect determined based on a full
analysis of FY 2009 claims data is more or less than our current
estimates, it would change, possibly lessen, the anticipated cumulative
adjustments that we currently estimate we would have to make for the FY
2008 and FY 2009 combined adjustment. Therefore, we believe that it
would be more prudent to delay implementation of the documentation and
coding adjustment to allow for a more complete analysis of FY 2009
claims data for hospitals receiving hospital-specific rates.
Comment: One commenter request that CMS rescind the documentation
and coding adjustment for SCHs and MDHs. The commenter contended that,
due to the special recognition and protection afforded to these
provider types by the Medicare program, CMS should more closely
reexamine any negative payment adjustment that may threaten the
viability of these providers. Commenters also questioned the statutory
authority to apply this adjustment to SCHs and MDHs. The commenters
argued that because Congress included specific statutory authority to
adjust the standardized amount in section 1886(d)(3)(A)(vi) of the Act,
CMS is precluded from using the broader ``adjustments'' language in
section 1886(d)(5)(I)(i) of the Act to apply those same adjustments to
the hospital-specific rate.
Response: We disagree with the commenter that the Secretary's broad
authority to make exceptions and adjustment to payment amounts under
section 1886(d)(3)(A)(vi) of the Act cannot be applied in this
instance. We have discussed the basis for applying such an adjustment
in prior rules (in the FY 2009 proposed rule (73 FR 23540), the FY 2009
final rule (73 FR 48448), and the FY 2010 proposed rule (74 FR 24098))
and do not agree that the language in section 1886(d)(3)(A)(vi) of the
Act limits our authority under section 1886(d)(5)(I)(i) of the Act to
make such an adjustment. We recognize that SCHs and MDHs are entitled
through legislation to receive the hospital-specific rate in order to
compensate for their unique service requirements in the provider
community. Similar to our approach with IPPS hospitals, through future
rulemaking, we will consider a phase-in of the documentation and coding
adjustment over an appropriate period, beginning in FY 2011, and will
continue to separately analyze SCH and MDH claims data to assure that
any future adjustment is appropriate for these provider types.
9. Background on the Application of the Documentation and Coding
Adjustment to the Puerto Rico-Specific Standardized Amount
Puerto Rico hospitals are paid based on 75 percent of the national
standardized amount and 25 percent of the Puerto Rico-specific
standardized amount. As noted previously, the documentation and coding
adjustment we adopted in the FY 2008 IPPS final rule with comment
period relied upon our authority under section 1886(d)(3)(A)(vi) of the
Act, which provides the Secretary the authority to adjust ``the
standardized amounts computed under this paragraph'' to eliminate the
effect of changes in coding or classification that do not reflect real
changes in case-mix. Section 1886(d)(3)(A)(vi) of the Act applies to
the national standardized amounts computed under section 1886(d)(3) of
the Act, but does not apply to the Puerto Rico-specific standardized
amount computed under section 1886(d)(9)(C) of the Act. In calculating
the FY 2008 payment rates, we made an inadvertent error and applied the
FY 2008 -0.6 percent documentation and coding adjustment to the Puerto
Rico-specific standardized amount, relying on our authority under
section 1886(d)(3)(A)(vi) of the Act. However, section
1886(d)(3)(A)(vi) of the Act authorizes application of a documentation
and coding adjustment to the national standardized amount and does not
apply to the Puerto Rico specific standardized amount. In the FY 2009
IPPS final rule (73 FR 48449), we corrected this inadvertent error by
removing the -0.6 percent documentation and coding adjustment from the
FY 2008 Puerto Rico-specific rates.
While section 1886(d)(3)(A)(vi) of the Act is not applicable to the
Puerto Rico-specific standardized amount, we believe that we have the
authority to apply the documentation and coding adjustment to the
Puerto Rico-specific standardized amount using our special exceptions
and adjustment authority under section 1886(d)(5)(I)(i) of the Act.
Similar to SCHs and MDHs that are paid based on the hospital-specific
rate, we believe that Puerto Rico hospitals that are paid based on the
Puerto Rico-specific standardized amount should not have the potential
to realize increased payments due to documentation and coding changes
that do not reflect real increases in patients' severity of illness.
Consistent with the approach described for SCHs and MDHs, in the FY
2009 IPPS final rule (73 FR 48449), we indicated that we planned to
examine our FY 2008 claims data for hospitals in Puerto Rico. We
indicated in the FY 2009 IPPS proposed rule (73 FR 23541) that if we
found evidence of significant increases in case-mix for patients
treated in these hospitals, we would consider proposing application of
the documentation and coding adjustments to the FY 2010 Puerto Rico-
specific standardized amount under our authority in section
1886(d)(5)(I)(i) of the Act.
10. Documentation and Coding Adjustment to the Puerto Rico-Specific
Standardized Amount
For the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we performed a
retrospective evaluation of the FY 2008 claims data for Puerto Rico
hospitals using the same methodology described earlier for IPPS
hospitals paid under the national standardized amounts under section
1886(d) of the Act. We found that, for Puerto Rico hospitals, the
increase in payments for discharges occurring during FY 2008 due to
documentation and coding that did not reflect real changes in case-mix
for
[[Page 43777]]
discharges occurring during FY 2008 was approximately 1.1 percent. When
we calculated the within-base DRG changes and the across-base DRG
changes for Puerto Rico hospitals, we found that responsibility for the
case-mix change between FY 2007 and FY 2008 is much more evenly shared.
Across-base DRG shifts accounted for 44 percent of the changes, and
within-base DRG shifts accounted for 56 percent. Thus, the change in
the percentage of discharges with an MCC was not as large as that for
other IPPS hospitals. In Figure 4 in the proposed rule, we showed that,
for Puerto Rico hospitals, there was a 3 percentage point increase in
the discharges with an MCC from 22 percent to 25 percent and a
corresponding decrease of 3 percentage points from 58 percent to 55
percent in discharges without a CC or an MCC.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24101),
we solicited public comment on the proposed -1.1 percent prospective
adjustment to the hospital-specific rates under section
1886(d)(5)(I)(i) of the Act and our intent to address in the FY 2011
rulemaking cycle any changes in FY 2009 case-mix due to changes in
documentation and coding that did not reflect real changes in case-mix
for discharges occurring during FY 2009. We also stated that we
intended to update our analysis with FY 2008 data on claims paid
through March 2009 for the FY 2010 IPPS final rule.
Given these documentation and coding increases, consistent with our
statements in prior IPPS rules, we will use our authority under section
1886(d)(5)(I)(i) of the Act to adjust the Puerto Rico-specific rate.
However, in parallel to our decision to postpone adjustments to the
Federal standardized amount, we are adopting a similar policy for the
Puerto Rico-specific rate and will consider the phase-in of this
adjustment over an appropriate time period through future rulemaking.
The adjustment would be applied to the Puerto Rico-specific rate that
accounts for 25 percent of payments to Puerto Rico hospitals, with the
remaining 75 percent based on the national standardized amount.
Consequently, the overall reduction to the payment rates for Puerto
Rico hospitals to account for documentation and coding changes will be
slightly less than the reduction for IPPS hospitals paid based on 100
percent of the national standardized amount. We note that, as with the
hospital-specific rates, the Puerto Rico-specific standardized amount
had not previously been reduced based on estimated changes in
documentation and coding associated with the adoption of the MS-DRGs.
However, as we note earlier for IPPS hospitals and hospitals receiving
hospital-specific rates, if the estimated documentation and coding
effect determined based on a full analysis of FY 2009 claims data is
more or less than our current estimates, it would change, possibly
lessen, the anticipated cumulative adjustments that we currently
estimate we would have to make for the FY 2008 and FY 2009 combined
adjustment. Therefore, we believe that it would be more prudent to
delay implementation of the documentation and coding adjustment to
allow for a more complete analysis of FY 2009 claims data for Puerto
Rico hospitals.
Consistent with our approach for IPPS hospitals discussed above, we
will address in the FY 2011 rulemaking cycle any change in FY 2009
case-mix due to documentation and coding that did not reflect real
changes in case-mix for discharges occurring during FY 2009. We note
that, unlike the national standardized rates, the FY 2009 hospital-
specific rates were not previously reduced in order to account for
anticipated changes in documentation and coding that do not reflect
real changes in case-mix resulting from the adoption of the MS-DRGs.
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
In the FY 2009 IPPS final rule (73 FR 48450), we continued to
implement significant revisions to Medicare's inpatient hospital rates
by completing our 3-year transition from charge-based relative weights
to cost-based relative weights. Beginning in FY 2007, we implemented
relative weights based on cost report data instead of based on charge
information. We had initially proposed to develop cost-based relative
weights using the hospital-specific relative value cost center (HSRVcc)
methodology as recommended by MedPAC. However, after considering
concerns expressed in the public comments we received on the proposal,
we modified MedPAC's methodology to exclude the hospital-specific
relative weight feature. Instead, we developed national CCRs based on
distinct hospital departments and engaged a contractor to evaluate the
HSRVcc methodology for future consideration. To mitigate payment
instability due to the adoption of cost-based relative weights, we
decided to transition cost-based weights over 3 years by blending them
with charge-based weights beginning in FY 2007. (We refer readers to
the FY 2007 IPPS final rule for details on the HSRVcc methodology and
the 3-year transition blend from charge-based relative weights to cost-
based relative weights (71 FR 47882 through 47898).)
In FY 2008, we adopted severity-based MS-DRGs, which increased the
number of DRGs from 538 to 745. Many commenters raised concerns as to
how the transition from charge-based weights to cost-based weights
would continue with the introduction of new MS-DRGs. We decided to
implement a 2-year transition for the MS-DRGs to coincide with the
remainder of the transition to cost-based relative weights. In FY 2008,
50 percent of the relative weight for each DRG was based on the CMS DRG
relative weight and 50 percent was based on the MS-DRG relative weight.
In FY 2009, the third and final year of the transition from charge-
based weights to cost-based weights, we calculated the MS-DRG relative
weights based on 100 percent of hospital costs. We refer readers to the
FY 2007 IPPS final rule (71 FR 47882) for a more detailed discussion of
our final policy for calculating the cost-based DRG relative weights
and to the FY 2008 IPPS final rule with comment period (72 FR 47199)
for information on how we blended relative weights based on the CMS
DRGs and MS-DRGs.
a. Summary of the RTI Study of Charge Compression and CCR Refinement
As we transitioned to cost-based relative weights, some commenters
raised concerns about potential bias in the weights due to ``charge
compression,'' which is the practice of applying a higher percentage
charge markup over costs to lower cost items and services, and a lower
percentage charge markup over costs to higher cost items and services.
As a result, the cost-based weights would undervalue high-cost items
and overvalue low-cost items if a single CCR is applied to items of
widely varying costs in the same cost center. To address this concern,
in August 2006, we awarded a contract to RTI to study the effects of
charge compression in calculating the relative weights and to consider
methods to reduce the variation in the CCRs across services within cost
centers. RTI issued an interim draft report in January 2007 with its
findings on charge compression (which was posted on the CMS Web site
at: http://www.cms.hhs.gov/reports/downloads/Dalton.pdf). In that
report, RTI found that a number of factors contribute to charge
compression and affect the accuracy of the relative weights. RTI's
findings demonstrated that charge compression exists in
[[Page 43778]]
several CCRs, most notably in the Medical Supplies and Equipment CCR.
In its interim draft report, RTI offered a number of
recommendations to mitigate the effects of charge compression,
including estimating regression-based CCRs to disaggregate the Medical
Supplies Charged to Patients, Drugs Charged to Patients, and Radiology
cost centers, and adding new cost centers to the Medicare cost report,
such as adding a ``Devices, Implants and Prosthetics'' line under
``Medical Supplies Charged to Patients'' and a ``CT Scanning and MRI''
subscripted line under ``Radiology-Diagnostics''. (For more details on
RTI's findings and recommendations, we refer readers to the FY 2009
IPPS final rule (73 FR 48452).) Despite receiving public comments in
support of the regression-based CCRs as a means to immediately resolve
the problem of charge compression, particularly within the Medical
Supplies and Equipment CCR, we did not adopt RTI's recommendation to
create additional regression-based CCRs for several reasons. We were
concerned that RTI's analysis was limited to charges on hospital
inpatient claims, while typically hospital cost report CCRs combine
both inpatient and outpatient services. Further, because both the IPPS
and the OPPS rely on cost-based weights, we preferred to introduce any
methodological adjustments to both payment systems at the same time.
RTI's analysis of charge compression has since been expanded to
incorporate outpatient services. RTI evaluated the cost estimation
process for the OPPS cost-based relative weights, including a
reassessment of the regression-based CCR models using both outpatient
and inpatient charge data. This interim report was made available in
April 2008 during the public comment period on the FY 2009 IPPS
proposed rule and can be found on RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200804.pdf. The IPPS-specific chapters, which were
separately displayed in the April 2008 interim report, as well as the
more recent OPPS chapters, were included in the July 3, 2008 RTI final
report entitled, ``Refining Cost-to-Charge Ratios for Calculating APC
[Ambulatory Payment Classification] and DRG Relative Payment Weights,''
that became available at the time of the development of the FY 2009
IPPS final rule. The RTI final report can be found on RTI's Web site
at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf.
RTI's final report distinguished between two types of research
findings and recommendations: those pertaining to the accounting or
cost report data and those related to statistical regression analysis.
Importantly, RTI found that, under the IPPS and the OPPS, accounting
improvements to the cost reporting data reduce some of the sources of
aggregation bias without having to use regression-based adjustments. In
general, with respect to the regression-based adjustments, RTI
confirmed the findings of its March 2007 report that regression models
are a valid approach for diagnosing potential aggregation bias within
selected services for the IPPS and found that regression models are
equally valid for setting payments under the OPPS. RTI also suggested
that regression-based CCRs could provide a short-term correction until
accounting data could be sufficiently refined to support more accurate
CCR estimates under both the IPPS and the OPPS.
RTI also noted that cost-based weights are only one component of a
final prospective payment rate. There are other rate adjustments (wage
index, IME, and DSH) to payments derived from the revised cost-based
weights and the cumulative effect of these components may not improve
the ability of final payment to reflect resource cost. With regard to
APCs and MS-DRGs that contain substantial device costs, RTI cautioned
that the other rate adjustments largely offset the effects of charge
compression among hospitals that receive these adjustments. RTI
endorsed short-term regression-based adjustments, but also concluded
that more refined and accurate accounting data are the preferred long-
term solution to mitigate charge compression and related bias in
hospital cost-based weights.
As a result of this research, RTI made 11 recommendations. For a
more detailed summary of RTI's findings, recommendations, and public
comments we received on the report, we refer readers to the FY 2009
IPPS final rule (73 FR 48452 through 48453).
b. Summary of the RAND Corporation Study of Alternative Relative Weight
Methodologies
One of the reasons that we did not implement regression-based CCRs
at the time of the FY 2008 IPPS final rule with comment period was our
inability to investigate how regression-based CCRs would interact with
the implementation of MS-DRGs. In the FY 2008 final rule with comment
period (72 FR 47197), we stated that we engaged the RAND Corporation as
the contractor to evaluate the HSRV methodology in conjunction with
regression-based CCRs, and that we would consider its analysis as we
prepared for the FY 2009 IPPS rulemaking process. In the FY 2009 IPPS
final rule (73 FR 48453 through 48457), we provided a summary of the
RAND report and the public comments we received in response to the FY
2009 IPPS proposed rule. The report may be found on RAND's Web site at:
http://www.rand.org/pubs/working_papers/WR560/.
RAND evaluated six different methods that could be used to
establish relative weights, CMS' current relative weight methodology of
15 national CCRs and 5 alternatives, including a method in which the 15
national CCRs are disaggregated using the regression-based methodology,
and a method using hospital-specific CCRs for the 15 cost center
groupings. In addition, RAND analyzed our standardization methodologies
that account for systematic cost differences across hospitals. The
purpose of standardization is to eliminate systematic facility-specific
differences in cost so that these cost differences do not influence the
relative weights. The three standardization methodologies analyzed by
RAND include: The ``hospital payment factor'' methodology currently
used by CMS, under which a hospital's wage index factor, and IME and/or
DSH factor, are divided out of its estimated DRG cost; the HSRV
methodology, which standardizes the cost for a given discharge by the
hospital's own costliness rather than by the effect of the systematic
cost differences across groups of hospitals; and the HSRVcc
methodology, which removes hospital-level cost variation by calculating
hospital-specific charge-based relative values for each DRG at the cost
center level and standardizing them for differences in case-mix. Under
the HSRVcc methodology, a national average charge-based relative weight
is calculated for each cost center.
Overall, RAND found that none of the alternative methods of
calculating the relative weights represented a marked improvement in
payment accuracy over the current method, and there was little
difference across methods in their ability to predict cost at either
the discharge-level or the hospital-level. In their regression
analysis, RAND found that after controlling for hospital payment
factors, the relative weights are compressed (that is, understated).
However, RAND also found that the hospital payment factors are
overstated and increase more rapidly than cost.
[[Page 43779]]
Therefore, while the relative weights are compressed, these payment
factors offset the compression such that total payments to hospitals
increase more rapidly than hospitals' costs.
RAND found that relative weights using the 19 national
disaggregated regression-based CCRs result in significant
redistributions in payments among hospital groupings. However, RAND did
not believe the regression-based charge compression adjustments
significantly improve payment accuracy. With regard to standardization
methodologies, while RAND found that there is no clear advantage to the
HSRV method or the HSRVcc method of standardizing cost compared to the
current hospital payment factor standardization method, its analysis
did reveal significant limitations of CMS' current hospital payment
factor standardization method. The current standardization method has a
larger impact on the relative weights and payment accuracy than any of
the other alternatives that RAND analyzed because the method ``over-
standardizes'' by removing more variability for hospitals receiving a
payment factor than can be empirically supported as being cost-related
(particularly for IME and DSH). RAND found that instead of increasing
proportionately with cost, the payment factors CMS currently uses (some
of which are statutory), increase more rapidly than cost, thereby
reducing payment accuracy. RAND concluded that further analysis is
needed to isolate the cost-related component of the IPPS payment
adjustments (some of which has already been done by MedPAC), use them
to standardize cost, and revise the analysis of payment accuracy to
reflect only the cost-related component.
2. Summary of FY 2009 Changes and Discussion for FY 2010
In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in
response to the RTI's recommendations concerning cost report
refinements, and because of RAND's finding that regression-based
adjustments to the CCRs do not significantly improve payment accuracy,
we discussed our decision to pursue changes to the cost report to split
the cost center for Medical Supplies Charged to Patients into one line
for ``Medical Supplies Charged to Patients'' and another line for
``Implantable Devices Charged to Patients.'' We acknowledged, as RTI
had found, that charge compression occurs in several cost centers that
exist on the Medicare cost report. However, as we stated in the final
rule, we focused on the CCR for Medical Supplies and Equipment because
RTI found that the largest impact on the MS-DRG relative weights could
result from correcting charge compression for devices and implants. In
determining what should be reported in these respective cost centers,
we adopted the commenters' recommendation that hospitals should use
revenue codes established by AHA's National Uniform Billing Committee
to determine what should be reported in the ``Medical Supplies Charged
to Patients'' and the ``Implantable Devices Charged to Patients'' cost
centers.
When we developed the FY 2009 IPPS final rule, we considered all of
the public comments we received both for and against adopting
regression-based CCRs. Also noteworthy is RAND's belief that
regression-based CCRs may not significantly improve payment accuracy,
and that it is equally, if not more, important to consider revisions to
the current IPPS hospital payment factor standardization method in
order to improve payment accuracy. We continue to believe that,
ultimately, improved and more precise cost reporting is the best way to
minimize charge compression and improve the accuracy of the cost
weights. Accordingly, we did not propose to adopt regression-based CCRs
for the calculation of the FY 2010 IPPS relative weights.
However, in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR
24103), we expressed our concern about RAND's finding that there are
significant limitations of CMS' current hospital payment factor
standardization method. As summarized above, RAND found that the
current standardization method ``over-standardizes'' by removing more
variability for hospitals receiving a payment factor than can be
empirically supported as being cost-related (particularly for IME and
DSH). RAND found that instead of increasing proportionately with cost,
the payment factors CMS currently uses (some of which are statutory),
increase more rapidly than cost, thereby reducing payment accuracy.
Further analysis is needed to isolate the cost-related component of the
IPPS payment adjustments, use them to standardize cost, and revise the
analysis of payment accuracy to reflect only the cost-related
component. However, RAND cautioned that ``re-estimating'' these payment
factors ``raises important policy issues that warrant additional
analyses'' (page 49 of RAND's report, which is available on the Web
site at: http://www.rand.org/pubs/working_papers/WR560/), particularly
to ``determine the analytically justified levels using the MS-DRGs''
(page 86 of the RAND report). In addition, we noted that RTI, in its
July 2008 final report, also observed that the adjustment factors under
the IPPS (the wage index, IME, and DSH adjustments) complicate the
determination of cost and these factors ``within the rate calculation
may offset the effects of understated weights due to charge
compression'' (page 109 of RTI's final report, which is available at
the Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf). While it
may be more accurate to standardize using the empirically justified
levels of the IME and DSH adjustments, consideration needs to be given
to the extent to which these payment factors offset the compression of
the relative weights.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24103 and
24104), we stated that we understood that MedPAC performed an analysis
to identify empirically justifiable formulas for determining
appropriate IME and DSH adjustments. For example, in its March 2007
report (and reiterated in its March 2009 report), MedPAC asserts that
the current level of the IME adjustment factor, 5.5 percent for every
10 percent increase in resident-to-bed ratio, overstates IME payments
by more than twice the empirically justified level, resulting in
approximately $3 billion in overpayments. The empirical level of the
IME adjustment is estimated to be 2.2 percent for every 10 percent
increase in the resident-to-bed ratio. We stated that we cannot propose
to change the IME and DSH factors used for actual payment under the
IPPS because these factors are mandated by law. However, under section
1886(d)(4) of the Act, we have the authority to determine the
appropriate weighting factor for each MS-DRG (including which factors
or method we will employ in making annual adjustments to the MS-DRGs so
as to reflect changes in the relative use of hospital resources). In
addition, section 1886(d)(7)(B) of the Act precludes judicial review of
our methodology for determining the appropriate weighting factors.
Therefore, we do have some flexibility in what factors may be used for
standardization purposes. For purposes of standardization only, we
stated that one option may be for CMS to use the empirically justified
IME adjustment of 2.2 percent, such that only the cost-related
component of teaching hospitals is removed from the claim charges prior
to calculating the relative weights. Similarly, for the DSH adjustment,
in its March 2007 report, MedPAC found that costs per case increase
about 0.4 percent
[[Page 43780]]
for each 10 percent increase in the low-income patient percentage. This
is significantly less than the percentage increase expressed by the
current factors used in the DSH payment formulas. (According to MedPAC,
in FY 2004, about $5.5 billion in DSH payments were made above the
empirically justified level.) In looking only at urban hospitals with
greater than 100 beds, which manifest the strongest positive
correlation between cost and low income patient share, MedPAC found
that costs increase about 1.4 percent for every 10 percent increment of
the low-income patient percentage. MedPAC did not find a positive cost
relationship between low-income patient percentage and costs per case
for urban hospitals with less than 100 beds and/or for rural hospitals.
Therefore, for purposes of standardizing for the DSH adjustment, we
stated that an option we may consider is to incorporate an adjustment
factor of 1.4 percent for urban hospitals with greater than 100 beds,
and to remove the DSH payment adjustment altogether for other hospitals
that otherwise currently qualify for DSH payment. We also noted that
while we cannot predict the effect of using the empirical factors for
IME and DSH in the standardized methodology on the relative weights
without further analysis, dividing out (that is, excluding) reduced IME
and DSH payment factors from a hospital's total payment would result in
a greater share of teaching and DSH hospitals' costs used in
calculating the relative weights. With respect to the wage index,
because there are multiple wage index factors, one for each geographic
area, determining the true cost associated with geographic location and
standardizing for those costs is much more challenging. While we did
not propose changes for FY 2010, in light of the previous discussion of
the current IME and DSH adjustments in the standardization process, we
solicited public comments as to how the standardization process can be
improved to more precisely remove cost differences across hospitals,
thereby improving the accuracy of the relative weights in subsequent
fiscal years.
Charge Compression
Comment: Commenters continue to oppose the regression-based CCR
approach to calculate the relative weights. The commenters cited the
results of the RAND report on alternative relative weight methodologies
in which RAND found that ``none of the alternative weight methodologies
represent a marked improvement over the current system.'' In addition,
the commenters noted the RTI study, which concluded that more refined
and accurate accounting data would be the preferred long-term solution
to mitigate charge compression.
Some commenters also continue to support our policy finalized in
the FY 2009 IPPS final rule to address charge compression (that is, the
creation of separate cost centers for Implantable Devices Charged to
Patients and Medical Supplies Charged to Patients).
Response: We appreciate the comments with respect to regression-
based CCRs and the use of refined cost report data. However, we note
that we have not proposed any changes to the existing cost-based
relative weight methodology for FY 2010.
Comment: Some commenters sought clarification on which revenue
codes should be used to report various implantable devices. Some
commenters disagreed with the definition of a high-cost device that
only applied to implantables because the commenters believed that there
are other high-cost devices that are not implantable, but should be
included in the device cost center.
Response: We did not propose any policy changes with respect to the
use of revenue codes or alternative ways for identifying high-cost
devices. Therefore, we are not responding to these comments at this
time. We refer readers to the discussion in the FY 2009 IPPS final rule
concerning our current policy on these matters (73 FR 48462 and 48462).
Comment: Commenters responded to our solicitation for options on
possibly revising the current standardization methodology. MedPAC
supported the option of standardizing hospitals' service charges using
the empirical estimates of DSH and IME rather than their actual payment
amounts. MedPAC also expressed support for the use of the HSRV
methodology for calculating relative weights because it would obviate
the need to standardize hospitals' charges and it would allow for costs
to be comparable across hospitals. Other commenters continue to oppose
the HSRV methods of standardization. These commenters believe that the
HSRV methodology is inappropriate for a cost-based methodology and only
applicable in charge-based systems that account for mark-up practices.
Some of these commenters expressed general concern about revising the
current standardization methodology because CMS has implemented
numerous changes to the relative weights and DRGs in recent years,
including moving to cost-based relative weights and to MS-DRGs, making
it difficult for hospitals to predict their payments. Commenters
suggested that, because hospitals have been dealing with other Medicare
payment changes, such as quality reporting, and in light of health
reform legislation, CMS wait before modifying the relative weight
methodology to allow payments under the cost-based relative weights to
stabilize and to allow hospitals to better predict their payments.
Response: In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we
expressed our concerns regarding RAND's finding that there are
significant limitations of CMS' current hospital payment factor
standardization method. As summarized above, RAND found that the
current standardization method ``over-standardizes'' by removing more
variability for hospitals receiving a payment factor than can be
empirically supported as being cost-related (particularly for IME and
DSH). We further stated that given MedPAC's analysis that identifies
empirically justifiable formulas for determining appropriate IME and
DSH adjustments, perhaps one option for improving the accuracy of the
standardization process is to use the empirically justified IME and DSH
factors. We did not propose any changes for FY 2010, although we
solicited public comments as to how the standardization process can be
changed to improve the accuracy of the relative weights in subsequent
fiscal years. Therefore, the commenters need not be concerned that we
are introducing yet another significant change to the calculation of
the relative weights or the MS-DRGs for FY 2010. We appreciate the
public comments received, and we will consider the commenters' concerns
as we continue to study the issue.
Comment: One commenter expressed concern regarding the effects of
standardizing the relative weights by only removing the empirical costs
of DSH and IME, rather than removing the entire effects of DSH and IME.
The commenter was concerned that, by removing the empirical costs of
DSH and IME in setting the relative weights, the non-DSH and
nonteaching hospitals would be adversely affected by lower relative
weights and a lower standardized amount. The commenter requested that
thorough analysis be done and shared with the industry before CMS
proposed any changes to the standardization method.
Response: As we stated in the proposed rule, we cannot predict the
effect of using the empirical factors for IME and DSH in the
standardized methodology on the relative weights without further
analysis. We
[[Page 43781]]
acknowledge that dividing out (that is, excluding) reduced IME and DSH
payment factors from a hospital's total payment would result in a
greater share of teaching and DSH hospitals' payments being
characterized as costs that would then be used in calculating the
relative weights. We also are unsure as to whether a change in the
relative weights would affect the standardized amount. In any case,
should we propose changes to the current standardization process, we
will make our analysis and impacts available to the public for comment,
in accordance with our general practice.
3. Timeline for Revising the Medicare Cost Report
As mentioned in the FY 2009 IPPS final rule (73 FR 48467), we are
currently in the process of comprehensively reviewing the Medicare
hospital cost report, and the finalized policy from the FY 2009 IPPS
final rule to split the current cost center for Medical Supplies
Charged to Patients into one line for ``Medical Supplies Charged to
Patients'' and another line for ``Implantable Devices Charged to
Patients,'' as part of our initiative to update and revise the hospital
cost report. Under an effort initiated by CMS to update the Medicare
hospital cost report to eliminate outdated requirements in conjunction
with provisions of the Paperwork Reduction Act (PRA), we stated that we
have been planning to propose the actual changes to the cost reporting
form, the attending cost reporting software, and the cost reporting
instructions in Chapter 40 of the Medicare Provider Reimbursement
Manual (PRM), Part II. Under the effort to update the cost report and
eliminate outdated requirements in conjunction with the provisions of
the PRA, we stated that changes to the cost reporting form and cost
reporting instructions would be made available to the public for
comment. Thus, the public would have an opportunity to suggest
comprehensive reforms (which they had advocated in the FY 2009 IPPS
final rule in response to our proposals), and would similarly be able
to make suggestions for ensuring that these reforms are made in a
manner that is not disruptive to hospitals' billing and accounting
systems, and are first and foremost within the guidelines of GAAP,
which are consistent with the Medicare principles of reimbursement, and
sound accounting practices.
In the FY 2009 IPPS final rule (73 FR 48468), we stated that we
expect the revised cost reporting forms that reflect one cost center
for ``Medical Supplies Charged to Patients'' and one cost center for
``Implantable Devices Charged to Patients'' would not be available
until cost reporting periods beginning after the Spring of 2009. At the
time the proposed rule was issued, we anticipated that the transmittal
to create this new cost center would be issued in June 2009. Because
there is approximately a 3-year lag between the availability of cost
report data for IPPS and OPPS ratesetting purposes in a given fiscal
year or calendar year, we stated that we may be able to derive two
distinct CCRs, one for medical supplies and one for devices, for use in
calculating the FY 2013 IPPS relative weights and the CY 2013 OPPS
relative weights. Until the revised cost reporting forms are published,
we stated that hospitals must include costs and charges of separately
chargeable medical supplies and implantable medical devices in the cost
center for ``Medical Supplies Charged to Patients'' (section 2202.8 of
the PRM-I), and effective for cost reporting periods specified in the
revised cost reporting forms, hospitals must include costs and charges
of separately chargeable medical supplies in the cost center for
``Medical Supplies Charged to Patients'' and of separately chargeable
implantable medical devices in the new ``Implantable Devices Charged to
Patients'' cost center.
Comment: A number of commenters addressed the new cost reporting
forms in which implantable device costs that had been reported on
Medical Supplies Charged to Patients under the current cost reporting
forms will now be reported on a new line for ``Implantable Devices
Charged to Patients''. The commenters recommended that CMS specifically
mandate in the cost reporting instructions that hospitals report their
medical supplies and implantable devices separately to ensure that
hospitals will report their costs in both cost centers.
Response: In the revised Form CMS-2552-96 and the new Form CMS-
2552-10 cost reporting instructions, we will clearly indicate that low
cost medical supplies should be reported on the line for Medical
Supplies Charged to Patients, and that high cost medical devices should
be reported on the Implantable Devices Charged to Patients line. The
cost reporting instructions will provide further guidance on
differentiating between high cost items and low cost items.
Comment: Several commenters urged CMS to work with the hospital
industry as CMS revises the Medicare hospital cost report. The
commenters expressed disappointment that CMS has not worked with the
hospital industry at the outset of revising the Medicare hospital cost
report. The commenters urged CMS not to make piecemeal changes to the
Medicare hospital cost report; rather, CMS should make changes that
align with hospitals' protocols and payment methodologies to improve
the accuracy of the cost-based MS-DRG relative weights. The commenters
requested that the public have the opportunity to comment on cost
reporting forms and instructions before they are implemented. In
addition, the commenters urged that CMS work with the National Uniform
Billing Committee (NUBC) to develop standards for the use of revenue
codes and to mandate standardized cost centers.
Response: In the FY 2009 IPPS proposed and final rules (73 FR 23546
and 73 FR 48461), we stated that we began a comprehensive review of the
Medicare hospital cost report, and splitting the current cost center
for Medical Supplies Charged to Patients into one line for ``Medical
Supplies Charged to Patients'' and another line for ``Implantable
Devices Charged to Patients'' is part of that initiative to update and
revise the cost report. We also stated that under the effort to update
the cost report and eliminate outdated requirements in conjunction with
the PRA, changes to the cost report form and cost report instructions
would be made available to the public for comment. Thus, the public
would have an opportunity to suggest the more comprehensive reforms
that they are advocating, and would similarly be able to make
suggestions for ensuring that these reforms are made in a manner that
is not disruptive to hospitals' billing and accounting systems, and are
within the guidelines of GAAP, which are consistent with the Medicare
principles of reimbursement, and sound accounting practices. In fact,
the new draft hospital cost report Form CMS-2552-10 went on public
display through the Federal Register on July 2, 2009, for a 60-day
review and comment period, which ends August 31, 2009. Those wishing to
review and comment on the document can do so at http://www.cms.hhs.gov/PaperworkReductionActof1995. We are willing to work with and consider
comments from finance and cost report experts from the hospital
community as we work to improve and modify the hospital cost report and
standardize the use of revenue codes. The cost center for Implantable
Devices Charged to Patients will be available for use for cost
reporting periods beginning on or after May 1, 2009. The revised
hospital cost report Form CMS-2552-10 will be
[[Page 43782]]
available for cost reporting periods beginning on or after February 1,
2010.
Comment: Some comments that expressed concerns with the delay of
the cost reporting changes which would, in turn, delay the ability to
use supply and device CCRs in the ratesetting process. The commenters
stated that, in the FY 2009 IPPS final rule, CMS had anticipated using
the revised CCR for the FY 2012 rule. However, due to delays in the
issuance of instructions on cost reporting, CMS now believes that new
CCRs for Medical Supplies Charged to Patients and Implantable Devices
Charged to Patients may be used in the FY 2013 IPPS proposed and final
rules. The commenters urged CMS to issue instructions to hospitals on a
timely basis so that the new cost centers may be implemented as quickly
as possible for FY 2013 ratesetting purposes. The commenters also
suggested that, if CMS anticipates further delays in implementing the
new cost centers, CMS implement regression-based CCRs as a short-term
solution to address charge compression until data from the new cost
centers become available. The commenters were also concerned that the
new cost center may not be implemented consistently across hospitals
and urged CMS to use analytical methods to test and supplement hospital
cost center data in rate setting. For example, the commenters suggested
that CMS use regression-based CCRs to measure the accuracy of the
device cost center for the FY 2013 relative weights.
Response: We are sympathetic to the commenters' concerns and regret
the delay in the issuance of the revised cost reporting forms. However,
we are making progress on this front. As we stated in response to a
previous comment, the new draft hospital cost report Form CMS-2552-10
went on display at the Federal Register on July 2, 2009, for a 60-day
review and comment period, which ends August 31, 2009. Those wishing to
review and comment on the document can do so at http://www.cms.hhs.gov/PaperworkReductionActof1995. After the revised cost report is available
for use by all hospitals, and we begin to use the data to create CCRs
for use in the calculation of the relative weights, we will analyze and
monitor how hospitals are reporting their data and what effect the data
are having on the separate CCRs for medical supplies and implantable
devices. Comparison of the CCRs derived from the revised cost report to
regression-based CCRs might be one method of gauging the accuracy and
effectiveness of the separate cost centers for Medical Supplies Charged
to Patients and Implantable Devices Charged to Patients.
Comment: Several commenters asked for clarification on the new
``Implantable Devices Charged to Patients'' cost center that was
finalized in the FY 2009 IPPS final rule and will be part of the new
Medicare Hospital Cost Report form. The commenters asked that CMS
clarify the statement in the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule that ``hospitals must include costs and charges of separately
chargeable medical supplies and implantable medical devices in the cost
center for `Medical Supplies Charged to Patients' '' as referenced in
PRM-I Section 2202.8. The commenters were confused by the reference to
PRM-I Section 2202.8 because that section defines ancillary services,
with no mention of medical supplies. In addition, one commenter noted
the hospitals are currently testing their systems to report costs and
charges for implantable devices and asked whether it would be
acceptable for hospitals to establish a cost center for ``Implantable
Devices Charged to Patients'' at line 55.01 of the current cost report
until the revised cost report is available. The commenter understood
that the subscripted cost center would be rolled up into Line 55 for
the purposes of calculating the relative weights until the new cost
report is available.
Response: We included the reference to Section 2202.8 of the PRM-I,
which defines ancillary services, to remind hospitals that any items
reported in the Medical Supplies Charged to Patients cost center are
items (high cost or low cost) that are separately chargeable ancillary
services. In accordance with Section 2202.8 of the PRM-I, ancillary
services are those services for which a separate charge is customarily
made in addition to the routine service charge. With respect to
subscripting Line 55 to establish a cost center for Implantable Devices
Charged to Patients, we have provided Line 55.30 to report Implantable
Devices Charged to Patients on Form CMS-2552-96 and Line 69 on the
proposed new Form CMS-2552-10.
Comment: Some commenters suggested that CMS engage in outreach and
educational activities to hospitals on the changes to the cost report
and reporting of charges with respect to the medical device and medical
supply cost centers so that hospitals can appropriately report data.
The commenters recommended that the outreach activities go beyond the
``distribution of bulletins that are used to inform providers about
changes to the Medicare program.''
Response: Although it is a bit early to plan specific outreach
activities at this point, given that the proposed rule for the revised
cost reporting forms has only been released on July 2, 2009, we agree
that such educational activities are important, and we have been
considering some options for educating the provider community involving
the fiscal intermediaries and MACs and the cost report vendors. We look
forward to working with the provider community in these initiatives.
Accordingly, we are not implementing any changes to the relative
weight calculation for FY 2010. We will continue to focus on possible
ways to improve the weights through cost reporting and look forward to
reviewing the comments received on the draft revised cost reporting
forms. In addition, we will continue to think about possible ways to
refine the standardization process as a means to improve the accuracy
of the relative weights. As stated above, any further changes we decide
to make to any portion of the relative weights calculation will be
promulgated first through notice and comment rulemaking, which will
allow the public sufficient opportunity to review relevant analyses and
impacts of such potential changes.
F. Preventable Hospital-Acquired Conditions (HACs), Including
Infections
1. Statutory Authority
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. By October 1, 2007,
the Secretary was required to select, in consultation with the Centers
for Disease Control (CDC), at least two conditions that: (a) are high
cost, high volume, or both; (b) are assigned to a higher paying MS-DRG
when present as a secondary diagnosis (that is, conditions under the
MS-DRG system that are CCs or MCCs); and (c) could reasonably have been
prevented through the application of evidence-based guidelines. The
list of conditions can be revised, again in consultation with CDC, from
time to time as long as the list contains at least two conditions.
Medicare continues to assign a discharge to a higher paying MS-DRG
if a selected HAC is present on admission (POA). However, since October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA. Thus, if a
selected HAC that was not present on admission manifests during the
hospital stay, the case is paid as though the secondary diagnosis was
not present. However, if any
[[Page 43783]]
nonselected CC/MCC appears on the claim, the claim will be paid at the
higher MS-DRG rate; to cause a lower MS-DRG payment, all CCs/MCCs on
the claim must be selected conditions for the HAC payment provision.
Since October 1, 2007, hospitals have been required to submit
information on Medicare claims specifying whether diagnoses were POA.
The POA indicator reporting requirement and the HAC payment provision
apply to IPPS hospitals only. Non-IPPS hospitals, including CAHs,
LTCHs, IRFs, IPFs, cancer hospitals, children's hospitals, hospitals in
Maryland operating under waivers, rural health clinics, federally
qualified health centers, RNHCIs, and Department of Veterans Affairs/
Department of Defense hospitals, are exempt from POA reporting and the
HAC payment provision. Throughout this section, the term ``hospital''
refers to an IPPS hospital.
2. HAC Selection Process
In the FY 2007 IPPS proposed rule (71 FR 24100), we sought public
input regarding conditions with evidence-based prevention guidelines
that should be selected in implementing section 1886(d)(4)(D) of the
Act. The public comments we received were summarized in the FY 2007
IPPS final rule (71 FR 48051 through 48053).
In the FY 2008 IPPS proposed rule (72 FR 24716 through 24726), we
sought public comment on conditions that we proposed to select. In the
FY 2008 IPPS final rule with comment period (72 FR 47200 through
47218), we selected 8 categories to which the HAC payment provisions
would apply.
In the FY 2009 IPPS proposed rule (73 FR 23547), we proposed
several additional candidate HACs as well as refinements to the
previously selected HACs. In the FY 2009 IPPS final rule (73 FR 48471),
we expanded and refined several of the previously selected HACs, and we
selected 2 additional categories of HACs. A complete list of the 10
current categories of HACs is included in section II.F.4. of this
preamble.
3. Collaborative Process
CMS experts have worked closely with public health and infectious
disease professionals from across the Department of Health and Human
Services, including CDC, AHRQ, and the Office of Public Health and
Science, to identify the candidate preventable HACs, review comments,
and select HACs. CMS and CDC have also collaborated on the process for
hospitals to submit a POA indicator for each diagnosis listed on IPPS
hospital Medicare claims and on the payment implications of the various
POA reporting options.
On December 17, 2007, CMS and CDC hosted a jointly-sponsored HAC
and POA Listening Session to receive input from interested
organizations and individuals. On December 18, 2008, CMS, CDC, and AHRQ
hosted a second jointly-sponsored HAC and POA Listening Session to
receive input from interested organizations and individuals. The
agenda, presentations, audio file, and written transcript of the
December 18, 2008 Listening Session are available on the CMS Web site
at: http://www.cms.hhs.gov/HospitalAcqCond/07_EducationalResources.asp#TopOfPage.
4. Selected HAC Categories
The following table lists the current HACs.
------------------------------------------------------------------------
HAC CC/MCC (ICD-9-CM code)
------------------------------------------------------------------------
Foreign Object Retained After Surgery.. 998.4 (CC), 998.7 (CC).
Air Embolism........................... 999.1 (MCC).
Blood Incompatibility.................. 999.6 (CC).
Pressure Ulcer Stages III & IV......... 707.23 (MCC), 707.24 (MCC).
Falls and Trauma: Codes within these ranges on
the CC/MCC list:
--Fracture......................... 800-829.
--Dislocation...................... 830-839.
--Intracranial Injury.............. 850-854.
--Crushing Injury.................. 925-929.
--Burn............................. 940-949.
--Electric Shock................... 991-994.
Catheter-Associated Urinary Tract 996.64 (CC).
Infection (UTI).
Also excludes the following
from acting as a CC/MCC: 112.2
(CC), 590.10 (CC), 590.11
(MCC), 590.2 (MCC), 590.3
(CC), 590.80 (CC), 590.81
(CC), 595.0 (CC), 597.0 (CC),
599.0 (CC).
Vascular Catheter-Associated Infection. 999.31 (CC).
Manifestations of Poor Glycemic Control 250.10-250.13 (MCC), 250.20-
250.23 (MCC), 251.0 (CC),
249.10-249.11 (MCC), 249.20-
249.21 (MCC).
------------------------------------------------------------------------
Surgical Site Infections
------------------------------------------------------------------------
Surgical Site Infection, Mediastinitis, 519.2 (MCC).
Following Coronary Artery Bypass Graft And one of the following
(CABG). procedure codes: 36.10-36.19.
Surgical Site Infection Following 996.67 (CC), 998.59 (CC).
Certain Orthopedic Procedures. And one of the following
procedure codes: 81.01-81.08,
81.23-81.24, 81.31-81.38,
81.83, 81.85.
Surgical Site Infection Following Principal Diagnosis--278.01,
Bariatric Surgery for Obesity. 998.59 (CC)
And one of the following
procedure codes: 44.38, 44.39,
or 44.95.
Deep Vein Thrombosis and Pulmonary 415.11 (MCC), 415.19 (MCC),
Embolism Following Certain Orthopedic 453.40-453.42 (CC).
Procedures. And one of the following
procedure codes: 00.85-00.87,
81.51-81.52, or 81.54.
------------------------------------------------------------------------
We refer readers to section II.F.6. of the FY 2008 IPPS final rule
with comment period (72 FR 47202 through 47218) and to section II.F.7.
of the FY 2009 IPPS final rule (73 FR 48474 through 48486) for detailed
analyses
[[Page 43784]]
supporting the selection of each of these HACs.
The list of selected HAC categories is dependent upon CMS' list of
diagnoses designated as CC/MCCs. As changes and/or new diagnosis codes
are proposed and finalized to the list of CC/MCCs, these changes need
to be reflected in the list of selected HAC categories. In the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106), we proposed the
addition of ICD-9-CM codes 813.46 (Torus fracture of ulna) and 813.47
(Torus fracture of radius and ulna) to more precisely define the
previously selected HAC category of falls and trauma. We refer readers
to Table 6A in the Addendum to this final rule for the adoption of ICD-
9-CM codes 813.46 and 813.47 as CCs.
Comment: Commenters supported the addition of ICD-9-CM codes 813.46
and 813.47 to more precisely define the falls and trauma HAC category.
Response: We appreciate the commenters' support of a more precise
definition of the falls and trauma category. We are finalizing the
addition of ICD-9-CM codes 813.46 and 813.47 to more precisely define
the falls and trauma HAC category.
5. Public Input Regarding Selected and Potential Candidate HACs
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24104
through 24106), we did not propose to add or remove categories of HACs.
However, we indicated that we continue to encourage public dialogue
about refinements to the HAC list. During and after the December 18,
2008 Listening Session, we received many oral and written stakeholder
comments about both previously selected and potential candidate HACs.
In response to the Listening Session, commenters strongly supported
using information gathered from early experience with the HAC payment
provision to inform maintenance of the HAC list and consideration of
future potential candidate HACs. Further, commenters emphasized the
need for a robust program evaluation prior to modifying the HAC list.
Strong support was also expressed for a program evaluation in response
to the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106).
Comment: Commenters overwhelmingly expressed strong support for a
robust program evaluation before modifying the HAC list. Many
commenters stated that CMS' approach to employ a studied program
analysis during FY 2010 allows hospitals additional time to develop
processes for improving performance on previously selected HACs.
Response: We appreciate the support we have received for our
decision to undertake a program evaluation. The Medicare HAC policy
aims to ensure patients are receiving high quality care, and the
program evaluation will enable us to understand the impact of the
program.
Comment: Several commenters made specific suggestions for the
program evaluation. A number of commenters suggested that the program
evaluation should consider assessing the policy's impact on patient
treatment and potential unintended consequences. Some commenters
indicated that CMS should validate POA indicator data and explore how
information learned from POA coding could be used to better understand
and prevent certain HACs. Commenters encouraged CMS to examine the
extent to which the program is increasing adherence to evidence-based
guidelines. Commenters also encouraged CMS to ensure transparency in
the development of its program evaluation and to allow for public
comment at various stages of the evaluation. Some commenters requested
that the final program evaluation results be shared publicly.
Response: We appreciate the specific suggestions provided regarding
the program evaluation. These recommendations will be taken into
consideration as the program evaluation is developed. We agree with
commenters that monitoring unintended consequences and assessing
adherence to evidence-based guidelines should be a priority for the
program evaluation. We also agree that validation of POA coding, as
well as examining each POA indicator, are areas of critical importance
for the program evaluation. We appreciate the public's interest in the
program evaluation and plan to include updates and findings from the
evaluation on CMS' Hospital-Acquired Conditions and Present on
Admission Indicator Web site available at: http://www.cms.hhs.gov/HospitalAcqCond/.
6. POA Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
Through Change Request No. 5679 (released on June 20, 2007), CMS issued
instructions requiring IPPS hospitals to submit POA indicator data for
all diagnosis codes on Medicare claims. CMS also issued Change Request
No. 6086 (released on June 13, 2008) regarding instructions for
processing non-IPPS claims. Specific instructions on how to select the
correct POA indicator for each diagnosis code are included in the ICD-
9-CM Official Guidelines for Coding and Reporting, available on the CDC
Web site at: http://www.cdc.gov/nchs/datawh/ftpserv/ftpicd9/icdguide07.pdf (the POA reporting guidelines begin on page 92).
Additional information regarding POA indicator reporting and
application of the POA reporting options is available on the CMS Web
site at: http://www.cms.hhs.gov/HospitalAcqCond. CMS has historically
not provided coding advice. Rather, CMS collaborates with the American
Hospital Association (AHA) through the Coding Clinic for ICD-9-CM. CMS
has been collaborating with the AHA to promote the Coding Clinic for
ICD-9-CM as the source for coding advice about the POA indicator.
There are five POA indicator reporting options, as defined by the
ICD-9-CM Official Guidelines for Coding and Reporting:
------------------------------------------------------------------------
Indicator Descriptor
------------------------------------------------------------------------
Y.......................... Indicates that the condition was present on
admission.
W.......................... Affirms that the hospital has determined
based on data and clinical judgment that
it is not possible to document when the
onset of the condition occurred.
N.......................... Indicates that the condition was not
present on admission.
U.......................... Indicates that the documentation is
insufficient to determine if the condition
was present at the time of admission.
1.......................... Signifies exemption from POA reporting. CMS
established this code as a workaround to
blank reporting on the electronic 4010A1.
A list of exempt ICD-9-CM diagnosis codes
is available in the ICD-9-CM Official
Guidelines for Coding and Reporting.
------------------------------------------------------------------------
In the FY 2009 IPPS final rule (73 FR 48486 through 48487), we
adopted as final our proposal to: (1) Pay the CC/MCC MS-DRGs for those
HACs coded with ``Y'' and ``W'' indicators; and (2) not pay the CC/MCC
MS-DRGs for those
[[Page 43785]]
HACs coded with ``N'' and ``U'' indicators. Though we did not make any
proposals regarding the HAC POA payment determinations in the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule, commenters addressed this aspect
of the HAC payment provision.
Comment: Commenters suggested that CMS should consider paying for
HACs coded with the ``U'' indicator.
Response: We adopted a policy of not paying for the ``U'' option
because we believe that this approach encourages documentation and will
ensure more accurate public health data. We refer readers to the FY
2009 IPPS final rule (73 FR 48486 through 48487) for further discussion
of our coding policy. In addition, as part of CMS' program evaluation
of the HAC payment provision, we intend to analyze the ``U'' POA
reporting options (section II.F.4. of this preamble).
In addition to providing specific suggestions on what CMS should
consider for the program evaluation, commenters also offered
suggestions on how to address POA data beyond the program evaluation.
Comment: A few commenters recommended that AHRQ continue to develop
strategies to improve the accuracy of documenting POA.
Response: Through the collaborative partnership that CMS has
developed with AHRQ around the program evaluation, we will continue to
work with AHRQ to identify strategies to improve the accuracy of
documenting POA reporting.
Comment: Some comments suggested that CMS consider publicly
releasing aggregate POA data to decrease the incidence of preventable
HACs. The commenters indicated that one effective approach for
decreasing the incidence of preventable HACs would be to provide each
hospital with aggregate POA rates based on peer comparisons.
Response: We agree with the suggestion that the public release of
aggregate POA data should be considered as one prong in a multi-pronged
strategy to decrease the incidence of preventable HACs. We refer
readers to the FY 2009 IPPS final rule (73 FR 48488) for a detailed
discussion regarding public reporting of POA indicator data.
7. Additional Considerations Addressing the HAC and POA Payment
Provision
In addition to receiving comments on the program evaluation
(II.F.5) and uses of POA indicator data (II.F.6), we also received
comments addressing many other topics related to HAC and POA. This
section summarizes those topics and provides responses.
Comment: Commenters suggested that CMS consider the evaluation of
new technologies that detect, prevent, and treat HACs as a research
priority.
Response: We agree with commenters that evaluating all methods to
reduce preventable HACs, including new technologies, is a top priority
for CMS. We refer readers to section II.I. of this preamble for
additional information on CMS' new technology add-on payment policy.
Comment: Some commenters addressed expansion of the principles
behind the HAC payment provision to other settings of care and other
entitlement benefits, beyond fee-for-service Medicare. One commenter
specifically expressed concern that the Medicare HAC policy may have
unintended consequences for the pediatric population, as similar
policies are being adopted by State Medicaid agencies. The commenter
suggested that these Medicaid policies may discourage physicians from
treating complicated pediatric patients for whom the risk of certain
HACs cannot be eliminated using evidence-based guidelines.
Response: The Medicare HAC policy applies only to hospitals that
are subject to the IPPS. While CMS does not develop or implement
individual State Medicaid policies, we do endorse alignment of
incentives across all systems of care and between the Medicare and
Medicaid programs.
Comment: Commenters recommended that CMS clarify how hospitals may
appeal a HAC payment determination for a particular patient who is not
eligible for higher payment through assignment to the higher CC/MCC
level of the MS-DRG.
Response: We thank the commenters for seeking clarification
regarding appeals and the HAC payment provision. We refer readers to
the FY 2008 IPPS final rule with comment period (72 FR 47216) for
further information on existing procedures for review of HAC payment
adjustments.
Comment: Several commenters believed that some of CMS' selected
HACs may not be fully preventable and recommended that CMS' payment
methodology include risk adjustment.
Response: We agree with the commenters that a risk adjustment
methodology may lead to greater precision of HAC payment determinations
and refer readers to the FY 2009 IPPS final rule (73 FR 48487 through
48488) for a detailed discussion of HACs and risk adjustment at both
the individual and population levels.
Comment: A few commenters urged CMS to focus on more global
hospital-wide assessments of harm, such as rate-based measurement of
HACs, rather than targeting individual HAC events.
Response: We agree with the commenters that capturing rates of HACs
may more accurately assess the level of harm within a given institution
and refer readers to the FY 2009 IPPS final rule (73 FR 48488) for a
detailed discussion of the advantages and disadvantages of rate-based
measurement of HACs.
Comment: Commenters expressed support for expansion of the HAC list
to include categories such as ventilator-associated pneumonia, failure
to rescue, surgical site infection following implantation of devices,
Clostridium difficile-associated disease, and malnutrition.
Response: We thank the commenters for their continued engagement
and monitoring of candidate HACs. We will continue to monitor these
conditions as an aspect of the program evaluation and may consider
discussion of these candidate HACs in future rulemaking.
Comment: A few commenters encouraged CMS to adopt a pay-for-
performance initiative that is complementary to the current HAC program
and incorporates specific initiatives outlined in the HHS Action Plan
to Prevent Healthcare-Associated Infections. One commenter suggested
that mandatory reporting of case rates should be incorporated into pay-
for-performance initiatives.
Response: We agree with the commenters that pay-for-performance and
value-based purchasing (VBP) programs may be one of several payment
tools for reducing preventable HACs and refer readers to the FY 2009
IPPS final rule (73 FR 48487 through 48488) for a detailed discussion
of how VBP initiatives such as the Hospital VBP Plan Report to Congress
can address preventable HACs.
G. Changes to Specific MS-DRG Classifications
1. MDC 5 (Diseases and Disorders of the Circulatory System):
Intraoperative Fluorescence Vascular Angiography (IFVA)
As we discussed in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24106 through 24107) we received a request to reassign cases
reporting the use of intraoperative fluorescence vascular angiography
(IFVA) with coronary artery bypass graft (CABG) procedures from MS-DRGs
235 and 236 (Coronary Bypass without Cardiac Catheterization with and
without MCC,
[[Page 43786]]
respectively) into MS-DRG 233 (Coronary Bypass with Cardiac
Catheterization with MCC) and MS-DRG 234 (Coronary Bypass with Cardiac
Catheterization without MCC). Effective October 1, 2007, procedure code
88.59 (Intra-operative fluorescence vascular angiography (IFVA))
describes this technology.
IFVA technology consists of a mobile device imaging system with
software. The technology is used to test cardiac graft patency and
technical adequacy at the time of coronary artery bypass grafting
(CABG). While this system does not involve fluoroscopy or cardiac
catheterization, it has been suggested by the manufacturer and clinical
studies that it yields results that are similar to those achieved with
selective coronary arteriography and cardiac catheterization.
Intraoperative coronary angiography provides information about the
quality of the anastomosis, blood flow through the graft, distal
perfusion and durability. For additional detailed information regarding
IFVA technology, we refer readers to the September 28-29, 2006 ICD-9-CM
Coordination and Maintenance Committee meeting handout at the following
Web site: http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp#TopOfPage.
We examined data on cases identified by procedure code 88.59 in MS-
DRGs 233, 234, 235, and 236 in the FY 2008 MedPAR file. As shown in the
table below, for both MS-DRGs 235 and 236, the cases utilizing IFVA
technology identified by procedure code 88.59 have a shorter length of
stay and lower average costs compared to all cases in MS-DRGs 235 and
236. There were a total of 10,312 cases in MS-DRG 235 with an average
length of stay of 11.12 days with average costs of $33,846. There were
88 cases in MS-DRG 235 identified by procedure code 88.59 with an
average length of stay of 9.82 days with average costs of $29,258. In
MS-DRG 236, there were a total of 24,799 cases with an average length
of stay of 6.52 days and average costs of $22,329. There were 159 cases
in MS-DRG 236 identified by procedure code 88.59 with an average length
of stay of 6.30 days and average costs of $20,404. The data clearly
demonstrate that the IFVA cases identified by procedure code 88.59 are
assigned appropriately to MS-DRGs 235 and 236. We also examined data on
cases identified by procedure code 88.59 in MS-DRGs 233 and 234.
Similarly, in MS-DRGs 233 and 234, cases identified by procedure code
88.59 reflect shorter lengths of stay and lower average costs compared
to all of the other cases in those MS-DRGs. There were a total of
17,453 cases in MS-DRG 233 with an average length of stay of 13.65 days
with average costs of $41,199. There were 60 cases in MS-DRG 233
identified by procedure code 88.59 with an average length of stay of
12.82 days and average costs of $38,842. In MS-DRG 234, there were a
total of 27,003 cases with an average length of stay of 8.70 days and
average costs of $28,327. There were 69 cases in MS-DRG 234 identified
by procedure code 88.59 with an average length of stay of 8.75 days and
average costs of $25,308. As a result of our analysis, the data
demonstrate that the IFVA cases identified by procedure code 88.59 are
appropriately assigned to MS-DRGs 233 and 234.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average cost*
----------------------------------------------------------------------------------------------------------------
235--All cases.................................................. 10,312 11.12 $33,846
235--Cases with code 88.59...................................... 88 9.82 29,258
235--Cases without code 88.59................................... 10,224 11.14 33,886
236--All cases.................................................. 24,799 6.52 22,329
236--Cases with code 88.59...................................... 159 6.30 20,404
236--Cases without code 88.59................................... 24,640 6.52 22,341
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average cost*
----------------------------------------------------------------------------------------------------------------
233--All cases.................................................. 17,453 13.65 41,199
233--Cases with code 88.59...................................... 60 12.82 38,842
233--Cases without code 88.59................................... 17,393 13.65 41,207
234--All cases.................................................. 27,003 8.70 28,327
234--Cases with code 88.59...................................... 69 8.75 25,308
234--Cases without code 88.59................................... 26,934 8.70 28,334
----------------------------------------------------------------------------------------------------------------
* In the FY 2007 IPPS final rule (71 FR 47882), we adopted a cost-based weighting methodology. The cost-based
weights were adopted over a 3-year transition period in \1/3\ increments between FY 2007 and FY 2009. The
average cost represents the average standardized charges on the claims reduced to cost using the cost center-
specific CCRs for a specific DRG. The standardization process includes adjustments for IME, DSH, and wage
index as applied to individual hospitals. This estimation of cost is the same method used in the computation
of the relative weights. We are using cost-based data instead of our historical charge-based data to evaluate
proposed MS-DRG classification changes.
We believe that if the cases identified by procedure code 88.59
were proposed to be reassigned from MS-DRGs 235 and 236 to MS-DRGs 233
and 234, they would be significantly overpaid. In addition, because the
cases in MS-DRGs 235 and 236 did not actually have a cardiac
catheterization performed, a proposal to reassign cases identified by
procedure code 88.59 would result in lowering the relative weights of
MS-DRGs 233 and 234 where a cardiac catheterization is truly performed.
In summary, the data do not support moving IFVA cases identified by
procedure code 88.59 from MS-DRGs 235 and 236 into MS-DRGs 233 and 234.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we invited the
public to submit comments on our proposal not to make any MS-DRG
modifications for cases reporting procedure code 88.59 for FY 2010.
Below, we provide a summation of the public comments we received and
our responses.
[[Page 43787]]
Comment: A number of commenters believed that the use of IFVA in
conjunction with CABG procedures leads to positive outcomes. Many of
the commenters stated that they had performed IFVA and that, by using
IFVA along with the CABG procedure, they were able to reduce their
patients' lengths of stay and reduce complications, which in turn
reduced hospitals costs. The commenters stated that the CMS published
data indicated that patients who undergo a CABG procedure along with
IFVA ``showed consistently shortened length of stay and the resulting
cost savings.'' The commenters stated that, despite cost savings from
the routine treatment of CABG patients with IFVA, their facilities were
not prepared to purchase this technology unless there were additional
Medicare payments.
The commenters did not dispute the fact that the CMS data showed
IFVA cases used considerably less resources than cases undergoing a
cardiac catheterization. However, the commenters expressed concern that
CMS did not suggest a mechanism to encourage hospitals to invest in the
IFVA equipment by providing additional payment for the utilization of
IFVA.
Some commenters urged CMS to explore alternative methods of payment
to facilities for utilizing the IFVA technology.
Another commenter representing a specialty society indicated that
several of its members, who are cardiothoracic surgeons, had differing
opinions on the value of IFVA as an adjunctive procedure to CABG
surgery. This commenter stated that, due to a lack of information
regarding the efficacy of IFVA within its cardiac surgery database, the
commenter was unable to appropriately assess the effectiveness of the
technology.
Response: We appreciate and acknowledge the commenters' concerns.
We would like to point out that the costs associated with the IFVA
technology, when utilized with coronary artery bypass (CABG)
procedures, are already accounted for within the MS-DRGs for the CABG
procedure. In other words, cases reporting procedure code 88.59, when
performed with a CABG procedure, are currently grouped to one of the
MS-DRGs describing a CABG procedure. Our claims data indicate that IFVA
cases have average costs very similar to other cases within the MS-DRGs
to which they are currently assigned. Our data do not support
classifying code 88.59 as a cardiac catheterization so that all cases
where IFVA is performed would be assigned to the CABG DRGs with cardiac
catheterization (MS-DRGs 233 and 234). The cardiac catheterization
cases have consistently higher costs than cases that only utilize IFVA
with CABG.
In response to concerns that CMS did not provide an alternative for
facilities to account for costs associated with IFVA use in conjunction
with CABG surgery, in our evaluation of data for possible proposals for
modifications to the MS-DRGs, we did not find data to support a MS-DRG
change for IFVA. The request we received was to reassign cases
reporting the use of IFVA with CABG procedures from MS-DRGs 235 and 236
into MS-DRG 233 and MS-DRG 234. To make this change, we would have to
add the IFVA procedure to the list of cardiac catheterization
procedures listed under MS-DRGs 233 and 234. As the commenters noted in
its own submitted comments, the data presented in the FY 2010 proposed
rule (74 FR 24107), for cases where IFVA (code 88.59) was reported with
a CABG procedure, demonstrated that these cases resulted in shorter
lengths of stay and lower average costs compared to all cases within
the specified CABG MS-DRGs. As such, it would be inappropriate to
reassign cases reporting the use of IFVA to higher weighted MS-DRGs
merely as an incentive for hospitals to invest in the IFVA technology.
With regards to the commenter's suggestion that CMS give
consideration to the utilization of the cardiac surgery database to
analyze IFVA, we refer the commenter and readers to section V.A.1-5 of
the FY 2010 proposed rule (74 FR 24165 through 24176) for a discussion
of CMS' Hospital Value-Based Purchasing (VBP) Plan, a policy that
strives to align payment incentives with the quality of care as well as
the resources used to deliver care to encourage high-value health care.
In conclusion, many commenters expressed support for the limited
MS-DRG changes proposed for FY 2010, given the major changes that took
place with the recent implementation of the MS-DRG system. Our analysis
of claims data indicates that IFVA cases have average costs very
similar to other cases within the MS-DRGs to which they are currently
assigned, and the data do not support the request to classify IFVA as a
cardiac catheterization at this time. Therefore, as final policy for FY
2010, we are finalizing our proposal to not make any changes to MS-DRGs
233, 234, 235, or 236 for cases reporting the use of intraoperative
fluorescence vascular angiography (IFVA), procedure code 88.59.
2. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue): Infected Hip and Knee Replacements
As discussed in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74
FR 24107 through 24109), we received a request that we examine the
issue of patients who have undergone hip or knee replacement procedures
that have subsequently become infected and who are then admitted for
inpatient services for removal of the prosthesis. The requestor stated
that these patients are presented with devastating complications and
require extensive resources to treat. The infection often results in
the need for multiple re-operations, prolonged use of intravenous and
oral antibiotics, extended rehabilitation, and frequent followups.
Furthermore, the requestor stated that, even with extensive treatment,
the outcomes can still be poor for some of these patients. The
requestor stated that patients who are admitted for inpatient services
with an infected hip or knee prosthesis must first undergo a procedure
to remove the prosthesis and to insert an antibiotic spacer to treat
the infection and maintain a space for the new prosthesis. The new
prosthesis cannot be inserted until after the infection has been
treated. Patients who are admitted for inpatient services with a hip or
knee infection and then undergo a removal of the prosthesis are
captured by the following procedure codes:
80.05 (Arthrotomy for removal of prosthesis, hip)
80.06 (Arthrotomy for removal of prosthesis, knee)
In addition, code 84.56 (Insertion or replacement of (cement)
spacer)) would be used for any insertion of a spacer that would be
reported if an antibiotic spacer were inserted.
The issue of hip and knee infections and revisions was discussed in
the FY 2009 IPPS final rule (73 FR 48498 through 48507) in response to
a more complicated request that we received involving the creation and
modification of several joint DRGs. Because data did not support the
requestor's suggested changes, we did not make any modifications to the
joint DRGs at that time.
The current requestor asked that we move cases involving the
removal of hip and knee prostheses (procedure codes 80.05 and 80.06)
from their current assignment in MS-DRGs 480, 481, and 482 (Hip and
Femur Procedures Except Major Joint with MCC, with CC, without CC/MCC,
respectively) and in MS-DRGs 495, 496, and 497 (Local Excision of
[[Page 43788]]
Internal Fixation Device Except Hip and Femur with MCC, with CC, and
with CC/MCC, respectively) and assign them to MS-DRGs 463, 464, and 465
(Wound Debridement and Skin Graft Except Hand, for Musculo-Connective
Tissue Disease with MCC, with CC, without CC/MCC, respectively). MS-
DRGs 463, 464, and 465 include cases that are treated with a
debridement for infection. The requestor stated that these cases are
clinically similar to those captured by procedure codes 80.05 and 80.06
where the prosthesis is removed and a new prosthesis is not inserted
because of an infection.
The requestor specifically asked that we remove the hip arthrotomy
code 80.05 from MS-DRGs 480, 481, and 482, and assign it to MS-DRGs
463, 464, and 465. The requestor also recommended that we remove the
knee arthrotomy code 80.06 from MS-DRGs 495, 496, and 497 and assign it
to MS-DRGs 463, 464, and 465.
If we were to accept the requestor's suggestion, joint replacement
cases in which the patients were admitted for inpatient services to
remove the prosthesis because of an infection would be assigned to the
higher paying debridement MS-DRGs (MS-DRGs 463, 464, and 465). As
mentioned earlier, these MS-DRGs contain other cases involving
treatment for infections.
For the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we examined
hip replacement cases identified by procedure code 80.05 in MS-DRGs
480, 481, and 482, and knee replacement cases identified by procedure
code 80.06 in MS-DRGs 495, 496, and 497 using the FY 2008 MedPAR file.
Our data from the FY 2008 MedPAR file support the requestor's
suggestion that these cases have similar costs to those in MS-DRGs 463,
464, and 465, and that they are significantly more expensive to treat
than those in their current MS-DRG assignments. The following table
summarizes those findings:
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average cost*
----------------------------------------------------------------------------------------------------------------
463--All Cases.................................................. 4,834 16.59 $26,696
464--All Cases.................................................. 4,934 9.52 15,065
465--All Cases.................................................. 1,696 5.45 9,041
480--All Cases.................................................. 31,181 8.89 17,168
480--Cases with code 80.05...................................... 643 13.35 26,053
480--Cases without code 80.05................................... 30,538 8.80 16,981
481--All Cases.................................................. 72,406 5.68 11,259
481--Cases with code 80.05...................................... 871 8.34 17,202
481--Cases without code 80.05................................... 71,535 5.65 11,187
482--All Cases.................................................. 37,443 4.65 9,320
482--Cases with code 80.05...................................... 282 6.82 13,718
482--Cases without code 80.05................................... 37,161 4.63 9,287
495--All Cases.................................................. 2,140 10.40 18,729
495--Cases with code 80.06...................................... 513 11.53 23,508
495--Cases without code 80.06................................... 1,627 10.04 17,432
496--All Cases.................................................. 5,518 5.73 10,827
496--Cases with code 80.06...................................... 1,346 6.67 14,454
496--Cases without code 80.06................................... 4,172 5.42 9,657
497--All Cases.................................................. 5,856 2.84 7,148
497--Cases with code 80.06...................................... 688 5.08 12,234
497--Cases without code 80.06................................... 5,168 2.54 6,470
----------------------------------------------------------------------------------------------------------------
* In the FY 2007 IPPS final rule (71 FR 47882), we adopted a cost-based weighting methodology. The cost-based
weights were adopted over a 3-year transition period in \1/3\ increments between FY 2007 and FY 2009. The
average cost represents the average standardized charges on the claims reduced to cost using the cost center-
specific CCRs for a specific DRG. The standardization process includes adjustments for IME, DSH, and wage
index as applied to individual hospitals. This estimation of cost is the same method used in the computation
of the relative weights. We are using cost-based data instead of our historical charge-based data to evaluate
proposed MS-DRG classification changes.
The data show that hip replacement cases with procedure code 80.05
in MS-DRGs 480, 481, and 482 have average costs of $26,053, $17,202,
and $13,718, respectively, compared to overall average costs of $17,168
in MS-DRG 480; $11,259 in MS-DRG 481; and $9,320 in MS-DRG 482. The
data also show that knee replacement cases with procedure code 80.06 in
MS-DRGs 495, 496, and 497 have average costs of $23,508, $14,454, and
$12,234, respectively, compared to average costs of all cases of
$18,729 in MS-DRG 495, $10,827 in MS-DRG 496, and $7,148 in MS-DRG 497.
All cases in MS-DRGs 463, 464, and 465 had average costs of $26,696,
$15,065, and $9,041, respectively.
The results of this analysis of data support the reassignment of
procedure codes 80.05 and 80.06 to MS-DRGs 463, 464, and 465.
Therefore, in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR
24107 through 24109), we proposed to move procedure codes 80.05 and
80.06 from their current assignments in MS-DRGs 480, 481, and 482 and
495, 496, and 497, and assign them to MS-DRGs 463, 464, and 465. We
also proposed to revise the code title of procedure code 80.05 to read
``Arthrotomy for removal of prosthesis without replacement, hip'' and
the title of procedure code 80.06 to read ``Arthrotomy for removal of
prosthesis without replacement, knee'', effective October 1, 2009, as
in shown in Table 6F of the Addendum to the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule.
Comment: A number of commenters supported our recommendation to
move codes 80.05 and 80.06 from their current assignments in MS-DRGs
480, 481, and 482 and 495, 496, and 497 and assign them to MS-DRGs 463,
464, and 465. The commenters also supported the proposed changes to the
code titles for both codes 80.05 and 80.06, effective October 1, 2009.
One commenter supported this MS-DRG change for the treatment of
infection following hip and knee arthroplasty patients because,
according to the commenter, considerable resources are required to care
for these patients whose deep infections are one of the most
devastating complications
[[Page 43789]]
associated with hip and knee arthroplasty. The commenter further stated
that the current hospital payment rate provides a disincentive for
hospitals to admit patients with infected total joint replacements and
creates an economic burden on tertiary care referral centers treating
these patients. Several other commenters also agreed that these cases
are significantly more expensive to treat than other cases in the
current MS-DRG assignments. One commenter stated that this reassignment
will more accurately reflect the costs associated with treating the
removal of hip and knee prostheses.
Some of the commenters who supported the proposed changes stated
that, given the recent major changes to the MS-DRGs, it was appropriate
for CMS to propose a limited number of MS-DRG classification changes
for FY 2010. The commenters had no objections to the proposal to move
codes 80.05 and 80.06 to MS-DRGs 463, 464, and 465.
Response: We appreciate the support of the commenters and agree
that it is appropriate to move codes 80.05 and 80.06 to MS-DRGs 463,
464, and 465.
Comment: Several commenters who supported this proposed MS-DRG
assignment change also recommended that CMS consider revising the
titles for MS-DRGs 463, 464, and 465 to reflect the proposed
reassignment change. The commenters suggested the following MS-DRG
titles for MS-DRGs 463, 464, and 465: ``Wound Debridement, Skin Graft,
and/or Removal of Infected Prosthesis Except hand for Musculoskeletal-
Connective Tissue Disease with MCC, with CC, or without CC/MCC,''
respectively.
Response: The MS-DRG titles are general in nature and usually do
not describe all the diagnoses and procedure codes included in each MS-
DRG. We do not use the full MS-DRG titles within the IPPS. Rather, we
use abbreviated titles, as is shown in Table 5 of the Addendum to this
FY 2010 IPPS/RY 2010 LTCH PPS final rule. Our abbreviated titles are
constrained by the fact that they must be 68 characters long. The
current abbreviated title for MS-DRG 465 is already 68 characters long.
The MS-DRG 465 abbreviated title is as follows: Wnd debrid & skn graft
exc hand, for musculo-conn tiss dis w/o CC/MM. As a result, we are
unable to accommodate the commenter's suggestion by making a clear MS-
DRG abbreviated title that includes all of the recommended language
within our 68 character limitation. We also note that not all
prosthesis removals are being moved to MS-DRGs 463, 364, and 465. We
are only moving knee and hip prosthesis removals to these MS-DRGs.
Therefore, we believe that the suggested new title may be misleading
because it implies all types of prosthesis removals are in these MS-
DRGs. Therefore, we are maintaining the current titles for MS-DRGs 463,
464, and 465.
After consideration of the public comments we received, we are
finalizing our proposal to move procedure codes 80.05 and 80.06 to MS-
DRGs 463, 464, and 465. We are also finalizing our proposal to revise
the titles of procedure codes 80.05 and 80.06. The revised title for
procedure code 80.05 is ``Arthrotomy for removal of prosthesis without
replacement, hip''. The revised title for procedure code 80.06 is
``Arthrotomy for removal of prosthesis without replacement, knee''.
These modifications and revisions are effective October 1, 2009, as
reflected in Table 6F of the Addendum to this final rule.
3. Medicare Code Editor (MCE) Changes
As explained under section II.B.1. of the preamble of this final
rule, the Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into a DRG. In the FY 2020
IPPS/LTCH PPS proposed rule (74 FR 24109 through 24110), for FY 2010,
we proposed to make the following changes to the MCE edits:
a. Diagnoses Allowed for Males Only Edit
There are four diagnosis codes that were inadvertently left off of
the MCE edit titled ``Diagnoses Allowed for Males Only.'' These codes
are located in the chapter of the ICD-9-CM diagnosis codes entitled
``Diseases of Male Genital Organs.'' In the FY 2009 IPPS final rule, we
indicated that we were adding the following four codes to this MCE
edit:
603.0 (Encysted hydrocele)
603.1 (Infected hydrocele)
603.8 (Other specified types of hydrocele)
603.9 (Hydrocele, unspecified).
We had no reported problems or confusion with the omission of these
codes from this section of the MCE, but in order to have an accurate
product, we indicated that we were adding these codes for FY 2009.
However, through an oversight, we failed to implement the indicated FY
2009 changes to the MCE by adding codes 603.0, 603.1, 603.8, and 603.9
to the MCE edit of diagnosis allowed for males only. In the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule, we acknowledged this omission and
again proposed to make the changes.
We did not receive any public comments on the proposed changes to
the edit for Diagnosis Allowed for Males Only. Therefore, we are
finalizing our proposal to add diagnosis codes 603.0, 603.1, 603.8, and
603.9 to this MCE edit for FY 2010.
b. Manifestation Codes as Principal Diagnosis Edit
Manifestation codes describe the manifestation of an underlying
disease, not the disease itself. Therefore, manifestation codes should
not be used as a principal diagnosis. The National Center for Health
Statistics (NCHS) has removed the advice ``code first associated
disorder'' from three codes, thereby making them acceptable principal
diagnosis codes. These codes are:
365.41 (Glaucoma associated with chamber angle anomalies)
365.42 (Glaucoma associated with anomalies of iris)
365.43 (Glaucoma associated with other anterior segment
anomalies)
In order to make conforming changes to the MCE, in the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24109), we proposed to
remove codes 365.41, 365.42, and 365.43 from the Manifestation Code as
Principal Diagnosis Edit.
We did not receive any public comments on the proposed changes to
the edit for Manifestation Codes as Principal Diagnosis. Therefore, we
are finalizing our proposal to remove manifestation codes 365.41,
365.42, and 365.43 from the principal diagnosis edit. These codes will
be acceptable as principal diagnosis, effective October 1, 2010.
c. Invalid Diagnosis or Procedure Code
The MCE checks each diagnosis, including the admitting diagnosis,
and each procedure against a table of valid ICD-9-CM codes. If an
entered code does not agree with any code on the list, it is assumed to
be invalid or that the 4th or 5th digit of the code is invalid or
missing.
An error was discovered in this edit. ICD-9-CM code 00.01
(Therapeutic ultrasound of vessels of head and neck) was inadvertently
left out of the MCE tables. The inclusion of this code in the MCE
tables would have generated an error message at the Medicare contractor
level, but we had instructed the
[[Page 43790]]
Medicare contractors to override this edit for discharges on or after
October 1, 2008. To make a conforming change to the MCE, in the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24109), we proposed to add
code 00.01 to the table of valid codes.
We did not receive any public comments on our proposed changes to
the edit for Invalid Diagnosis or Procedure Codes. Therefore, we are
finalizing our proposal to add code 00.01 to the table of valid codes
for FY 2010.
d. Unacceptable Principal Diagnosis
There are selected codes that describe a circumstance that
influences an individual's health status but not a current illness or
injury and codes that are not specific manifestations but may describe
illnesses due to an underlying cause. These codes are considered
unacceptable as a principal diagnosis.
For FY 2008, a series of diagnostic codes were created at
subcategory 209, Neuroendocrine Tumors. An instructional note under
this subcategory stated that coders were to ``Code first any associated
multiple endocrine neoplasia syndrome (258.01-258.03)''. Medicare
contractors had interpreted this note to mean that none of the codes in
subcategory 209 were acceptable principal diagnoses and had entered
these codes on the MCE edit for unacceptable principal diagnoses. We
later deemed this interpretation to be incorrect. We had not intended
that the series of codes at subcategory 209 were only acceptable as
secondary diagnoses.
To avoid future misinterpretation, in the FY 2010 IPPS/RY 2919 LTCH
PPS proposed rule (74 FR 24109 through 24110), we proposed to remove
the following codes from the MCE edit for unacceptable principal
diagnoses.
209.00 (Malignant carcinoid tumor of the small intestine,
unspecified portion)
209.01 (Malignant carcinoid tumor of the duodenum)
209.02 (Malignant carcinoid tumor of the jejunum)
209.03 (Malignant carcinoid tumor of the ileum)
209.10 (Malignant carcinoid tumor of the large intestine,
unspecified portion)
209.11 (Malignant carcinoid tumor of the appendix)
209.12 (Malignant carcinoid tumor of the cecum)
209.13 (Malignant carcinoid tumor of the ascending colon)
209.14 (Malignant carcinoid tumor of the transverse colon)
209.15 (Malignant carcinoid tumor of the descending colon)
209.16 (Malignant carcinoid tumor of the sigmoid colon)
209.17 (Malignant carcinoid tumor of the rectum)
209.20 (Malignant carcinoid tumor of unknown primary site)
209.21 (Malignant carcinoid tumor of the bronchus and lung)
209.22 (Malignant carcinoid tumor of the thymus)
209.23 (Malignant carcinoid tumor of the stomach)
209.24 (Malignant carcinoid tumor of the kidney)
209.25 (Malignant carcinoid tumor of foregut, not otherwise
specified)
209.26 (Malignant carcinoid tumor of midgut, not otherwise
specified)
209.27 (Malignant carcinoid tumor of hindgut, not otherwise
specified)
209.29 (Malignant carcinoid tumor of other sites)
209.30 (Malignant poorly differentiated neuroendocrine
carcinoma, any site)
209.40 (Benign carcinoid tumor of the small intestine,
unspecified portion)
209.41 (Benign carcinoid tumor of the duodenum)
209.42 (Benign carcinoid tumor of the jejunum)
209.43 (Benign carcinoid tumor of the ileum)
209.50 (Benign carcinoid tumor of the large intestine,
unspecified portion)
209.51 (Benign carcinoid tumor of the appendix)
209.52 (Benign carcinoid tumor of the cecum)
209.53 (Benign carcinoid tumor of the ascending colon)
209.54 (Benign carcinoid tumor of the transverse colon)
209.55 (Benign carcinoid tumor of the descending colon)
209.56 (Benign carcinoid tumor of the sigmoid colon)
209.57 (Benign carcinoid tumor of the rectum)
209.60 (Benign carcinoid tumor of unknown primary site)
209.61 (Benign carcinoid tumor of the bronchus and lung)
209.62 (Benign carcinoid tumor of the thymus)
209.63 (Benign carcinoid tumor of the stomach)
209.64 (Benign carcinoid tumor of the kidney)
209.65 (Benign carcinoid tumor of foregut, not otherwise
specified)
209.66 (Benign carcinoid tumor of midgut, not otherwise
specified)
209.67 (Benign carcinoid tumor of hindgut, not otherwise
specified)
209.69 (Benign carcinoid tumor of other sites)
In the meantime, CMS has issued instructions in the form of an
internal working document called a joint signature memorandum to the
Medicare contractors to override this edit and process claims
containing codes from the subcategory 209 series as acceptable
principal diagnoses.
We acted quickly to negate the effects of this edit, as it was an
erroneous edit to the MCE resulting in unintended consequences. We did
not receive any public comments on the proposed change to the edit for
Unacceptable Principal Diagnosis. Therefore, we are finalizing our
proposal to remove the codes listed above (that is, codes 209.00
through 209.69) from the MCE edit for Unacceptable Principal Diagnosis.
e. Creation of New Edit Titled ``Wrong Procedure Performed''
On January 15, 2009, CMS issued three National Coverage Decision
memoranda on the coverage of erroneous surgeries on Medicare patients:
Wrong Surgical or Other Invasive Procedure Performed on a Patient (CAG-
00401N); Surgical or Other Invasive Procedure Performed on the Wrong
Body Part (CAG-00402N); and Surgical or Other Invasive Procedure
Performed on the Wrong Patient (CAG-00403N). We refer readers to the
following CMS Web sites to view the memoranda in their entirety: For
the decision memorandum on surgery on the wrong body part: https://www.cms.hhs.gov/mcd/viewdecisionmemo.asp?id=222. For the decision
memorandum on surgery on the wrong patient: https://www.cms.hhs.gov/mcd/viewdecisionmemo.asp?id=221. For the decision memorandum on the
wrong surgery performed on a patient: https:[sol][sol]www.cms.hhs.gov/
mcd/viewdecisionmemo.asp?id=223.
To conform to these new coverage decisions, in the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule (74 FR 24110), we proposed to create a new
edit to identify cases in which wrong surgeries occurred. The NCHS has
revised the title of one E-code and created two new E-codes to identify
cases in which incorrect surgeries have occurred. The revised E-code
title is:
E876.5 (Performance of wrong operation (procedure) on
correct patient).
The two new E-codes are as follows:
E876.6 (Performance of operation (procedure) on patient
not scheduled for surgery).
E876.7 (Performance of correct operation (procedure) on
wrong side/body part).
For the benefit of the reader, we are providing the following brief
background information on external causes of injury and poisoning codes
(E-
[[Page 43791]]
codes). E-codes are intended to provide data for injury research and
evaluation of injury prevention strategies. E-codes capture how the
injury or poisoning happened (cause), the intent (unintentional or
accidental; or intentional, such as suicide or assault), and the place
where the event occurred. The use of E-codes is supplemental to the
ICD-9-CM diagnosis codes. The National Center for Health Statistics
(NCHS)/CDC has created and maintains the ICD-9-CM Official Guidelines
for Coding and Reporting, including instructions concerning E-codes,
and has made these guidelines available on the Web site at: http://www.cdc.gov/nchs/datawh/ftpserv/ftpicd9/icdguide08.pdf. The guidelines
are a national HIPAA standard. The guidelines are being updated
effective October 1, 2009, to recognize the fact that CMS requires the
reporting of E-codes as part of its wrong procedure performed national
coverage decision. The fourth quarter issue of Coding Clinic for ICD-9-
CM will also include information on the new wrong surgery codes as well
as the updated Coding Guidelines.
A complete list of all of the E-codes that will be implemented on
October 1, 2009, can be found on the CMS Web site home page at: http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/07_summarytables.asp#TopOfPage in the download titled ``New, Deleted, and
Invalid Diagnosis and Procedure Codes.''
Currently, an E-code used as a principal diagnosis will receive the
MCE Edit ``E-code as principal diagnosis''. This edit will remain in
effect. However, we proposed a change to the MCE so that E-codes E876.5
through E876.7, whether they are in the principal or secondary
diagnosis position, will trigger the ``Wrong Procedure Performed''
edit. Any claim with this edit will be rejected.
Comment: Several commenters requested that CMS clarify its policy
on reporting of E-codes, stating that CMS has never required the
reporting of these codes prior to the proposed rule. The commenters
also stated that an edit for codes E876.5 through E876.7 should not be
applied to claims in which one of these E-codes was listed as the
principal diagnosis as there is already an MCE edit that addresses E-
codes in this position. One commenter agreed that eliminating the ``E-
code as Principal Diagnosis'' edit that is currently in place will
address many issues for reporting E-codes as principal diagnosis.
Response: The commenters are correct that the reporting of E-codes
has not previously been required for reporting to CMS. However, as
noted above, the E-codes are used for many purposes and are often
required by institutions in order to describe a complete patient
encounter with health services. We believe that any of the three
aforementioned wrong surgery situations presents such an egregious
scenario that hospitals will capture this information through the use
of the applicable E-codes.
The commenters are correct that E-codes in the principal diagnosis
position on the claim will trigger an edit in which claims will be
returned to the provider. However, we did not propose to delete this
edit; this edit will remain in place along with the Wrong Procedure
Performed edit. Claims with E-codes other than codes E876.5 through
E876.7 reported in the principal diagnosis position will be subject to
the longstanding Principal Diagnosis edit. Claims with codes E876.5
through E876.7 reported in either the principal or secondary diagnosis
position will be subject to the Wrong Procedures Performed edit. These
claims will be rejected.
Comment: Commenters suggested that the Wrong Procedure Performed
edit should be triggered if the E-code is reported in either the E-code
position on the claim or in the secondary diagnosis position.
Response: We agree that the edit should be triggered no matter in
what position it is reported. However, we encourage reporting of the E-
codes in the secondary diagnosis position.
Comment: One commenter suggested that if codes E876.5 through
E876.7 were to be reported in the principal diagnosis position, the
``E-code as Principal Diagnosis'' edit should be invoked and the claim
returned to the provider so that the claim could then be resubmitted
listing the codes in the correct sequence. The commenter further
suggested that the Wrong Procedure Performed edit should only be
triggered when the E-codes are reported in the correct position on the
claim.
Response: We do not believe this suggestion is in the best interest
of the hospital industry. Performance of the wrong surgery is not a
reasonable and necessary treatment for the Medicare beneficiary, and
these claims will be rejected. To cause the Medicare contractor (the
fiscal intermediary or the A/B MAC) to return the claim to the
provider, have the provider correct the sequencing of the codes on the
claim and return it to the contractor, only to ultimately have the
claim be rejected, add steps to a process that results in the same
outcome.
Comment: One commenter suggested that updated coding guidance
should address the definition of operation/procedure, and [define] what
constitutes a wrong procedure for consistent assignment [of the codes]
to coincide with industry definitions.
Response: We take this opportunity to point out that the definition
of an operation or procedure is a longstanding description, dating from
the Uniform Hospital Discharge Data Set promulgated by the Secretary of
the U.S. Department of Health, Education, and Welfare in 1974. In
addition, with regard to the suggestion that there need to be
guidelines regarding the performance of a wrong surgery in any of the
three cases described by these codes, we believe that any of these
three scenarios are so flagrant that the average individual could
determine that a wrong surgery had taken place. Therefore, we do not
believe we should wait for a determination by the industry of what
constitutes the definition of a wrong surgery.
Comment: One commenter urged CMS to work closely with the other
Cooperating Parties for ICD-9-CM to provide guidance for coding,
reporting, and sequencing of codes E876.5 through E876.7. Several
commenters suggested that CMS begin processing all of the reported
diagnosis and procedure codes.
Response: We acknowledge the current CMS system limitations that
allow us to process only the first nine diagnosis codes and six
procedure codes reported on the hospital bills and that do not allow us
to process codes from the external cause of injury field when making an
MS-DRG assignment. We have discussed these internal CMS system
limitations in previous rules. In anticipation of the implementation of
ICD-10 on October 1, 2013, CMS is undertaking extensive efforts to
update its systems. These system updates include plans to begin
processing up to 25 diagnosis codes and 25 procedure codes as well as
the ability to process codes reported in the external cause of injury
field. With these system updates, we believe the concerns expressed by
commenters concerning CMS' limited processing of reported codes will be
resolved. In the meantime, hospitals should continue their current and
longstanding practice of reporting the ICD-9-CM diagnosis and procedure
codes which affect the MS-DRG assignment among the first nine diagnosis
and first six procedure coding fields.
As stated below, CMS will implement a wrong surgery (Wrong
Procedure Performed) coverage edit in the MCE on October 1, 2009, that
will lead to any
[[Page 43792]]
claim with a wrong surgery E-code triggering this edit to be rejected.
Should hospitals perform any of the three wrong surgeries and
submit claims on which the E-code is omitted or is listed in a field
that we do not currently process for the MS-DRG assignment (the code is
not reported among the first nine diagnosis codes or the code is
reported in the External Cause of Injury field), the case may be
subject to retrospective review by the Recovery Audit Contractor (RAC)
and then subsequently denied. Patterns of apparent coding abuse may be
referred to the Office of Inspector General for HHS for additional
investigation.
We also have referred this new Wrong Procedure Performed national
coverage decision to the Cooperating Parties for ICD-9-CM who update
and maintain the Official ICD-9-CM Coding Guidelines. These guidelines
are a national HIPAA standard. The guidelines are being updated
effective October 1, 2009, to recognize the fact that CMS requires the
reporting of E-codes as part of its wrong procedure performed national
coverage decision. The fourth quarter issue of Coding Clinic for ICD-9-
CM will also include information on the new wrong surgery codes as well
as the updated Coding Guidelines. We believe the clarity provided by
the national coverage decisions, the MCE edits, the updated Official
ICD-9-CM Coding Guidelines, and the Fourth Quarter Coding Clinic
article on the new wrong surgery codes should make clear how the codes
are to be used and reported.
After consideration of the public comments we received, we are
finalizing our proposal to change the MCE so the E-codes E876.5 through
E876.7, whether they are in the principal or secondary diagnosis
position, will trigger the ``Wrong Procedure Performed'' edit.
Therefore, any claim with this edit will be rejected, effective October
1, 2009.
f. Procedures Allowed for Females Only Edit
It has come to our attention that code 75.37 (Amnioinfusion) and
code 75.38 (Fetal pulse oximetry) were inadvertently omitted from the
MCE edit ``Procedures Allowed for Females Only.'' In order to correct
this omission, in the FY 2010 IPPS/RY 2010 LTCH proposed rule (74 FR
24110 through 24111), we proposed to add codes 75.37 and 75.38 to the
edit for procedures allowed for females only.
We did not receive any public comments on our proposal. Therefore,
for FY 2010, we are adding codes 75-37 and 75.38 to the Procedures
Allowed for Females Only edit.
4. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, we
reviewed the surgical hierarchy of each MDC, as we have for previous
reclassifications and recalibrations, to determine if the ordering of
classes coincides with the intensity of resource utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 1 and 2 and surgical class B includes MS-DRGs
3, 4, and 5. Assume also that the average costs of MS-DRG 1 is higher
than that of MS-DRG 3, but the average costs of MS-DRGs 4 and 5 are
higher than the average costs of MS-DRG 2. To determine whether
surgical class A should be higher or lower than surgical class B in the
surgical hierarchy, we would weight the average costs of each MS-DRG in
the class by frequency (that is, by the number of cases in the MS-DRG)
to determine average resource consumption for the surgical class. The
surgical classes would then be ordered from the class with the highest
average resource utilization to that with the lowest, with the
exception of ``other O.R. procedures'' as discussed below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients in the MDC with these
diagnoses. Therefore, assignment to these surgical classes should only
occur if no other surgical class more closely related to the diagnoses
in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has a lower average costs than the class ordered
below it.
For FY 2010, we did not propose any revisions to the surgical
hierarchy.
We did not receive any public comments on our proposal not to make
any revisions to the surgical hierarchy and, therefore, are finalizing
our proposed decision in this final rule.
5. Complications or Comorbidity (CC) Exclusions List
a. Background
As indicated earlier in the preamble of this final rule, under the
IPPS 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
[[Page 43793]]
complication or comorbidity. A substantial complication or comorbidity
was defined as a condition that, because of its presence with a
specific principal diagnosis, would cause an increase in the length of
stay by at least 1 day in at least 75 percent of the patients. We refer
readers to section II.D.2. and 3. of the preamble of the FY 2008 IPPS
final rule with comment period for a discussion of the refinement of
CCs in relation to the MS-DRGs we adopted for FY 2008 (72 FR 47121
through 47152).
b. CC Exclusions List for FY 2010
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another.
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another.
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another.
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another.
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\2\
---------------------------------------------------------------------------
\2\ See the FY 1989 final rule (53 FR 38485, September 30,
1988), for the revision made for the discharges occurring in FY
1989; the FY 1990 final rule (54 FR 36552, September 1, 1989), for
the FY 1990 revision; the FY 1991 final rule (55 FR 36126, September
4, 1990), for the FY 1991 revision; the FY 1992 final rule (56 FR
43209, August 30, 1991) for the FY 1992 revision; the FY 1993 final
rule (57 FR 39753, September 1, 1992), for the FY 1993 revision; the
FY 1994 final rule (58 FR 46278, September 1, 1993), for the FY 1994
revisions; the FY 1995 final rule (59 FR 45334, September 1, 1994),
for the FY 1995 revisions; the FY 1996 final rule (60 FR 45782,
September 1, 1995), for the FY 1996 revisions; the FY 1997 final
rule (61 FR 46171, August 30, 1996), for the FY 1997 revisions; the
FY 1998 final rule (62 FR 45966, August 29, 1997) for the FY 1998
revisions; the FY 1999 final rule (63 FR 40954, July 31, 1998), for
the FY 1999 revisions; the FY 2001 final rule (65 FR 47064, August
1, 2000), for the FY 2001 revisions; the FY 2002 final rule (66 FR
39851, August 1, 2001), for the FY 2002 revisions; the FY 2003 final
rule (67 FR 49998, August 1, 2002), for the FY 2003 revisions; the
FY 2004 final rule (68 FR 45364, August 1, 2003), for the FY 2004
revisions; the FY 2005 final rule (69 FR 49848, August 11, 2004),
for the FY 2005 revisions; the FY 2006 final rule (70 FR 47640,
August 12, 2005), for the FY 2006 revisions; the FY 2007 final rule
(71 FR 47870) for the FY 2007 revisions; the FY 2008 final rule (72
FR 47130) for the FY 2008 revisions, and the FY 2009 final rule (73
FR 48510). In the FY 2000 final rule (64 FR 41490, July 30, 1999, we
did not modify the CC Exclusions List because we did not make any
changes to the ICD-9-CM codes for FY 2000.
---------------------------------------------------------------------------
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24111
through 24112), we proposed to make limited revisions to the CC
Exclusions List for FY 2010 to take into account the changes made in
the ICD-9-CM diagnosis coding system effective October 1, 2009. (We
refer readers to section II.G.7. of the preamble of this final rule for
a discussion of ICD-9-CM changes.) We proposed to make these changes in
accordance with the principles established when we created the CC
Exclusions List in 1987. In addition, we indicated on the CC Exclusions
List some changes as a result of updates to the ICD-9-CM codes to
reflect the exclusion of codes from being MCCs under the MS-DRG system
that we adopted in FY 2008.
Comment: One comment asked CMS if it would be reasonable to
consider modifying future GROUPER logic so that patients with multiple
secondary diagnoses classified as CCs would be assigned to the MCC
level. In other words, the commenter stated, multiple CCs would be
considered the same as having an MCC.
Response: We believe this comment is outside the scope of the
proposed rule because we did not propose significant revisions to the
MS-DRGs. Moreover, as discussed earlier, we made significant
refinements to the inpatient payment system when we implemented the MS-
DRG system in FY 2008. We refer readers to section II.D. of the FY 2008
IPPS final rule with comment period for a full discussion of how the
MS-DRG system was established based on severity levels of illness (72
FR 47141). As we noted earlier, we received a number of comments
recognizing the recent major changes to the MS-DRGs. The commenters
stated that, given these recent major changes, it is appropriate for
CMS to make only a limited number of MS-DRG classification changes for
FY 2010. We believe that reclassifying a case with two or more CCs as
an MCC would have a major impact on the MS-DRG system because 51
percent of the cases in the MedPAR file have more than one CC
(5,980,824 of 11,801,371 cases in FY 2008). Therefore, we have decided
not to modify the GROUPER logic to classify a case with multiple CCs as
an MCC for FY 2010.
Comment: Several commenters recommended that CMS consider making
further adjustments to the MS-DRG assignments based on obesity. The
commenters stated that higher Body Mass Index (BMI) ratings add to the
complexity of care for patients, such as those patients undergoing
orthopedic procedures. The commenters recommended the following changes
to the list of MCCs and CCs.
One commenter recommended that CMS add the following codes to the
CC list. Another commenter recommended that CMS add these same codes to
the MCC list.
731.3 (Major osseous defects)
V85.35 (Body mass index 35.0-35.9, adult)
V85.36 (Body mass index 36.0-36.9, adult)
V85.37 (Body mass index 37.0-37.9, adult)
Both commenters recommended that CMS add the following codes to the
MCC list:
V85.38 (Body mass index 38.0-38.9, adult)
V85.39 (Body mass index 39.0-39.9, adult)
V85.40 (Body mass index 40 and over, adult)
Response: We believe this comment is outside the scope of the
specific proposal in the proposed rule because we did not propose
significant revisions to the MS-DRGs. In the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24091), we stated that we were encouraging
individuals with comments about MS-DRG classifications to submit these
comments no later than early December of each year so they can be
carefully considered for possible
[[Page 43794]]
inclusion in the annual proposed rule and, if included, may be
subjected to public review and comment. Therefore, we are not adding
these codes to the MCC list or the CC list for FY 2010. We may consider
their appropriateness for inclusion in next year's annual IPPS proposed
rule.
After consideration of the public comments received, we are
adopting the proposed limited revisions to the CC Exclusion List as
final for FY 2010 without change.
Tables 6G and 6H, Additions to and Deletions from the CC Exclusion
List, respectively, which are effective for discharges occurring on or
after October 1, 2009, are not being published in this final rule
because of the length of the two tables. Instead, we are making them
available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS. Each of these principal diagnoses
for which there is a CC exclusion is shown in Tables 6G and 6H with an
asterisk, and the conditions that will not count as a CC, are provided
in an indented column immediately following the affected principal
diagnosis.
A complete updated MCC, CC, and Non-CC Exclusions List is also
available through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS. Beginning with discharges on or
after October 1, 2009, the indented diagnoses will not be recognized by
the GROUPER as valid CCs for the asterisked principal diagnosis.
To assist readers in identifying the changes to the MCC and CC
lists that occurred as a result of updates to the ICD-9-CM codes, as
described in Tables 6A, 6C, and 6E of the Addendum to this final rule,
we are providing the following summaries of those MCC and CC changes.
Summary of Additions to the MS-DRG MCC List--Table 6I.1
------------------------------------------------------------------------
Code Description
------------------------------------------------------------------------
277.88....................... Tumor lysis syndrome.
670.22....................... Puerperal sepsis, delivered, with mention
of postpartum complication.
670.24....................... Puerperal sepsis, postpartum condition or
complication.
670.32....................... Puerperal septic thrombophlebitis,
delivered, with mention of postpartum
complication.
670.34....................... Puerperal septic thrombophlebitis,
postpartum condition or complication.
670.80....................... Other major puerperal infection,
unspecified as to episode of care or not
applicable.
670.82....................... Other major puerperal infection,
delivered, with mention of postpartum
complication.
670.84....................... Other major puerperal infection,
postpartum condition or complication.
756.72....................... Omphalocele.
756.73....................... Gastroschisis.
768.73....................... Severe hypoxic-ischemic encephalopathy.
779.32....................... Bilious vomiting in newborn.
------------------------------------------------------------------------
Summary of Deletions From the MS-DRG MCC List--Table 6I.2
------------------------------------------------------------------------
Code Description
------------------------------------------------------------------------
768.7........................ Hypoxic-ischemic encephalopathy (HIE).
------------------------------------------------------------------------
Summary of Additions to the MS-DRG CC List--Table 6J.1
------------------------------------------------------------------------
Code Description
------------------------------------------------------------------------
209.71....................... Secondary neuroendocrine tumor of distant
lymph nodes.
209.72....................... Secondary neuroendocrine tumor of liver.
209.73....................... Secondary neuroendocrine tumor of bone.
209.74....................... Secondary neuroendocrine tumor of
peritoneum.
209.79....................... Secondary neuroendocrine tumor of other
sites.
416.2........................ Chronic pulmonary embolism.
453.50....................... Chronic venous embolism and thrombosis of
unspecified deep vessels of lower
extremity.
453.51....................... Chronic venous embolism and thrombosis of
deep vessels of proximal lower
extremity.
453.52....................... Chronic venous embolism and thrombosis of
deep vessels of distal lower extremity.
453.6........................ Venous embolism and thrombosis of
superficial vessels of lower extremity.
453.71....................... Chronic venous embolism and thrombosis of
superficial veins of upper extremity.
453.72....................... Chronic venous embolism and thrombosis of
deep veins of upper extremity.
453.73....................... Chronic venous embolism and thrombosis of
upper extremity, unspecified.
453.74....................... Chronic venous embolism and thrombosis of
axillary veins.
453.75....................... Chronic venous embolism and thrombosis of
subclavian veins.
453.76....................... Chronic venous embolism and thrombosis of
internal jugular veins.
453.77....................... Chronic venous embolism and thrombosis of
other thoracic veins.
453.79....................... Chronic venous embolism and thrombosis of
other specified veins.
453.81....................... Acute venous embolism and thrombosis of
superficial veins of upper extremity.
453.82....................... Acute venous embolism and thrombosis of
deep veins of upper extremity.
453.83....................... Acute venous embolism and thrombosis of
upper extremity, unspecified.
453.84....................... Acute venous embolism and thrombosis of
axillary veins.
453.85....................... Acute venous embolism and thrombosis of
subclavian veins.
453.86....................... Acute venous embolism and thrombosis of
internal jugular veins.
453.87....................... Acute venous embolism and thrombosis of
other thoracic veins.
453.89....................... Acute venous embolism and thrombosis of
other specified veins.
569.71....................... Pouchitis.
569.79....................... Other complications of intestinal pouch.
670.10....................... Puerperal endometritis, unspecified as to
episode of care or not applicable.
[[Page 43795]]
670.12....................... Puerperal endometritis, delivered, with
mention of postpartum complication.
670.14....................... Puerperal endometritis, postpartum
condition or complication.
670.20....................... Puerperal sepsis, unspecified as to
episode of care or not applicable.
670.30....................... Puerperal septic thrombophlebitis,
unspecified as to episode of care or not
applicable.
768.70....................... Hypoxic-ischemic encephalopathy,
unspecified.
768.71....................... Mild hypoxic-ischemic encephalopathy.
768.72....................... Moderate hypoxic-ischemic encephalopathy.
813.46....................... Torus fracture of ulna (alone).
813.47....................... Torus fracture of radius and ulna.
------------------------------------------------------------------------
Summary of Deletions From the MS-DRG CC List--Table 6J.2
------------------------------------------------------------------------
Code Description
------------------------------------------------------------------------
453.8........................ Other venous embolism and thrombosis of
other specified veins.
------------------------------------------------------------------------
These summary lists are the same as those lists included in the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24111 through 24112).
Comment: One commenter supported the CC designations for new codes
813.46 (Torus fracture of ulna (alone)) and 813.47 (Torus fracture of
radius and ulna).
Response: We appreciate the commenter's support.
Alternatively, the complete documentation of the GROUPER logic,
including the current CC Exclusions List, is available from 3M/Health
Information Systems (HIS), which, under contract with CMS, is
responsible for updating and maintaining the GROUPER program. The
current MS-DRG Definitions Manual, Version 26.0, is available for
$250.00, which includes shipping and handling. Version 26.0 of the
manual is also available on a CD for $200.00; a combination hard copy
and CD is available for $400.00. Version 27.0 of this manual, which
will include the final FY 2010 MS-DRG changes, will be available in CD
only for $225.00. These manuals may be obtained by writing 3M/HIS at
the following address: 100 Barnes Road, Wallingford, CT 06492; or by
calling (203) 949-0303, or by obtaining an order form at the Web site:
http://www.3MHIS.com. Please specify the revision or revisions
requested.
6. Review of Procedure Codes in MS DRGs 981 Through 983; 984 Through
986; and 987 Through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to change the
procedures assigned among these CMS DRGs. Under the MS-DRGs that we
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC). CMS DRG 476 became
MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure Unrelated to
Principal Diagnosis with MCC, with CC, and without CC/MCC). CMS DRG 477
became MS-DRGs 987, 988, and 989 (Nonextensive O.R. Procedure Unrelated
to Principal Diagnosis with MCC, with CC, and without CC/MCC).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These DRGs are intended to capture atypical
cases, that is, those cases not occurring with sufficient frequency to
represent a distinct, recognizable clinical group. MS-DRGs 984 through
986 (previously CMS DRG 476) are assigned to those discharges in which
one or more of the following prostatic procedures are performed and are
unrelated to the principal diagnosis:
60.0, Incision of prostate
60.12, Open biopsy of prostate
60.15, Biopsy of periprostatic tissue
60.18, Other diagnostic procedures on prostate and
periprostatic tissue
60.21, Transurethral prostatectomy
60.29, Other transurethral prostatectomy
60.61, Local excision of lesion of prostate
60.69, Prostatectomy, not elsewhere classified
60.81, Incision of periprostatic tissue
60.82, Excision of periprostatic tissue
60.93, Repair of prostate
60.94, Control of (postoperative) hemorrhage of prostate
60.95, Transurethral balloon dilation of the prostatic
urethra
60.96, Transurethral destruction of prostate tissue by
microwave thermotherapy
60.97, Other transurethral destruction of prostate tissue
by other thermotherapy
60.99, Other operations on prostate
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\3\
---------------------------------------------------------------------------
\3\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962); in FY 2000 (64 FR 41496); in FY 2001 (65
FR 47064); or in FY 2002 (66 FR 39852). In the FY 2003 final rule
(67 FR 49999) we did not move any procedures from DRG 477. However,
we did move procedure codes from DRG 468 and placed them in more
clinically coherent DRGs. In the FY 2004 final rule (68 FR 45365),
we moved several procedures from DRG 468 to DRGs 476 and 477 because
the procedures are nonextensive. In the FY 2005 final rule (69 FR
48950), we moved one procedure from DRG 468 to 477. In addition, we
added several existing procedures to DRGs 476 and 477. In the FY
2006 (70 FR 47317), we moved one procedure from DRG 468 and assigned
it to DRG 477. In FY 2007, we moved one procedure from DRG 468 and
assigned it to DRGs 479, 553, and 554. In FYs 2008 and 2009, no
procedures were moved, as noted in the FY 2008 final rule with
comment period (72 FR 46241), and in the FY 2009 final rule (73 FR
48513).
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[[Page 43796]]
For FY 2010, we did not propose to change the procedures assigned
among these MS-DRGs. We did not receive any public comments on our
proposal not to change the procedures assigned among the cited MS-DRGs
and, therefore, are adopting it as final for FY 2010 in this final
rule.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987
Through 989 to MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (formerly CMS DRG 468) or MS-DRGs 987 through
989 (formerly CMS DRG 477) 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 DRGs for the MDC in which the diagnosis falls. For
FY 2010, we did not propose to remove any procedures from MS-DRGs 981
through 983 or MS-DRGs 987 through 989. We did not receive any public
comments on our proposal and, therefore, are adopting it as final for
FY 2010 in this final rule.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986, and 987 through
989 (formerly, CMS DRGs 468, 476, and 477, respectively), to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average charges
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
For FY 2010, we did not propose to move any procedure codes among
these MS-DRGs. We did not receive any public comments on our proposal
and, therefore, are adopting it as final for FY 2010 in this final
rule.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on our review this year, we did not propose to add any
diagnosis codes to MDCs for FY 2010. We did not receive any public
comments on this subject.
7. Changes to the ICD-9-CM Coding System
As described in section II.B.1. of the preamble of this final rule,
the ICD-9-CM is a coding system used for the reporting of diagnoses and
procedures performed on a patient. In September 1985, the ICD-9-CM
Coordination and Maintenance Committee was formed. This is a Federal
interdepartmental committee, co-chaired by the National Center for
Health Statistics (NCHS), the Centers for Disease Control and
Prevention, and CMS, charged with maintaining and updating the ICD-9-CM
system. The Committee is jointly responsible for approving coding
changes, and developing errata, addenda, and other modifications to the
ICD-9-CM to reflect newly developed procedures and technologies and
newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The Official Version of the ICD-9-CM contains the list of valid
diagnosis and procedure codes. (The Official Version of the ICD-9-CM is
available from the Government Printing Office on CD-ROM for $19.00 by
calling (202) 512-1800.) Complete information on ordering the CD-ROM is
also available at: http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/05_CDROM.asp#TopOfPage. The Official Version of the ICD-9-CM is no
longer available in printed manual form from the Federal Government; it
is only available on CD-ROM. Users who need a paper version are
referred to one of the many products available from publishing houses.
The NCHS has lead responsibility for the ICD-9-CM diagnosis codes
included in the Tabular List and Alphabetic Index for Diseases, while
CMS has lead responsibility for the ICD-9-CM procedure codes included
in the Tabular List and Alphabetic Index for Procedures.
The Committee encourages participation in the above process by
health-related organizations. In this regard, the Committee holds
public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. After considering the opinions expressed at the public
meetings and in writing, the Committee formulates recommendations,
which then must be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2010 at a public meeting held on September 24-25,
2008 and finalized the coding changes after consideration of comments
received at the meetings and in writing by December 5, 2008. Those
coding changes are announced in Tables 6A through 6F in the Addendum to
this final rule. The Committee held its 2009 meeting on March 11-12,
2009. New codes for which there was a consensus of public support and
for which complete tabular and indexing changes are made by May 2009
will be included in the October 1, 2009 update to ICD-9-CM. Code
revisions that were discussed at the March 11-12, 2009 Committee
meeting but that could not be finalized in time to include them in the
Addendum to the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule are
included in Tables 6A through 6F of this final rule and are marked with
an asterisk (*).
Copies of the minutes of the procedure codes discussions at the
Committee's September 24-25, 2008 meeting and March 11-12, 2009 meeting
can be obtained from the CMS Web site at: http://cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 24-25, 2008 meeting and
March 11-12, 2009 meeting are found at: http://www.cdc.gov/nchs/icd9.htm. Paper copies of these minutes are no longer available and the
mailing list has been discontinued. These Web sites also provide
detailed information about the Committee, including information on
[[Page 43797]]
requesting a new code, attending a Committee meeting, and timeline
requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-9-CM
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by E-mail to:
[email protected].
Questions and comments concerning the procedure codes should be
addressed to: Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination
and Maintenance Committee, CMS, Center for Medicare Management,
Hospital and Ambulatory Policy Group, Division of Acute Care, C4-08-06,
7500 Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent
by E-mail to: [email protected].
The ICD-9-CM code changes that have been approved will become
effective October 1, 2009. The new ICD-9-CM codes are listed, along
with their MS-DRG classifications, in Tables 6A and 6B (New Diagnosis
Codes and New Procedure Codes, respectively) in the Addendum to this
final rule. As we stated above, the code numbers and their titles were
presented for public comment at the ICD-9-CM Coordination and
Maintenance Committee meetings. Both oral and written comments were
considered before the codes were approved.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24114),
we solicited comments on the proposed classification of these new
codes. We did not receive any public comments on the proposed MS-DRG
assignments for the new diagnosis and procedure codes. Therefore, in
this final rule, we are adopting as final without modification the MS-
DRG classifications for the new codes for FY 2010 that were included in
the proposed rule and the new codes that were discussed at the spring
but were not finalized in time to be included in the proposed rule.
For codes that have been replaced by new or expanded codes, the
corresponding new or expanded diagnosis codes are included in Table 6A
in the Addendum to this final rule. New procedure codes are shown in
Table 6B in the Addendum to this final rule. Diagnosis codes that have
been replaced by expanded codes or other codes or have been deleted are
in Table 6C (Invalid Diagnosis Codes) in the Addendum to this final
rule. These invalid diagnosis codes will not be recognized by the
GROUPER beginning with discharges occurring on or after October 1,
2009. Table 6D in the Addendum to this final rule contains invalid
procedure codes. These invalid procedure codes will not be recognized
by the GROUPER beginning with discharges occurring on or after October
1, 2009. Revisions to diagnosis code titles are in Table 6E (Revised
Diagnosis Code Titles) in the Addendum to this final rule, which also
includes the MS-DRG assignments for these revised codes. Table 6F in
the Addendum to this final rule includes revised procedure code titles
for FY 2010.
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October. As stated previously,
ICD-9-CM codes discussed at the March 11-12, 2009 Committee meeting
that receive consensus and that were finalized by May 2009 are included
in Tables 6A through 6F in the Addendum to this final rule.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) * * * until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will be available 6 months
earlier than would be possible with updates occurring only once a year
on October 1.
While section 1886(d)(5)(K)(vii) of the Act states that the
addition of new diagnosis and procedure codes on April 1 of each year
shall not require the Secretary to adjust the payment, or DRG
classification, under section 1886(d) of the Act until the fiscal year
that begins after such date, we have to update the DRG software and
other systems in order to recognize and accept the new codes. We also
publicize the code changes and the need for a mid-year systems update
by providers to identify the new codes. Hospitals also have to obtain
the new code books and encoder updates, and make other system changes
in order to identify and report the new codes.
The ICD-9-CM Coordination and Maintenance Committee holds its
meetings in the spring and fall in order to update the codes and the
applicable payment and reporting systems by October 1 of each year.
Items are placed on the agenda for the ICD-9-CM Coordination and
Maintenance Committee meeting if the request is received at least 2
months prior to the meeting. This requirement allows time for staff to
review and research the coding issues and prepare material for
discussion at the meeting. It also allows time for the topic to be
publicized in meeting announcements in the Federal Register as well as
on the CMS Web site. The public decides whether or not to attend the
meeting based on the topics listed on the agenda. Final decisions on
code title revisions are currently made by March 1 so that these titles
can be included in the IPPS proposed rule. A complete addendum
describing details of all changes to ICD-9-CM, both tabular and index,
is published on the CMS and NCHS Web sites in May of each year.
Publishers of coding books and software use this information to modify
their products that are used by health care providers. This 5-month
time period has proved to be necessary for hospitals and other
providers to update their systems.
A discussion of this timeline and the need for changes are included
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance
Committee minutes. The public agreed that there was a need to hold the
fall meetings earlier, in September or October, in order to meet the
new implementation dates. The public provided comment that additional
time would be needed to update hospital systems and obtain new code
books and coding software. There was considerable concern expressed
about the impact this new April update would have on providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-9-CM
Coordination and Maintenance Committee meeting are considered for
[[Page 43798]]
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 1, 2009 implementation of an ICD-9-CM
code at the September 24-25, 2008 Committee meeting. Therefore, there
were no new ICD-9-CM codes implemented on April 1, 2009.
Current addendum and code title information is published on the CMS
Web site at: http://www.cms.hhs.gov/icd9ProviderDiagnosticCodes/01_overview.asp#TopofPage. Information on ICD-9-CM diagnosis codes, along
with the Official ICD-9-CM Coding Guidelines, can be found on the Web
site at: http://www.cdc.gov/nchs/icd9.htm. Information on new, revised,
and deleted ICD-9-CM codes is also provided to the AHA for publication
in the Coding Clinic for ICD-9-CM. AHA also distributes information to
publishers and software vendors.
CMS also sends copies of all ICD-9-CM coding changes to its
Medicare contractors for use in updating their systems and providing
education to providers.
These same means of disseminating information on new, revised, and
deleted ICD-9-CM codes will be used to notify providers, publishers,
software vendors, contractors, and others of any changes to the ICD-9-
CM codes that are implemented in April. The code titles are adopted as
part of the ICD-9-CM Coordination and Maintenance Committee process.
Thus, although we publish the code titles in the IPPS proposed and
final rules, they are not subject to comment in the proposed or final
rules. We will continue to publish the October code updates in this
manner within the IPPS proposed and final rules. For codes that are
implemented in April, we will assign the new procedure code to the same
DRG in which its predecessor code was assigned so there will be no DRG
impact as far as DRG assignment. Any midyear coding updates will be
available through the Web sites indicated above and through the Coding
Clinic for ICD-9-CM. Publishers and software vendors currently obtain
code changes through these sources in order to update their code books
and software systems. We will strive to have the April 1 updates
available through these Web sites 5 months prior to implementation
(that is, early November of the previous year), as is the case for the
October 1 updates.
Comment: A number of commenters addressed concerns regarding the
implementation of ICD-10 and the processing more than nine diagnosis
and six procedure codes in anticipation of the implementation of ICD-
10. Several commenters recommended that CMS begin processing all
reported diagnosis and procedure codes on claims, even before the
planned implementation of ICD-10-CM and ICD-10-PCS on October 1, 2013.
Other commenters recommended that CMS be transparent during all steps
of ICD-10 implementation and make provisions for stakeholder comments
and input during the transition. One commenter recommended that the
final ICD-10 version of MS-DRGs be adopted using notice and comment
rulemaking.
Response: We did not address the planned implementation of ICD-10
in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule and, therefore,
consider these comments beyond the scope of the proposed rule.
Therefore, we will not address them in this final rule. We refer
readers to the separate CMS final rule published in the Federal
Register that announced the implementation of modifications to medical
data code set standards to adopt ICD-10-CM and ICD-10-PCS (74 FR 3328
through 3362). CMS is currently undergoing extensive efforts to update
its Medicare payment systems as part of the move to ICD-10. Part of
these system efforts will involve the expansion of our ability to
process more diagnosis and procedure codes. Information on ICD-10 can
be found on the CMS Web site at: http://www.cms.hhs.gov/ICD10. The
final ICD-10 version of MS-DRGs will be adopted under the formal
rulemaking process as part of our annual IPPS updates.
8. Other Issues Not Addressed in the Proposed Rule
We received a number of public comments on issues that were not the
subject of proposals in the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule.
a. Administration of Tissue Plasminogen Activator (tPA) (rtPA)
We received a public comment requesting that CMS conduct an
analysis of diagnosis code V45.88 (Status post administration of tPA
(rtPA) in a different facility within the last 24 hours prior to
admission to current facility) under MDC 1 (Diseases and Disorders of
the Nervous System). This code was created for use beginning October 1,
2008, and the commenter believes that the use of this code during FY
2009 and FY 2010 could potentially result in a new MS-DRG or set of MS-
DRGs in FY 2011. The commenter believed that an expedited analysis
would help show if the code is being used.
This comment is outside the scope of the proposed rule, as we did
not propose any MS-DRG changes based on data analysis of cases
including diagnosis code V45.88. Therefore, we will not undertake an
evaluation of code V45.88 at this time for FY 2010. As we stated in FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24091), we encourage
individuals with comments about MS-DRG classifications to submit these
comments no later than early December of each year so they can be
carefully considered for possible inclusion in the annual proposed rule
and, if included, may be subjected to public review and comment.
b. Coronary Artery Bypass Graft (CABG) With Intraoperative Angiography
We received a number of comments that recommended creating new MS-
DRGs to separately identify the use of intraoperative angiography, by
any method, in CABG surgery under MDC 5 (Diseases and Disorders of the
Circulatory System). Intraoperative angiography is used to assess
bypass graft patency. The commenters acknowledged that imaging in the
operating room is a fairly new concept. However, the commenters stated
that there is a movement to encourage greater use of this technology in
conjunction with CABG procedures to identify and correct any technical
issues with the graft(s) at the time of surgery. According to the
commenters, intraoperative angiography would reduce graft failure
complications and hospital readmissions while improving patient care
outcomes.
The commenters expressed concern that the costs related to
intraoperative angiography are not fully realized in the current
structure of the MS-DRGs. One commenter suggested creating four new MS-
DRGs to identify the use of intraoperative angiography when performed
with CABG surgery. The commenter stated that in the current MS-DRG
scheme, there is not a mechanism to determine when intraoperative
angiography is performed. Angiography is commonly performed as a
separate procedure in a catheterization laboratory and the ICD-9-CM
procedure codes do not distinguish between preoperative,
[[Page 43799]]
intraoperative, and postoperative angiography. Procedure code 88.59
(Intraoperative fluorescence vascular angiography (IFVA)), is one
intraoperative angiography technique that allows visualization of the
coronary vasculature. The commenter proposed four new MS-DRGs in
addition to the existing MS-DRGs for CABG in an attempt to
differentiate the utilization of resources between intraoperative
angiography and IFVA when utilized with CABG.
Another commenter suggested that CMS should consider completely
separating CABG procedures from cardiac catheterization. This commenter
indicated that the concept is ``worthy of serious consideration because
of its relationship to much larger issues in management of coronary
artery disease.'' Other commenters recommended that CMS assign IFVA
cases to the ``Other Cardiovascular MS-DRGs,'' MS-DRGs 228, 229, and
230.
We believe the requests to create new MS-DRGs in FY 2010 for CABG
cases with intraoperative angiography and IFVA are outside the scope of
the issues addressed in the proposed rule. The recommendation to move
IFVA cases to Other Cardiovascular MS-DRGs 228, 229, and 230 is also
out of scope issues addressed in the proposed rule. Therefore, we are
not providing responses to these public comments in this final rule. We
will consider the requests for new MS-DRGs regarding this topic during
the FY 2011 rulemaking process.
c. Insertion of Gastrointestinal Stent
We received a public comment requesting that CMS analyze the need
to create new MS-DRGs in FY 2011 to better capture patients who undergo
the insertion of a gastrointestinal stent under MDC 6 (Diseases and
Disorders of the Digestive System). The stents are inserted in the
esophagus, duodenum, biliary tract, or the colon in order to
reestablish or maintain patency of these vessels to allow swallowing,
drainage, or passage of waste. The commenter requested that the new MS-
DRGs be subdivided into three severity levels (with MCC, with CC, and
without CC/MCC). The commenter stated it had data that showed cases
with gastrointestinal stent insertions have higher costs than other
cases within the same MS-DRGs. The commenter also stated that there are
a small number of these cases, and acknowledged that there may be some
concern about the need to establish new DRGs for such a small number of
cases.
This comment relating to a request to create new MS-DRGs in FY 2011
for cases with gastrointestinal stents is outside the scope of the FY
2010 proposed rule. We will consider this request alone with other
timely received requests for updates to the FY 2011 MS-DRGs during the
FY 2011 rulemaking process. As we stated above, we encourage
individuals with comments about MS-DRG classifications to submit these
comments no later than early December of each year so they can be
carefully considered for possible inclusion in the annual proposed rule
and, if included, may be subjected to public review and comment.
H. Recalibration of MS-DRG Weights
In section II.E. of the preamble of this final rule, we state that
we fully implemented the cost-based DRG relative weights for FY 2009,
which was the third year in the 3-year transition period to calculate
the relative weights at 100 percent based on costs. In the FY 2008 IPPS
final rule with comment period (72 FR 47267), as recommended by RTI,
for FY 2008, we added two new CCRs for a total of 15 CCRs: one for
``Emergency Room'' and one for ``Blood and Blood Products,'' both of
which can be derived directly from the Medicare cost report.
As we proposed, in developing the FY 2010 system of weights, we
used two data sources: claims data and cost report data. As in previous
years, the claims data source is the MedPAR file. This file is based on
fully coded diagnostic and procedure data for all Medicare inpatient
hospital bills. The FY 2008 MedPAR data used in this final rule include
discharges occurring on October 1, 2007, through September 30, 2008,
based on bills received by CMS through March 31, 2009, from all
hospitals subject to the IPPS and short-term, acute care hospitals in
Maryland (which are under a waiver from the IPPS under section
1814(b)(3) of the Act). The FY 2008 MedPAR file used in calculating the
relative weights includes data for approximately 11,283,982 Medicare
discharges from IPPS providers. Discharges for Medicare beneficiaries
enrolled in a Medicare Advantage managed care plan are excluded from
this analysis. The data exclude CAHs, including hospitals that
subsequently became CAHs after the period from which the data were
taken. The second data source used in the cost-based relative weighting
methodology is the FY 2007 Medicare cost report data files from HCRIS
(that is, cost reports beginning on or after October 1, 2006, and
before October 1, 2007), which represents the most recent full set of
cost report data available. We used the March 31, 2009 update of the
HCRIS cost report files for FY 2007 in setting the relative cost-based
weights.
The methodology we used to calculate the DRG cost-based relative
weights from the FY 2008 MedPAR claims data and FY 2007 Medicare cost
report data is as follows:
To the extent possible, all the claims were regrouped
using the FY 2010 MS-DRG classifications discussed in sections II.B.
and G. of the preamble of this final rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2008 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 95.9 percent of the providers in the MedPAR file
had charges for 10 of the 15 cost centers. Claims for providers that
did not have charges greater than zero for at least 10 of the 15 cost
centers were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the mean of the log
distribution of both the total charges per case and the total charges
per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis
[[Page 43800]]
present on the claim, the POA indicator field was reset to ``Y'' for
``Yes'' just for relative weight-setting purposes for all claims that
otherwise have an ``N'' (No) or a ``U'' (documentation insufficient to
determine if the condition was present at the time of inpatient
admission) in the POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), then it is not a ``HAC,'' and the hospital is paid with
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
this meets policy goals of encouraging quality care and generates
program savings, it presents an issue for the relative weight-setting
process. Because cases identified as HACs are likely to be more complex
than similar cases that are not identified as HACs, the charges
associated with HACs are likely to be higher as well. Thus, if the
higher charges of these HAC claims are grouped into lower severity MS-
DRGs prior to the relative weight-setting process, the relative weights
of these particular MS-DRGs would become artificially inflated,
potentially skewing the relative weights. In addition, we want to
protect the integrity of the budget neutrality process by ensuring
that, in estimating payments, no increase to the standardized amount
occurs as a result of lower overall payments in a previous year that
stem from using weights and case-mix that are based on lower severity
MS-DRG assignments. If this would occur, the anticipated cost savings
from the HAC policy would be lost.
To avoid these problems, in the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24116), we proposed to reset the POA indicator
field to ``Y'' just for relative weight-setting purposes for all claims
that otherwise have an ``N'' or a ``U'' in the POA field. This
``forces'' 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.
We did not receive any public comments on our proposal to reset the
POA indicator field to ``Y'' for relative weight-setting purposes for
all claims that otherwise have an ``N'' or a ``U'' in the POA field. We
are finalizing this proposal for FY 2010 accordingly.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 15 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals in Alaska and Hawaii, the
applicable cost-of-living adjustment. Because hospital charges include
charges for both operating and capital costs, we standardized total
charges to remove the effects of differences in geographic adjustment
factors, cost-of-living adjustments, and DSH payments under the capital
IPPS as well. Charges were then summed by MS-DRG for each of the 15
cost groups so that each MS-DRG had 15 standardized charge totals.
These charges were then adjusted to cost by applying the national
average CCRs developed from the FY 2007 cost report data.
The 15 cost centers that we used in the relative weight calculation
are shown in the following table. The table shows the lines on the cost
report and the corresponding revenue codes that we used to create the
15 national cost center CCRs.
BILLING CODE 4120-01-P
[[Page 43801]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.000
[[Page 43802]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.001
[[Page 43803]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.002
[[Page 43804]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.003
[[Page 43805]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.004
[[Page 43806]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.005
[[Page 43807]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.006
BILLING CODE 4120-01-C
We developed the national average CCRs as follows:
Taking the FY 2007 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland as we are including their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-4 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-4. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 15 cost centers by the corresponding national average CCR, we
summed the 15 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The new cost-based relative weights were then normalized by an
adjustment factor of 1.54381 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The 15 national average CCRs for FY 2010 are as follows:
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................... 0.553
Intensive Days................................................. 0.480
Drugs.......................................................... 0.200
Supplies & Equipment........................................... 0.348
Therapy Services............................................... 0.415
Laboratory..................................................... 0.163
Operating Room................................................. 0.282
Cardiology..................................................... 0.181
Radiology...................................................... 0.161
Emergency Room................................................. 0.278
Blood and Blood Products....................................... 0.424
Other Services................................................. 0.426
Labor & Delivery............................................... 0.462
Inhalation Therapy............................................. 0.201
Anesthesia..................................................... 0.136
------------------------------------------------------------------------
As we explained in section II.E. of the preamble of this final
rule, we have completed our 2-year transition to the MS-DRGs. For FY
2008, the first year of the transition, 50 percent of the relative
weight for an MS-DRG was based on the two-thirds cost-based weight/one-
third charge-based weight calculated using FY 2006 MedPAR data grouped
to the Version 24.0 (FY 2007) DRGs. The remaining 50 percent of the FY
2008 relative weight for an MS-DRG was based on the two-thirds cost-
based weight/one-third charge-based weight calculated using FY 2006
MedPAR grouped to the Version 25.0 (FY 2008) MS-DRGs. In FY 2009, the
relative weights were based on 100 percent cost weights computed using
the Version 26.0 (FY 2009) MS-DRGs.
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 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24123), we proposed to use that same case
threshold in recalibrating the MS-DRG weights for FY 2010. Using the FY
2008 MedPAR data set, there are 8 MS-DRGs that contain fewer than 10
cases. Under the MS-DRGs, we have fewer low-volume DRGs than under the
CMS DRGs because we no longer have separate DRGs for patients age 0 to
17 years. With the exception of newborns, we previously separated some
DRGs based on whether the patient was age 0 to 17 years or age 17 years
and older. Other than the age split, cases grouping to these DRGs are
identical. The DRGs for patients age 0 to 17 years generally have very
low volumes because children are typically ineligible for Medicare. In
the past, we have found that the low volume of cases for the pediatric
DRGs could lead to significant year-to-year instability in their
relative weights. Although we have always encouraged non-Medicare
payers to develop weights applicable to their own patient populations,
we have heard frequent complaints from providers about the use of the
Medicare relative weights in the pediatric population. We believe that
eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2010, because we do not have sufficient MedPAR data to set
accurate and stable cost weights for these low-volume MS-DRGs, we
proposed to compute weights for the
[[Page 43808]]
low-volume MS-DRGs by adjusting their FY 2009 weights by the percentage
change in the average weight of the cases in other MS-DRGs. The
crosswalk table is shown below:
------------------------------------------------------------------------
Low[dash]volume MS-DRG MS-DRG title Crosswalk to MS-DRG
------------------------------------------------------------------------
768..................... Vaginal Delivery with FY 2009 FR weight
O.R. Procedure Except (adjusted by percent
Sterilization and/or change in average
D&C. weight of the cases
in other MS-DRGs).
789..................... Neonates, Died or FY 2009 FR weight
Transferred to (adjusted by percent
Another Acute Care change in average
Facility. weight of the cases
in other MS-DRGs).
790..................... Extreme Immaturity or FY 2009 FR weight
Respiratory Distress (adjusted by percent
Syndrome, Neonate. change in average
weight of the cases
in other MS-DRGs).
791..................... Prematurity with Major FY 2009 FR weight
Problems. (adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
792..................... Prematurity without FY 2009 FR weight
Major Problems. (adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
793..................... Full-Term Neonate with FY 2009 FR weight
Major Problems. (adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
794..................... Neonate with Other FY 2009 FR weight
Significant Problems. (adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
795..................... Normal Newborn........ FY 2009 FR weight
(adjusted by percent
change in average
weight of the cases
in other MS-DRGs).
------------------------------------------------------------------------
Comment: Some commenters questioned whether Medicare Advantage
claims were used to calculate the MS-DRG relative weights for FY 2010
in the proposed rule. The commenters noted that CMS' policy has been to
exclude Medicare Advantage claims from the relative weights
calculation, but believed that CMS may have inadvertently included
those claims in the calculation in the proposed rule. The commenters
believed that if the Medicare Advantage claims were included, the
amount paid under the IPPS will be overstated. The commenters
recommended that CMS ensure that Medicare Advantage claims are excluded
from the relative weights calculation. However, the commenters
requested that CMS continue to include the Medicare Advantage claims in
the MedPAR dataset for analysis purposes.
Response: Historically, we have excluded data from Medicare
Advantage claims from the calculation of the relative weights. As has
been stated in the preamble of previous IPPS rules and, most recently,
in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24115),
``Discharges for Medicare beneficiaries enrolled in a Medicare
Advantage managed care plan are excluded from this analysis.''
Consistent with this language, in the FY 2010 proposed rule, we
intended to exclude Medicare Advantage claims from the calculation of
the relative weights for FY 2010 as well. However, the December 2008
update of the FY 2008 MedPAR data that was used as the source for
calculating the relative weights contained a significant number of
Medicare Advantage claims. This inclusion is a result of hospitals
being required to submit informational only claims for all Medicare
Advantage patients they treated for discharges occurring on or after
October 1, 2006, under Change Request 5647, Transmittal 1311. As a
result, we inadvertently included claims from discharges of patients
enrolled in Medicare Advantage plans in the calculation of the proposed
FY 2010 relative weights. We have corrected this oversight in the
calculation of the final FY 2010 relative weights and, therefore, no
Medicare Advantage claims data are included in the calculations in this
final rule. Specifically, we added an edit to the relative weight
calculation to remove any claims that have a GHO--Paid indicator value
of ``1,'' which effectively removes Medicare Advantage claims from the
relative weights calculations. We are continuing to include Medicare
Advantage claims in the Expanded Modified MedPAR file that is available
to researchers for purchase under a data use agreement with CMS.
We did not receive any public comments on this section. Therefore,
we are adopting the national average CCRs as proposed, with the MS-DRG
weights recalibrated based on these CCRs.
I. Add-On Payments for New Services and Technologies
1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that the process must apply to a new medical service or
technology if, ``based on the estimated costs incurred with respect to
discharges involving such service or technology, the DRG prospective
payment rate otherwise applicable to such discharges under this
subsection is inadequate.'' We note that beginning with FY 2008, CMS
transitioned from CMS-DRGs to MS-DRGs.
The regulations implementing these provisions specify three
criteria for a new medical service or technology to receive an
additional payment: (1) The medical service or technology must be new;
(2) the medical service or technology must be costly such that the DRG
rate otherwise applicable to discharges involving the medical service
or technology is determined to be inadequate; and (3) the service or
technology must demonstrate a substantial clinical improvement over
existing services or technologies. These three criteria are explained
below in the ensuing paragraphs in further detail.
Under the first criterion, as reflected in 42 CFR 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. Typically,
there is a lag of 2 to 3 years from the point a new medical service or
technology is first introduced on the market (generally on the date
that the technology receives FDA approval/clearance) and when data
reflecting the use of the medical service or technology
[[Page 43809]]
are used to calculate the MS-DRG weights. For example, data from
discharges occurring during FY 2008 are used to calculate the FY 2010
MS-DRG weights in this final rule. Section 412.87(b)(2) of the
regulations therefore provides that ``a medical service or technology
may be considered new within 2 or 3 years after the point at which data
begin to become available reflecting the ICD-9-CM code assigned to the
new medical service or technology (depending on when a new code is
assigned and data on the new medical service or technology become
available for DRG recalibration). After CMS has recalibrated the DRGs,
based on available data to reflect the costs of an otherwise new
medical service or technology, the medical service or technology will
no longer be considered `new' under the criterion for this section.''
The 2-year to 3-year period during which a medical service or
technology can be considered new would ordinarily begin on the date on
which the medical service or technology received FDA approval or
clearance. (We note that, for purposes of this section of the final
rule, we generally refer to both FDA approval and FDA clearance as FDA
``approval.'') However, in some cases, initially there may be no
Medicare data available for the new service or technology following FDA
approval. For example, the newness period could extend beyond the 2-
year to 3-year period after FDA approval is received in cases where the
product initially was generally unavailable to Medicare patients
following FDA approval, such as in cases of a national noncoverage
determination or a documented delay in bringing the product onto the
market after that approval (for instance, component production or drug
production has been postponed following FDA approval due to shelf life
concerns or manufacturing issues). After the MS-DRGs have been
recalibrated to reflect the costs of an otherwise new medical service
or technology, the medical service or technology is no longer eligible
for special add-on payment for new medical services or technologies (as
specified under Sec. 412.87(b)(2)). For example, an approved new
technology that received FDA approval in October 2008 and entered the
market at that time may be eligible to receive add-on payments as a new
technology for discharges occurring before October 1, 2011 (the start
of FY 2012). Because the FY 2012 MS-DRG weights would be calculated
using FY 2010 MedPAR data, the costs of such a new technology would be
fully reflected in the FY 2012 MS-DRG weights. Therefore, the new
technology would no longer be eligible to receive add-on payments as a
new technology for discharges occurring in FY 2012 and thereafter.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases
involving the new technology exceed certain threshold amounts. In the
FY 2004 IPPS final rule (68 FR 45385), we established the threshold at
the geometric mean standardized charge for all cases in the MS-DRG plus
75 percent of 1 standard deviation above the geometric mean
standardized charge (based on the logarithmic values of the charges and
converted back to charges) for all cases in the MS-DRG to which the new
medical service or technology is assigned (or the case-weighted average
of all relevant MS-DRGs, if the new medical service or technology
occurs in more than one MS-DRG).
However, section 503(b)(1) of Public Law 108-173 amended section
1886(d)(5)(K)(ii)(I) of the Act to provide that, beginning in FY 2005,
CMS will apply ``a threshold * * * that is the lesser of 75 percent of
the standardized amount (increased to reflect the difference between
cost and charges) or 75 percent of one standard deviation for the
diagnosis-related group involved.'' (We refer readers to section IV.D.
of the preamble to the FY 2005 IPPS final rule (69 FR 49084) for a
discussion of the revision of the regulations to incorporate the change
made by section 503(b)(1) of Pub. L. 108-173.) Table 10 that was
included in the notice published in the Federal Register on October 3,
2008, contains the final thresholds that are being used to evaluate
applications for new technology add-on payments for FY 2010 (73 FR
57888).
We note that section 124 of Public Law 110-275 extended, through FY
2009, wage index reclassifications under section 508 of Public Law 108-
173 (the MMA) and special exceptions contained in the final rule
promulgated in the Federal Register on August 11, 2004 (69 FR 49105 and
49107) and extended under section 117 of Public Law 110-173 (the
MMSEA). The wage data affect the standardized amounts (as well as the
outlier offset and budget neutrality factors that are applied to the
standardized amounts), which we use to compute the cost criterion
thresholds. Therefore, the thresholds reflected in Table 10 in the
Addendum to the FY 2009 IPPS final rule were tentative. As noted
earlier, on October 3, 2008, we published a Federal Register notice (73
FR 57888) that contained a new Table 10 with revised thresholds that
reflect the wage index rates for FY 2009 as a result of implementation
of section 124 of Public Law 110-275. The revised thresholds also were
published on the CMS Web site. The revised thresholds published in
Table 10 in the October 3, 2008 Federal Register notice were used to
determine if an applicant for new technology add-on payments discussed
in this FY 2010 final rule met the cost criterion threshold for new
technology add-on payments for FY 2010.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the HIPAA Privacy Rule at 45 CFR parts 160 and 164
applies to claims information that providers submit with applications
for new technology add-on payments. Specifically, we explained that
health plans, including Medicare, and providers that conduct certain
transactions electronically, including the hospitals that would be
receiving payment under the FY 2001 IPPS final rule, are required to
comply with the HIPAA Privacy Rule. We further explained how such
entities could meet the applicable HIPAA requirements by discussing how
the HIPAA Privacy Rule permitted providers to share with health plans
information needed to ensure correct payment, if they had obtained
consent from the patient to use that patient's data for treatment,
payment, or health care operations. We also explained that, because the
information to be provided within applications for new technology add-
on payment would be needed to ensure correct payment, no additional
consent would be required. The HHS Office for Civil Rights has since
amended the HIPAA Privacy Rule, but the results remain. The HIPAA
Privacy Rule no longer requires covered entities to obtain consent from
patients to use or disclose protected health information for treatment,
payment, or health care operations, and expressly permits such entities
to use or to disclose protected health information for any of these
purposes. (We refer readers to 45 CFR 164.502(a)(1)(ii), and
164.506(c)(1) and (c)(3), and the Standards for Privacy of Individually
[[Page 43810]]
Identifiable Health Information published in the Federal Register on
August 14, 2002, for a full discussion of changes in consent
requirements.)
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a complete discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost to
charge ratios (``CCRs'') as described in Sec. 412.84(h)) exceed the
full DRG payment (including payments for IME and DSH, but excluding
outlier payments), Medicare will make an add-on payment equal to the
lesser of: (1) 50 percent of the estimated costs of the new technology
(if the estimated costs for the case including the new technology
exceed Medicare's payment); or (2) 50 percent of the difference between
the full DRG payment and the hospital's estimated cost for the case.
Unless the discharge qualifies for an outlier payment, Medicare payment
is limited to the full MS-DRG payment plus 50 percent of the estimated
costs of the new technology.
Section 1886(d)(4)(C)(iii) of the Act requires that the adjustments
to annual MS-DRG classifications and relative weights must be made in a
manner that ensures that aggregate payments to hospitals are not
affected. Therefore, in the past, we accounted for projected payments
under the new medical service and technology provision during the
upcoming fiscal year, while at the same time estimating the payment
effect of changes to the MS-DRG classifications and recalibration. The
impact of additional payments under this provision was then included in
the budget neutrality factor, which was applied to the standardized
amounts and the hospital-specific amounts. However, section 503(d)(2)
of Public Law 108-173 provides that there shall be no reduction or
adjustment in aggregate payments under the IPPS due to add-on payments
for new medical services and technologies. Therefore, following section
503(d)(2) of Public Law 108-173, add-on payments for new medical
services or technologies for FY 2005 and later years have not been
subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our current practice
of how CMS evaluates the eligibility criteria for new medical service
or technology add-on payment applications. We also amended Sec.
412.87(c) to specify that all applicants for new technology add-on
payments must have FDA approval for their new medical service or
technology by July 1 of each year prior to the beginning of the fiscal
year that the application is being considered.
Applicants for add-on payments for new medical services or
technologies for FY 2011 must submit a formal request, including a full
description of the clinical applications of the medical service or
technology and the results of any clinical evaluations demonstrating
that the new medical service or technology represents a substantial
clinical improvement, along with a significant sample of data to
demonstrate that the medical service or technology meets the high-cost
threshold. Complete application information, along with final deadlines
for submitting a full application, will be posted as it becomes
available on our Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/08_newtech.asp. To allow interested parties to identify the new
medical services or technologies under review before the publication of
the proposed rule for FY 2011, the Web site also will list the tracking
forms completed by each applicant.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Office of Clinical Standards and
Quality (OCSQ) and the Director of the Center for Medicare Management
(CMM), who is also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CMM, OCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
CMS plans to continue its Open Door forums with stakeholders who
are interested in CTI's initiatives. In addition, to improve the
understanding of CMS' processes for coverage, coding, and payment and
how to access them, the CTI has developed an ``innovator's guide'' to
these processes. The intent is to consolidate this information, much of
which is already available in a variety of CMS documents and in various
places on the CMS Web site, in a user-friendly format. This guide was
published in August 2008 and is available on the CMS Web site at:
http://www.cms.hhs.gov/CouncilonTechInnov/Downloads/InnovatorsGuide8_25_08.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further
[[Page 43811]]
guidance about how they can navigate these processes, can contact the
CTI at [email protected] or from the ``Contact Us'' section of the CTI
home page (http://www.cms.hhs.gov/CouncilonTechInnov/).
Comment: One commenter recommended that CMS deem a device to be a
substantial clinical improvement ``* * * if it has been granted a
humanitarian device exemption or priority review based on the fact that
it represents breakthrough technologies, that offer significant
advantages over existing approved alternatives, for which no
alternatives exist, or the availability of which is in the best
interests of the patients.''
Response: As stated in the FY 2008 IPPS final rule (72 FR 47302),
the FDA provides a number of different types of approvals to devices,
drugs and other medical products. At this time, we do not believe that
any particular type of FDA approval alone would automatically
demonstrate a substantial clinical improvement for the Medicare
population. However, as noted in previous final rules, we do take FDA
approval into consideration in our evaluation of new technology
applications. We note that a Humanitarian Device Exemption (HDE)
approval only requires that ``the probable benefit outweighs the risk
of injury or illness'' as opposed to the safety and effectiveness
standard that exists for pre-market approval (PMA). Among other
requirements, the labeling of a humanitarian use device must state that
the effectiveness of the device for the specific indication has not
been demonstrated. While an HDE approval certainly does not preclude us
from considering a technology for an add-on payment, neither does it
suggest that the product automatically meets the requirement to be
judged a substantial clinical improvement. Under the substantial
clinical improvement criterion, we will continue to evaluate a
technology with an HDE approval by measuring it against the specific
criteria we listed for determining substantial clinical improvement at
66 FR 46914.
Comment: A number of commenters addressed topics relating to the
marginal cost factor for the new technology add-on payment, the
potential implementation of ICD-10-CM, the use of external data in
determining the cost threshold, paying new technology add-on payments
for two to three years, mapping new technologies to the appropriate MS-
DRG and the use of the date that a ICD-9-CM code is assigned to a
technology or the FDA approval date (whichever is later) as the start
of the newness period.
Response: We did not request public comments nor propose to make
any changes to any of the issues summarized above. Because these
comments are outside of the scope of the provisions included in the
proposed rule, we are not providing a complete summary of the comments
or responding to them in this final rule.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and technology applications requires the Secretary to--
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries;
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending;
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement; and
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2010 prior
to publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we
published a notice in the Federal Register on November 28, 2008 (73 FR
72490), and held a town hall meeting at the CMS Headquarters Office in
Baltimore, MD, on February 17, 2009. In the announcement notice for the
meeting, we stated that the opinions and alternatives provided during
the meeting would assist us in our evaluations of applications by
allowing public discussion of the substantial clinical improvement
criterion for each of the FY 2010 new medical service and technology
add-on payment applications before the publication of the FY 2010 IPPS
proposed rule.
Approximately 90 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. Each of the five FY 2010 applicants presented
information on its technology, including a discussion of data
reflecting the substantial clinical improvement aspect of the
technology. We considered each applicant's presentation made at the
town hall meeting, as well as written comments submitted on each
applicant's application, in our evaluation of the new technology add-on
applications for FY 2010 in the FY 2010 proposed rule and in this final
rule.
In response to the published notice and the new technology town
hall meeting, we received two written comments regarding applications
for FY 2010 new technology add-on payments. We summarized these
comments or, if applicable, indicated that there were no comments
received, at the end of each discussion of the individual applications
in the FY 2010 IPPS/RY LTCH PPS proposed rule. We did not receive any
general comments about the application of the substantial clinical
improvement criterion.
A further discussion of our evaluation of the applications and the
documentation for new technology add-on payments submitted for FY 2010
approval is provided under the specified areas under this section.
3. FY 2010 Status of Technologies Approved for FY 2009 Add-On Payments
We approved one application for new technology add-on payments for
FY 2009: CardioWest\TM\ Temporary Total Artificial Heart System
(CardioWest\TM\ TAH-t).
SynCardia Systems, Inc. submitted an application for approval of
the CardioWest\TM\ temporary Total Artificial Heart system (TAH-t). The
TAH-t is a technology that is used as a bridge to heart transplant
device for heart transplant-eligible patients with end-stage
biventricular failure. The TAH-t pumps up to 9.5 liters of blood per
minute. This high level of perfusion helps improve hemodynamic function
in patients, thus making them better heart transplant candidates.
The TAH-t was approved by the FDA on October 15, 2004, for use as a
bridge to transplant device in cardiac transplant-eligible candidates
at risk of imminent death from biventricular failure. The TAH-t is
intended to be
[[Page 43812]]
used in hospital inpatients. One of the FDA's post-approval
requirements is that the manufacturer agrees to provide a post-approval
study demonstrating success of the device at one center can be
reproduced at other centers. The study was to include at least 50
patients who would be followed up to 1 year, including (but not limited
to) the following endpoints: survival to transplant; adverse events;
and device malfunction.
In the past, Medicare did not cover artificial heart devices,
including the TAH-t. However, on May 1, 2008, CMS issued a final
national coverage determination (NCD) expanding Medicare coverage of
artificial hearts when they are implanted as part of a study that is
approved by the FDA and is determined by CMS to meet CMS' Coverage with
Evidence Development (CED) clinical research criteria. (The final NCD
is available on the CMS Web site at: http://www.cms.hhs.gov/mcd/viewdecisionmemo.asp?id=211.)
We indicated in the FY 2009 IPPS final rule (73 FR 48555) that,
because Medicare's previous coverage policy with respect to this device
had precluded payment from Medicare, we did not expect the costs
associated with this technology to be currently reflected in the data
used to determine the relative weights of MS-DRGs. As we have indicated
in the past, and as we discussed in the FY 2009 IPPS final rule,
although we generally believe that the newness period would begin on
the date that FDA approval was granted, in cases where the applicant
can demonstrate a documented delay in market availability subsequent to
FDA approval, we would consider delaying the start of the newness
period. This technology's situation represented such a case. We also
noted that section 1886(d)(5)(K)(ii)(II) of the Act requires that we
provide for the collection of cost data for a new medical service or
technology for a period of at least 2 years and no more than 3 years
``beginning on the date on which an inpatient hospital code is issued
with respect to the service or technology.'' Furthermore, the statute
specifies that the term ``inpatient hospital code'' means any code that
is used with respect to inpatient hospital services for which payment
may be made under the IPPS and includes ICD-9-CM codes and any
subsequent revisions. Although the TAH-t has been described by the ICD-
9-CM code(s) since the time of its FDA approval, because the TAH-t had
not been covered under the Medicare program (and, therefore, no
Medicare payment had been made for this technology), this code could
not be ``used with respect to inpatient hospital services for which
payment'' is made under the IPPS, and thus we assumed that none of the
costs associated with this technology would be reflected in the
Medicare claims data used to recalibrate the MS-DRG relative weights
for FY 2009. For this reason, as discussed in the FY 2009 IPPS final
rule, despite the FDA approval date of the technology, we determined
that TAH-t would still be eligible to be considered ``new'' for
purposes of the new technology add-on payment because the TAH-t met the
newness criterion on the date that Medicare coverage began, consistent
with issuance of the final NCD, effective on May 1, 2008.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the TAH-t
and consideration of the public comments we received on the FY 2009
IPPS proposed rule, we approved the TAH-t for new technology add-on
payments for FY 2009 (73 FR 48557). We indicated that we believed the
TAH-t offered a new treatment option that previously did not exist for
patients with end-stage biventricular failure. However, we indicated
that we recognized that Medicare coverage of the TAH-t is limited to
approved clinical trial settings. The new technology add-on payment
status does not negate the restrictions under the NCD nor does it
obviate the need for continued monitoring of clinical evidence for the
TAH-t. We remain interested in seeing whether the clinical evidence
demonstrates that the TAH-t continues to be effective. If evidence is
found that the TAH-t may no longer offer a substantial clinical
improvement, we reserve the right to discontinue new technology add-on
payments, even within the 2 to 3 year period that the device may still
be considered to be new.
The new technology add-on payment for the TAH-t for FY 2009 is
triggered by the presence of ICD-9-CM procedure code 37.52
(Implantation of total heart replacement system), condition code 30,
and the diagnosis code reflecting clinical trial--V70.7 (Examination of
participant in clinical trial). For FY 2009, we finalized a maximum
add-on payment of $53,000 (that is, 50 percent of the estimated
operating costs of the device of $106,000) for cases that involve this
technology. As noted above, the TAH-t is still eligible to be
considered ``new'' for purposes of the new technology add-on payment
because the TAH-t met the newness criterion on the date that Medicare
coverage began, consistent with issuance of the final NCD, effective on
May 1, 2008.
We did not receive any public comments on our proposal to continue
new technology add-on payments for the TAH-t for FY 2010. Therefore, as
we proposed, for FY 2010, we are continuing the new technology add-on
payments for cases involving the TAH-t in FY 2010 with a maximum add-on
payment of $53,000.
4. FY 2010 Applications for New Technology Add-On Payments
We received six applications to be considered for new technology
add-on payment for FY 2010. However, one applicant, Emphasys Medical,
withdrew its application for the Zephyr[supreg] Endobronchial Valve
(Zephyr[supreg] EBV) prior to the publication of the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule. Since the Zephyr[supreg] EBV application
was withdrawn prior to the town hall meeting and publication of the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule, we did not discuss the
application in the proposed rule and also will not discuss it in this
final rule.
During the public comment period, three additional applicants
withdrew their applications from further consideration for FY 2010 new
technology add-on payments. A discussion and final determination of the
remaining two applications is presented below.
a. The AutoLITT\TM\ System
Monteris Medical submitted an application for new technology add-on
payments for FY 2010 for the AutoLITT\TM\. However, the applicant
withdrew its application for new technology add-on payments during the
public comment period.
Comment: One commenter supported the AutoLITT\TM\ application. The
commenter stated that AutoLITT\TM\ represented an advance because it
provides the ability to ``steer and rotate the beam to the size and
shape of the tumor'' and that such ability is a significant advance
from the current non-directional systems. The commenter noted that it
had ``no longitudinal or systemic studies to verify precisely the
degree of improvement in patient care,'' but that use of the
AutoLITT\TM\ had led to a quicker recovery time and fewer complications
in its experience with the device. Specifically, the commenter stated
that it was able to discharge patients within 24 to 48 hours which is
faster than with traditional therapies.
Response: We appreciate the commenter's response to the proposed
[[Page 43813]]
rule. We note again that the applicant withdrew its application from
consideration for new technology add-on payments for FY 2010.
Accordingly, we are not providing a response to the comment.
b. CLOLAR[supreg] (Clofarabine) Injection
Genzyme Oncology submitted an application for new technology add-on
payments for FY 2010 for CLOLAR[supreg] (clofarabine) injection.
However, the applicant withdrew its application for new technology add-
on payments during the public comment period. In the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule in section II.I.4.b. of the preamble, we
included a detailed discussion relating to our policy for determining
whether a new technology is substantially similar to an existing
technology in our analysis of whether CLOLAR would meet the newness
criterion. Because the CLOLAR application has been withdrawn, we will
not make a determination regarding substantially similarity to
determine newness for that application. Instead, we have provided our
discussion of substantial similarity below and have summarized and
responded to comments received on that topic.
Substantial Similarity Discussion
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we stated that
the newness criterion is intended to apply to technologies that have
been available to Medicare beneficiaries for no more than 2 to 3 years.
Therefore, a technology that applies for a supplemental FDA approval
must demonstrate that the new approval is not substantially similar to
the prior approval.
As discussed above, the new technology add-on payment is available
to new medical services or technologies that satisfy the three criteria
set forth in our regulations at Sec. 412.87(b) (that is, newness,
high-costs, and substantial clinical improvement). Typically, we begin
our analysis with an evaluation of whether an applicant's technology
meets what we refer to as the ``newness criterion'' under Sec.
412.87(b)(2) (that is, whether Medicare data are available to fully
reflect the cost of the technology in the MS-DRG weights through
recalibration). Generally, we believe that the costs of a technology
begin to be reflected in the hospital charge data used to recalibrate
the MS-DRG relative weights when the technology becomes available on
the market, usually on or soon after the date on which it receives FDA
approval.
Congress provided for the new technology add-on payment in order to
ensure that Medicare beneficiaries have access to new technologies. As
discussed previously, there often is a lag time of 2 to 3 years before
the costs of new technologies are reflected in the recalibration of the
relevant MS-DRGs. Because a new technology often has higher costs than
existing technologies, during this lag time the current MS-DRG payment
may not adequately reflect the costs of the new technology. The new
technology add-on payment addresses this concern by ensuring that
hospitals receive an add-on payment under the IPPS for costly new
technologies that represent a substantial clinical improvement over
existing technologies until such time when the cost of the technology
is reflected within the MS-DRG relative weights. When an existing
technology receives FDA approval for a new indication, similar concerns
may arise. If, prior to the FDA approval for the new indication, the
technology has not been used to treat Medicare patients for purposes
consistent with the new indication, the relevant MS-DRGs may not
reflect the cost of the technology. Consequently, Medicare
beneficiaries may not have adequate access to the technology when used
for purposes consistent with the new indication. Allowing the new
technology add-on payment for the technology when used for the new
indication would address this concern. For these reasons, we believe
that treating an existing technology as ``new'' when approved by the
FDA for a new indication may be warranted under certain circumstances.
In the September 7, 2001 final rule (66 FR 46915), we stated that a
new use of an existing technology may be eligible for the new
technology add-on payment under certain conditions. In the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule, we stated that we believe it is
appropriate to consider an existing technology for the new technology
add-on payments when its new use is not substantially similar to
existing uses of the technology. In the FY 2006 IPPS final rule (70 FR
47351), we explained our policy regarding substantial similarity in
detail and its relevance for assessing if the hospital charge data used
in the development of the relative weights for the relevant DRGs
reflect the costs of the technology. In that final rule, we stated
that, for determining substantial similarity, we consider (1) whether a
product uses the same or a similar mechanism of action to achieve a
therapeutic outcome, and (2) whether a product is assigned to the same
or a different DRG. We indicated that both of the above criteria should
be met in order for a technology to be considered ``substantially
similar'' to an existing technology. However, in that same final rule,
we also noted that, due to the complexity of issues regarding the
substantial similarity component of the newness criterion, it may be
necessary to exercise flexibility when considering whether technologies
are substantially similar to one another. Specifically, we stated that
we may consider additional factors depending on the circumstances
specific to each application.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we stated that
we believe that in determining whether a new use of an existing
technology is substantially similar to existing uses of the technology,
it may be relevant to consider not only the two criteria discussed in
the FY 2006 IPPS final rule, but also certain additional factors.
Specifically, we stated that it may also be appropriate to analyze
whether, as compared to existing uses of the technology, the new use
involves the treatment of the same or similar type of disease and the
same or similar patient population. Accordingly, we proposed to add a
third factor of consideration to our analysis of whether a new
technology is substantially similar to one or more existing
technologies. Specifically, we proposed to consider whether the new use
of the technology involves the treatment of the same or similar type of
disease and the same or similar patient population (74 FR 24130) in
addition to considering the already established factors described in
the FY 2006 IPPS final rule. We explained that if all three components
are present and the new use is deemed substantially similar to one or
more of the existing uses of the technology (that is beyond the newness
period), we would conclude that the technology is not new and,
therefore, is not eligible for the new technology add-on payment. In
the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we noted that we
considered, but rejected, the inclusion of the third factor in the FY
2006 IPPS final rule on the grounds that we believed that it was more
relevant to analyze whether the costs of the technology were already
reflected in the relative weights of the MS-DRGs. However, in the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule, we stated that upon further
consideration, we believe that both the type of disease and patient
population for which a technology is used are also relevant in
determining whether one indication of a technology is ``substantially
similar'' to another.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we noted that
the discussion of substantial similarity in the FY 2006 IPPS final rule
related to
[[Page 43814]]
comparing two separate technologies made by different manufacturers.
Nevertheless, we stated that the criteria discussed in the FY 2006 IPPS
final rule also are relevant when comparing the similarity between a
new use and existing uses of the same technology (or a very similar
technology manufactured by the same manufacturer). In other words, we
stated that it is necessary to establish that the new indication for
which the technology has received FDA approval is not substantially
similar to that of the prior indication. We explained that such a
distinction is necessary to determine the appropriate start date of the
newness period in evaluating whether the technology would qualify for
add-on payments (that is, the date of the ``new'' FDA approval or that
of the prior approval), or whether the technology could qualify for
separate new technology add-on payments under each indication.
Comment: Several commenters supported our proposal to add a third
factor of consideration to our analysis of whether a technology is
substantially similar to another technology or to a previous version of
the same technology with a new FDA indication. The commenters commended
CMS for proposing to add the third factor and encouraged CMS to apply
all three factors to future decisions regarding proposed new
technologies. One commenter encouraged CMS to consider codifying all
three substantial similarity factors in the regulations. Another
commenter asked that CMS clarify whether the proposed criterion applied
both to products that receive a second or follow-on indication as well
as to separate and distinct products that have the same or similar
mechanism of action, but are intended to treat a separate disease or
patient population. The commenter also noted that, in FY 2006, it
recommended that CMS include an additional factor when determining
whether products were substantially similar, specifically, whether the
products conferred the same level of substantial clinical improvement.
The commenter asserted that the addition of this would ``ensure that
products found to represent a true advancement in clinical care--even
if they utilize a similar mechanism of action, could be eligible for
new technology add-on payments.''
Response: We thank the commenters for their support of our
proposal.
In response to the comment asking for clarification about whether
the proposed additional factor under substantial similarity would apply
solely to a technology approved for a new indication or to two separate
and distinct products, we refer the commenter to our discussion above
in which we stated, ``the discussion of substantial similarity in the
FY 2006 IPPS final rule related to comparing two separate technologies
made by different manufacturers. Nevertheless, we believe the criteria
discussed in the FY 2006 IPPS final rule also are relevant when
comparing the similarity between a new use and existing uses of the
same technology (or a very similar technology manufactured by the same
manufacturer). In other words, we believe that it is necessary to
establish that the new indication for which the technology has received
FDA approval is not substantially similar to that of the prior
indication.'' Therefore, all three factors of substantial similarity
will apply in both scenarios.
In response to the comment that suggested we analyze whether two
products (or one product with two different indications) confer the
same level of substantial clinical improvement, we note that
substantial similarity is considered under the newness criterion (that
is, to determine if a technology may still be considered ``new'' for
purposes of the new technology add-on payment). As we stated in FY 2006
final IPPS rule, we base our decisions about new technology add-on
payments on a logical sequence of determinations moving from the
newness criterion to the cost criterion and finally to the substantial
clinical improvement criterion. Specifically, we do not make
determinations about substantial clinical improvement unless a product
has already been determined to be new and to meet the cost criterion.
Therefore, we are reluctant to import substantial clinical improvement
considerations into the logical prior decision about whether
technologies are new. Furthermore, while we make separate
determinations about whether similar products meet the substantial
clinical improvement criterion, we do not believe that it would be
appropriate to make determinations about whether one product or another
is clinically superior.
In response to the comment that suggested that we codify the
factors we use to evaluate substantial similarity, we note that we did
not propose to amend the new technology add-on regulations in the
proposed rule. However, we will consider making such a proposal in a
future rulemaking period.
We are finalizing our proposal to add a third factor of
consideration to our analysis of whether a new technology is
substantially similar to one or more existing technologies.
Specifically, in making a determination of whether a new technology is
substantially similar to an existing technology, we will consider
whether the new use of the technology involves the treatment of the
same or similar type of disease and the same or similar patient
population (74 FR 24130), in addition to considering the already
established factors described in the FY 2006 IPPS final rule (that is,
(1) whether a product uses the same or a similar mechanism of action to
achieve a therapeutic outcome; and (2) whether a product is assigned to
the same or a different DRG).
c. LipiScan\TM\ Coronary Imaging System
InfraReDx, Inc. submitted an application for new technology add-on
payments for FY 2010 for the LipiScan\TM\ Coronary Imaging System
(LipiScan\TM\). The LipiScan\TM\ device is a diagnostic tool that uses
Intravascular Near Infrared Spectroscopy (INIRS) during a cardiac
catheterization to scan the artery wall in order to determine coronary
plaque composition. The purpose of the device is to identify lipid-rich
areas in the artery because such areas have been shown to be more prone
to rupture. The procedure does not require flushing or occlusion of the
artery. INIRS identifies the chemical content of plaque by focusing
near infrared light at the vessel wall and measuring reflected light at
different wavelengths (that is, spectroscopy). The LipiScan\TM\ system
collects approximately 1,000 measurements per 12.5 mm of pullback, with
each measurement interrogating an area of 1 to 2 mm\2\ of lumen surface
perpendicular to the longitudinal axis of the catheter. When the
catheter is in position, the physician activates the pullback and
rotation device and the scan is initiated providing 360 degree images
of the length of the artery. The rapid acquisition speed for the image
freezes the motion of the heart and permits scanning of the artery in
less than 2 minutes. When the catheter pullback is completed, the
console displays the scan results, which are referred to as a
``chemogram'' image. The chemogram image requires reading by a trained
user, but, according to the applicant, was designed to be simple to
interpret.
With regard to the newness criterion, the LipiScanTM
received a 510K FDA clearance for a new indication on April 25, 2008,
and was available on the market immediately thereafter. On June 23,
2006, InfraReDx, Inc. was granted a 510K FDA clearance for the
``InfraReDx Near Infrared (NIR) Imaging System.'' Both devices are
under the common
[[Page 43815]]
name of ``Near Infrared Imaging System'' according to the 510K summary
document from the FDA. However, the InfraReDx NIR Imaging System device
that was approved by the FDA in 2006 was approved ``for the near
infrared imaging of the coronary arteries,'' whereas the
LipiScanTM device cleared by the FDA in 2008 is for a
modified indication. The modified indication specified that
LipiScanTM is ``intended for the near-infrared examination
of coronary arteries * * *, the detection of lipid-core-containing
plaques of interest * * * [and] for the assessment of coronary artery
lipid core burden.''
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24132),
we expressed our concerns regarding whether LipiScanTM is
substantially similar to its predicate device that was approved by FDA
in 2006. Specifically, it appears that the two devices, which are
manufactured by the same company, do not differ in either design or
functionality, according to the approval order documents from the FDA.
In the 2008 approval order, the FDA stated, ``The LipiScan Coronary
Imaging System utilizes the same basic catheter design as the
predicate, the InfraReDx NIR Imaging System (June 23, 2006). These
devices have a similar intended use, use the same operating principal,
incorporate the same basic catheter design, have the same shelf life,
and are packaged using the same materials and processes. The
modifications from the InfraReDx NIR Imaging System to the LipiScan
Coronary Imaging System are the improved catheter design, improved user
interface (including PBR and console), and the additional testing
required to support an expanded indication for use.'' Therefore, it
appears that the only difference between the two approvals may be a
modification of the intended use.
As mentioned earlier in our discussion of substantial similarity in
section II.I.4.b. of this final rule, our policy regarding substantial
similarity discussed in the FY 2006 final rule (70 FR 47351 through
47532) outlined two criteria as it relates to two separate technologies
that are made by different manufacturers that were used to guide our
determination of whether two technologies were substantially similar to
one another. Although the LipiScanTM is a diagnostic device
and not a therapeutic device we believe that the substantial similarity
component of the newness criterion still applies.
Both the prior and the new FDA indications for
LipiScanTM use the same or a similar mechanism of action to
achieve a desired therapeutic outcome, and both treat patients that
would generally be assigned to the same MS-DRG. Similarly, both
indications of LipiScanTM are intended to treat the same
disease in the same patient population. Consequently, in the 2010 IPPS/
RY 2010 LTCH PPPS proposed rule, we stated that we have concerns as to
whether or not the two intended uses are substantially similar,
especially considering that the technologies appear essentially
identical. In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we
welcomed public comment on whether or not the latest 510K FDA clearance
should be considered ``substantially similar'' to its predicate
technology approved by the FDA in 2006 (74 FR 24133).
Comment: One commenter, the manufacturer, gave comments regarding
whether LipiScanTM was substantially similar to its
predicate device and whether it met the newness criterion for new
technology add-on payments. The manufacturer included the following
table to illustrate the differences between the version of the device
that was approved in 2006 and the version that was approved in 2008:
------------------------------------------------------------------------
2006 NIRS device Marketed 2008 LipiScan
------------------------------------------------------------------------
Console........... No display of results of Results displayed
scan. immediately.
Catheter.......... Saline-filled with Air-filled with no
microbubble problem microbubble problem.
obscuring many scans.
Algorithm......... No algorithmic processing Algorithm validated in
of NIR signals--no means over 1,000 autopsy
of certifying that lipid measurements proving
core plaque is present. that NIRS can detect
lipid core plaque, and
providing diagnosis of
lipid core plaque to the
MD during the case.
------------------------------------------------------------------------
In addition, the commenter asserted that the version of the device
that was approved by the FDA in 2006 was ``never marketed, donated or
sold to hospitals because it had numerous shortcomings that were not
overcome until [the date of its second FDA clearance, April 25,
2008].'' Finally, the commenter noted that Medicare claims do not
contain any charge for LipiScanTM prior to that date.
Response: Because the manufacturer has provided statements that
LipiScanTM was not marketed until after its second FDA
clearance, we believe that it is no longer necessary to determine
whether the version of the device that was cleared by the FDA in 2008
is substantially similar to that which was cleared in 2006. As noted by
the applicant, CMS uses the date of FDA approval or the date that a
technology is marketed (if the manufacturer can document there was a
delay in bringing the technology to market after FDA approval) and thus
available to Medicare beneficiaries as the start of the newness period.
In this case, the manufacturer has provided such documentation.
Therefore, we believe that based on the evidence that supports that
LipiScanTM was not marketed or otherwise available to
Medicare beneficiaries until April 25, 2008, LipiScanTM
meets the newness criterion.
We note that the LipiScanTM technology is identified by
ICD-9-CM procedure code 38.23 (Intravascular spectroscopy), which
became effective October 1, 2008, and cases involving the use of this
device generally map to MS-DRG 246 (Percutaneous Cardiovascular
Procedures with Drug-Eluting Stent(s) with MCC or 4+ Vessels/Stents);
MS-DRG 247 (Percutaneous Cardiovascular Procedures with Drug-Eluting
Stent(s) without MCC); MS-DRG 248 (Percutaneous Cardiovascular
Procedures with Non-Drug-Eluting Stent(s) with MCC or 4+ Vessels/
Stents); MS-DRG 249 (Percutaneous Cardiovascular Procedures with Non-
Drug-Eluting Stent(s) without MCC); MS-DRG 250 (Percutaneous
Cardiovascular Procedures without Coronary Artery Stent with MCC); and
MS-DRG 251 (Percutaneous Cardiovascular Procedures without Coronary
Artery Stent without MCC).
In an effort to demonstrate that the technology meets the cost
criterion, the applicant used the FY 2009 After Outliers Removed (AOR)
file (posted on the CMS Web site) for cases potentially eligible for
LipiScanTM. The applicant believes that every case within
DRGs 246, 247, 248, 249, 250, and 251 are eligible for
LipiScanTM. In addition, the applicant believes that
LipiScanTM will be evenly distributed across patients in
each of the six MS-DRGs (16.6 percent within each MS-DRG). Using data
from the AOR file, the applicant found the average standardized charge
per case for MS-DRGs 246, 247, 248, 249, 250, and
[[Page 43816]]
251 was $65,364, $42,162, $58,754, $37,048, $61,016, and $35,878
respectively, equating to an average standardized charge per case of
$50,037. The applicant indicated that the average standardized charge
per case does not include charges related to LipiScanTM;
therefore, it is necessary to add the charges related to the device to
the average standardized charge per case in evaluating the cost
threshold criterion. Although the applicant submitted data related to
the estimated cost of LipiScanTM per case, the applicant
noted that the cost of the device was proprietary information. Based on
a sampling of two hospitals that have used the device, the applicant
used a markup of 120 percent of the costs and estimates $5,280 in
charges related to LipiScanTM. Because the applicant lacked
a significant sample of cases to determine the charges associated with
the device, we expressed our concerns in the proposed rule as to
whether or not the estimate of $5,280 in charges related to the device
was a valid estimate (74 FR 24133).
Adding the estimated charges related to the drug to the average
standardized charge per case (based on the case distribution from the
applicant's 2009 AOR analysis) results in a case-weighted average
standardized charge per case of $55,317 ($50,037 plus $5,280). Using
the FY 2010 thresholds published in Table 10 (73 FR 58008), the case-
weighted threshold for MS-DRGs 246, 247, 248, 249, 250, and 251 was
$53,847 (all calculations above were performed using unrounded
numbers). Because the case-weighted average standardized charge per
case for the applicable MS-DRGs exceed the case-weighted threshold
amount, the applicant maintains that LipiScanTM would meet
the cost criterion. In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule,
we invited public comment on whether or not LipiScanTM meets
the cost criterion.
Comment: One commenter, the applicant, submitted comments regarding
whether LipiScanTM meets the cost criterion. The commenter
noted that LipiScanTM is now used in 11 hospitals, 10 of
which are non-Department of Veterans Affairs (VA) hospitals. This
represented an increase from the two hospitals it noted in its
application when the applicant submitted it in November 2008. Based on
a sampling of all 10 non-VA hospitals that are actively using the
device, the applicant determined that the average charge for the device
was $7,497. Using the same methodology from the proposed rule and the
AOR file from the FY 2010 proposed rule (posted on the CMS Web site)
instead of the FY 2009 final rule AOR file, the applicant determined a
case-weighted average standardized charge of $47,059 for MS-DRGs 246-
251. Based on charge data from these 10 hospitals, the applicant
determined a mean charge of $7,497 for the LipiScanTM
device. The applicant added the average charge of the device to the
charge per case and determined an average case-weighted charge per case
of $54,556 ($47,059 plus $7,497). Based on the Table 10 thresholds
published in the proposed rule (74 FR 24570), the case-weighted
threshold for MS-DRGs 246-251 was $52,881. Because the case-weighted
average standardized charge per case for the applicable MS-DRGs exceed
the case-weighted threshold amount, the applicant maintains that based
on this analysis the LipiScanTM would meet the cost
criterion.
In addition, the applicant stated that it analyzed Hospital Cost
Report Information System (``HCRIS'') data from 2007. Specifically, the
applicant searched for the 100 cardiac catheterization labs that had
the highest volume of cases in the United States. Based on the HCRIS
data from these 100 labs, the applicant determined the mean cost-to-
charge ratio was 0.204 with a mark-up of 490 percent yielding a charge
of $11,760 for LipiScanTM. Assuming that the
LipiScanTM device was marked-up 490 percent, the case-
weighted average standardized charge per case for cases involving the
use of LipiScanTM would be $58,819 ($47,059 plus $11,760)
across MS-DRGs 246-251. Similar to the above computation, based on the
Table 10 thresholds published in the proposed rule (74 FR 24570), the
case-weighted threshold for MS-DRGs 246-251 was $52,881. Because the
case-weighted average standardized charge per case for the applicable
MS-DRGs exceed the case-weighted threshold amount, the applicant
maintains that based on this analysis the LipiScanTM would
also meet the cost criterion.
Response: We thank the commenter for the updated analyses. As noted
above in its comment, the applicant determined the case-weighted
threshold using Table 10 thresholds from the proposed rule. The
thresholds in Table 10 published in the proposed rule are for
applicants for new technology add-on payments for FY 2011. The correct
case-weighted threshold to be used to evaluate FY 2010 proposals is the
same threshold ($53,847) that the applicant used in its analysis from
the proposed rule, which is based on Table 10 thresholds for FY 2010
applicants (as noted in the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule). Nevertheless, under the applicant's updated analysis using the
Table 10 threshold for FY 2010 applicants, the case-weighted average
standardized charge per case in either of the two analyses above (in
the applicant's comment) would exceed the case-weighted Table 10
threshold of $53,847.
We reviewed all three analyses that the applicant submitted (one in
the proposed rule and two in its comment) and, based on all three
analyses, we agree that the applicant meets the cost criterion.
With regard to substantial clinical improvement, the applicant
maintains that the device meets this criterion for the following
reasons. The applicant noted that the September 1, 2001 final rule
states that one facet of the criterion for substantial clinical
improvement is ``the device offers the ability to diagnose a medical
condition in a patient population where the medical condition is
currently undetectable or offers the ability to diagnose a medical
condition earlier in a patient population than allowed by currently
available methods. There must also be evidence that use of the device
to make a diagnosis affects the management of the patient'' (66 FR
46914). The applicant believes that LipiScanTM meets all
facets of this criterion. The applicant asserted that the device is
able to detect a condition that is not currently detectable. The
applicant explained that LipiScanTM is the first device of
its kind to be able to detect lipid-core-containing plaques and to
assess coronary artery lipid core burden. The applicant further noted
that FDA, in its approval documentation, has indicated that ``This is
the first device that can help assess the chemical makeup of coronary
artery plaques and help doctors identify those of particular concern.''
In addition, the applicant stated that the LipiScanTM
chemogram permits a clinician to detect lipid-core-containing plaques
in the coronary arteries compared to other currently available devices
that do not have this ability. The applicant explained that the
angiogram, the conventional test for coronary atherosclerosis, shows
only minimal coronary narrowing. However, the applicant indicated that
the LipiScanTM chemogram has the ability to reveal when an
artery contains extensive lipid-core-containing plaque at an earlier
stage.
The applicant also noted that the device has the ability to allow
providers to make a diagnosis that better affects the management of the
patient. Specifically, the applicant explained that the chemogram
results are available to the interventional cardiologist during
[[Page 43817]]
the PCI procedure, and have been found to be useful in decision-making.
In their application, the applicant stated that physicians have
reported changes in therapy based on LipiScanTM findings in
20 to 50 percent of patients. The applicant further stated in their
application that the most common use of LipiScanTM results
has been for selection of the length of artery to be stented. In some
cases a longer stent has been used when there is a lipid-core-
containing plaque adjacent to the area that is being stented because a
flow-limiting stenosis is present. Therefore, the applicant contends
that the use of LipiScanTM by clinicians to select the
length of artery to be stented and as an aid in selection of intensity
of lipid-altering therapy, demonstrates that LipiScanTM
affects the management of patients.
The applicant also submitted commentary from Interventional
Cardiologists (a group of clinicians who currently utilize the
LipiScanTM device) explaining the clinical benefits of the
device. The applicant further noted that the device may have other
potential uses that would be of clinical benefit, and studies are
currently being conducted to investigate these other potential uses.
The applicant explained that LipiScanTM offers promise as a
means to enhance progress against the two leading problems in coronary
disease management: (1) The unacceptably high rate of second events
that occur even after catheterization, revascularization, and the
institution of optimal medical therapy; and (2) the failure to diagnose
coronary disease early, which results in sudden death or myocardial
infarction being the first sign of the disease in most patients. The
applicant further stated that the identification of coronary lipid-
core-containing plaques, which can most readily be done in those
already undergoing catheterization, is likely to be of benefit in the
prevention of second events. In the longer term, the applicant stated
that the identification of lipid-core-containing plaques by
LipiScanTM may contribute to the important goal of primary
prevention of coronary events, which, in the absence of adequate
diagnostic methods, continue to cause extensive morbidity, mortality
and health care expenditures in Medicare beneficiaries and the general
population.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we noted that
while we recognize that the identification of lipid-rich plaques in the
coronary vasculature holds promise in the management of coronary artery
disease, we were concerned that statements in the FDA approval
documents, as well as statements made by investigators in the
literature, suggest that the clinical implications of identifying these
lipid-rich plaques are not yet certain and that further studies need to
be done to understand the clinical implications of this information (74
FR 24134). We also noted that we were concerned that there are no
outcome data regarding the use of the LipiScanTM technology.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we welcomed
public comment regarding whether or not the LipiScanTM
technology represents a substantial clinical improvement in the
Medicare population.
Comment: Two commenters submitted comments regarding whether
LipiScanTM represented a substantial clinical improvement.
One commenter supported approving LipiScanTM for new
technology add-on payments and noted that the statute indicated that
either a ``diagnostic device or a therapy should be eligible for the
add-on payment.'' (emphasis provided) The commenter stated that the
device had been studied in detail by the FDA and that the FDA concluded
that the device identified lipid core plaques with ``accuracy suitable
for clinical use.'' Additionally, the commenter stated that the device
``has already started changing the therapeutic decisionmaking process
and has the potential to provide additional benefits in the struggle
against the leading cause of death in the United States.''
The applicant stated that it believed that LipiScanTM is
a ``substantial clinical improvement'' over existing technologies
because it enables the physician to choose the length of artery to be
stented as well as the intensity of lipid lowering medical therapy that
should be used. The applicant asserted that the detection of lipid core
plaque could ultimately be helpful to physicians in managing patient
care and improving clinical outcomes because such plaques are prone to
sudden rupture. Additionally, the applicant asserted that there were
three ways in which it met CMS' regulatory standard for a substantial
clinical improvement including:
1. It detects ``a condition that is not currently detectable''
because it is the only device approved to identify the lipid core
content in coronary arteries.
2. It ``enables the patient to be diagnosed earlier'' because other
available diagnostic tests (including exercise testing and coronary
angiography) do not identify lipid core plaque; whereas without this
technology, the first sign that a lipid-rich plaque is present may be
an acute myocardial infarction.
3. It affects the management of the patient by:
Affecting the selection of the length of the artery to be
stented;
Affecting the selection of the appropriate target levels
for lipid altering pharmacologic therapy;
The chance that it may eventually be linked to the
prevention of peri-stenting myocardial infarction.
As an attachment to its comment, the applicant submitted a legal
analysis that stated that neither the statute nor the regulations
require that a diagnostic device be linked to improved clinical
outcomes; rather, an improvement in diagnosis alone is the only
requirement. The legal memorandum also noted that the statute
``references technology that improves either diagnosis or treatment''
and that a new technology ``need not improve both, nor does the statute
specify that the diagnostic must be linked to a treatment that improves
outcomes.'' Additionally, the legal analysis stated that
LipiScanTM has submitted evidence in accord with both the
statute and the regulations that it ``provides an improvement in
diagnosis of coronary artery disease by identifying the presence of the
lipid core plaque'' and asserts that this point is further evidenced by
the FDA which stated that the device ``is the first device that can
help assess the chemical make-up of coronary artery plaques and help
physicians identify those plaques with lipid cores, which may be of
particular concern.'' The legal analysis also stated that CMS should
not require new diagnostics to be judged by the same criteria that have
been applied to judge new therapeutics because ``such an approach would
not be in accord with the plain language of the regulation and that
statue, both of which envision distinct clinical benefits associated
with either a diagnostic or a therapy.''
Finally, the applicant summarized an article that considered the
``effect of diagnostic imaging on decisionmaking.'' Specifically, the
applicant summarized the hierarchy of six levels of diagnostic efficacy
presented in the article:
``Level 1: Technical efficacy, the physics are appropriate for the
target of the diagnostic;
Level 2: Diagnostic accuracy, the sensitivity and specificity for
the diagnostic target are appropriate;
Level 3: Diagnostic thing efficacy, the physician accepts the
diagnostic as capable of identifying the target;
Level 4: Therapeutic efficacy, the physician selects or does not
select a given therapy on the basis of the diagnostic outcome;
[[Page 43818]]
Level 5: Therapeutic outcome efficacy, the therapy selected on the
basis of the results of the diagnostic outcome provides an improvement
in the health outcome of the patient;
Level 6: Cost-effectiveness, the benefits to society have a
favorable relationship to the costs of the diagnostic.''
The applicant claimed that, applying the analysis from the article,
the FDA approval established that Levels 1 and 2 were met which it
believed to be consistent with the requirement under 42 CFR
412.87(b)(1). Further, the applicant asserted that the testimony
provided by physicians who are using LipiScan demonstrates that
physicians are accepting the results to identify lipid core plaque
(Level 3) and are utilizing the device to guide therapy (Level 4).
Response: We disagree with the commenters who stated that the
statute and regulations require that a diagnostic technology need only
``improve'' diagnosis and that the FDA approval of a diagnostic
technology in and of itself meets the regulatory criteria under Sec.
412.87(b)(1). The commenter correctly notes that section
1886(d)(5)(K)(viii) of the Act requires us to provide for public input
on whether a new technology ``substantially improves the diagnosis or
treatment'' of Medicare beneficiaries. Section 1886(d)(5)(K)(vi) of the
Act also authorizes the Secretary to establish through notice-and-
comment rulemaking the criteria that a new medical service or
technology must meet in order to be eligible for the new technology
add-on patient. Under this authority, we established three criteria
through notice and comment rulemaking--the newness criterion, the cost
criterion, and the substantial clinical improvement criterion (66 FR
46924). Specifically, Sec. 412.87(b)(1) of the regulations provides
that a new medical service or technology must ``represent an advance
that substantially improves, relating to technologies previously
available, the diagnosis or treatment of Medicare beneficiaries.''
As we explained in that rule, we will consider a diagnostic
technology to meet the substantial clinical improvement criterion if
the technology not only ``offers the ability to diagnose a medical
condition in a patient population where that medical condition is
currently undetectable or offers the ability to diagnose a medical
condition earlier in a patient population than allowed by currently
available methods,'' but also if ``use of the device to make a
diagnosis affects the management of the patient'' (66 FR 46914). Under
the commenter's analysis, a diagnostic technology effectively would
only need to receive FDA approval and be the only technology approved
for a particular diagnostic capability in order to be deemed a
``substantial improvement'' for purposes of new technology add-on
payments, regardless of its ability to positively affect patient
management. This approach would deem a device leading to the
identification of new information (in this case, whether plaques
contain a lipid core) as a substantial improvement in diagnosis even if
such detection has not been ``demonstrated to represent a substantial
improvement in caring for Medicare beneficiaries'' and is not linked to
evidence-based, significant, and positive changes in the management of
patients or, ultimately, to changes in clinical outcomes. We do not
believe this rationale is consistent with our prior statements
regarding the substantial clinical improvement criterion of the new
technology add-on payment provision. Nor do we believe it would be
appropriate to provide additional payments for new diagnostic tools
that fail to significantly change the management of patients, thereby
improving clinical outcomes.
As to whether LipiScan\TM\ represents a substantial improvement in
diagnosis, we considered first, whether LipiScan\TM\ ``offers the
ability to diagnose a medical condition in a patient population where
that medical condition is currently undetectable or offers the ability
to diagnose a medical condition earlier in a patient population than
allowed by currently available methods,'' and second whether ``use of
the device to make a diagnosis affects the management of the patient''
(66 FR 46914). In the case of LipiScan\TM\, the applicant has stated
that it believes that LipiScan\TM\ offers the ability to diagnose a
condition that is previously undetectable because it allows the
detection of lipid-rich plaques in patients with coronary artery
disease (CAD). We agree with the applicant that existing technologies
may not be able to adequately identify lipid-rich plaques. However, we
disagree that use of LipiScan\TM\ affects the management of the patient
at this time.
To qualify for the new technology add-on payment, a diagnostic
capability must also be linked to ``evidence that use of the device to
make a diagnosis affects the management of the patient.'' We believe
that this evidence is necessary to determine whether the new technology
affords a ``clear improvement over the use of previously available
technologies.'' We do not consider any particular type of evidence to
be dispositive; instead, we will consider all information presented for
each application to determine whether there is evidence to support a
conclusion that ``use of the device to make a diagnosis affects the
management of the patient'' (in the case of a diagnostic technology).
Consequently, we do not consider merely anecdotal claims that a device
affects the management of the patient as sufficient evidence to
demonstrate that a new diagnostic device affects the management of the
patient, particularly where the device could be used for a relatively
large patient population. Rather, we will consider whether the peer-
reviewed medical literature supports or clinical studies indicate that
the diagnostic device should generally be used by providers in guiding
the management of their patients. In addition, we will consider
evidence demonstrating clinically accepted use of the device in a
manner that actually affects the management of patients.
In the case of LipiScan\TM\, we note that other methods exist for
diagnosing CAD, including intravascular ultrasound (IVUS) and optical
coherence tomography (OCT). In addition, the evidence available to CMS
at the time of making a final rule determination consisted of anecdotal
claims made by the applicant and one other commenter, that the
identification of such plaques affects the management of the patient. A
review of the literature yielded no additional evidence to support the
applicant's claim. Furthermore, we believe that the prognostic
implications of detecting lipid-rich plaque are not yet sufficiently
well enough understood and documented in the peer-reviewed evidence to
conclude that such identification will lead to significant and
evidence-based changes in the management of CAD. In addition, we note
that there are relatively few cases in which LipiScan\TM\ has been used
relative to the patient population in which it could potentially be
used. Specifically, the applicant claims that the device could
potentially be used in every patient who undergoes coronary
angiography. To date, the device is only in use in 11 hospitals total,
and there have been no data published to indicate that management of
patients has changed, even in the hospitals where the device has been
used. Given the size of the patient population that the manufacturer
claims stands to benefit from use of LipiScan\TM\, the fact that so few
hospitals are using the technology raises significant concerns
regarding whether use of LipiScan\TM\ actually
[[Page 43819]]
affects the management of patients in a meaningful manner.
Therefore, while we recognize that LipiScan\TM\ provides the
ability to detect lipid-rich plaque which is currently undetectable by
any other means, we are nonetheless still concerned that there is
significant uncertainty within the clinical community regarding the
prognostic implications of obtaining this information. We note that we
did not receive any public comment during the public comment period
from physicians who may be using the device. We believe the evidence
supplied by the applicant that the device is affecting the management
of the patient is not able to be validated broadly and is still
anecdotal. Further, the discussions of the technology in the scientific
studies submitted by the applicant acknowledge the possible potential
of the technology to affect treatment in the future, but all stated
that additional studies are necessary to determine its actual clinical
utility. Specifically, in an editorial published in 2008, the author
wrote, ``In conclusion, further studies are warranted to determine if
detection of [lipid core plaque of interest] by [near infrared
spectroscopy] imaging will contribute to enhanced prediction of
outcomes in patients with known CAD.'' (Young, 2008) Also, in a letter
to the editor in the Journal of the College of Cardiology, another
author wrote about his experience with three patients over a period of
three weeks to share his ``initial observations.'' The author wrote
that ``* * * preliminary results suggest that intravascular
investigation of chemical composition of a coronary plaque has become a
clinical reality [but] it remains to be seen whether chemograms would
perform better than the ultrasound of whether they will be able to
predict adverse events and faciltate development of clinically
effective strategies for management of vulnerable plaques before it is
too late.'' (Maini, 2008) (emphasis added).
We believe that these conclusions, and others, as stated in the
literature further support our previously stated view that the
prognostic implications of detecting lipid-rich plaque are not well
enough understood and therefore the detection of such plaque cannot be
reasonably assumed to lead to evidence-based, significant, and positive
medical management of patients with CAD that is generally accepted by
clinicians, much less lead to improved clinical outcomes. We agree with
the commenter and applicant that the identification of lipid-rich
plaques may hold promise and ultimately lead to changes in the
management of CAD and that LipiScan\TM\ ``has the potential to provide
additional benefits in the struggle against the leading cause of death
in the United States.'' However, we do not believe the evidence and
information available at this time allows us to determine that it meets
the substantial clinical improvement criterion.
For these reasons, we are not approving LipiScan\TM\ for new
technology add-on payments for FY 2010.
d. Spiration[supreg] IBV[supreg] Valve System
Spiration, Inc. submitted an application for new technology add-on
payments for FY 2010 for the Spiration[supreg] IBV[supreg] Valve System
(Spiration[supreg] IBV[supreg]). The Spiration[supreg] IBV[supreg] is a
device that is used to place, via bronchoscopy, small, one-way valves
into selected small airways in the lung in order to limit airflow into
selected portions of lung tissue that have prolonged air leaks
following surgery while still allowing mucus, fluids, and air to exit,
thereby reducing the amount of air that enters the pleural space. The
device is intended to control prolonged air leaks following three
specific surgical procedures: lobectomy; segmentectomy; or lung volume
reduction surgery. According to the applicant, an air leak that is
present on postoperative day 7 is considered ``prolonged'' unless
present only during forced exhalation or cough. In order to help
prevent valve migration, there are five anchors with tips that secure
the valve to the airway. The implanted valves are intended to be
removed no later than 6 weeks after implantation.
With regard to the newness criterion, the Spiration[supreg]
IBV[supreg] received a Humanitarian Device Exemption (HDE) approval
from the FDA on October 24, 2008. We are unaware of any previously FDA-
approved predicate devices, or otherwise similar devices, that could be
considered substantially similar to the Spiration[supreg] IBV[supreg].
However, the applicant asserted that the FDA has precluded the device
from being used in the treatment of any patients until Institutional
Review Board (IRB) approvals regarding its study sites. Therefore, it
would appear that the Spiration[supreg] IBV[supreg] would meet the
newness criterion once it has obtained at least one IRB approval
because the device would then be available on the market to treat
Medicare beneficiaries. In the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule, we welcomed public comments about the date on which the newness
period should begin for this technology should it meet the other
criteria to be approved for new technology add-on payments (74 FR
24135).
We also noted that the Spiration[supreg] IBV[supreg] is currently
described by ICD-9-CM procedure code 33.71 (Endoscopic insertion or
replacement of bronchial valve(s)). At the September 2008 ICD-9-CM
Coordination and Maintenance Committee meeting, we discussed a proposal
to revise the existing code and create a new code for endoscopic
bronchial valve insertion in single and multiple lobes. In the proposed
rule, we included the revised title of procedure code 33.71 to
``Endoscopic insertion or replacement of bronchial valve(s), single
lobes'' and also the new procedure code 33.73 (Endoscopic insertion or
replacement of bronchial valve(s), multiple lobes) in order to
distinguish between single and multiple lobes (Table 6F and 6B in the
Addendum to the proposed rule (74 FR 24501 and 24494, respectively)).
Comment: The applicant commented that nine hospitals have confirmed
receipt of the Spiration[supreg] IBV[supreg] and the first IRB approval
for the Spiration[supreg] IBV[supreg] was March 12, 2009. The applicant
believes that this would confirm that the technology meets the newness
criteria.
Another commenter commented that the IRB at the commenter's
hospital has made pending approval of the Spiration[supreg] IBV[supreg]
and expects to be able to use the Spiration[supreg] IBV[supreg] within
the next month.
Response: We thank the commenters for providing this information on
when the newness period should begin for the Spiration[supreg]
IBV[supreg]. Based on the information above from the applicant, the
Spiration[supreg] IBV[supreg] meets the newness criterion and the
newness period for the Spiration[supreg] IBV[supreg] begins on March
12, 2009.
In an effort to demonstrate that the technology meets the cost
criterion, the applicant searched the FY 2007 MedPAR file for cases
potentially eligible for use of the Spiration[supreg] IBV[supreg].
Specifically, the applicant searched for cases with one of the
following procedure codes: 32.4 (Lobectomy of lung); 32.3 (Segmental
resection of lung); or 32.22 (Long volume reduction surgery). The
applicant found 4,225 cases (or 21.6 percent of all cases) in MS-DRG
163 (Major Chest Procedure with MCC), 8,960 cases (or 45.8 percent of
all cases) in MS-DRG 164 (Major Chest Procedure with CC), and 6,358
cases (or 32.5 percent of all cases) in MS-DRG 165 (Major Chest
Procedure without CC/MCC). The average standardized charge per case was
$88,326 for MS-DRG 163, $48,494 for MS-DRG 164, and $38,463 for MS-DRG
[[Page 43820]]
165, equating to a case-weighted average standardized charge per case
of $53,842.
The average standardized charge per case does not include charges
related to the Spiration[supreg] IBV[supreg]; therefore, it is
necessary to add the charges related to the device to the average
standardized charge per case in evaluating the cost threshold
criterion. Although the applicant submitted data related to the
estimated cost of the Spiration[supreg] IBV[supreg] per case, the
applicant noted that the cost of the device was proprietary
information. The applicant estimates $21,450 in charges related to the
Spiration[supreg] IBV[supreg] (based on a 100-percent charge markup of
the cost of the device). The applicant based this amount on seven
actual cases that received the device. Because the applicant lacked a
significant sample of cases to determine the charges associated with
the device, we expressed our concerns in the proposed rule as to
whether or not the $21,450 in charges related to the device is a valid
estimate. In addition, based on the seven cases, the applicant
determined an estimate of the number of valves used per case (the
applicant noted that the number of valves used per case is
proprietary). We also expressed concerns that the applicant lacked a
significant sample of cases to determine a valid estimate of the number
of valves per case. Adding the estimated charges related to the device
to the average standardized charge per case (based on the case
distribution from the applicant's FY 2007 MedPAR claims data analysis)
resulted in a case-weighted average standardized charge per case of
$75,292 ($53,842 plus $21,450). Using the FY 2010 thresholds published
in Table 10 (73 FR 58008), the case-weighted threshold for MS-DRGs 163,
164, and 165 was $54,715 (all calculations above were performed using
unrounded numbers). Because the case-weighted average standardized
charge per case for the applicable MS-DRGs exceed the case-weighted
threshold amount, the applicant maintains that the Spiration[supreg]
IBV[supreg] would meet the cost criterion.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we invited
public comment on whether or not the Spiration[supreg] IBV[supreg]
meets the cost criterion.
Comment: In response to our concerns in the proposed rule, the
applicant commented and cited a recent study in Chest,\4\ prepublished
on line on April 6, 2009 (Travaline 2009). The study reports on use of
bronchial valves (not necessarily made by the applicant) for air leaks
from a number of etiologies. From December 2002 through January 2007,
40 patients were treated with bronchial valves in 17 centers. The mean
number of valves per case was 2.9 for all patients in the study. The
mean number of valves was 2.28 for the subset of seven post surgical
air leak cases in the study.
---------------------------------------------------------------------------
\4\ Travaline JM et al. Treatment of persistent pulmonary air
leaks using endobronchial valves. Chest; Prepublished online; April
6, 2009.
---------------------------------------------------------------------------
We note that the applicant informed us that the information in the
proposed rule was incorrect and the number of actual cases where the
Spiration[supreg] IBV[supreg] was used was not seven. The applicant
informed CMS that the correct number of actual cases that used the
Spiration[supreg] IBV[supreg] was eight cases. In the proposed rule,
the applicant determined an average of 3.9 valves per case (or $21,450
in charges related to the device) for the Spiration[supreg] IBV[supreg]
based on these eight actual cases. However, the applicant explained
that if we were to remove one case that they considered to be outlier
because it used 10 valves, the average number of valves per case would
be 3.0, which is similar to the average amount of valves per case from
the Travaline study. The commenter also noted that the lower number of
valves used in the Travaline study for post surgical leaks compared to
the Spiration[supreg] IBV[supreg] data can be attributed to the design
of the Spiration[supreg] IBV[supreg] compared to the valve used in the
study that limits the sub segmental treatment. The commenter believes
that this newly published data supports the conclusion that it is
typical to insert multiple valves per case in prolonged air leak cases.
The applicant also commented that since the proposed rule, two
additional cases were performed using the Spiration[supreg] IBV[supreg]
(making a total of 10 cases). The applicant included these two
additional cases in its revised estimate of the average amount of
valves per case. In addition to removing the outlier case above, the
applicant also removed an additional case they considered to be an
outlier that used four valves and determined an average of 2.5 valves
per case (or $13,750 in charges related to the Spiration[supreg]
IBV[supreg]).
The applicant also noted that the case-weighted threshold was
$54,715 which is slightly higher than the case-weighted average
standardized charge per case of $53,842 (which does not include charges
related to the device). The commenter explained that even if we added a
charge of $5,550 for only one Spiration[supreg] IBV[supreg] to the
case-weighted average standardized charge per case (for a total case-
weighted average standardized charge per case of $59,392), the
Spiration[supreg] IBV[supreg] would still meet the cost criterion since
the case-weighted average standardized charge per case ($59,392)
exceeds the case-weighted threshold ($53,842).
The commenter also stated the following to strengthen confidence in
its MedPAR analysis. The commenter explained that its MedPAR analysis
profiled cases identified by the relevant surgical codes since specific
ICD-9-CM procedure and diagnosis are not available to identify cases of
prolonged air leaks within the FY 2007 MedPAR. The applicant cited peer
reviewed clinical literature that was submitted as part of its new
technology add-on payment application to demonstrate that patients with
prolonged air leaks had a greater length of stay and complication rates
compared to patients who did not have a prolonged air leak.
Specifically, the applicant noted that one study \5\ with 91 post
operative patients after pulmonary resection demonstrated that patients
with air leaks after 3 days had a greater length of stay (mean of 9.4
days vs. 5.4 days with a p value of p<0.0001). The commenter also noted
that a study of 552 post operative patients after LVRS in the National
Emphysema Treatment Trial \6\ demonstrated that patients with air leaks
had more complications (57 percent versus 30 percent with a p value of
p=0.0004) and longer length of stay (11.8 days vs. 7.6 days with a p
value of p=0.0005). The commenter also cited a retrospective study \7\
of 100 patients from a single center that showed the median length of
stay for patients with prolonged air leak after radical upper lobectomy
procedure was 11 days versus the median of 7 days for patients without
prolonged air leak. Based on these clinical data, the applicant
concluded that prolonged air leak cases are costlier than cases without
prolonged air leak. As a result, the commenter believes that its MedPAR
analysis was conservative in evaluating charges for surgical procedures
as a whole, without being able to uniquely identify costlier prolonged
air leak cases.
---------------------------------------------------------------------------
\5\ Bardell T, Petiskas D Can Respir J 2003 March, Vol. 10, No
2.
\6\ Decamp MM, Ann Thorac Surg. 2006 July; Vol. 82, No. 1.
\7\ Abolhoda A et al. Chest 1998; 113:1507-10.
---------------------------------------------------------------------------
Response: We thank the applicant for submitting additional data to
determine the amount of charges related to the Spiration[supreg]
IBV[supreg]. In order to determine that the applicant met the cost
criteria, in addition to the applicant's analysis, we searched the
March update of the FY 2008 MedPAR for the same procedure codes that
the applicant searched in their MedPAR analysis. We found 5,501 cases
in MS-DRG 163 (or 23.9 percent
[[Page 43821]]
of all cases), 11,151 cases in MS-DRG 164 (or 48.4 percent of all
cases), and 6,380 cases in MS-DRG 165 (or 27.7 percent of all cases).
The average standardized charge per case was $85,958 for MS-DRG 163,
$48,731 for MS-DRG 164, and $37,586 for MS-DRG 165, equating to a case-
weighted average standardized charge per case of $54,535. Adding the
revised estimate of charges of $13,750 (2.5 valves x $5,550) related to
the device to the average standardized charge per case (based on the
case distribution from out FY 2008 MedPAR claims data analysis)
resulted in a case-weighted average standardized charge per case of
$68,285. Using the FY 2010 thresholds published in Table 10 (73 FR
58008), the case-weighted threshold for MS-DRGs 163, 164 and 165 was
$55,952 (all calculations above were performed using unrounded
numbers). Based on this analysis, the case-weighted average
standardized charge per case for the applicable MS-DRGs exceeds the
case-weighted threshold amount. Additionally, similar to what the
applicant stated above, if we only included the amount of charges for
one valve, the case-weighted average standardized charge per case of
$60,035 ($54,535 plus $5,550) would still exceed the case-weighted
threshold of $55,952. Therefore, we believe that the applicant meets
the cost criterion.
Additionally, the applicant submitted supplemental data from
multiple sources in an effort to determine the average amount of valves
that would be used per case. We note that the average number of valves
from actual cases involving the Spiration[supreg] IBV[supreg] (2.5
valves per case) is higher than the average amount of valves (2.28
valves per case) from the seven post surgical air leak cases from the
Traveline study (not the Spiration[supreg] IBV[supreg]). However, we
prefer to rely on actual case data when available and the actual case
data is a more conservative estimate of the average amount of valves
per case compared to those cases in the studies that did not use the
Spiration[supreg] IBV[supreg].
With respect to how the device would meet the substantial clinical
improvement criterion, the applicant submitted information that was
based on the Summary of Safety and Probable Benefit (SSPB) from the
FDA's HDE approval order for the device. The clinical results indicate
the Spiration[supreg] IBV[supreg] can be deployed in the intended
airway reasonably safely with a minimally invasive bronchoscopy
procedure. There have been a limited number of device complications and
no occurrences of device erosion or migration. The Spiration[supreg]
IBV[supreg] can be removed using a bronchoscope. Laboratory results
indicate that the Spiration[supreg] IBV[supreg] significantly reduces
airflow to the lung tissue beyond the treated airway, and a significant
reduction in distal airflow is anticipated to augment the resolution of
air leaks of the lung. Therefore, the applicant asserts, it is
reasonable to conclude that the probable benefit to health associated
with using the device for the target population outweighs the risk of
illness or injuries, taking into account the probable risks and
benefits of currently available devices or alternative forms of
treatment when used as indicated in accordance with the directions for
use.
We recognize that prolonged air leaks after these types of lung
surgery can be a significant problem, and that Spiration[supreg]
IBV[supreg] therapy may represent a new alternative in treating
properly selected patients. However, we emphasized our concerns in the
proposed rule that the outcome data presented are from a sample set of
only seven patients, and the FDA HDE did not require demonstration of
either safety or effectiveness. Therefore, in the FY 2010 IPPS/RY 2010
LTCH PPS proposed rule, we welcomed public comment as to whether or not
the Spiration[supreg] IBV[supreg] represents a substantial clinical
improvement for Medicare beneficiaries.
We did not receive any written public comments regarding this
application for new technology add-on payments concerning the new
technology town hall meeting.
Comment: A number of commenters agreed with the applicant that the
Spiration[supreg] IBV[supreg] meets the substantial clinical
improvement criteria. The commenters also recommended the approval of
the Spiration[supreg] IBV[supreg] for new technology add-on payments in
FY 2010. One commenter, an association of thoracic surgeons, expressed
support for approving the Spiration[supreg] IBV[supreg] for new
technology add-on payments. The commenter explained that the
Spiration[supreg] IBV[supreg] offers a less invasive treatment of the
prolonged air leak, whereas the alternative treatment would be a major
re-operation which costs more money and poses a greater risk to the
patient.
The remaining commenters were physicians who had experience using
bronchial valves or had actual experience using the Spiration[supreg]
IBV[supreg]. These commenters noted that excluding the
Spiration[supreg] IBV[supreg], current treatments for prolonged air
leaks include chest tube drainage, occlusion of airways with fibrin
``glue'', and/or re-operation. One of the commenters explained that
endobronchial valves offer a unique method for treating prolonged air
leaks by temporarily preventing air from flowing into the segment of
the lung with the air leak. The commenter noted that the efficacy of
the valve can be predicted effectively by occluding the lobe or segment
involved with a balloon catheter to determine if the air leak can be
stopped. If a balloon is effective in stopping the leak, then a valve
can also be effective in stopping the leak. The commenter explained
that the advantage of this treatment is that after the leak has
completely healed, the valves can be removed with a minimally invasive
fiber-optic bronchoscopy. The commenter concluded that the
Spiration[supreg] IBV[supreg] represents a substantial improvement
since it offers a valuable, new, unique treatment option for prolonged
post thoracotomy air leak and is the only bronchial valve with FDA
approval (HDE).
Another commenter stated that using a bronchial valve to treat an
air leak, resulted in the air leak ceasing at the end of the procedure.
The commenter noted that for safety reasons, chest tubes are left in
for 48 hours and patients in its care have been discharged 72 hours
after the procedure. The bronchial valve was typically removed within
4-6 weeks after the procedure. The commenter further stated that it was
not aware of any randomized clinical trials that prove that bronchial
valves make air leaks stop. However, the commenter maintained that
based on their experience, air leaks that lasted 14 days or longer
which suddenly ceased upon use of a bronchial valve would be strong
circumstantial evidence that the therapy works and can shorten
hospitalization in appropriately selected patients. The commenter also
believes that using a bronchial valve for air leaks still present after
five days following surgery would likely result in an overall cost
savings since the duration of hospitalization is usually dependent on
air leak cessation. The commenter concluded that the Spiration[supreg]
IBV[supreg] represents a substantial clinical improvement and CMS
should approve Spiration[supreg] IBV[supreg] for new technology add-on
payments in FY 2010.
One of the commenters noted that in its experience using
endobronchial valves, patients with prolonged air leaks who were in the
hospital for many weeks with chest tubes in place were discharged and
had the chest tubes removed within days upon use of an endobronchial
valve. The commenter cited an example of a patient currently treated by
the commenter who has undergone numerous procedures with anesthesia in
the operating room and requires another two procedures. The commenter
believed that this patient
[[Page 43822]]
would have been able to be managed in a bronchoscopy suite under
moderate sedation with use of an endobronchial valve. As the only
bronchial valve with FDA approval (HDE), the commenter believed the
Spiration[supreg] IBV[supreg] represents a substantial clinical
improvement and recommended that CMS make new technology add-on
payments for the Spiration[supreg] IBV[supreg] in FY 2010.
Another commenter noted that conservative management of air leaks
results in prolonged hospitalization and limited mobilization of
patients with a much higher risk of additional complications such as
pneumonia, empyema, deep venous thrombosis and pulmonary embolism, and
progressive deconditioning. These complications take a toll on patients
with prolonged air leaks and result in a significantly worse overall
outcomes, prolonged hospital stay, and substantial increase in costs.
The commenter also noted its extensive experience using the
Spiration[supreg] IBV[supreg] valve in clinical trials as a potential
therapy for palliation of severe emphysema. Specifically, the commenter
stated that the valves are easy to place in desired segments and
effectively block distal airflow with a high safety profile in
published studies. The commenter further stated that the valves are
stable with no incidence of valve migration in over 600 valves placed
in emphysema patients with follow-up that included endoscopic and
radiologic surveillance. The commenter also noted their extensive
experience in valve removal, which is part of the intended therapy for
patients that have valve treatment for air leaks (since once the air
leaks are resolved the valves will no longer be necessary). The
commenter disclosed that it did not have any personal experience in
using the Spiration[supreg] IBV[supreg] for patients with air leaks,
but are familiar with the existing literature on similar treatments as
well as the case series using the Spiration[supreg] IBV[supreg] for
this indication. With this background, the commenter believed that the
Spiration[supreg] IBV[supreg] has a high likelihood of helping to
resolve prolonged postsurgical air leaks and therefore minimizes the
duration of chest tube drainage and hospitalization for patients (with
an attendant decrease in the risk of complications that accompany
prolonged hospitalization). The commenter also believed that the high
safety profile and effectiveness of the Spiration[supreg] IBV[supreg]
for occluding segmental airways suggests a very high likelihood of
clinical benefit in this group of patients with the indication of
prolonged air leak. The commenter concluded that it believed that the
Spiration[supreg] IBV[supreg] represents a substantial improvement to
currently available treatment options for patients who have post-
surgical prolonged air leaks. The commenter recommended that CMS
approve the Spiration[supreg] IBV[supreg] for new technology add
payments so that hospitals are appropriately reimbursed for this new
important technology.
Response: We appreciate the commenters submitting their comments in
support of the Spiration[supreg] IBV[supreg]. Many of the commenters
described their positive experiences using the Spiration[supreg]
IBV[supreg] or other bronchial valves that resolved cases of air leaks,
which improved the clinical outcome of the patient. Furthermore, the
commenters suggested that most, if not all, of the cases treated using
the Spiration[supreg] IBV[supreg] and other bronchial valves would have
had to have undergone further invasive treatments had the
Spiration[supreg] IBV[supreg] or other bronchial valves not have been
available to resolve the air leak. Additionally, the Spiration[supreg]
IBV[supreg] and other bronchial valve provided a quick resolution to
these cases of prolonged air leaks. We considered the commenters'
positive experiences using the Spiration[supreg] IBV[supreg] in our
determination (below) on whether the Spiration[supreg] IBV[supreg]
represents a substantial clinical improvement.
Comment: The applicant commented that providers have few treatment
options for effectively controlling prolonged air leaks. The applicant
noted that aside from the Spiration[supreg] IBV[supreg], no other
bronchoscopic treatments have been clinically accepted or approved by
the FDA. Therefore, management of prolonged air leaks due to persistent
bronchopleural fistula involves chest drainage and occasionally
pleurodesis, with more difficult cases requiring pleurectomy and
surgical repair. The applicant further noted that current treatment
options for air leaks are associated with risks and complications such
as prolonged use of chest tubes which increases the risk of pneumonia,
deep venous thrombosis, pulmonary embolus, atelectasis, subcutaneous
emphysema and empyema; restricted ambulation due to chest tube which
increases the risks associated with inactivity; prolonged requirements
for pain medication and extended post operative length of stay which
increases the potential for hospital acquired infections.
In response to our concerns in the proposed rule, the applicant
acknowledged that there are limited outcomes data associated with the
use of the Spiration[supreg] IBV[supreg] for prolonged air leaks.
However, the applicant cited that additional data has been published
since the proposed rule regarding the use of a bronchial valve for
prolonged air leaks. Specifically, the applicant cited the following
clinical benefit data from the Traveline 2009 study for patients who
received a bronchial valve for air leaks from multiple causes:
following valve placement, the air leaks resolved or decreased in 37 of
40 patients (92.5 percent); 19 patients (47.5 percent) had complete
resolution of the air leak acutely, 18 patients (45 percent) had
reduction, two patients (5 percent) had no change in air leak status,
and one patient (2.5 percent) the immediate change in air leak was not
reported.
Additionally, the applicant reported that all 10 procedures
performed with the Spiration[supreg] IBV[supreg] resulted in air leak
decrease and/or resolution. The applicant concluded that these results
demonstrated the following: Valve placement may reduce or avoid
complications associated with current treatments of prolonged air
leaks; patients who received bronchial valves experienced air leak
resolution or decrease unlike a situation absent bronchial valves where
a patient may need to remain in the hospital; patients with a bronchial
valve are able to be discharged with the valve thus avoiding risks,
complications and costs associated with prolonged lengths of
hospitalizations. The applicant believed that these conclusions from
the newly published data together with Spiration[supreg] data
demonstrate that the Spiration[supreg] IBV[supreg] meets the
substantial clinical improvement criteria.
Response: We thank the applicant for providing additional clinical
data to demonstrate that the Spiration[supreg] IBV[supreg] meets the
substantial clinical improvement criteria. With respect to substantial
clinical improvement, we considered all the case specific clinical
information presented by the applicant and the public to determine
whether there is evidence to support a conclusion that use of the
Spiration[supreg] IBV[supreg] represents a substantial clinical
improvement. Specifically, we considered the peer-reviewed medical
literature, clinical studies, and the clinically accepted use of the
device. We remain concerned that no prospective comparative data exists
to help understand the benefit of the technology versus other
modalities. We also do not know what the outcome would have been for
the cases presented as examples in the Traveline study (that is, if or
when those air leaks might have resolved on their own). Additionally,
many of the cases in that study were not for the indicated use (post-
operative prolonged air leak management). However, we agree that the
Spiration[supreg]
[[Page 43823]]
IBV[supreg] can improve clinical outcomes by providing an alternative
treatment that is effective and often a less invasive method of
treating prolonged air leaks in a small patient population that is
properly and carefully selected (as required by the FDA). Additionally,
we received positive comments from a major thoracic society and from
physicians who indicated that the Spiration[supreg] IBV[supreg] and
other bronchial valves produced positive clinical outcomes by resolving
air leaks. Also, the comments we received from the physicians
demonstrated a change to the clinical therapy for cases of air leaks by
using a bronchial valve such as the Spiration[supreg] IBV[supreg]
instead of other alternative treatments such as an invasive surgery to
resolve the air leak. Furthermore, the Spiration[supreg] IBV[supreg] is
the only device currently approved for the purpose of treating
prolonged air leaks following lobectomy, segmentectomy, and LVRS
patients in the United States. Without the availability of this device,
patients with prolonged air leaks (following lobectomy, segmentectomy,
and LVRS) might otherwise remain inpatients in the hospital (and have a
longer length of stay than they might otherwise have without the
Spiration[supreg] IBV[supreg]) or might even require additional
invasive surgeries to resolve the air leak. We also note that use of
the Spiration[supreg] IBV[supreg] may lead to more rapid beneficial
resolution of prolonged air leaks and reduce recovery time following
the three lung surgeries mentioned above. Therefore, after reviewing
the totality of the evidence, we have determined that the
Spiration[supreg] IBV[supreg] represents a substantial clinical
improvement over existing therapies for prolonged air leaks for
carefully selected patients.
Accordingly, after consideration of the clinical evidence received,
we are approving the Spiration[supreg] IBV[supreg] for new technology
add-on payments in FY 2010. However, we remain interested in seeing
whether the clinical evidence continues to find it to be effective.
This approval is on the basis of using the Spiration[supreg]
IBV[supreg] consistent with the FDA approval (HDE), and we emphasize
the need for appropriate patient selection accordingly. Therefore, we
intend to limit the add-on payment to cases involving prolonged air
leaks following lobectomy, segmentectomy and LVRS in MS-DRGs 163, 164,
and 165. Cases involving the Spiration[supreg] IBV[supreg] that are
eligible for the new technology add-on payment will be identified by
assignment to MS-DRGs 163, 164, and 165 with procedure code 33.71 or
33.73 in combination with one of the following procedure codes: 32.22,
32.30, 32.39, 32.41, or 32.49.
The average cost of the Spiration[supreg] IBV[supreg] is reported
as $2,750. Based on the applicant's revised data, the average amount of
valves per case is 2.5. Therefore, the total maximum cost for the
Spiration[supreg] IBV[supreg] is expected to be $6,875 per case ($2,750
x 2.5). Under section 412.88(a)(2), new technology add-on payments are
limited to the lesser of 50 percent of the average cost of the device
or 50 percent of the costs in excess of the MS-DRG payment for the
case. As a result, the maximum add-on payment for a case involving the
Spiration[supreg] IBV[supreg] is $3,437.50.
e. TherOx Downstream[supreg] System
TherOx, Inc. submitted an application for new technology add-on
payments for FY 2010 for the TherOx Downstream[supreg] System. However,
the applicant withdrew its application for new technology add-on
payments during the public comment period.
We did not receive any public comments on this application.
5. Technical Correction to the Regulations
In the FY 2009 IPPS final rule, when we revised the regulations at
Sec. 412.87 to incorporate changes relating to the announcement of
determinations and deadline for consideration of new medical service or
technology applications, we made a change to paragraph (b)(1) (73 FR
48755). In paragraph (b)(1), we inadvertently used the incorrect word
``relating'' in the provision that read ``A new medical service or
technology represents an advance that substantially improves, relating
to technologies previously available, the diagnosis or treatment of
Medicare beneficiaries'' (emphasis added). The correct word should have
been ``relative.'' We proposed to make a technical correction to Sec.
412.87(b)(1), replacing the word ``relating'' with the word
``relative'' (74 FR 24137). We did not receive any public comments on
this proposal. Accordingly, we are finalizing this proposed correction.
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary must adjust the standardized amounts ``for area differences
in hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' In
accordance with the broad discretion conferred under the Act, we
currently define hospital labor market areas based on the definitions
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the FY 2010 hospital wage index based on the
statistical areas, including OMB's revised definitions of Metropolitan
Areas, appears under section III.C. of this preamble.
Beginning October 1, 1993, section 1886(d)(3)(E) of the Act
requires that we update the wage index annually. Furthermore, this
section of the Act provides that the Secretary base the update on a
survey of wages and wage-related costs of short-term, acute care
hospitals. The survey must exclude the wages and wage-related costs
incurred in furnishing skilled nursing services. This provision also
requires us to make any updates or adjustments to the wage index in a
manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The adjustment for FY 2010 is
discussed in section II.B. of the Addendum to this final rule.
As discussed below in section III.I. of this preamble, we also take
into account the geographic reclassification of hospitals in accordance
with sections 1886(d)(8)(B) and 1886(d)(10) of the Act when calculating
IPPS payment amounts. Under section 1886(d)(8)(D) of the Act, the
Secretary is required to adjust the standardized amounts so as to
ensure that aggregate payments under the IPPS after implementation of
the provisions of sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the
Act are equal to the aggregate prospective payments that would have
been made absent these provisions. The budget neutrality adjustment for
FY 2010 is discussed in section II.A.4.b. of the Addendum to this final
rule.
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in
order to construct an occupational mix adjustment to the wage index. A
discussion of the occupational mix adjustment that we are applying
beginning October 1, 2009 (the FY 2010 wage index) appears under
section III.D. of this preamble.
[[Page 43824]]
B. Requirements of Section 106 of the MIEA-TRHCA
1. Wage Index Study Required Under the MIEA-TRHCA
a. Legislative Requirement
Section 106(b)(1) of the MIEA-TRHCA (Pub. L. 109-432) required
MedPAC to submit to Congress, not later than June 30, 2007, a report on
the Medicare wage index classification system applied under the
Medicare IPPS. Section 106(b) of MIEA-TRHCA required the report to
include any alternatives that MedPAC recommends to the method to
compute the wage index under section 1886(d)(3)(E) of the Act.
In addition, section 106(b)(2) of the MIEA-TRHCA instructed the
Secretary of Health and Human Services, taking into account MedPAC's
recommendations on the Medicare wage index classification system, to
include in the FY 2009 IPPS proposed rule one or more proposals to
revise the wage index adjustment applied under section 1886(d)(3)(E) of
the Act for purposes of the IPPS. The Secretary was also to consider
each of the following:
Problems associated with the definition of labor markets
for the wage index adjustment.
The modification or elimination of geographic
reclassifications and other adjustments.
The use of Bureau of Labor of Statistics (BLS) data or
other data or methodologies to calculate relative wages for each
geographic area.
Minimizing variations in wage index adjustments between
and within MSAs and statewide rural areas.
The feasibility of applying all components of CMS'
proposal to other settings.
Methods to minimize the volatility of wage index
adjustments while maintaining the principle of budget neutrality.
The effect that the implementation of the proposal would
have on health care providers on each region of the country.
Methods for implementing the proposal(s), including
methods to phase in such implementations.
Issues relating to occupational mix such as staffing
practices and any evidence on quality of care and patient safety
including any recommendation for alternative calculations to the
occupational mix.
In the FY 2009 IPPS final rule (73 FR 48563 through 48567), we
discussed the MedPAC's study and recommendations, the CMS contract with
Acumen, L.L.C. for assistance with impact analysis and study of wage
index reform, and public comments we received on the MedPAC
recommendations and the CMS/Acumen study and analysis.
b. Interim and Final Reports on Results of Acumen's Study
(1) Interim Report on Impact Analysis of Using MedPAC's Recommended
Wage Index
In the FY 2009 IPPS final rule (73 FR 48566 through 48567), we
discussed the analysis conducted by Acumen comparing use of the MedPAC
recommended wage indices to the current CMS wage index. We refer
readers to section III.B.1.e. of that final rule for a full discussion
of the impact analysis as well as to Acumen's interim report available
on the Web site: http://www.acumenllc.com/reports/cms.
(2) Acumen's Final Report on Analysis of the Wage Index Data and
Methodology
Acumen's final report addressing the issues in section 106(b)(2) of
the MIEA-TRHCA is divided into two parts. The first part analyzes the
strengths and weaknesses of the data sources used to construct the
MedPAC and CMS indexes. The first part of Acumen's study is complete
and was published on Acumen's Web site after the publication of the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule. The second part of Acumen's
study, which is expected to be released on Acumen's Web site after the
publication of this FY 2010 IPPS/RY 2010 LTCH PPS final rule, will
focus on the methodology of wage index construction and covers issues
related to the definition of wage areas and methods of adjusting for
differences among neighboring wage areas, as well as reasons for
differential impacts of shifting to a new index.
The following is a description of the analyses for both parts of
Acumen's final report.
Part I: Wage Data Analysis
Differences between the BLS data and the CMS wage data--
Acumen assessed the strengths and weaknesses of the data used to
construct the CMS wage index and the MedPAC compensation index by
examining the differences between the BLS and the CMS wage data. Acumen
also evaluated the importance of accounting for self-employed workers,
part-time workers, and industry wage differences.
Employee benefit (wage-related) cost--Acumen considered
whether benefit costs need to be included in the hospital wage index
and discussed the differences between Worksheet A benefits data
(proposed by MedPAC to use with BLS wage data) and Worksheet S-3
benefit data. Acumen also analyzed the possibility of using BLS'
Employer Costs for Employee Compensation (ECEC) series as an
alternative to Worksheet A or Worksheet S-3 benefits data that would
pose less of a data collection burden for providers.
Impact of the fixed national occupational weights--Acumen
assessed MedPAC's and CMS' methods for adjusting for occupational mix
differences. While the proposed MedPAC compensation index uses fixed
weights for occupations representative of the hospital industry
nationally, the CMS wage index incorporates an occupational mix
adjustment (OMA) from a separate data collection.
Year-to-year volatility in the CMS and BLS wage data--
Acumen calculated the extent of volatility in the CMS and BLS wage
indexes using several measures of volatility. Acumen also explored
potential causes of volatility, such as the number of hospitals and the
annual change in the number of hospitals in a wage area. Finally,
Acumen evaluated the impact on annual volatility of using a 2-year
rolling average of CMS wage index values.
In the first part of its final report, Acumen suggests that
MedPAC's recommended methods for revising the wage index represent an
improvement over the existing methods, and that the BLS data should be
used so that the MedPAC approach can be implemented.
Comment: Several commenters reiterated their concerns regarding the
use of the BLS data for computing the Medicare wage index that they had
expressed in public comments on the FY 2009 IPPS final rule (73 FR
48564). The commenters stated that they still have significant concerns
about the shortcomings of the BLS data, and they urged CMS to move
cautiously in considering MedPAC's and Acumen's findings. Other
commenters expressed support for MedPAC's and Acumen's findings and
recommendations, although some commenters cautioned that a few
refinements may still be needed before adopting these recommendations.
MedPAC commented that they look forward to the completion of the Acumen
study and to working with CMS on improving the hospital wage index.
Response: As Acumen's study is incomplete at the time of
preparation of this final rule, we are making no assessments or
conclusions in this rule with regards to Acumen's findings in Part I of
its final report. As we mention below, we will consider both of
Acumen's final reports and public comments in assessing MedPAC's
[[Page 43825]]
recommendations and making future proposals for changes in the wage
index.
Part II: Wage Index Construction
Alternative wage area definitions--Acumen will
explore the conceptual basis for defining wage areas and investigate
alternative wage area definitions that have been considered in prior
literature to reduce differences between areas.
Differences between and within contiguous wage
areas--Acumen will estimate different methods for smoothing wage index
values between geographically proximate areas and examine the
justification for and sensitivity to assumptions used by MedPAC in its
smoothing method.
Reasons for differential impacts of shifting to a new
index--Acumen will analyze the impact on hospitals if CMS were to adopt
MedPAC's proposed compensation index, with a focus on hospitals that
would no longer qualify for exceptions such as geographic
reclassification and the rural floor. Acumen will also determine if
there are identifiable reasons for the different impacts.
As mentioned above, Acumen is expected to complete and publish its
analysis for the second part of its final report after the publication
date of this final rule.
We indicated in the FY 2009 IPPS final rule that, in developing any
proposal(s) for additional wage index reform that may be included in
the FY 2010 IPPS proposed rule, we would consider all of the public
comments on the MedPAC recommendations that we had received in that
proposed rulemaking cycle, along with the interim and final reports to
be submitted to us by Acumen. As Acumen's study was not complete at the
time of issuance of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we
did not propose any additional changes to the hospital wage index for
acute care hospitals for the FY 2010 IPPS.
2. FY 2009 Policy Changes in Response to Requirements Under Section
106(b) of the MIEA-TRHCA
To implement the requirements of section 106(b) of the MIEA-TRHCA
and respond to MedPAC's recommendations in its June 2007 report to
Congress, in the FY 2009 IPPS final rule (73 FR 48567 through 48574),
we made the following policy changes relating to the hospital wage
index. (We refer readers to the FY 2009 IPPS final rule for a full
discussion of the basis for the proposals, the public comments
received, and the FY 2009 final policy.)
a. Reclassification Average Hourly Wage Comparison Criteria
In the FY 2009 IPPS final rule, we adopted the policy to adjust the
reclassification average hourly wage standard, comparing a
reclassifying hospital's (or county hospital group's) average hourly
wage relative to the average hourly wage of the area to which it seeks
reclassification. We provided for a phase-in of the adjustment over 2
years. For applications for reclassification for the first transitional
year, FY 2010, the average hourly wage standards were set at 86 percent
for urban hospitals and group reclassifications and 84 percent for
rural hospitals. For applications for reclassification for FY 2011 (for
which the application deadline is September 1, 2009) and for subsequent
fiscal years, the average hourly wage standards will be 88 percent for
urban and group reclassifications and 86 percent for rural hospitals
(Sec. Sec. 412.230, 412.232, and 412.234 of the regulations). As
stated above, these policies were adopted in the FY 2009 IPPS final
rule.
In response to our summary of the FY 2009 policy changes in the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24139), we received
several public comments, which are summarized below.
Comment: Several commenters opposed raising the average hourly wage
thresholds to 88 percent for urban and group reclassifications and 86
percent for rural hospitals for applications for FY 2011 and subsequent
years.
Response: As we discussed in the FY 2009 IPPS proposed and final
rules, section 106(b) of the MIEA-TRHCA required the Secretary to make
one or more proposals to revise the wage index adjustment for FY 2009.
In the FY 2009 IPPS proposed rule (73 FR 48567 through 48574), we
indicated that while we had limited authority to make changes to the
nine specific areas of the wage index that the law required us to
study, we did carefully review the criteria established in regulations
for allowing a hospital to geographically reclassify. Specifically, in
the FY 2009 IPPS final rule, we updated the geographic reclassification
criteria based on a review of the statistical metrics that were used to
establish the original standards in 1993. The original individual
standards were set using a methodology that calculated a percentile
range of one standard deviation from the mean in which a typical
hospital's average hourly wage would be expected to fall relative to
its combined labor market average hourly wage. In short, we found that
the average hospital average hourly wage as a percentage of its area's
wage had increased from approximately 96 percent in FY 1993 to 98
percent in the most recent 3 fiscal years. Further, the standard
deviation had been reduced from approximately 12 percent to 10 percent
over the same time period. The original criteria were set equal to the
average less the standard deviation (96 percent less 12 percentage
points). The revised reclassification criteria based on these same
statistical metrics led us to change the standard to 88 percent (98
percent less 10 percentage points). By refining our standards, we found
that the number of hospitals that are able to reclassify despite not
demonstrating average hourly wage levels that truly justify a higher
wage index will be reduced.
We considered public comments received in response to the FY 2009
IPPS proposed rule before making this change final in the FY 2009 IPPS
final rule (73 FR 48567 through 48574). The change in policy did not
affect any 3-year geographic reclassifications that went into effect
beginning in FY 2009. Further, in response to public comments on the FY
2009 IPPS proposed rule, we decided to adopt the revised
reclassification criteria over a 2-year transitional period. Hospitals
will be subject to the 88 percent criteria for urban and group
reclassifications (86 percent for rural areas) for 3-year geographic
reclassifications beginning for FY 2011 applications due to the MGCRB
no later than 5 p.m. (EST) on September 1, 2009.
Finally, in the FY 2009 IPPS final rule and in section III.B.1.b.
of the preamble of this final rule, we discuss our contract with Acumen
to assist us in studying the wage index and the MedPAC recommendations,
and also to assist us in developing other proposals for reforming the
wage index. At this time, the study is still in progress and Acumen
intends to issue its final report this year. We will consider possible
additional changes to the wage index through the formal rulemaking
process after our review of Acumen's final report and recommendations.
b. Within-State Budget Neutrality Adjustment for the Rural and Imputed
Floors
In the FY 2009 IPPS final rule, we adopted State level budget
neutrality (rather than the national budget neutrality adjustment) for
the rural and imputed floors, to be effective beginning with the FY
2009 wage index. The transition from the national budget neutrality
adjustment to the State level budget neutrality adjustment is being
[[Page 43826]]
phased in over a 3-year period. In FY 2009, hospitals received a
blended wage index that was 20 percent of a wage index with the State
level rural and imputed floor budget neutrality adjustment and 80
percent of a wage index with the national budget neutrality adjustment.
In FY 2010, the blended wage index reflects 50 percent of the State
level adjustment and 50 percent of the national adjustment. In FY 2011,
the adjustment will be completely transitioned to the State level
methodology.
In the FY 2009 IPPS final rule, we incorporated this policy in our
regulation at Sec. 412.64(e)(4). Specifically, we provided that CMS
makes an adjustment to the wage index to ensure that aggregate payments
after implementation of the rural floor under section 4410 of the
Balanced Budget Act of 1997 (Pub. L. 105-33) and the imputed rural
floor under Sec. 412.64(h)(4) are made in a manner that ensures that
aggregate payments to hospitals are not affected and that, beginning
October 1, 2008, CMS would transition from a nationwide adjustment to a
statewide adjustment, with a statewide adjustment fully in place by
October 1, 2010. We note that the imputed floor expires on September
30, 2011 (as discussed in section III.H. of this preamble).
Comment: Several commenters requested that CMS repeal its decision
to apply a State level budget neutrality adjustment for the rural and
imputed floors. The commenters cited the disparity between the severe
negative economic consequences of the policy for States with hospitals
receiving a floor payment, compared to the relatively minor benefits
received by nonfloor States. Multiple commenters pointed out that,
because numerous other aspects of the Medicare wage index either cross
State lines (CBSAs), or are modeled on national budget neutrality
(geographic reclassification and outlier payments), they were concerned
that a State-specific adjustment establishes a poor precedent and
violates the intent of the legislation that established the rural
floor.
Response: We disagree that a State level budget neutrality
adjustment establishes a poor precedent. Unlike geographic
reclassification or outlier payment budget neutrality adjustments, the
construction of the rural and imputed floors requires that wage index
comparisons be made between labor market areas within a specific State.
Analysis in the FY 2009 IPPS final rule demonstrated how, at a State-
by-State level, the rural and imputed floors create a benefit for a
minority of States that is then funded by a majority of States,
including States that are overwhelmingly rural in character. In the FY
2009 IPPS final rule, we also explained that because the imputed and
rural floor comparisons occur at the State level, we believed it would
be sound policy to make the budget neutrality adjustment specific to
the State, redistributing payments among hospitals within the State,
rather than adjusting payments to hospitals in other States. In the FY
2009 IPPS final rule, we adopted a 3-year phase-in to address the
concerns that such a transition in policy may lead to sudden decreases
in payments for certain providers. FY 2010 will mark the second year of
this transition, with a 50-percent national, 50-percent within-State
budget neutrality adjustment. We believe that this transition period
will continue to mitigate any negative impacts on affected hospitals
while we proceed towards the planned adoption of 100-percent within-
State budget neutrality in FY 2011.
In addition, we do not believe the legislative history demonstrates
an intent for a particular type of budget neutrality adjustment. The
Conference Report for the rural floor states: ``The Secretary would be
required to make any adjustments in the wage index in a budget neutral
manner.'' (H.R. Conf. Rep. No. 105-217, 105th Cong., 1st Sess. at 712)
However, the report does not reference a national budget neutrality
adjustment, as compared to a statewide budget neutrality adjustment.
Both the legislative history and the plain language of the rural floor
provision anticipate that the Secretary would have administrative
discretion regarding the ``manner'' of the budget neutrality
adjustment. Section 4410(b) of the BBA of 1997 (Pub. L. 105-33)
requires that the Secretary adjust wage indices ``in a manner which
assures that the aggregate payments made under section 1886(d) of the
Social Security Act * * * in a fiscal year for the operating costs of
inpatient hospital services are not greater or less than those which
would be made in the year if this section did not apply.'' Thus,
Congress provided discretion to the Secretary to determine the manner
of ensuring that the rural floor did not increase costs above what they
would have been in the absence of the rural floor, and the Secretary
has exercised such discretion through the adoption of a statewide
adjustment.
Comment: A number of commenters in an all-urban State urged CMS to
make the imputed floor a permanent provision. The commenters explained
that their State is geographically disadvantaged because it is bordered
by two of the five largest cities in the United States, and the
hospitals in the State have to compete with those larger cities for
labor resources and patients. The commenters noted that, when CMS
adopted the imputed floor policy in the FY 2005 IPPS final rule (69 FR
49109), CMS acknowledged a concern by some individuals that hospitals
in all-urban States are financially and competitively disadvantaged in
the absence of an imputed floor wage index. The commenters stated that
CMS has provided no rationale for discontinuing the imputed floor after
FY 2011 and has provided no documentation to support that the
``anomalous'' situation, as it was described by CMS in the FY 2005 IPPS
final rule, has changed for all-urban States.
Response: We appreciate the commenter's concern about the imputed
floor. However, we made no proposals regarding the imputed floor in the
FY 2010 IPPS/RY 2010 LTCH PPS proposed rule. Therefore, we are making
no decisions in this final rule regarding any future extension of the
imputed floor. We will address the imputed floor policy in the FY 2011
IPPS proposed rule, which will allow for opportunity for public
comment.
Comment: One commenter requested clarification as to the
discrepancy between rural and imputed floor budget neutrality factors
referenced in the proposed rule (1.00016 referenced at 74 FR 24243 (the
Addendum to the proposed rule) and 1.000017 referenced at 74 FR 24663
(Appendix A to the proposed rule)).
Response: We have included an updated budget neutrality factor in
section I.A.4.c. of the Addendum to this final rule, along with an
explanation in section VI.I of Appendix A to this final rule of why the
adjustment amounts varied in the proposed rule.
Comment: One commenter requested CMS to explain how the rural floor
budget neutrality adjustment is performed so that it can be certified
and compared to prior years. The commenter also expressed concerns
about how State level budget neutrality may complicate a hospital's
geographic reclassification application process, may result in rural
hospitals with high wage indices being significantly disadvantaged, and
may cause deviations in payments between hospital reclassifications
into a labor market from an adjoining State.
Response: We provided ample details of the iterative rural floor
budget neutrality calculation process in the FY 2008 IPPS final rule
with comment period (72 FR 47325 through 4733). In the FY 2009 IPPS
final rule (73 FR 48574), we further explained how the
[[Page 43827]]
same calculation process will be used to phase in a State level budget
neutrality adjustment.
In response to the commenter's other concerns, the specific
scenarios presented may occur regardless of how rural and imputed floor
budget neutrality is achieved. The application of the rural floor
itself, despite a national or a State level budget neutrality
adjustment, may result in situations where hospitals classified or
reclassified to the same labor market area may receive differing wage
indices. Hospitals always must evaluate multiple scenarios when
determining whether to apply for a reclassification or withdraw a
geographic reclassification request. We provide the best information
available in the IPPS proposed rule to facilitate these decisions and
allow hospitals a 45-day period following publication of the proposed
rule to evaluate their options.
C. Core-Based Statistical Areas for the Hospital Wage Index
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. In
accordance with the broad discretion under section 1886(d)(3)(E) of the
Act, beginning with FY 2005, we define hospital labor market areas
based on the Core-Based Statistical Areas (CBSAs) established by OMB
and announced in December 2003 (69 FR 49027). For a discussion of OMB's
revised definitions of CBSAs and our implementation of the CBSA
definitions, we refer readers to the preamble of the FY 2005 IPPS final
rule (69 FR 49026 through 49032).
As with the FY 2009 final rule, in the FY 2010 IPPS/RY 2010 LTCH
PPS proposed rule (74 FR 24139), we proposed to provide that hospitals
receive 100 percent of their wage index based upon the CBSA
configurations. Specifically, for each hospital, we proposed to
determine a wage index for FY 2010 employing wage index data from
hospital cost reports for cost reporting periods beginning during FY
2006 and using the CBSA labor market definitions. We consider CBSAs
that are MSAs to be urban, and CBSAs that are Micropolitan Statistical
Areas as well as areas outside of CBSAs to be rural. In addition, it
has been our longstanding policy that where an MSA has been divided
into Metropolitan Divisions, we consider the Metropolitan Division to
comprise the labor market areas for purposes of calculating the wage
index (69 FR 49029) (regulations at Sec. 412.64(b)(1)(ii)(A)).
On November 20, 2008, OMB announced three Micropolitan Statistical
Areas that now qualify as MSAs (OMB Bulletin No. 09-01). The new urban
CBSAs are as follows:
Cape Girardeau-Jackson, Missouri-Illinois (CBSA 16020).
This CBSA is comprised of the principal cities of Cape Girardeau and
Jackson, Missouri in Alexander County, Illinois; Bollinger County,
Missouri, and Cape Girardeau County, Missouri.
Manhattan, Kansas (CBSA 31740). This CBSA is comprised of
the principal city of Manhattan, Kansas in Geary County, Pottawatomie
County, and Riley County.
Mankato-North Mankato, Minnesota (CBSA 31860). This CBSA
is comprised of the principal cities of Mankato and North Mankato,
Minnesota in Blue Earth County and Nicollet County.
OMB also changed the principal cities and titles of a number of
CBSAs and a Metropolitan Division, as follows:
Broomfield, Colorado qualifies as a new principal city of
the Denver-Aurora, Colorado CBSA. The new title is Denver-Aurora-
Broomfield, Colorado CBSA.
Chapel Hill, North Carolina qualifies as a new principal
city of the Durham, North Carolina CBSA. The new title is Durham-Chapel
Hill, North Carolina CBSA.
Chowchilla, California qualifies as a new principal city
of the Madera, California CBSA. The new title is Madera-Chowchilla,
California CBSA.
Panama City Beach, Florida qualifies as a new principal
city of the Panama City-Lynn Haven, Florida CBSA. The new title is
Panama City-Lynn Haven-Panama City Beach, Florida CBSA.
East Wenatchee, Washington qualifies as a new principal
city of the Wenatchee, Washington CBSA. The new title is Wenatchee-East
Wenatchee, Washington CBSA.
Rockville, Maryland replaces Gaithersburg, Maryland as the
third most populous city of the Bethesda-Frederick-Gaithersburg,
Maryland Metropolitan Division. The new title is Bethesda-Frederick-
Rockville, Maryland Metropolitan Division.
The OMB bulletin is available on the OMB Web site at http://www.whitehouse.gov/OMB--go to ``Bulletins'' or ``Statistical Programs
and Standards.'' CMS will apply these changes to the IPPS beginning
October 1, 2009.
We note that several public commenters who responded to the
proposed rule expressed their concerns that CAHs in the new MSAs will
lose their CAH status and be forced to convert to IPPS hospitals
because the areas will be designated as urban instead of rural. The
commenters recalled that the same situation occurred in FY 2005 when
CMS adopted OMB's CBSA definitions. At that time, CMS allowed CAHs
located in rural counties that became urban to maintain their CAH
status for 2 years (69 FR 49221). If these CAHs were unable in 2 years
to obtain rural status under Sec. 412.103, they were required to
convert to IPPS status. A more detailed discussion of the public
comments and our response is included in section VII.C. of the preamble
of this final rule.
D. Occupational Mix Adjustment to the FY 2010 Wage Index
As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, in order to construct an occupational mix adjustment
to the wage index, for application beginning October 1, 2004 (the FY
2005 wage index). The purpose of the occupational mix adjustment is to
control for the effect of hospitals' employment choices on the wage
index. For example, hospitals may choose to employ different
combinations of registered nurses, licensed practical nurses, nursing
aides, and medical assistants for the purpose of providing nursing care
to their patients. The varying labor costs associated with these
choices reflect hospital management decisions rather than geographic
differences in the costs of labor.
1. Development of Data for the FY 2010 Occupational Mix Adjustment
Based on the 2007-2008 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program. For
the FY 2009 hospital wage index, we used data from the 2006 Medicare
Wage Index Occupational Mix Survey (the 2006 survey) to calculate the
occupational mix adjustment. In the 2006 survey, we included several
modifications to the original occupational mix survey, the 2003 survey,
including (1) allowing hospitals to report their own average hourly
wage rather than using BLS data; (2) extending the prospective survey
period; and (3) reducing the number of occupational categories but
refining the subcategories for registered nurses.
The 2006 survey provided for the collection of hospital-specific
wages and hours data, a 6-month prospective
[[Page 43828]]
reporting period (that is, January 1, 2006, through June 30, 2006), the
transfer of each general service category that comprised less than 4
percent of total hospital employees in the 2003 survey to the ``all
other occupations'' category (the revised survey focused only on the
mix of nursing occupations), additional clarification of the
definitions for the occupational categories, an expansion of the
registered nurse category to include functional subcategories, and the
exclusion of average hourly rate data associated with advance practice
nurses. The 2006 survey included only two general occupational
categories: Nursing and ``all other occupations.'' The nursing category
had four subcategories: Registered nurses, licensed practical nurses,
aides, orderlies, attendants, and medical assistants. The registered
nurse subcategory included two functional subcategories: Management
personnel and staff nurses or clinicians. As indicated above, the 2006
survey provided for a 6-month data collection period, from January 1,
2006 through June 30, 2006. To allow flexibility for the reporting
period beginning and ending dates to accommodate some hospitals'
biweekly payroll and reporting systems, we modified the 6-month data
collection period for the 2006 survey from January 1, 2006, through
June 30, 2006, to a 6-month reporting period that began on or after
December 25, 2005, and ended before July 9, 2006. OMB approved the
revised 2006 occupational mix survey (Form CMS-10079 (2006)) on April
25, 2006. The original timelines for the collection, review, and
correction of the 2006 occupational mix data were discussed in detail
in the FY 2007 IPPS final rule (71 FR 48008).
As we proposed, for the FY 2010 hospital wage index, we used
occupational mix data collected on a revised 2007-2008 Medicare Wage
Index Occupational Mix Survey (the 2007-2008 survey) to compute the
occupational mix adjustment for FY 2010. In the FY 2008 IPPS final rule
with comment period (72 FR 47315), we discussed how we modified the
2006 occupational mix survey. The revised 2007-2008 occupational mix
survey provided for the collection of hospital-specific wages and hours
data for the 1-year period of July 1, 2007, through June 30, 2008,
additional clarifications to the survey instructions, the elimination
of the registered nurse subcategories, some refinements to the
definitions of the occupational categories, and the inclusion of
additional cost centers that typically provide nursing services.
On February 2, 2007, we published in the Federal Register a notice
soliciting comments on the proposed revisions to the 2006 occupational
mix survey (72 FR 5055). The comment period for the notice ended on
April 3, 2007. After considering the comments we received, we made a
few minor editorial changes and published the final 2007-2008
occupational mix survey on September 14, 2007 (72 FR 52568). OMB
approved the survey without change on February 1, 2008 (OMB Control
Number 0938-0907). The 2007-2008 Medicare occupational mix survey (Form
CMS-10079 (2008)) is available on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage, and through
the fiscal intermediaries/MACs. Hospitals were required to submit their
completed surveys to their fiscal intermediaries/MACs by September 2,
2008. The preliminary, unaudited 2007-2008 occupational mix survey data
were released in early October 2008, along with the FY 2006 Worksheet
S-3 wage data, for the FY 2010 wage index review and correction
process.
2. Calculation of the Occupational Mix Adjustment for FY 2010
For FY 2010 (as we did for FY 2009), we are calculating the
occupational mix adjustment factor using the following steps:
Step 1--For each hospital, determine the percentage of the total
nursing category attributable to a nursing subcategory by dividing the
nursing subcategory hours by the total nursing category's hours. Repeat
this computation for each of the four nursing subcategories: Registered
nurses; licensed practical nurses; nursing aides, orderlies, and
attendants; and medical assistants.
Step 2--Determine a national average hourly rate for each nursing
subcategory by dividing a subcategory's total salaries for all
hospitals in the occupational mix survey database by the subcategory's
total hours for all hospitals in the occupational mix survey database.
Step 3--For each hospital, determine an adjusted average hourly
rate for each nursing subcategory by multiplying the percentage of the
total nursing category (from Step 1) by the national average hourly
rate for that nursing subcategory (from Step 2). Repeat this
calculation for each of the four nursing subcategories.
Step 4--For each hospital, determine the adjusted average hourly
rate for the total nursing category by summing the adjusted average
hourly rate (from Step 3) for each of the nursing subcategories.
Step 5--Determine the national average hourly rate for the total
nursing category by dividing total nursing category salaries for all
hospitals in the occupational mix survey database by total nursing
category hours for all hospitals in the occupational mix survey
database.
Step 6--For each hospital, compute the occupational mix adjustment
factor for the total nursing category by dividing the national average
hourly rate for the total nursing category (from Step 5) by the
hospital's adjusted average hourly rate for the total nursing category
(from Step 4).
If the hospital's adjusted average hourly rate is less than the
national average hourly rate (indicating the hospital employs a less
costly mix of nursing employees), the occupational mix adjustment
factor is greater than 1.0000. If the hospital's adjusted average
hourly rate is greater than the national average hourly rate, the
occupational mix adjustment factor is less than 1.0000.
Step 7--For each hospital, calculate the occupational mix adjusted
salaries and wage-related costs for the total nursing category by
multiplying the hospital's total salaries and wage-related costs (from
Step 5 of the unadjusted wage index calculation in section III.G. of
this preamble) by the percentage of the hospital's total workers
attributable to the total nursing category (using the occupational mix
survey data, this percentage is determined by dividing the hospital's
total nursing category salaries by the hospital's total salaries for
``nursing and all other'') and by the total nursing category's
occupational mix adjustment factor (from Step 6 above).
The remaining portion of the hospital's total salaries and wage-
related costs that is attributable to all other employees of the
hospital is not adjusted by the occupational mix. A hospital's all
other portion is determined by subtracting the hospital's nursing
category percentage from 100 percent.
Step 8--For each hospital, calculate the total occupational mix
adjusted salaries and wage-related costs for a hospital by summing the
occupational mix adjusted salaries and wage-related costs for the total
nursing category (from Step 7) and the portion of the hospital's
salaries and wage-related costs for all other employees (from Step 7).
To compute a hospital's occupational mix adjusted average hourly
wage, divide the hospital's total occupational mix adjusted salaries
and wage-related costs by the hospital's total hours (from Step 4 of
the unadjusted wage index calculation in section III.G. of this
preamble).
[[Page 43829]]
Step 9--To compute the occupational mix adjusted average hourly
wage for an urban or rural area, sum the total occupational mix
adjusted salaries and wage-related costs for all hospitals in the area,
then sum the total hours for all hospitals in the area. Next, divide
the area's occupational mix adjusted salaries and wage-related costs by
the area's hours.
Step 10--To compute the national occupational mix adjusted average
hourly wage, sum the total occupational mix adjusted salaries and wage-
related costs for all hospitals in the Nation, then sum the total hours
for all hospitals in the Nation. Next, divide the national occupational
mix adjusted salaries and wage-related costs by the national hours. The
FY 2010 occupational mix adjusted national average hourly wage is
$33.5268.
Step 11--To compute the occupational mix adjusted wage index,
divide each area's occupational mix adjusted average hourly wage (Step
9) by the national occupational mix adjusted average hourly wage (Step
10).
Step 12--To compute the Puerto Rico specific occupational mix
adjusted wage index, follow Steps 1 through 11 above. The FY 2010
occupational mix adjusted Puerto Rico-specific average hourly wage is
$14.2555.
The table below is an illustrative example of the occupational mix
adjustment.
BILLING CODE 4120-01-P
[[Page 43830]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.007
[[Page 43831]]
[GRAPHIC] [TIFF OMITTED] TR27AU09.008
BILLING CODE 4120-01-C
[[Page 43832]]
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the proposed FY
2010 wage index. For the FY 2007-2008 survey, the response rate was 89
percent.
In computing the FY 2010 wage index, if a hospital did not respond
to the occupational mix survey, or if we determined that a hospital's
submitted data were too erroneous to include in the wage index, we
assigned the hospital the average occupational mix adjustment for the
labor market area. We believed this method had the least impact on the
wage index for other hospitals in the area. For areas where no hospital
submitted data for purposes of calculating the proposed occupational
mix adjustment, we applied the national occupational mix factor of
1.0000 in calculating the area's FY 2010 occupational mix adjusted wage
index. (We indicated in the FY 2008 and FY 2009 IPPS final rules that
we reserve the right to apply a different approach in future years,
including potentially penalizing nonresponsive hospitals (72 FR
47314).) In addition, if a hospital submitted a survey, but that survey
data cannot be used because we determine it to be aberrant, we also
assigned the hospital the average occupational mix adjustment for its
labor market area. For example, if a hospital's individual nurse
category average hourly wages were out of range (that is, unusually
high or low), and the hospital did not provide sufficient documentation
to explain the aberrancy, or the hospital did not submit any registered
nurse salaries or hours data, we assigned the hospital the average
occupational mix adjustment for the labor market area in which it is
located.
In calculating the average occupational mix adjustment factor for a
labor market area, we replicated Steps 1 through 6 of the calculation
for the occupational mix adjustment. However, instead of performing
these steps at the hospital level, we aggregated the data at the labor
market area level. In following these steps, for example, for CBSAs
that contain providers that did not submit occupational mix survey
data, the occupational mix adjustment factor ranged from a low of
0.9252 (CBSA 17780, College Station-Bryan, TX), to a high of 1.0933
(CBSA 29700, Laredo, TX). Also, in computing a hospital's occupational
mix adjusted salaries and wage-related costs for nursing employees
(Step 7 of the calculation), in the absence of occupational mix survey
data, we multiplied the hospital's total salaries and wage-related
costs by the percentage of the area's total workers attributable to the
area's total nursing category. For FY 2010, there are 7 CBSAs (that
include 15 hospitals) for which we did not have occupational mix data
for any of its hospitals. The CBSAs are:
CBSA 21940--Fajardo, PR (one hospital)
CBSA 22140--Farmington, NM (one hospital)
CBSA 25020--Guayama, PR (three hospitals)
CBSA 36140--Ocean City, NJ (one hospital)
CBSA 38660--Ponce, PR (six hospitals)
CBSA 41900--San German-Cabo Rojo, PR (two hospitals)
CBSA 49500--Yauco, PR (one hospital)
Since the FY 2007 IPPS final rule, we have periodically discussed
applying a hospital-specific penalty to hospitals that fail to submit
occupational mix survey data. (71 FR 48013 through 48014; 72 FR 47314
through 47315; and 73 FR 48580). During the FY 2008 rulemaking cycle,
some commenters suggested a penalty equal to a 1- to 2-percent
reduction in the hospital's wage index value or a set percentage of the
standardized amount. During the FY 2009 rulemaking cycle, several
commenters reiterated their view that full participation in the
occupational mix survey is critical, and that CMS should develop a
methodology that encourages hospitals to report occupational mix survey
data but does not unfairly penalize neighboring hospitals. However, to
date, we have not adopted a penalty for hospitals that fail to submit
occupational mix data.
After review of the data for the proposed FY 2010 wage index, we
became concerned about the increasing number of hospitals that fail to
submit occupational mix data and the impact it may have on area wage
indices. The survey response rate has dropped significantly from 93.8
percent for the 2003 survey to 90.7 percent for the 2006 survey and
90.3 percent for the 2007-2008 survey. In 40 CBSAs, the response rate
was under 70 percent. In addition, for 50 areas, including New York-
White Plains-Wayne, New York-New Jersey (35644), Oklahoma City,
Oklahoma (36420), Rural Georgia (11), Rural Oklahoma (37), Dallas-
Plano-Irving, TX (19124), Newark-Union, NJ-PA (35084), and Fort Worth-
Arlington, TX (23104), the area response rate decreased 15 percent or
more between the 2006 survey and the 2007-2008 survey. In all of Puerto
Rico, only 21.6 percent of hospitals submitted 2007-2008 survey data.
If we had proposed to apply a penalty for nonresponsive hospitals for
the FY 2010 wage index, Puerto Rico hospitals would have been
significantly adversely affected in both the proposed national and
Puerto Rico-specific wage indices. We indicated in the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule that, while we were not proposing a penalty
at that time, we would consider the public comments we previously
received, as well as any public comments on the proposed rule, as we
develop the proposed FY 2011 wage index. One approach that we will
explore is to assign any nonresponsive hospital the occupational mix
factor deriving from the survey that would result in the greatest
negative adjustment to the hospital's wage index. We also will consider
applying the same penalty to hospitals that submit unusable
occupational mix data. Although we would apply this penalty factor in
establishing the hospital's payment rate, we would not use this factor
in computing the area's wage index. Rather, in computing the area wage
index, we would apply the same methodology as described above (that is,
assign the nonresponsive hospital the average occupational mix
adjustment factor for the labor market area) so that other hospitals in
the area are minimally impacted by the hospital's failure to submit
occupational mix data. Again, we note that we reserve the right to
penalize nonresponsive hospitals in the future. In the FY 2010 IPPS/RY
2010 LTCH PPS proposed rule, we welcomed public comments on this matter
and indicated that we would address this issue in next year's IPPS
proposed rule.
Comment: Several commenters indicated that they share CMS' concerns
about the increasing number of hospitals that fail to submit
occupational mix data. The commenters contended that accuracy and
fairness in the occupational mix adjustment will only be achieved
through 100 percent hospital participation and agreed that CMS should
consider a penalty for hospitals that do not participate. The
commenters suggested that CMS should not simply substitute unfavorable
occupational mix data for noncompliant hospitals because it could
unfairly penalize other neighboring hospitals that are diligent in
reporting their data. Some commenters recommended that CMS apply a
percentage adjustment to the standardized rate or to the wage index
that would reduce Medicare
[[Page 43833]]
payment to nonparticipating hospitals, similar to the slight payment
differential for hospitals failing to provide quality data. One
commenter added that the penalty should be applied in a budget neutral
manner. Another commenter suggested that the penalty should be applied
to inpatient and outpatient payments. The commenters also recommended
an appeal process that would allow hospitals to rectify the situation
when the Medicare contractor or CMS determines that a hospital's data
were not submitted, not acceptable, or unusable.
Response: We appreciate all of the comments and suggestions we
received regarding a penalty for hospitals that do not participate in
the occupational mix survey. We will consider these comments and other
methods in developing a proposal for the FY 2011 IPPS proposed rule.
Comment: Several commenters gave suggestions for improving the next
update of the occupational mix survey. (The 2007-2008 survey will
expire with the FY 2012 wage index.) Suggestions included the
following:
Use calendar year 2010 instead of the 12 months ending
June 30, 2011.
Add unit secretaries because their duties are similar to
the administrative functions of nurses and medical assistants.
Add an ``all other nursing'' category to capture all
employees in the specified cost centers who are not in the specific
categories (for example, emergency medical technicians and instrument
technicians). This will help CMS and others to quantify the percent of
nursing cost center employees that are not covered under the survey
categories.
Revise the Medicare cost report to include the
occupational mix survey data.
Response: Although we made no proposals in the FY 2010 proposed
rule regarding the next update of the occupational mix survey, we
appreciate receiving these comments and will consider them as we plan
and develop the new survey. As with prior updates to the occupational
mix survey, we will publish a notice of proposed data collection with a
comment period, through the Paperwork Reduction Act process, in a
future Federal Register.
E. Worksheet S-3 Wage Data for the FY 2010 Wage Index
The FY 2010 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2006 (the FY 2009 wage index was based on FY
2005 wage data).
1. Included Categories of Costs
The FY 2010 wage index includes the following categories of data
associated with costs paid under the IPPS (as well as outpatient
costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty).
Home office costs and hours.
Certain contract labor costs and hours (which include
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315)).
Wage-related costs, including pensions and other deferred
compensation costs. We note that, on March 28, 2008, CMS published a
technical clarification to the cost reporting instructions for pension
and deferred compensation costs (sections 2140 through 2142.7 of the
Provider Reimbursement Manual, Part I). These instructions are used for
developing pension and deferred compensation costs for purposes of the
wage index, as discussed in the instructions for Worksheet S-3, Part
II, Lines 13 through 20 and in the FY 2006 IPPS final rule (70 FR
47369).
Comment: Several commenters addressed our policy for determining
pension costs for the wage index. The commenters acknowledged that they
have raised many of their arguments, such as arguments regarding
retroactivity, before the Provider Reimbursement Review Board (PRRB).
Response: First, we did not propose to make any changes to, nor
request public comments on, reporting pension costs for the wage index.
Therefore, we consider the public comments received on this issue
outside of the scope of this rulemaking. Further, we already discussed
our policies for reporting pension costs in the FY 2006 IPPS final rule
(70 FR 47369). We note that the policy for reporting pension costs for
the wage index currently can be found in section 3605.2 of the Provider
Reimbursement Manual (PRM), Part II, and section 2142 of PRM, Part I.
We expect that purely legal arguments, such as arguments on
retroactivity, will be addressed through the adjudication process.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2009, the wage
index for FY 2010 also excludes the direct and overhead salaries and
hours for services not subject to IPPS payment, such as SNF services,
home health services, costs related to GME (teaching physicians and
residents) and certified registered nurse anesthetists (CRNAs), and
other subprovider components that are not paid under the IPPS. The FY
2010 wage index also excludes the salaries, hours, and wage-related
costs of hospital-based rural health clinics (RHCs), and Federally
qualified health centers (FQHCs) because Medicare pays for these costs
outside of the IPPS (68 FR 45395). In addition, salaries, hours, and
wage-related costs of CAHs are excluded from the wage index, for the
reasons explained in the FY 2004 IPPS final rule (68 FR 45397).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
Under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indices applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indices for non-IPPS providers, other
than for LTCHs. (Beginning with this final rule, for the RY 2010, we
are including in the same document updates to the LTCH PPS.) Such
comments should be made in response to separate proposed rules for
those providers.
F. Verification of Worksheet S-3 Wage Data
The wage data for the FY 2010 wage index were obtained from
Worksheet S-3, Parts II and III of the FY 2006 Medicare cost reports.
Instructions for completing Worksheet S-3, Parts II and III are in the
Provider Reimbursement Manual (PRM), Part II, sections 3605.2 and
3605.3. The data file used to construct the wage index includes FY 2006
data submitted to us as of March 2, 2009. As in past years, we
performed an intensive review of the wage data, mostly through the use
of edits designed to identify aberrant data.
We asked our fiscal intermediaries/MACs to revise or verify data
elements that resulted in specific edit failures. For the proposed FY
2010 wage index, we identified and excluded 34 providers with data that
were too aberrant to include in the proposed wage index, although we
stated that if data elements for some of these providers were
corrected, we intended to include some of these providers in the FY
2010 final wage index. We instructed fiscal intermediaries/MACs to
complete their
[[Page 43834]]
data verification of questionable data elements and to transmit any
changes to the wage data no later than April 15, 2009. The data for 2
of the hospitals identified in the proposed rule were resolved;
however, the data for 8 additional hospitals were identified as too
aberrant to include in the final wage index. Therefore, we determined
that the data for 40 hospitals (that is, 34 - 2 + 8 = 40) should not be
included in the FY 2010 final wage index.
In constructing the FY 2010 wage index, we included the wage data
for facilities that were IPPS hospitals in FY 2006, inclusive of those
facilities that have since terminated their participation in the
program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397). For this final rule, we removed
17 hospitals that converted to CAH status between February 18, 2008,
the cut-off date for CAH exclusion from the FY 2009 wage index, and
February 16, 2009, the cut-off date for CAH exclusion from the FY 2010
wage index. After removing hospitals with aberrant data and hospitals
that converted to CAH status, the FY 2010 wage index is calculated
based on 3,519 hospitals.
In the FY 2008 final rule with comment period (72 FR 47317) and the
FY 2009 IPPS final rule (73 FR 48582), we discussed our policy for
allocating a multicampus hospital's wages and hours data, by full-time
equivalent (FTE) staff, among the different labor market areas where
its campuses are located. During the FY 2010 wage index desk review
process, we requested fiscal intermediaries/MACs to contact multicampus
hospitals that had campuses in different labor market areas to collect
the data for the allocation. As we proposed, the FY 2010 wage index in
this final rule includes separate wage data for campuses of three
multicampus hospitals.
For FY 2010, we are again allowing hospitals to use FTE or
discharge data for the allocation of a multicampus hospital's wage data
among the different labor market areas where its campuses are located.
The Medicare cost report was updated in May 2008 to provide for the
reporting of FTE data by campus for multicampus hospitals. Because the
data from cost reporting periods that begin in FY 2008 will not be used
in calculating the wage index until FY 2012, a multicampus hospital
will still have the option, through the FY 2011 wage index, to use
either FTE or discharge data for allocating wage data among its
campuses by providing the information from the applicable cost
reporting period to CMS through its fiscal intermediary/MAC. Two of the
three multicampus hospitals chose to have their wage data allocated by
their Medicare discharge data for the FY 2010 wage index. One of the
hospitals provided FTE staff data for the allocation. The average
hourly wage associated with each geographical location of a multicampus
hospital is reflected in Table 2 of the Addendum to this final rule.
G. Method for Computing the FY 2010 Unadjusted Wage Index
The method used to compute the FY 2010 wage index without an
occupational mix adjustment follows:
Step 1--As noted above, we are basing the FY 2010 wage index on
wage data reported on the FY 2006 Medicare cost reports. We gathered
data from each of the non-Federal, short-term, acute care hospitals for
which data were reported on the Worksheet S-3, Parts II and III of the
Medicare cost report for the hospital's cost reporting period beginning
on or after October 1, 2005, and before October 1, 2006. In addition,
we included data from some hospitals that had cost reporting periods
beginning before October 2005 and reported a cost reporting period
covering all of FY 2005. These data are included because no other data
from these hospitals would be available for the cost reporting period
described above, and because particular labor market areas might be
affected due to the omission of these hospitals. However, we generally
describe these wage data as FY 2005 data. We note that, if a hospital
had more than one cost reporting period beginning during FY 2006 (for
example, a hospital had two short cost reporting periods beginning on
or after October 1, 2005, and before October 1, 2006), we included wage
data from only one of the cost reporting periods, the longer, in the
wage index calculation. If there was more than one cost reporting
period and the periods were equal in length, we included the wage data
from the later period in the wage index calculation.
Step 2--Salaries--The method used to compute a hospital's average
hourly wage excludes certain costs that are not paid under the IPPS.
(We note that, beginning with FY 2008 (72 FR 47315), we include Lines
22.01, 26.01, and 27.01 of Worksheet S-3, Part II for overhead services
in the wage index. However, we note that the wages and hours on these
lines are not incorporated into Line 101, Column 1 of Worksheet A,
which, through the electronic cost reporting software, flows directly
to Line 1 of Worksheet S-3, Part II. Therefore, the first step in the
wage index calculation for FY 2010 is to compute a ``revised'' Line 1,
by adding to the Line 1 on Worksheet S-3, Part II (for wages and hours
respectively) the amounts on Lines 22.01, 26.01, and 27.01.) In
calculating a hospital's average salaries plus wage-related costs, we
subtract from Line 1 (total salaries) the GME and CRNA costs reported
on Lines 2, 4.01, 6, and 6.01, the Part B salaries reported on Lines 3,
5 and 5.01, home office salaries reported on Line 7, and exclude
salaries reported on Lines 8 and 8.01 (that is, direct salaries
attributable to SNF services, home health services, and other
subprovider components not subject to the IPPS). We also subtract from
Line 1 the salaries for which no hours were reported. To determine
total salaries plus wage-related costs, we add to the net hospital
salaries the costs of contract labor for direct patient care, certain
top management, pharmacy, laboratory, and nonteaching physician Part A
services (Lines 9 and 10), home office salaries and wage-related costs
reported by the hospital on Lines 11 and 12, and nonexcluded area wage-
related costs (Lines 13, 14, and 18).
We note that contract labor and home office salaries for which no
corresponding hours are reported are not included. In addition, wage-
related costs for nonteaching physician Part A employees (Line 18) are
excluded if no corresponding salaries are reported for those employees
on Line 4.
Step 3--Hours--With the exception of wage-related costs, for which
there are no associated hours, we compute total hours using the same
methods as described for salaries in Step 2.
Step 4--For each hospital reporting both total overhead salaries
and total overhead hours greater than zero, we then allocate overhead
costs to areas of the hospital excluded from the wage index
calculation. First, we determine the ratio of excluded area hours (sum
of Lines 8 and 8.01 of Worksheet S-3, Part II) to revised total hours
(Line 1 minus the sum of Part II, Lines 2, 3, 4.01, 5, 5.01, 6, 6.01,
7, and Part III, Line 13 of Worksheet S-3). We then compute the amounts
of overhead salaries and hours to be allocated to excluded areas by
multiplying the above ratio by the total overhead salaries and hours
reported on
[[Page 43835]]
Line 13 of Worksheet S-3, Part III. Next, we compute the amounts of
overhead wage-related costs to be allocated to excluded areas using
three steps: (1) We determine the ratio of overhead hours (Part III,
Line 13 minus the sum of lines 22.01, 26.01, and 27.01) to revised
hours excluding the sum of lines 22.01, 26.01, and 27.01 (Line 1 minus
the sum of Lines 2, 3, 4.01, 5, 5.01, 6, 6.01, 7, 8, 8.01, 22.01,
26.01, and 27.01). (We note that for the FY 2008 and subsequent wage
index calculations, we are excluding the sum of lines 22.01, 26.01, and
27.01 from the determination of the ratio of overhead hours to revised
hours because hospitals typically do not provide fringe benefits (wage-
related costs) to contract personnel. Therefore, it is not necessary
for the wage index calculation to exclude overhead wage-related costs
for contract personnel. Further, if a hospital does contribute to wage-
related costs for contracted personnel, the instructions for Lines
22.01, 26.01, and 27.01 require that associated wage-related costs be
combined with wages on the respective contract labor lines.); (2) we
compute overhead wage-related costs by multiplying the overhead hours
ratio by wage-related costs reported on Part II, Lines 13, 14, and 18;
and (3) we multiply the computed overhead wage-related costs by the
above excluded area hours ratio. Finally, we subtract the computed
overhead salaries, wage-related costs, and hours associated with
excluded areas from the total salaries (plus wage-related costs) and
hours derived in Steps 2 and 3.
Step 5--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries
plus wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2003, through April 15,
2005, for private industry hospital workers from the BLS' Compensation
and Working Conditions. We use the ECI because it reflects the price
increase associated with total compensation (salaries plus fringes)
rather than just the increase in salaries. In addition, the ECI
includes managers as well as other hospital workers. This methodology
to compute the monthly update factors uses actual quarterly ECI data
and assures that the update factors match the actual quarterly and
annual percent changes. We also note that, since April 2006 with the
publication of March 2006 data, the BLS' ECI uses a different
classification system, the North American Industrial Classification
System (NAICS), instead of the Standard Industrial Codes (SICs), which
no longer exist. We have consistently used the ECI as the data source
for our wages and salaries and other price proxies in the IPPS market
basket and, as we proposed, we are not making any changes to the usage
for FY 2010. The factors used to adjust the hospital's data were based
on the midpoint of the cost reporting period, as indicated below.
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
Adjustment
After Before factor
------------------------------------------------------------------------
10/14/2005.................................. 11/15/2005 1.04966
11/14/2005.................................. 12/15/2005 1.04632
12/14/2005.................................. 01/15/2006 1.04296
01/14/2006.................................. 02/15/2006 1.03955
02/14/2006.................................. 03/15/2006 1.03610
03/14/2006.................................. 04/15/2006 1.03269
04/14/2006.................................. 05/15/2006 1.02936
05/14/2006.................................. 06/15/2006 1.02613
06/14/2006.................................. 07/15/2006 1.02298
07/14/2006.................................. 08/15/2006 1.01990
08/14/2006.................................. 09/15/2006 1.01688
09/14/2006.................................. 10/15/2006 1.01391
10/14/2006.................................. 11/15/2006 1.01098
11/14/2006.................................. 12/15/2006 1.00808
12/14/2006.................................. 01/15/2007 1.00526
01/14/2007.................................. 02/15/2007 1.00257
02/14/2007.................................. 03/15/2007 1.00000
03/14/2007.................................. 04/15/2007 0.99745
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2006, and ending December 31, 2006, is June 30, 2006. An
adjustment factor of 1.02298 would be applied to the wages of a
hospital with such a cost reporting period. In addition, for the data
for any cost reporting period that began in FY 2006 and covered a
period of less than 360 days or more than 370 days, we annualize the
data to reflect a 1-year cost report. Dividing the data by the number
of days in the cost report and then multiplying the results by 365
accomplishes annualization.
Step 6--Each hospital is assigned to its appropriate urban or rural
labor market area before any reclassifications under section
1886(d)(8)(B), section 1886(d)(8)(E), or section 1886(d)(10) of the
Act. Within each urban or rural labor market area, we add the total
adjusted salaries plus wage-related costs obtained in Step 5 for all
hospitals in that area to determine the total adjusted salaries plus
wage-related costs for the labor market area.
Step 7--We divide the total adjusted salaries plus wage-related
costs obtained under both methods in Step 6 by the sum of the
corresponding total hours (from Step 4) for all hospitals in each labor
market area to determine an average hourly wage for the area.
Step 8--We add the total adjusted salaries plus wage-related costs
obtained in Step 5 for all hospitals in the Nation and then divide the
sum by the national sum of total hours from Step 4 to arrive at a
national average hourly wage. Using the data as described above, the
national average hourly wage (unadjusted for occupational mix) is
$33.5491.
Step 9--For each urban or rural labor market area, we calculate the
hospital wage index value, unadjusted for occupational mix, by dividing
the area average hourly wage obtained in Step 7 by the national average
hourly wage computed in Step 8.
Step 10--Following the process set forth above, we develop a
separate Puerto Rico-specific wage index for purposes of adjusting the
Puerto Rico standardized amounts. (The national Puerto Rico
standardized amount is adjusted by a wage index calculated for all
Puerto Rico labor market areas based on the national average hourly
wage as described above.) We add the total adjusted salaries plus wage-
related costs (as calculated in Step 5) for all hospitals in Puerto
Rico and divide the sum by the total hours for Puerto Rico (as
calculated in Step 4) to arrive at an overall average hourly wage
(unadjusted for occupational mix) of $14.2462 for Puerto Rico. For each
labor market area in Puerto Rico, we calculate the Puerto Rico-specific
wage index value by dividing the area average hourly wage (as
calculated in Step 7) by the overall Puerto Rico average hourly wage.
Step 11--Section 4410 of Public Law 105-33 provides that, for
discharges on or after October 1, 1997, the area wage index applicable
to any hospital that is located in an urban area of a State may not be
less than the area wage index applicable to hospitals located in rural
areas in that State. The areas affected by this provision are
identified in Table 4D-2 of the Addendum to this final rule.
In the FY 2005 IPPS final rule (69 FR 49109), we adopted the
``imputed'' floor as a temporary 3-year measure to address a concern by
some individuals that hospitals in all-urban States were disadvantaged
by the absence of rural hospitals to set a wage index floor in those
States. The imputed floor was originally set to expire in FY 2007, but
we extended it an additional year in the FY 2008 IPPS final rule with
comment period (72 FR 47321). In the FY 2009 IPPS final rule (73 FR
48570 through 48574 and 48584), we extended the imputed floor for an
additional 3 years, through FY 2011.
[[Page 43836]]
H. Analysis and Implementation of the Occupational Mix Adjustment and
the FY 2010 Occupational Mix Adjustment Wage Index
As discussed in section III.D. of this preamble, for FY 2010, we
apply the occupational mix adjustment to 100 percent of the FY 2010
wage index. We calculated the occupational mix adjustment using data
from the 2007-2008 occupational mix survey data, using the methodology
described in section III.D.3. of this preamble.
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the FY 2010 wage index
results in a national average hourly wage of $33.5268 and a Puerto
Rico-specific average hourly wage of $14.2555. After excluding data of
hospitals that either submitted aberrant data that failed critical
edits, or that do not have FY 2006 Worksheet S-3 cost report data for
use in calculating the FY 2010 wage index, we calculated the FY 2010
wage index using the occupational mix survey data from 3,178 hospitals.
Using the Worksheet S-3 cost report data of 3,519 hospitals and
occupational mix survey data from 3,178 hospitals represents a 90.3
percent survey response rate. The FY 2010 national average hourly wages
for each occupational mix nursing subcategory as calculated in Step 2
of the occupational mix calculation are as follows:
------------------------------------------------------------------------
Average hourly
Occupational mix nursing subcategory wage
------------------------------------------------------------------------
National RN......................................... $36.071788464
National LPN and Surgical Technician................ 20.882610908
National Nurse Aide, Orderly, and Attendant......... 14.619113985
National Medical Assistant.......................... 16.486068445
National Nurse Category............................. 30.482374867
------------------------------------------------------------------------
The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is
$30.482374867. 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 July 2007 through June 2008 occupational mix survey
data, we determined (in Step 7 of the occupational mix calculation)
that the national percentage of hospital employees in the nurse
category is 44.31 percent, and the national percentage of hospital
employees in the all other occupations category is 55.69 percent. At
the CBSA level, the percentage of hospital employees in the nurse
category ranged from a low of 29.08 percent in one CBSA, to a high of
70.76 percent in another CBSA.
We compared the FY 2010 occupational mix adjusted wage indices for
each CBSA to the unadjusted wage indices for each CBSA. As a result of
applying the occupational mix adjustment to the wage data, the wage
index values for 205 (52.4 percent) urban areas and 32 (68.1 percent)
rural areas will increase. One hundred and six (27.1 percent) urban
areas will increase by 1 percent or more, and 5 (1.3 percent) urban
areas will increase by 5 percent or more. Nineteen (40.4 percent) rural
areas will increase by 1 percent or more, and no rural areas will
increase by 5 percent or more. However, the wage index values for 186
(47.6 percent) urban areas and 14 (29.8 percent) rural areas will
decrease. Eighty-eight (22.5 percent) urban areas will decrease by 1
percent or more, and no urban area will decrease by 5 percent or more.
Seven (14.9 percent) rural areas will decrease by 1 percent or more,
and no rural areas will decrease by 5 percent or more. The largest
positive impacts are 7.83 percent for an urban area and 2.97 percent
for a rural area. The largest negative impacts are 3.90 percent for an
urban area and 2.32 percent for a rural area. One rural area is
unaffected. These results indicate that a larger percentage of rural
areas (68.1 percent) benefit from the occupational mix adjustment than
do urban areas (52.4 percent). While these results are more positive
overall for rural areas than under the previous occupational mix
adjustment that used survey data from 2006, approximately one-third
(29.8 percent) of rural CBSAs will still experience a decrease in their
wage indices as a result of the occupational mix adjustment.
We also compared the FY 2010 wage data adjusted for occupational
mix from the 2007-2008 survey to the FY 2010 wage data adjusted for
occupational mix from the 2006 survey. This analysis illustrates the
effect on area wage indices of using the 2007-2008 survey data compared
to the 2006 survey data; that is, it shows whether hospitals' wage
indices are increasing or decreasing under the current survey data as
compared to the prior survey data. Our analysis shows that the FY 2010
wage index values for 185 (47.3 percent) urban areas and 19 (40.4
percent) rural areas will increase. Sixty-two (15.9 percent) urban
areas will increase by 1 percent or more, and no urban areas will
increase by 5 percent or more. One (2.1 percent) rural area will
increase by 1 percent or more, and no rural areas will increase by 5
percent or more. However, the wage index values for 202 (51.7 percent)
urban areas and 28 (59.6 percent) rural areas will decrease using the
2007-2008 data. Fifty-five (14.1 percent) urban areas will decrease by
1 percent or more, and one (0.26 percent) urban area will decrease by 5
percent or more. Three (6.4 percent) rural areas will decrease by 1
percent or more, and no rural areas will decrease by 5 percent or more.
The largest positive impacts using the 2007-2008 data compared to the
2006 data are 4.32 percent for an urban area and 2.34 percent for a
rural area. The largest negative impacts are 6.46 percent for an urban
area and 4.40 percent for a rural area. Four urban areas and no rural
areas will be unaffected. These results indicate that a larger
percentage of urban areas (47.3 percent) will benefit from the 2007-
2008 occupational mix survey as compared to the 2006 survey than will
rural areas (40.4 percent). Further, the wage indices of more CBSAs
overall (52.5 percent) will be decreasing due to application of the
2007-2008 occupational mix survey data as compared to the 2006 survey
data to the wage index. However, as noted in the analysis above, a
greater percentage of rural areas (68.1 percent) will benefit from the
application of the occupational mix adjustment than will urban areas.
The wage index values for FY 2010 (except those for hospitals
receiving wage index adjustments under section 1886(d)(13) of the Act)
included in Tables 4A, 4B, 4C, and 4F of the
[[Page 43837]]
Addendum to this final rule include the occupational mix adjustment.
Tables 3A and 3B in the Addendum to this final rule list the 3-year
average hourly wage for each labor market area before the redesignation
of hospitals based on FYs 2008, 2009, and 2010 cost reporting periods.
Table 3A lists these data for urban areas and Table 3B lists these data
for rural areas. In addition, Table 2 in the Addendum to this final
rule includes the adjusted average hourly wage for each hospital from
the FY 2004 and FY 2005 cost reporting periods, as well as the FY 2006
period used to calculate the FY 2010 wage index. The 3-year averages
are calculated by dividing the sum of the dollars (adjusted to a common
reporting period using the method described previously) across all 3
years, by the sum of the hours. If a hospital is missing data for any
of the previous years, its average hourly wage for the 3-year period is
calculated based on the data available during that period. The average
hourly wages in Tables 2, 3A, and 3B in the Addendum to this final rule
include the occupational mix adjustment. The wage index values in
Tables 4A, 4B, 4C, and 4D-1 also include the State-specific rural floor
and imputed floor budget neutrality adjustments.
I. Revisions to the Wage Index Based on Hospital Redesignations
1. General
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify 13 months prior to the start of the fiscal year for which
reclassification is sought (generally by September 1). Generally,
hospitals must be proximate to the labor market area to which they are
seeking reclassification and must demonstrate characteristics similar
to hospitals located in that area. The MGCRB issues its decisions by
the end of February for reclassifications that become effective for the
following fiscal year (beginning October 1). The regulations applicable
to reclassifications by the MGCRB are located in 42 CFR 412.230 through
412.280.
Section 1886(d)(10)(D)(v) of the Act provides that, beginning with
FY 2001, a MGCRB decision on a hospital reclassification for purposes
of the wage index is effective for 3 fiscal years, unless the hospital
elects to terminate the reclassification. Section 1886(d)(10)(D)(vi) of
the Act provides that the MGCRB must use average hourly wage data from
the 3 most recently published hospital wage surveys in evaluating a
hospital's reclassification application for FY 2003 and any succeeding
fiscal year.
Section 304(b) of Public Law 106-554 provides that the Secretary
must establish a mechanism under which a statewide entity may apply to
have all of the geographic areas in the State treated as a single
geographic area for purposes of computing and applying a single wage
index, for reclassifications beginning in FY 2003. The implementing
regulations for this provision are located at 42 CFR 412.235.
Section 1886(d)(8)(B) of the Act requires the Secretary to treat a
hospital located in a rural county adjacent to one or more urban areas
as being located in the labor market area to which the greatest number
of workers in the county commute, if the rural county would otherwise
be considered part of an urban area under the standards for designating
MSAs and if the commuting rates used in determining outlying counties
were determined on the basis of the aggregate number of resident
workers who commute to (and, if applicable under the standards, from)
the central county or counties of all contiguous MSAs. In light of the
CBSA definitions and the Census 2000 data that we implemented for FY
2005 (69 FR 49027), we undertook to identify those counties meeting
these criteria. Eligible counties are discussed and identified under
section III.I.5. of this preamble.
2. Effects of Reclassification/Redesignation
Section 1886(d)(8)(C) of the Act provides that the application of
the wage index to redesignated hospitals is dependent on the
hypothetical impact that the wage data from these hospitals would have
on the wage index value for the area to which they have been
redesignated. These requirements for determining the wage index values
for redesignated hospitals are applicable both to the hospitals deemed
urban under section 1886(d)(8)(B) of the Act and hospitals that were
reclassified as a result of the MGCRB decisions under section
1886(d)(10) of the Act. Therefore, as provided in section 1886(d)(8)(C)
of the Act, the wage index values were determined by considering the
following:
If including the wage data for the redesignated hospitals
would reduce the wage index value for the area to which the hospitals
are redesignated by 1 percentage point or less, the area wage index
value determined exclusive of the wage data for the redesignated
hospitals applies to the redesignated hospitals.
If including the wage data for the redesignated hospitals
reduces the wage index value for the area to which the hospitals are
redesignated by more than 1 percentage point, the area wage index
determined inclusive of the wage data for the redesignated hospitals
(the combined wage index value) applies to the redesignated hospitals.
If including the wage data for the redesignated hospitals
increases the wage index value for the urban area to which the
hospitals are redesignated, both the area and the redesignated
hospitals receive the combined wage index value. Otherwise, the
hospitals located in the urban area receive a wage index excluding the
wage data of hospitals redesignated into the area.
Rural areas whose wage index values would be reduced by excluding
the wage data for hospitals that have been redesignated to another area
continue to have their wage index values calculated as if no
redesignation had occurred (otherwise, redesignated rural hospitals are
excluded from the calculation of the rural wage index). The wage index
value for a redesignated rural hospital cannot be reduced below the
wage index value for the rural areas of the State in which the hospital
is located.
CMS also has adopted the following policies:
The wage data for a reclassified urban hospital is
included in both the wage index calculation of the urban area to which
the hospital is reclassified (subject to the rules described above) and
the wage index calculation of the urban area where the hospital is
physically located.
In cases where hospitals have reclassified to rural areas,
such as urban hospitals reclassifying to rural areas under 42 CFR
412.103, the hospital's wage data are: (a) included in the rural wage
index calculation, unless doing so would reduce the rural wage index;
and (b) included in the urban area where the hospital is physically
located. The effect of this policy, in combination with the statutory
requirement at section 1886(d)(8)(C)(ii) of the Act, is that rural
areas may receive a wage index based upon the highest of: (1) Wage data
from hospitals geographically located in the rural area; (2) wage data
from hospitals geographically located in the rural area, but excluding
all data associated with hospitals reclassifying out of the rural area
under section 1886(d)(8)(B) or section 1886(d)(10) of the Act; or (3)
wage data associated with hospitals geographically located in the area
plus all hospitals reclassified into the rural area.
[[Page 43838]]
In addition, in accordance with the statutory language referring to
``hospitals'' in the plural under sections 1886(d)(8)(C)(i) and
1886(d)(8)(C)(ii) of the Act, our longstanding policy is to consider
reclassified hospitals as a group when deciding whether to include or
exclude them from both urban and rural wage index calculations.
3. FY 2010 MGCRB Reclassifications
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in 42 CFR
412.230 through 412.280.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2010 reclassification requests. Based on
such reviews, there were 292 hospitals approved for wage index
reclassifications by the MGCRB for FY 2010. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2010, hospitals
reclassified during FY 2008 or FY 2009 are eligible to continue to be
reclassified to a particular labor market area based on such prior
reclassifications. There were 313 hospitals approved for wage index
reclassifications in FY 2008 and 271 hospitals approved for wage index
reclassifications in FY 2009. Of all of the hospitals approved for
reclassification for FY 2008, FY 2009, and FY 2010, based upon the
review at the time of this final rule, 861 hospitals are in a
reclassification status for FY 2010.
Under 42 CFR 412.273, hospitals that have been reclassified by the
MGCRB are permitted to withdraw their applications within 45 days of
the publication of a proposed rule. Generally stated, the request for
withdrawal of an application for reclassification or termination of an
existing 3-year reclassification that would be effective in FY 2010 had
to be received by the MGCRB within 45 days of the publication of the FY
2010 IPPS proposed rule. Hospitals may also cancel prior
reclassification withdrawals or terminations in certain circumstances.
For further information about withdrawing, terminating, or canceling a
previous withdrawal or termination of a 3-year reclassification for
wage index purposes, we refer the reader to 42 CFR 412.273, as well as
the FY 2002 IPPS final rule (66 FR 39887) and the FY 2003 IPPS final
rule (67 FR 50065).
Changes to the wage index that result from withdrawals of requests
for reclassification, wage index corrections, appeals, and the
Administrator's review process for FY 2010 are incorporated into the
wage index values published in this FY 2010 IPPS/RY 2010 LTCH PPS final
rule. These changes affect not only the wage index value for specific
geographic areas, but also the wage index value redesignated 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
hospitals. Further, the wage index value for the area from which the
hospitals are redesignated may be affected.
Applications for FY 2011 reclassifications are due to the MGCRB by
September 1, 2009 (the first working day of September 2009). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d).
Applications and other information about MGCRB reclassifications may be
obtained, beginning in mid-July 2009, via the CMS Internet Web site at:
http://cms.hhs.gov/MGCRB/02_instructions_and_applications.asp, or by
calling the MGCRB at (410) 786-1174. The mailing address of the MGCRB
is: 2520 Lord Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
Comment: Several commenters suggested that CMS lower the employment
interchange measure (EIM) from 15 percent to 7.5 percent. EIM is a
measure of ties between two adjacent entities, used when defining
Combined Statistical Areas (CSAs). The EIM is calculated as the sum of
the percentage of employed residents commuting from the smaller area to
the larger area and the percentage of employment in the smaller area
accounted for by workers residing in the larger area. Hospitals seeking
a group reclassification from one urban area to another must be located
in the same CSA (or CBSA where relevant) as the urban area to which
they seek redesignation, as stated in Sec. 412.234(a)(3)(iv) of the
regulations.
Response: We are not adopting the commenters' recommendation.
First, we have a longstanding policy of using OMB's statistical area
definitions to set our labor market areas, and OMB does not modify the
statistical area definitions to meet the requirements of any
nonstatistical program. Second, such a change in the EIM could
significantly reduce the wage indices of some reclassified hospitals.
In analyzing the implications of the EIM change suggested by the
commenters, we reviewed 31 of 127 CSAs (these are the 31 areas for
which the Office of Personnel Management uses a 7.5 percent EIM in
determining locality payment adjustments under the general schedule for
Federal employees). The result was that the change would allow a total
of at least 57 hospitals in 21 counties to reclassify, and while a
national budget neutrality adjustment would affect all hospitals
equally, the additional reclassifications could significantly reduce
the wage index applied to reclassified hospitals in certain areas--in
some cases, by as much as 10 percent as a result of the additional
reclassifications. These effects could be even more significant were
the EIM changed for all counties nationally.
4. Redesignations of Hospitals Under Section 1886(d)(8)(B) of the Act
Section 1886(d)(8)(B) of the Act requires us to treat a hospital
located in a rural county adjacent to one or more urban areas as being
located in the MSA if certain criteria are met. Effective beginning FY
2005, we use OMB's 2000 CBSA standards and the Census 2000 data to
identify counties in which hospitals qualify under section
1886(d)(8)(B) of the Act to receive the wage index of the urban area.
Hospitals located in these counties have been known as ``Lugar''
hospitals and the counties themselves are often referred to as
``Lugar'' counties. We provide the FY 2010 chart below with the listing
of the rural counties containing the hospitals designated as urban
under section 1886(d)(8)(B) of the Act. For discharges occurring on or
after October 1, 2009, hospitals located in the rural county in the
first column of this chart will be redesignated for purposes of using
the wage index of the urban area listed in the second column.
Rural Counties Containing Hospitals Redesignated as Urban Under Section
1886(d)(8)(B) of the Act
[Based on CBSAs and Census 2000 data]
------------------------------------------------------------------------
Rural county CBSA
------------------------------------------------------------------------
Cherokee, AL.................................... Rome, GA.
[[Page 43839]]
Macon, AL....................................... Auburn-Opelika, AL.
Talladega, AL................................... Anniston-Oxford, AL.
Hot Springs, AR................................. Hot Springs, AR.
Windham, CT..................................... Hartford-West Hartford-
East Hartford, CT.
Bradford, FL.................................... Gainesville, FL.
Hendry, FL...................................... West Palm Beach-Boca
Raton-Boynton, FL.
Levy, FL........................................ Gainesville, FL.
Walton, FL...................................... Fort Walton Beach-
Crestview-Destin, FL.
Banks, GA....................................... Gainesville, GA.
Chattooga, GA................................... Chattanooga, TN-GA.
Jackson, GA..................................... Atlanta-Sandy Springs-
Marietta, GA.
Lumpkin, GA..................................... Atlanta-Sandy Springs-
Marietta, GA.
Morgan, GA...................................... Atlanta-Sandy Springs-
Marietta, GA.
Peach, GA....................................... Macon, GA.
Polk, GA........................................ Atlanta-Sandy Springs-
Marietta, GA.
Talbot, GA...................................... Columbus, GA-AL.
Bingham, ID..................................... Idaho Falls, ID.
Christian, IL................................... Springfield, IL.
DeWitt, IL...................................... Bloomington-Normal,
IL.
Iroquois, IL.................................... Kankakee-Bradley, IL.
Logan, IL....................................... Springfield, IL.
Mason, IL....................................... Peoria, IL.
Ogle, IL........................................ Rockford, IL.
Clinton, IN..................................... Lafayette, IN.
Henry, IN....................................... Indianapolis-Carmel,
IN.
Spencer, IN..................................... Evansville, IN-KY.
Starke, IN...................................... Gary, IN.
Warren, IN...................................... Lafayette, IN.
Boone, IA....................................... Ames, IA.
Buchanan, IA.................................... Waterloo-Cedar Falls,
IA.
Cedar, IA....................................... Iowa City, IA.
Allen, KY....................................... Bowling Green, KY.
Assumption Parish, LA........................... Baton Rouge, LA.
St. James Parish, LA............................ Baton Rouge, LA.
Allegan, MI..................................... Holland-Grand Haven,
MI.
Montcalm, MI.................................... Grand Rapids-Wyoming,
MI.
Oceana, MI...................................... Muskegon-Norton
Shores, MI.
Shiawassee, MI.................................. Lansing-East Lansing,
MI.
Tuscola, MI..................................... Saginaw-Saginaw
Township North, MI.
Fillmore, MN.................................... Rochester, MN.
Dade, MO........................................ Springfield, MO.
Pearl River, MS................................. Gulfport-Biloxi, MS.
Caswell, NC..................................... Burlington, NC.
Davidson, NC.................................... Greensboro-High Point,
NC.
Granville, NC................................... Durham, NC.
Harnett, NC..................................... Raleigh-Cary, NC.
Lincoln, NC..................................... Charlotte-Gastonia-
Concord, NC-SC.
Polk, NC........................................ Spartanburg, SC.
Los Alamos, NM.................................. Santa Fe, NM.
Lyon, NV........................................ Carson City, NV.
Cayuga, NY...................................... Syracuse, NY.
Columbia, NY.................................... Albany-Schenectady-
Troy, NY.
Genesee, NY..................................... Rochester, NY.
Greene, NY...................................... Albany-Schenectady-
Troy, NY.
Schuyler, NY.................................... Ithaca, NY.
Sullivan, NY.................................... Poughkeepsie-Newburgh-
Middletown, NY.
Wyoming, NY..................................... Buffalo-Niagara Falls,
NY.
Ashtabula, OH................................... Cleveland-Elyria-
Mentor, OH.
Champaign, OH................................... Springfield, OH.
Columbiana, OH.................................. Youngstown-Warren-
Boardman, OH-PA.
Cotton, OK...................................... Lawton, OK.
Linn, OR........................................ Corvallis, OR.
Adams, PA....................................... York-Hanover, PA.
Clinton, PA..................................... Williamsport, PA.
Greene, PA...................................... Pittsburgh, PA.
Monroe, PA...................................... Allentown-Bethlehem-
Easton, PA-NJ.
Schuylkill, PA.................................. Reading, PA.
Susquehanna, PA................................. Binghamton, NY.
Clarendon, SC................................... Sumter, SC.
[[Page 43840]]
Lee, SC......................................... Sumter, SC.
Oconee, SC...................................... Greenville, SC.
Union, SC....................................... Spartanburg, SC.
Meigs, TN....................................... Cleveland, TN.
Bosque, TX...................................... Waco, TX.
Falls, TX....................................... Waco, TX.
Fannin, TX...................................... Dallas-Plano-Irving,
TX.
Grimes, TX...................................... College Station-Bryan,
TX.
Harrison, TX.................................... Longview, TX.
Henderson, TX................................... Dallas-Plano-Irving,
TX.
Milam, TX....................................... Austin-Round Rock, TX.
Van Zandt, TX................................... Dallas-Plano-Irving,
TX.
Willacy, TX..................................... Brownsville-Harlingen,
TX.
Buckingham, VA.................................. Charlottesville, VA.
Floyd, VA....................................... Blacksburg-
Christiansburg-
Radford, VA.
Middlesex, VA................................... Virginia Beach-Norfolk-
Newport News, VA.
Page, VA........................................ Harrisonburg, VA.
Shenandoah, VA.................................. Winchester, VA-WV.
Island, WA...................................... Seattle-Bellevue-
Everett, WA.
Mason, WA....................................... Olympia, WA.
Wahkiakum, WA................................... Longview, WA.
Jackson, WV..................................... Charleston, WV.
Roane, WV....................................... Charleston, WV.
Green, WI....................................... Madison, WI.
Green Lake, WI.................................. Fond du Lac, WI.
Jefferson, WI................................... Milwaukee-Waukesha-
West Allis, WI.
Walworth, WI.................................... Milwaukee-Waukesha-
West Allis, WI.
------------------------------------------------------------------------
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Affected hospitals were permitted to compare the
reclassified wage index for the labor market area in Table 4C in the
Addendum to the proposed rule into which they would be reclassified by
the MGCRB to the wage index for the area to which they are redesignated
under section 1886(d)(8)(B) of the Act. Hospitals could have withdrawn
from an MGCRB reclassification within 45 days of the publication of the
FY 2010 proposed rule.
Comment: Several commenters suggested that CMS allow Lugar
hospitals the ability to waive their Lugar status once and have the
waiver be effective until the hospital chooses to withdraw.
Response: Section 1886(d)(8)(B) of the Act required us to treat a
hospital located in a rural county adjacent to one or more urban areas
as being located in the MSA to which the greatest number of workers in
the county commute. Hospitals satisfying the criteria under section
1886(d)(8)(B) of the Act are treated as urban hospitals and are also
eligible for reclassification through the MGCRB or may waive their
Lugar status if eligible to receive the out-migration adjustment. Once
a hospital is listed as a Lugar hospital under section 1886(d)(8)(B) of
the Act, it is treated as such until the hospital waives its Lugar
status. Hospitals can only waive Lugar status if they are in a county
that is eligible to receive an out-migration adjustment. A rural
hospital that is redesignated as Lugar, or urban, that wishes to stay
rural can apply to be reclassified back to rural status under Sec.
412.103 of the regulations. Otherwise, hospitals that are redesignated
as Lugar can only waive Lugar status if they are eligible for the out-
migration adjustment.
The wage index is updated annually and, as such, hospitals wishing
to waive their Lugar redesignation in order to receive the rural area
wage index plus the out-migration adjustment must request the waiver
annually. Each year, the preamble of the IPPS proposed rule is specific
that hospitals redesignated under section 1886(d)(8) of the Act or
reclassified under section 1886(10) of the Act will be deemed to have
chosen to retain their redesignation or reclassification, and that
hospitals redesignated under section 1886(d)(8) of the Act will be
deemed to have waived the out-migration adjustment, unless they
explicitly notify CMS within 45 days from the publication of the
proposed rule that they elect to receive the out-migration adjustment
instead. For example, we refer readers to the FY 2009 IPPS proposed
rule (73 FR 23635). The introductory text of Table 4J in the Addendum
to the rule also reminds hospitals of the annual process.
If a hospital chooses to waive its Lugar status within 45 days of
the proposed rule, each year it must send a written request to CMS at
the following address: Division of Acute Care, Center for Medicare
Management, C4-08-06, 7500 Security Boulevard, Baltimore, MD 21244,
Attn: Brian Slater; and must send a copy to the MGCRB. The mailing
address for the MGCRB is: 2520 Lord Baltimore Drive, Suite L,
Baltimore, MD 21244-2670.
5. Reclassifications Under Section 1886(d)(8)(B) of the Act
As discussed in the FY 2009 IPPS final rule (73 FR 48588), Lugar
hospitals are treated like reclassified hospitals for purposes of
determining their applicable wage index and receive the reclassified
wage index for the urban area to which they have been redesignated.
Because Lugar hospitals are treated like reclassified hospitals, when
they are seeking reclassification by the MGCRB, they are subject to the
rural reclassification rules set forth at 42 CFR 412.230. The
procedural rules set forth at Sec. 412.230 list the criteria that a
hospital must meet in order to reclassify as a rural hospital. Lugar
hospitals are
[[Page 43841]]
subject to the proximity criteria and payment thresholds that apply to
rural hospitals. Specifically, the hospital must be no more than 35
miles from the area to which it seeks reclassification (Sec.
412.230(b)(1)); and the hospital must show that its average hourly wage
is at least 106 percent of the average hourly wage of all other
hospitals in the area in which the hospital is located (Sec.
412.230(d)(1)(iii)(C)). In accordance with policy adopted in the FY
2009 IPPS final rule (73 FR 48568 and 48569), beginning with
reclassifications for the FY 2010 wage index, a Lugar hospital must
also demonstrate that its average hourly wage is equal to at least 84
percent (for FY 2010 reclassifications) and 86 percent (for
reclassifications for FY 2011 and subsequent fiscal years) of the
average hourly wage of hospitals in the area to which it seeks
redesignation (Sec. 412.230(d)(1)(iv)(C)).
Hospitals not located in a Lugar county seeking reclassification to
the urban area where the Lugar hospitals have been redesignated are not
permitted to measure to the Lugar county to demonstrate proximity (no
more than 15 miles for an urban hospital, and no more than 35 miles for
a rural hospital or the closest urban or rural area for RRCs or SCHs)
in order to be reclassified to such urban area. These hospitals must
measure to the urban area exclusive of the Lugar County to meet the
proximity or nearest urban or rural area requirement. We treat New
England deemed counties in a manner consistent with how we treat Lugar
counties. (We refer readers to FY 2008 IPPS final rule with comment
period (72 FR 47337) for a discussion of this policy.)
6. Reclassifications Under Section 508 of Public Law 108-173
Section 508 of Public Law 108-173 allowed certain qualifying
hospitals to receive wage index reclassifications and assignments that
they otherwise would not have been eligible to receive under the law.
Although section 508 originally was scheduled to expire after a 3-year
period, Congress extended the provision several times, as well as
certain special exceptions that would have otherwise expired. For a
discussion of the original section 508 provision and its various
extensions, we refer readers to the FY 2009 IPPS final rule (73 FR
48588). The most recent extension of the provision was included in
section 124 of Public Law 110-275 (MIPPA). Section 124 extended,
through FY 2009, section 508 reclassifications as well as certain
special exceptions. Because the latest extension of these provisions
expires on September 30, 2009, and will not be applicable in FY 2010,
we are not making any changes related to these provisions in this final
rule.
J. FY 2010 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
In accordance with the broad discretion under section 1886(d)(13)
of the Act, as added by section 505 of Public Law 108-173, beginning
with FY 2005, we established a process to make adjustments to the
hospital wage index based on commuting patterns of hospital employees
(the ``out-migration'' adjustment). The process, outlined in the FY
2005 IPPS final rule (69 FR 49061), provides for an increase in the
wage index for hospitals located in certain counties that have a
relatively high percentage of hospital employees who reside in the
county but work in a different county (or counties) with a higher wage
index. Such adjustments to the wage index are effective for 3 years,
unless a hospital requests to waive the application of the adjustment.
A county will not lose its status as a qualifying county due to wage
index changes during the 3-year period, and counties will receive the
same wage index increase for those 3 years. However, a county that
qualifies in any given year may no longer qualify after the 3-year
period, or it may qualify but receive a different adjustment to the
wage index level. Hospitals that receive this adjustment to their wage
index are not eligible for reclassification under section 1886(d)(8) or
section 1886(d)(10) of the Act. Adjustments under this provision are
not subject to the budget neutrality requirements under section
1886(d)(3)(E) of the Act.
Hospitals located in counties that qualify for the wage index
adjustment are to receive an increase in the wage index that is equal
to the average of the differences between the wage indices of the labor
market area(s) with higher wage indices and the wage index of the
resident county, weighted by the overall percentage of hospital workers
residing in the qualifying county who are employed in any labor market
area with a higher wage index. Beginning with the FY 2008 wage index,
we use post-reclassified wage indices when determining the out-
migration adjustment (72 FR 47339).
For the FY 2010 wage index, we calculated the out-migration
adjustment using the same formula described in the FY 2005 IPPS final
rule (69 FR 49064), with the addition of using the post-reclassified
wage indices, to calculate the out-migration adjustment. This
adjustment is calculated as follows:
Step 1--Subtract the wage index for the qualifying county from the
wage index of each of the higher wage area(s) to which hospital workers
commute.
Step 2--Divide the number of hospital employees residing in the
qualifying county who are employed in such higher wage index area by
the total number of hospital employees residing in the qualifying
county who are employed in any higher wage index area. For each of the
higher wage index areas, multiply this result by the result obtained in
Step 1.
Step 3--Sum the products resulting from Step 2 (if the qualifying
county has workers commuting to more than one higher wage index area).
Step 4--Multiply the result from Step 3 by the percentage of
hospital employees who are residing in the qualifying county and who
are employed in any higher wage index area.
These adjustments will be effective for each county for a period of
3 fiscal years. For example, hospitals that received the adjustment for
the first time in FY 2009 will be eligible to retain the adjustment for
FY 2010. For hospitals in newly qualified counties, adjustments to the
wage index are effective for 3 years, beginning with discharges
occurring on or after October 1, 2009.
Hospitals receiving the wage index adjustment under section
1886(d)(13)(F) of the Act are not eligible for reclassification under
sections 1886(d)(8) or (d)(10) of the Act unless they waive the out-
migration adjustment. Consistent with our FY 2005, 2006, 2007, 2008,
and 2009 IPPS final rules, we are specifying that hospitals
redesignated under section 1886(d)(8) of the Act or reclassified under
section 1886(d)(10) of the Act will be deemed to have chosen to retain
their redesignation or reclassification. Section 1886(d)(10) hospitals
that wished to receive the out-migration adjustment, rather than their
reclassification adjustment, had to follow the termination/withdrawal
procedures specified in 42 CFR 412.273 and section III.I.3. of the
preamble of the proposed rule. Otherwise, they were deemed to have
waived the out-migration adjustment. Hospitals redesignated under
section 1886(d)(8) of the Act were deemed to have waived the out-
migration adjustment unless they explicitly notified CMS within 45 days
from the publication of the proposed rule that they elected to receive
the out-migration adjustment instead.
Table 4J in the Addendum to this final rule lists the out-migration
wage index adjustments for FY 2010.
[[Page 43842]]
Hospitals that are not otherwise reclassified or redesignated under
section 1886(d)(8) or section 1886(d)(10) of the Act will automatically
receive the listed adjustment. In accordance with the procedures
discussed above, redesignated/reclassified hospitals will be deemed to
have waived the out-migration adjustment unless CMS was otherwise
notified within the necessary timeframe. In addition, hospitals
eligible to receive the out-migration wage index adjustment and that
withdrew their application for reclassification will automatically
receive the wage index adjustment listed in Table 4J in the Addendum to
this final rule.
Comment: One commenter requested that CMS allow hospitals to submit
their own commuting data to apply for the out-migration adjustment.
Response: First, we did not propose any changes on commuting data
for purposes of calculating the out-migration adjustment. Therefore, we
believe this comment is outside the scope of the proposed rule. In
addition, as we stated in the FY 2005 IPPS final rule (69 FR 49063),
because the adjustment is based on the number of hospital workers in a
county who commute to other higher wage areas, we believe it would be
extremely problematic for individual hospitals to track and submit the
data necessary for determining the out-migration adjustment. A hospital
could not simply survey its own employees to obtain these necessary
data, but would have to survey all hospital workers who live in the
county where the hospital is located and commute to hospitals in other
higher wage index areas.
K. Process for Requests for Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the FY 2010 wage index were made available on
October 6, 2008, through the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this new file does
not alter the current wage index process or schedule. We notified the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encouraged hospitals to sign up for automatic notifications
of information about hospital issues and the scheduling of the Hospital
Open Door forums at: http://www.cms.hhs.gov/OpenDoorForums/.
In a memorandum dated October 6, 2008, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service of the
availability of the wage index data files and the process and timeframe
for requesting revisions (including the specific deadlines listed
below). We also instructed the fiscal intermediaries/MACs to advise
hospitals that these data were also made available directly through
their representative hospital organizations.
If a hospital wished to request a change to its data as shown in
the October 6, 2008 wage and occupational mix data files, the hospital
was to submit corrections along with complete, detailed supporting
documentation to its fiscal intermediary/MAC by December 8, 2008.
Hospitals were notified of this deadline and of all other possible
deadlines and requirements, including the requirement to review and
verify their data as posted on the preliminary wage index data files on
the Internet, through the October 6, 2008 memorandum referenced above.
In the October 6, 2008 memorandum, we also specified that a
hospital requesting revisions to its first and/or second quarter
occupational mix survey data was to copy its record(s) from the CY
2007-2008 occupational mix preliminary files posted to our Web site in
October, highlight the revised cells on its spreadsheet, and submit its
spreadsheet(s) and complete documentation to its fiscal intermediary/
MAC no later than December 8, 2008.
The fiscal intermediaries/MACs notified the hospitals by mid-
February 2009 of any changes to the wage index data as a result of the
desk reviews and the resolution of the hospitals' early-December
revision requests. The fiscal intermediaries/MACs also submitted the
revised data to CMS by mid-February 2009. CMS published the proposed
wage index public use files that included hospitals' revised wage index
data on February 23, 2009. In a memorandum also dated February 23,
2009, we instructed fiscal intermediaries/MACs to notify all hospitals
regarding the availability of the proposed wage index public use files
and the criteria and process for requesting corrections and revisions
to the wage index data. Hospitals had until March 10, 2009, to submit
requests to the fiscal intermediaries/MACs for reconsideration of
adjustments made by the fiscal intermediaries/MACs as a result of the
desk review, and to correct errors due to CMS's or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the wage
index data. Hospitals also were required to submit sufficient
documentation to support their requests.
After reviewing requested changes submitted by hospitals, fiscal
intermediaries/MACs were required to transmit any additional revisions
resulting from the hospitals' reconsideration requests by April 15,
2009. The deadline for a hospital to request CMS intervention in cases
where the hospital disagrees with the fiscal intermediary's (or, if
applicable, the MAC's) policy interpretations was April 22, 2009.
Hospitals were given the opportunity to examine Table 2 in the
Addendum to the proposed rule. Table 2 in the Addendum to the proposed
rule contained each hospital's adjusted average hourly wage used to
construct the wage index values for the past 3 years, including the FY
2006 data used to construct the proposed FY 2010 wage index. We noted
that the hospital average hourly wages shown in Table 2 only reflect
changes made to a hospital's data and transmitted to CMS by March 2,
2009.
We released the final wage index data public use files in early May
2009 on the Internet at http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage. The May 2009 public use files were made available
solely for the limited purpose of identifying any potential errors made
by CMS or the fiscal intermediary/MAC in the entry of the final wage
index data that resulted from the correction process described above
(revisions submitted to CMS by the fiscal intermediaries/MACs by April
15, 2009). If, after reviewing the May 2009 final files, a hospital
believed that its wage or occupational mix data were incorrect due to a
fiscal intermediary/MAC or CMS error in the entry or tabulation of the
final data, the hospital had to send a letter to both its fiscal
intermediary/MAC and CMS that outlined why the hospital believed an
error existed and that provided all supporting information, including
relevant dates (for example, when it first became aware of the error).
CMS and the fiscal intermediaries (or, if applicable, the MACs) had to
receive these requests no later than June 8, 2009.
Each request also had to be sent to the fiscal intermediary/MAC.
The fiscal intermediary/MAC reviewed requests upon receipt and
contacted CMS immediately to discuss any findings.
[[Page 43843]]
At this point in the process, that is, after the release of the May
2009 wage index data files, changes to the wage and occupational mix
data were only made in those very limited situations involving an error
by the fiscal intermediary/MAC or CMS that the hospital could not have
known about before its review of the final wage index data files.
Specifically, neither the fiscal intermediary/MAC nor CMS approved the
following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by
fiscal intermediaries or the MACs on or before April 15, 2009.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 23,
2009 wage index public use files.
Requests to revisit factual determinations or policy
interpretations made by the fiscal intermediary or the MAC or CMS
during the wage index data correction process.
Verified corrections to the wage index data received timely by CMS
and the fiscal intermediaries or the MACs (that is, by June 8, 2009)
were incorporated into the final wage index in this FY 2010 IPPS/RY
2010 LTCH PPS final rule, which will be effective October 1, 2009.
We created the processes described above to resolve all substantive
wage index data correction disputes before we finalize the wage and
occupational mix data for the FY 2010 payment rates. Accordingly,
hospitals that did not meet the procedural deadlines set forth above
will not be afforded a later opportunity to submit wage index data
corrections or to dispute the fiscal intermediary's (or, if applicable
the MAC's) decision with respect to requested changes. Specifically,
our policy is that hospitals that do not meet the procedural deadlines
set forth above will not be permitted to challenge later, before the
Provider Reimbursement Review Board, the failure of CMS to make a
requested data revision. (See W. A. Foote Memorial Hospital v. Shalala,
No. 99-CV-75202-DT (E.D. Mich. 2001) and Palisades General Hospital v.
Thompson, No. 99-1230 (D.D.C. 2003).) We refer readers also to the FY
2000 IPPS final rule (64 FR 41513) for a discussion of the parameters
for appealing to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the fiscal intermediary's (or,
if applicable, the MAC's) attention. Moreover, because hospitals had
access to the final wage index data by early May 2009, they had the
opportunity to detect any data entry or tabulation errors made by the
fiscal intermediary or the MAC or CMS before the development and
publication of the final FY 2010 wage index by August 2009, and the
implementation of the FY 2010 wage index on October 1, 2009. If
hospitals availed themselves of the opportunities afforded to provide
and make corrections to the wage and occupational mix data, the wage
index implemented on October 1 should be accurate. Nevertheless, in the
event that errors are identified by hospitals and brought to our
attention after June 8, 2009, we retain the right to make midyear
changes to the wage index under very limited circumstances.
Specifically, in accordance with 42 CFR 412.64(k)(1) of our
existing regulations, we make midyear corrections to the wage index for
an area only if a hospital can show that: (1) the fiscal intermediary
or the MAC or CMS made an error in tabulating its data; and (2) the
requesting hospital could not have known about the error or did not
have an opportunity to correct the error, before the beginning of the
fiscal year. For purposes of this provision, ``before the beginning of
the fiscal year'' means by the June 8 deadline for making corrections
to the wage data for the following fiscal year's wage index. This
provision is not available to a hospital seeking to revise another
hospital's data that may be affecting the requesting hospital's wage
index for the labor market area. As indicated earlier, because CMS
makes the wage index data available to hospitals on the CMS Web site
prior to publishing both the proposed and final IPPS rules, and the
fiscal intermediaries or the MAC notify hospitals directly of any wage
index data changes after completing their desk reviews, we do not
expect that midyear corrections will be necessary. However, under our
current policy, if the correction of a data error changes the wage
index value for an area, the revised wage index value will be effective
prospectively from the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385), we revised 42 CFR
412.64(k)(2) to specify that, effective on October 1, 2005, that is,
beginning with the FY 2006 wage index, a change to the wage index can
be made retroactive to the beginning of the Federal fiscal year only
when: (1) The fiscal intermediary (or, if applicable, the MAC) or CMS
made an error in tabulating data used for the wage index calculation;
(2) the hospital knew about the error and requested that the fiscal
intermediary (or if applicable the MAC) and CMS correct the error using
the established process and within the established schedule for
requesting corrections to the wage index data, before the beginning of
the fiscal year for the applicable IPPS update (that is, by the June 8,
2009 deadline for the FY 2010 wage index); and (3) CMS agreed that the
fiscal intermediary (or if applicable, the MAC) or CMS made an error in
tabulating the hospital's wage index data and the wage index should be
corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculates the final wage index (that
is, by the June 8, 2009 deadline), and CMS acknowledges that the error
in the hospital's wage index data was caused by CMS' or the fiscal
intermediary's (or, if applicable, the MAC's) mishandling of the data,
we believe that the hospital should not be penalized by our delay in
publishing or implementing the correction. As with our current policy,
we indicated that the provision is not available to a hospital seeking
to revise another hospital's data. In addition, the provision cannot be
used to correct prior years' wage index data; and it can only be used
for the current Federal fiscal year. In other situations where our
policies would allow midyear corrections, we continue to believe that
it is appropriate to make prospective-only corrections to the wage
index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a judicial decision reverses a CMS denial of a
hospital's wage index data revision request.
IV. Rebasing and Revision of the Hospital Market Baskets for Acute Care
Hospitals
A. Background
Effective for cost reporting periods beginning on or after July 1,
1979, we developed and adopted a hospital input price index (that is,
the hospital market basket for operating costs). Although ``market
basket'' technically describes the mix of goods and services used in
providing hospital care, this term is also commonly used to denote the
input price index (that is, cost category weights and price proxies
combined) derived from that market basket. Accordingly, the term
``market basket''
[[Page 43844]]
as used in this document refers to the hospital input price index.
The percentage change in the market basket reflects the average
change in the price of goods and services hospitals purchase in order
to provide inpatient care. We first used the market basket to adjust
hospital cost limits by an amount that reflected the average increase
in the prices of the goods and services used to provide hospital
inpatient care. This approach linked the increase in the cost limits to
the efficient utilization of resources.
Since the inception of the IPPS, the projected change in the
hospital market basket has been the integral component of the update
factor by which the prospective payment rates are updated every year.
An explanation of the hospital market basket used to develop the
prospective payment rates was published in the Federal Register on
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2006
IPPS final rule (70 FR 47387) in which we discussed the most recent
previous rebasing of the hospital input price index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index that is constructed in three steps. A Laspeyres price index
measures the change in price, over time, of the same mix of goods and
services purchased in the base period. Any changes in the quantity or
mix of goods and services (that is, intensity) purchased over time are
not measured.
The index itself is constructed in three steps. First, a base
period is selected (in this final rule, the base period is FY 2006) and
total base period expenditures are estimated for a set of mutually
exclusive and exhaustive spending categories based upon type of
expenditure. Then the proportion of total operating costs that each
category represents is determined. These proportions are called cost or
expenditure weights. Second, each expenditure category is matched to an
appropriate price or wage variable, referred to as a price proxy. In
nearly every instance, these price proxies are price levels derived
from publicly available statistical series that are published on a
consistent schedule (preferably at least on a quarterly basis).
Finally, the expenditure weight for each cost category is multiplied by
the level of its respective price proxy. The sum of these products
(that is, the expenditure weights multiplied by their price levels) for
all cost categories yields the composite index level of the market
basket in a given period. Repeating this step for other periods
produces a series of market basket levels over time. Dividing an index
level for a given period by an index level for an earlier period
produces a rate of growth in the input price index over that timeframe.
The market basket is described as a fixed-weight index because it
represents the change in price over time of the same mix (quantity and
intensity) of goods and services purchased to provide hospital services
in a base period. The effects on total expenditures resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. For example, shifting a traditionally
inpatient type of care to an outpatient setting might affect the volume
of inpatient goods and services purchased by the hospital, but would
not be factored into the price change measured by a fixed-weight
hospital market basket. In this manner, the market basket measures pure
price change only. Only when the index is rebased would changes in the
quantity and intensity be captured in the cost weights. Therefore, we
rebase the market basket periodically so the cost weights reflect
recent changes in the mix of goods and services that hospitals purchase
(hospital inputs) to furnish inpatient care between base periods. We
last rebased the hospital market basket cost weights effective for FY
2006 (70 FR 47387), with FY 2002 data used as the base period for the
construction of the market basket cost weights.
In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24154),
we invited public comments on our proposed methodological changes to
both the IPPS operating market basket and the capital input price index
(CIPI). We note that this section addresses only the rebasing and
revision of the IPPS market basket and CIPI for acute care hospitals
and for children's and cancer hospitals and RNHCIs, which are excluded
from the IPPS. We address the market basket that will be applicable to
LTCHs in section VIII.C.2. of the preamble of this final rule. Separate
documents will address the market basket for other hospitals that are
excluded from the IPPS.
B. Rebasing and Revising the IPPS Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in this final rule, we are shifting the base year
cost structure for the IPPS hospital index from FY 2002 to FY 2006).
``Revising'' means changing data sources, or price proxies, used in the
input price index. As published in the FY 2006 IPPS final rule (70 FR
47387), in accordance with section 404 of Public Law 108-173, CMS
determined a new frequency for rebasing the hospital market basket. We
established a rebasing frequency of every 4 years and, therefore, for
the FY 2010 IPPS update, as we proposed, we are rebasing and revising
the IPPS market basket and the CIPI.
1. Development of Cost Categories and Weights
a. Medicare Cost Reports
The major source of expenditure data for developing the rebased and
revised hospital market basket cost weights is the FY 2006 Medicare
cost reports. As was done in previous rebasings, these cost reports are
from IPPS hospitals only (hospitals excluded from the IPPS and CAHs are
not included) and are based on IPPS Medicare-allowable operating costs.
IPPS Medicare-allowable operating costs are costs that are eligible to
be paid for under the IPPS. For example, the IPPS market basket
excludes home health agency (HHA) costs as these costs would be paid
under the HHA PPS and, therefore, these costs are not IPPS Medicare-
allowable costs.
The IPPS cost reports yield seven major expenditure or cost
categories--the same as in the FY 2002-based hospital market basket:
Wages and salaries, employee benefits, contract labor, pharmaceuticals,
professional liability insurance (malpractice), blood and blood
products, and a residual ``all other.'' The cost weights that were
obtained directly from the Medicare cost reports are reported in Chart
1. These Medicare cost report cost weights are then supplemented with
information obtained from other data sources to derive the IPPS market
basket cost weights.
Chart 1--Major Cost Categories and Their Respective Cost Weights Found
in the Medicare Cost Reports
------------------------------------------------------------------------
FY 2002-based FY 2006-based
Major cost categories market basket market basket
------------------------------------------------------------------------
Wages and salaries.................. 45.590 45.156
[[Page 43845]]
Employee benefits................... 11.189 11.873
Contract labor...................... 3.214 2.598
Professional Liability Insurance 1.589 1.661
(Malpractice)......................
Pharmaceuticals..................... 5.855 5.380
Blood and blood products............ 1.082 1.078
All other........................... 31.481 32.254
------------------------------------------------------------------------
b. Other Data Sources
In addition to the Medicare cost reports, the other data source we
used to develop the IPPS market basket cost weights was the Benchmark
Input-Output (I-O) Tables created by the Bureau of Economic Analysis
(BEA), U.S. Department of Commerce. The BEA Benchmark I-O data are
scheduled for publication every 5 years. The most recent data available
are for 2002. BEA also produces Annual I-O estimates; however, the 2002
Benchmark I-O data represent a much more comprehensive and complete set
of data that are derived from the 2002 Economic Census. The Annual I-O
is simply an update of the Benchmark I-O tables. For the FY 2006 market
basket rebasing, we used the 1997 Benchmark I-O data. In the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24155), we proposed to use
the 2002 Benchmark I-O data in the FY 2006-based IPPS market basket, to
be effective for FY 2010. Instead of using the less detailed, less
accurate Annual I-O data, we aged the 2002 Benchmark I-O data forward
to FY 2006. The methodology we used to age the data forward involves
applying the annual price changes from the respective price proxies to
the appropriate cost categories. We repeat this practice for each year.
The ``all other'' cost category obtained directly from the Medicare
cost reports is divided into other hospital expenditure category shares
using the 2002 Benchmark I-O data. Therefore, the ``all other'' cost
category expenditure shares are proportional to their relationship to
``all other'' totals in the 2002 Benchmark I-O data. For instance, if
the cost for telephone services was to represent 10 percent of the sum
of the ``all other'' Benchmark I-O (see below) hospital expenditures,
then telephone services would represent 10 percent of the IPPS market
basket's ``all other'' cost category. Following publication of the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule, and in an effort to provide
greater transparency, we posted on the CMS market basket Web page at:
http://www.cms.hhs.gov/MedicareProgramRatesStats/05_MarketBasketResearch.asp#TopOfPage an illustrative spreadsheet that
shows how the detailed cost weights in the proposed rule (that is,
those not calculated using Medicare cost reports) were determined using
the 2002 Benchmark I-O data.
2. Final Cost Category Computation
As stated previously, for this rebasing we used the Medicare cost
reports to derive seven major cost categories. As we proposed, the FY
2006-based IPPS market basket includes three additional cost categories
that were not broken out separately in the FY 2002-based IPPS market
basket. The first is lifted directly from the Medicare cost reports:
Blood and blood products. The remaining two are derived using the
Benchmark I-O data: Administrative and business support services and
financial services. As we proposed, we broke out the latter two
categories so we can better match their respective expenses with price
proxies. A thorough discussion of our rationale for each of these cost
categories is provided in section IV.B.3. of the FY 2010 IPPS/RY 2010
LTCH PPS proposed rule (74 FR 24155) and this final rule. Also, the FY
2006-based IPPS market basket excludes one cost category: Photo
supplies. The 2002 Benchmark I-O weight for this category is
considerably smaller than the 1997 Benchmark I-O weight, presently
accounting for less than one-tenth of one percentage point of the IPPS
market basket. Therefore, as we proposed, we include the photo supplies
costs in the chemical cost category weight with other similar chemical
products (74 FR 24155).
As we proposed, we are not changing our definition of the labor-
related share. However, we rename our aggregate cost categories from
``labor-intensive'' and ``non-labor-intensive'' services to ``labor-
related'' and ``nonlabor-related'' services (74 FR 24155). As discussed
in more detail below and similar to the previous rebasing, we classify
a cost category as labor-related and include it in the labor-related
share if the cost category is defined as being labor-intensive and its
cost varies with the local labor market. In previous regulations, we
grouped cost categories that met both of these criteria into labor-
intensive services. We believe the new labels more accurately reflect
the concepts that they are intended to convey. We are not changing our
definition of the labor-related share because we continue to classify a
cost category as labor-related if the costs are labor-intensive and
vary with the local labor market.
3. Selection of Price Proxies
After computing the FY 2006 cost weights for the rebased hospital
market basket, it was necessary to select appropriate wage and price
proxies to reflect the rate of price change for each expenditure
category. With the exception of the proxy for professional liability,
all the proxies are based on Bureau of Labor Statistics (BLS) data and
are grouped into one of the following BLS categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure price changes for goods sold in markets other than the retail
market. PPIs are preferable price proxies for goods and services that
hospitals purchase as inputs because these PPIs better reflect the
actual price changes faced by hospitals. For example, we use a special
PPI for prescription drugs, rather than the Consumer Price Index (CPI)
for prescription drugs, because hospitals generally purchase drugs
directly from a wholesaler. The PPIs that we use measure price changes
at the final stage of production.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by the
typical consumer. Because they may not represent the price faced by a
producer, we used CPIs only if an appropriate PPI was not available, or
if the expenditures were more similar to those faced by retail
consumers in general rather than by purchasers of goods at the
wholesale level. For example, the CPI for food
[[Page 43846]]
purchased away from home is used as a proxy for contracted food
services.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. Appropriately, they are not affected by shifts in
employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. The CPIs, PPIs, and ECIs selected meet these criteria.
Comment: Several commenters stated that although the MMA requires
CMS to rebase the weights used in the hospital market basket more
frequently than every 5 years to reflect the most current data
available, it does not require CMS to modify or revise the price
proxies used in the market basket calculation. The commenters
discouraged CMS from incorporating any new price proxies, particularly
the new blended price proxy associated with the Chemicals cost
category, and indicated that such a change was not preferred at this
time. They pointed out that the methodology and data sources used by
CMS to derive the proposed 2006-based IPPS market basket yield a
projected 2.1 percent increase in the hospital market basket update,
while the historical methodology and data sources used to derive the FY
2002-based IPPS market basket yield a projected update of 2.3 percent.
Several commenters pointed to the current status and volatility of the
economy as a basis for maintaining the same price proxies going
forward. Those comments included the following:
Maintaining the current proxies will result in a more
stable market basket increase and will demonstrate forbearance, given
the current economic volatility that has occurred or may be yet to
come.
The country has recently experienced a period of very low
inflation. The funds from the ARRA (Pub. L. 111-5) are beginning to
work their way into the economy, possibly resulting in a period of
higher inflation that could substantially affect the market basket
estimate.
The new price proxies selected by CMS are not responsive
to the inflationary effects of the President's FY 2010 Budget and the
inflationary stimulus effect of the Troubled Asset Relief Program
(TARP), which is demonstrated by the modest market basket increases in
FY 2010 and FY 2011.
The traditional approach taken in developing the annual
market basket forecast is inadequate, given the severe downturn in the
economy and the potential for inflation to pick up at a pace quicker
than we have seen for many years. Following several years of updates
between 3 percent and 3.5 percent, a lower forecast may well
underestimate hospital input costs, particularly nursing labor, as
hospitals will not benefit from swelling labor markets due to the fact
that it is unlikely that newly-unemployed workers possess the
specialized skills required by hospitals.
As a result of these issues, multiple commenters urged CMS only to
rebase the data and weights used in the market basket calculation, and
not to revise the price proxies.
Response: We continuously monitor the technical appropriateness of
all of CMS' market baskets (including the hospital market basket)
whether or not the market basket is being rebased. However, whenever a
market basket is rebased, it is a matter of practice for CMS to
scrutinize all of its aspects, including the data sources that are used
to construct it, the selection of its exhaustive and mutually exclusive
cost categories, the weights associated with those categories, and the
price proxies that are applied. We are revising the hospital market
basket to make technical improvements that we believe results in more
accurate payment updates.
We believe that revising four new price proxies for existing cost
categories and including three additional price proxies for the new
cost categories in the FY 2006-based hospital market basket represents
a significant technical improvement to the market basket.
As many of the commenters stated, we proposed (and are adopting as
final) a new blended chemical price proxy for the Chemicals cost weight
in the FY 2006-based IPPS market basket. The FY 2002-based IPPS market
basket used the PPI for industrial chemicals (WPI061) to proxy the
chemicals cost category. In evaluating the technical merit of the
continuing use of that proxy, we compared the 2002 BEA Benchmark I-O
expenditure weights with the composition of the PPI for industrial
chemicals. Using a commodity-to-industry crosswalk, we were able to
identify the industry expenses classified by North American Industrial
Classification System (NAICS) that comprise the commodity-based PPI for
industrial chemicals.
We found that the relative PPI weights for each of the NAICS
expense categories were not always consistent with the expense weights
for the hospital industry, as indicated by the 2002 Benchmark I-O data.
For example, hospital spending for NAICS 325120 (Industrial Gas
Manufacturing)--the hospital industry's largest chemical expense
category (accounting for 29 percent of the hospital industry's total
chemical expenses)--is not found in the PPI for industrial chemicals.
In addition, hospital spending attributable to NAICS 325190 (Other
Basic Organic Chemical Manufacturing) accounts for just 26 percent of
the hospital industry's total chemical expenses. However, NAICS 325190
accounts for 41 percent of the PPI for industrial chemicals.
Given these findings, we proposed using a blended chemical price
index that reflects the relative weights of the hospital industry's
chemical expenses as indicated by the 2002 Benchmark I-O data. This
blended index is composed of the PPI for industrial gases (NAICS
325120), the PPI for other basic inorganic chemical manufacturing
(NAICS 325180), the PPI for other basic organic chemical manufacturing
(NAICS 325190), and the PPI for soap and cleaning compound
manufacturing (NAICS 325610). The expenses for these NAICS industries
account for approximately 90 percent of the hospital industry's
chemical expenses, excluding NAICS 324110--Petroleum Refineries, which
we proposed to include with other petroleum-related expenses classified
in the fuel, oil, and gas cost category. We believe this new blended
proxy represents a more accurate reflection of the price pressures
associated with hospital chemical expenses.
With respect to the state of the economy, we are attentive to the
recent downturn and the fact that this year's update is lower relative
to historical market basket updates. We also recognize the commenters'
uncertainty regarding future inflationary pressures, given the
activities undertaken in the last several months to aid the economy.
However, the most recent forecast of the rebased and revised FY 2006-
based IPPS market basket FY 2010 update factor reflects the current
expectations regarding the performance of the economy during FY 2010,
including the inflation expectations associated with the economic
stimulus plans. Moreover,
[[Page 43847]]
this forecast also reflects our most recent expectations regarding
price pressures associated with the labor market for hospital workers.
Comment: One commenter stated that CMS' proposal to rebase and
revise the market basket appears to be directed at reducing the rate of
increase in future market basket increases.
Response: When selecting the price proxies for the IPPS market
basket, we do not evaluate the resulting market basket update as a
criterion in selecting these proxies, but rather choose the most
technically appropriate measures of the price pressures faced by the
hospital industry. We believe the proxies that were articulated in the
FY 2010 proposed rule reflect that approach.
Comment: Several commenters supported CMS' proposed use of the PPI
for blood and organ banks for measuring changes in the cost of blood
and blood products. The commenters expressed appreciation for CMS'
responsiveness to the need for greater accuracy in the calculation of
price changes attributable to blood and blood products in the IPPS
market basket.
Response: We appreciate the commenters' support for our proposed
price proxy for the blood and blood products cost category. We agree
with the commenters that the implementation of this price proxy
represents a technical improvement to the IPPS market basket.
After consideration of the public comments received, we are
adopting as final the price proxies that we proposed in the FY 2010
IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24155-24159).
Chart 2 sets forth the FY 2006-based IPPS market basket, including
cost categories, weights, and price proxies. For comparison purposes,
the corresponding FY 2002-based IPPS market basket is listed as well. A
summary outlining the choice of the various proxies follows the chart.
Chart 2--FY 2006-Based IPPS Hospital Market-Basket Cost Categories, Weights, and Price Proxies With FY 2002-
Based IPPS Market Basket Included for Comparison
----------------------------------------------------------------------------------------------------------------
FY Rebased FY
2002[dash]based 2006-based
Cost Categories hospital market hospital Rebased FY 2006-based hospital
basket cost market basket market basket price proxies
weights cost weights
----------------------------------------------------------------------------------------------------------------
1. Compensation.............................. 59.993 59.627
A. Wages and Salaries \1\................ 48.171 47.213 ECI for Wages and Salaries,
Civilian Hospital Workers.
B. Employee Benefits \1\................. 11.822 12.414 ECI for Benefits, Civilian
Hospital Workers.
2. Utilities................................. 1.251 2.180
A. Fuel, Oil, and Gasoline............... 0.206 0.418 PPI for Petroleum Refineries.
B. Electricity........................... 0.669 1.645 PPI for Commercial Electric
Power.
C. Water and Sewage...................... 0.376 0.117 CPI-U for Water & Sewerage
Maintenance.
3. Professional Liability Insurance.......... 1.589 1.661 CMS Professional Liability
Insurance Premium Index.
4. All Other................................. 37.167 36.533
A. All Other Products.................... 20.336 19.473
(1.) Pharmaceuticals.................... 5.855 5.380 PPI for Pharmaceutical
Preparations (Prescriptions).
(2.) Food: Direct Purchases............. 1.664 3.982 PPI for Processed Foods & Feeds.
(3.) Food: Contract Services............ 1.180 0.575 CPI-U for Food Away From Home.
(4.) Chemicals \2\...................... 2.096 1.538 Blend of Chemical PPIs.
(5.) Blood and Blood Products \3\....... ............... 1.078 PPI for Blood and Organ Banks.
(6.) Medical Instruments................ 1.932 2.762 PPI for Medical, Surgical, and
Personal Aid Devices.
(7.) Photographic Supplies.............. 0.183
(8.) Rubber and Plastics................ 2.004 1.659 PPI for Rubber & Plastic
Products.
(9.) Paper and Printing Products........ 1.905 1.492 PPI for Converted Paper &
Paperboard Products.
(10.) Apparel........................... 0.394 0.325 PPI for Apparel.
(11.) Machinery and Equipment........... 0.565 0.163 PPI for Machinery & Equipment.
(12.) Miscellaneous Products \3\........ 2.558 0.519 PPI for Finished Goods Less Food
and Energy.
B. Labor-related Services................ 9.738 9.175
(1.) Professional Fees: Labor-related 5.510 5.356 ECI for Compensation for
\4\. Professional and Related
Occupations.
(2.) Administrative and Business Support n/a 0.626 ECI for Compensation for Office
Services \5\. and Administrative Services.
(3.) All Other: Labor-Related Services 4.228 3.193 ECI for Compensation for Private
\5\. Service Occupations.
C. Nonlabor-Related Services............. 7.093 7.885
(1.) Professional Fees: Nonlabor-Related n/a 4.074 ECI for Compensation for
\4\. Professional and Related
Occupations.
(2.) Financial Services \6\............. n/a 1.281 ECI for Compensation for
Financial Activities.
(3.) Telephone Services................. 0.458 0.627 CPI-U for Telephone Services.
(4.) Postage............................ 1.300 0.963 CPI-U for Postage.
(5.) All Other: Nonlabor-Related 5.335 0.940 CPI-U for All Items Less Food
Services \6\. and Energy.
------------------------------------------------------------------
Total.................................... 100.000 100.000
----------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Contract labor is distributed to wages and salaries and employee benefits based on the share of total
compensation that each category represents.
\2\ To proxy the ``chemicals'' cost category, we used a blended PPI composed of the PPI for industrial gases,
the PPI for other basic inorganic chemical manufacturing, the PPI for other basic organic chemical
manufacturing, and the PPI for soap and cleaning compound manufacturing. For more detail about this proxy, see
section IV.B.3.j. of the preamble of this final rule.
\3\ The ``blood and blood products'' cost category was contained within ``miscellaneous products'' cost category
in the FY 2002-based IPPS market basket.
[[Page 43848]]
\4\ The ``professional fees: Labor-related'' and ``professional fees: Nonlabor-related'' cost categories were
included in one cost category called ``professional fees'' in the FY 2002-based IPPS market basket. For more
detail about how these new categories were derived, we refer readers to sections IV.B.3.s. and v. of the
preamble of this final rule, on the labor-related share.
\5\ The ``administrative and business support services'' cost category was contained within ``all other: Labor-
intensive services'' cost category in the FY 2002-based IPPS market basket. The ``all other: Labor-intensive
services'' cost category is renamed the ``all other: Labor-related services'' cost category for the FY 2006-
based IPPS market basket.
\6\ The ``financial services'' cost category was contained within the ``all other: Non-labor intensive
services'' cost category in the FY 2002-based IPPS market basket. The ``all other: Nonlabor intensive
services'' cost category is renamed the ``all other: Nonlabor-related services'' cost category for the FY 2006-
based IPPS market basket.
As we proposed in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24156 through 24159), for this final rule, we use the following
choices with respect to the various proxies:
a. Wages and Salaries
We use the ECI for wages and salaries for hospital workers (all
civilian) (series code CIU1026220000000I) to measure the price
growth of this cost category. This same proxy was used in the FY 2002-
based IPPS market basket.
b. Employee Benefits
We use the ECI for employee benefits for hospital workers (all
civilian) to measure the price growth of this cost category. This same
proxy was used in the FY 2002-based IPPS market basket.
c. Fuel, Oil, and Gasoline
For the FY 2002-based market basket, this category only included
expenses classified under North American Industry Classification System
(NAICS) 21 (Mining). We proxied this category using the PPI for
commercial natural gas (series code WPU0552). For the FY 2006-
based market basket, we add costs to this category that had previously
been grouped in other categories. The added costs include petroleum-
related expenses under NAICS 324110 (previously captured in the
miscellaneous category), as well as petrochemical manufacturing
classified under NAICS 325110 (previously captured in the chemicals
category). These added costs represent 80 percent of the hospital
industry's fuel, oil, and gasoline expenses (or 80 percent of this
category). Because the majority of the industry's fuel, oil, and
gasoline expenses originate from petroleum refineries (NAICS 324110),
we use the PPI for petroleum refineries (series code
PCU324110) as the proxy for this cost category.
d. Electricity
We use the PPI for commercial electric power (series code
WPU0542) to measure the price growth of this cost category.
This same proxy was used in the FY 2002-based IPPS market basket.
e. Water and Sewage
We use the CPI for water and sewerage maintenance (all urban
consumers) (series code CUUR0000SEHG01) to measure the price
growth of this cost category. This same proxy was used in the FY 2002-
based IPPS market basket.
f. Professional Liability Insurance
We proxy price changes in hospital professional liability insurance
premiums (PLI) using percentage changes as estimated by the CMS
Hospital Professional Liability Index. To generate these estimates, we
collect commercial insurance premiums for a fixed level of coverage
while holding nonprice factors constant (such as a change in the level
of coverage). This method also is used to proxy PLI price changes in
the Medicare Economic Index (68 FR 63244). This same proxy was used in
the FY 2002-based IPPS market basket.
g. Pharmaceuticals
We use the PPI for pharmaceutical preparations (prescription)
(series code PCU32541DRX) to measure the price growth of this
cost category. This is a special index produced by BLS and is the same
proxy used in the FY 2002-based IPPS market basket.
h. Food: Direct Purchases
We use the PPI for processed foods and feeds (series code
WPU02) to measure the price growth of this cost category. This
same proxy was used in the FY 2002-based IPPS market basket.
i. Food: Contract Services
We use the CPI for food away from home (all urban consumers)
(series code CUUR0000SEFV) to measure the price growth of this
cost category. This same proxy was used in the FY 2002-based IPPS
market basket.
j. Chemicals
We use a blended PPI composed of the PPI for industrial gases
(NAICS 325120), the PPI for other basic inorganic chemical
manufacturing (NAICS 325180), the PPI for other basic organic chemical
manufacturing (NAICS 325190), and the PPI for soap and cleaning
compound manufacturing (NAICS 325610). Using the 2002 Benchmark I-O
data, we found that these NAICS industries accounted for approximately
90 percent of the hospital industry's chemical expenses. Therefore, we
use this blended index because we believe its composition better
reflects the composition of the purchasing patterns of hospitals than
does the PPI for industrial chemicals (series code WPU061),
the proxy used in the FY 2002-based IPPS market basket. Chart 3 below
shows the weights for each of the four PPIs used to create the blended
PPI, which we determined using the 2002 Benchmark I-O data.
Chart 3--Blended Chemical PPI Weights
------------------------------------------------------------------------
Weights (in
Name percent) NAICS
------------------------------------------------------------------------
PPI for Industrial Gases............ 35 325120
PPI for Other Basic Inorganic 25 325180
Chemical Manufacturing.............
PPI for Other Basic Organic Chemical 30 325190
Manufacturing......................
PPI for Soap and Cleaning Compound 10 325610
Manufacturing......................
------------------------------------------------------------------------
k. Blood and Blood Products
In the FY 2002-based IPPS market basket, we classified blood and
blood products into the miscellaneous products category and used the
PPI for finished goods less food and energy to proxy the price changes
associated with these expenses. At the time of the rebasing of the FY
2002-based IPPS market basket, we noticed an apparent divergence
between the PPI for blood
[[Page 43849]]
and blood derivatives, the price proxy used in the FY 1997-based IPPS
market basket, and blood costs faced by hospitals over the recent time
period. A thorough discussion of this analysis is found in the FY 2006
IPPS final rule (70 FR 47390).
Since the last rebasing of the market basket, BLS began collecting
data and publishing an industry PPI for blood and organ banks (NAICS
621991). For the FY 2006-based IPPS market basket, as we proposed, we
incorporate this series (series code PCU621991) into the
market basket and use it to proxy the blood and blood products cost
category.
l. Medical Instruments
We use the PPI for medical, surgical, and personal aid devices
(series code WPU156) to measure the price growth of this cost
category. In the 1997 Benchmark I-O data, approximately half of the
expenses classified in this category were for surgical and medical
instruments. Thus, we used the PPI for surgical and medical instruments
and equipment (series code WPU1562) to proxy this category in
the FY 2002-based IPPS market basket. The 2002 Benchmark I-O data show
that this category now represents only 33 percent of these expenses and
the largest expense category is surgical appliance and supplies
manufacturing (corresponding to series code WPU1563). Due to
this reallocation of costs over time, we are changing the price proxy
for this cost category to the more aggregated PPI for medical,
surgical, and personal aid devices.
m. Photographic Supplies
We are eliminating the cost category specific to photographic
supplies for the proposed FY 2006-based IPPS market basket. These costs
will now be included in the chemicals cost category because the costs
are presently reported as all other chemical products. Notably,
although we are eliminating the specific cost category, these costs
will still be accounted for within the IPPS market basket.
n. Rubber and Plastics
We use the PPI for rubber and plastic products (series code
WPU07) to measure price growth of this cost category. This
same proxy was used in the FY 2002-based IPPS market basket.
o. Paper and Printing Products
We use the PPI for converted paper and paperboard products (series
code WPU0915) to measure the price growth of this cost
category. This same proxy was used in the FY 2002-based IPPS market
basket.
p. Apparel
We use the PPI for apparel (series code WPU0381) to
measure the price growth of this cost category. This same proxy was
used in the FY 2002-based IPPS market basket.
q. Machinery and Equipment
We use the PPI for machinery and equipment (series code
WPU11) to measure the price growth of this cost category. This
same proxy was used in the FY 2002-based IPPS market basket.
r. Miscellaneous Products
We use the PPI for finished goods less food and energy (series code
WPUSOP3500) to measure the price growth of this cost category.
Using this index removes the double-counting of food and energy prices,
which are already captured elsewhere in the market basket. This same
proxy was used in the FY 2002-based IPPS market basket.
s. Professional Fees: Labor-Related
We use the ECI for compensation for professional and related
occupations (private industry) (series code CIS2020000120000I)
to measure the price growth of this category. It includes occupations
such as legal, accounting, and engineering services. This same proxy
was used in the FY 2002-based IPPS market basket.
t. Administrative and Business Support Services
We use the ECI for compensation for office and administrative
support services (private industry) (series code
CIU2010000220000I) to measure the price growth of this
category. Previously these costs were included in the ``all other:
labor-intensive cost'' category (now renamed the ``all other: labor-
related cost'' category), and were proxied by the ECI for compensation
for service occupations. We believe that this compensation index better
reflects the changing price of labor associated with the provision of
administrative services and its incorporation represents a technical
improvement to the market basket.
u. All Other: Labor-Related Services
We use the ECI for compensation for service occupations (private
industry) (series code CIU2010000300000I) to measure the price
growth of this cost category. This same proxy was used in the FY 2002-
based IPPS market basket.
v. Professional Fees: Nonlabor-Related
We use the ECI for compensation for professional and related
occupations (private industry) (series code CIS2020000120000I)
to measure the price growth of this category. This is the same price
proxy that we use for the professional fees: labor-related cost
category.
w. Financial Services
We use the ECI for compensation for financial activities (private
industry) (series code CIU201520A000000I) to measure the price
growth of this cost category. Previously these costs were included in
the ``all other: nonlabor-intensive cost'' category (now renamed the
``all other: nonlabor-related cost'' category), and were proxied by the
CPI for all items. We believe that this compensation index better
reflects the changing price of labor associated with the provision of
financial services and its incorporation represents a technical
improvement to the market basket.
x. Telephone Services
We use the CPI for telephone services (series code
CUUR0000SEED) to measure the price growth of this cost
category. This same proxy was used in the FY 2002-based IPPS market
basket.
y. Postage
We use the CPI for postage (series code CUUR0000SEEC01) to
measure the price growth of this cost category. This same proxy was
used in the FY 2002-based IPPS market basket.
z. All Other: Nonlabor-Related Services
We use the CPI for all items less food and energy (series code
CUUR0000SA0L1E) to measure the price growth of this cost
category. Previously these costs were proxied by the CPI for all items
in the FY 2002-based IPPS market basket. We believe that using the CPI
for all items less food and energy will remove any double-counting of
food and energy prices, which are already captured elsewhere in the
market basket. Consequently, we believe that the incorporation of this
proxy represents a technical improvement to the market basket.
Chart 4 compares both the historical and forecasted percent changes
in the FY 2002-based IPPS market basket and the FY 2006-based IPPS
market basket.
[[Page 43850]]
Chart 4--FY 2002-Based and FY 2006-Based Prospective Payment Hospital
Operating Index Percent Change, FY 2004 Through FY 2012
------------------------------------------------------------------------
FY 2002-based FY 2006-based
IPPS market IPPS market
Fiscal year (FY) basket operating basket operating
index percent index percent
change change
------------------------------------------------------------------------
Historical data:
FY 2004......................... 4.0 4.0
FY 2005......................... 4.3 3.9
FY 2006......................... 4.3 4.0
FY 2007......................... 3.4 3.6
FY 2008......................... 4.3 4.0
Average FYs 2004-2008........... 4.1 3.9
Forecast:
FY 2009......................... 2.1 2.6
FY 2010......................... 2.3 2.1
FY 2011......................... 2.8 2.7
FY 2012......................... 3.0 2.9
Average FYs 2009-2012........... 2.6 2.6
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2009, USMACRO/
CONTROL0609@CISSIM/TL0509.SIM.
The differences between the FY 2002-based and the FY 2006-based
IPPS market basket increases are mostly stemming from the revision the
proxy used for the chemicals cost category. As stated earlier, we are
adopting a blended chemical index that is comprised of four industry-
based chemical price proxies that represent approximately 90 percent of
the hospital industry's chemical expenses. The FY 2002-based IPPS
market basket used the PPI for industrial chemicals. The PPI for
industrial chemicals attributes more weight to direct petroleum
expenses, which is not consistent with a hospital's most recent
purchasing pattern according to the 2002 Benchmark I-O data. The lower
weight for direct petroleum expenses in the blended chemical index
results in less volatile price movements. We believe the blended index
represents a technical improvement because it better reflects the
purchasing patterns of hospitals.
Also contributing to the differences between the FY 2002-based and
the FY 2006-based IPPS market basket increases is the larger weight
associated with the professional fees category. In both market baskets,
these expenditures are proxied by the ECI for compensation for
professional and related services. The weight for professional fees in
the FY 2002-based IPPS market basket is 5.5 percent compared to 9.4
percent in the FY 2006-based IPPS market basket.
4. Labor-Related Share
Under section 1886(d)(3)(E) of the Act, the Secretary estimates
from time to time the proportion of payments that are labor-related.
``The Secretary shall adjust the proportion (as estimated by the
Secretary from time to time) of hospitals' costs which are attributable
to wages and wage-related costs of the DRG prospective payment rates *
* *.'' We refer to the proportion of hospitals' costs that are
attributable to wages and wage-related costs as the ``labor-related
share.''
The labor-related share is used to determine the proportion of the
national PPS base payment rate to which the area wage index is applied.
We include a cost category in the labor-related share if the costs are
labor intensive and vary with the local labor market. Given this, as we
proposed, we are including in the labor-related share the national
average proportion of operating costs that are attributable to wages
and salaries, employee benefits, contract labor, the labor-related
portion of professional fees, administrative and business support
services, and all other: labor-related services (previously referred to
in the FY 2002-based IPPS market basket as labor-intensive) (74 FR
24159). Consistent with previous rebasings, the ``all other: labor-
related services'' cost category is mostly comprised of building
maintenance and security services (including, but not limited to,
commercial and industrial machinery and equipment repair,
nonresidential maintenance and repair, and investigation and security
services). Because these services tend to be labor-intensive and are
mostly performed at the hospital facility (and, therefore, unlikely to
be purchased in the national market), we believe that they meet our
definition of labor-related services.
For the rebasing of the FY 2002-based IPPS market basket in the FY
2006 IPPS final rule, we included in the labor-related share the
national average proportion of operating costs that are attributable to
wages and salaries, employee benefits, contract labor, professional
fees, and labor-intensive services (70 FR 47393). For the FY 2006-based
IPPS market basket rebasing, the inclusion of the administrative and
business support services cost category into the labor-related share
remains consistent with the current labor-related share because this
cost category was previously included in the labor-intensive cost
category. As previously stated, we are establishing a separate
administrative and business support service cost category so that we
can use the ECI for compensation for office and administrative support
services to more precisely proxy these specific expenses.
For the FY 2002-based IPPS market basket, we assumed that all
nonmedical professional services (including accounting and auditing
services, engineering services, legal services, and management and
consulting services) were purchased in the local labor market and,
therefore, all of their associated fees varied with the local labor
market. As a result, we previously included 100 percent of these costs
in the labor-related share. In an effort to more accurately determine
the share of professional fees that should be included in the labor-
related share, we surveyed hospitals regarding the proportion of those
fees that go to companies that are located beyond their own local labor
market (the results are discussed below).
We continue to look for ways to refine our market basket approach
to more accurately account for the proportion of costs influenced by
the local labor market. To that end, we conducted a survey of hospitals
to empirically determine the proportion of contracted
[[Page 43851]]
professional services purchased by the industry that are attributable
to local firms and the proportion that are purchased from national
firms. We notified the public of our intent to conduct this survey on
December 9, 2005 (70 FR 73250) and received no comments (71 FR 8588).
With approval from the OMB, we contacted the industry and received
responses to our survey from 108 hospitals. Using data on FTEs to
allocate responding hospitals across strata (region of the country and
urban/rural status), we calculated poststratification weights. Based on
these weighted results, we determined that hospitals purchase, on
average, the following portions of contracted professional services
outside of their local labor market:
34 percent of accounting and auditing services;
30 percent of engineering services;
33 percent of legal services; and
42 percent of management consulting services.
We applied each of these percentages to its respective Benchmark I-
O cost category underlying the professional fees cost category. This is
the methodology that we used to separate the FY 2006-based IPPS market
basket professional fees category into professional fees: Labor-related
and professional fees: Nonlabor-related cost categories. In addition to
the professional services listed above, we also classified expenses
under NAICS 55, Management of Companies and Enterprises, into the
professional fees cost category as was done in previous rebasings. The
NAICS 55 data are mostly comprised of corporate, subsidiary, and
regional managing offices, or otherwise referred to as home offices.
Formerly, all of the expenses within this category were considered to
vary with, or be influenced by, the local labor market and were thus
included in the labor-related share. Because many hospitals are not
located in the same geographic area as their home office, we analyzed
data from a variety of sources in order to determine what proportion of
these costs should be appropriately included in the labor-related
share.
Comment: Several commenters disagreed with the proposed methodology
to apportion home offices costs into the labor-related share.
Response: Our proposed methodology was primarily based on data from
the Medicare cost reports, as well as a CMS database of Home Office
Medicare Records (HOMER) (a database that provides city and state
information (addresses) for home offices). The Medicare cost report
requires hospitals to report their home office provider numbers. Using
the HOMER database to determine the home office location for each home
office provider number, we compared the location of the hospital with
the location of the hospital's home office. We then proposed to
determine the proportion of costs that should be allocated to the
labor-related share based on the percent of hospitals that had home
offices located in their respective local labor markets--defined as
being in the same MSA. Using this proposed methodology, we had
determined that 27 percent of hospitals that had home offices had those
home offices located in their respective local labor markets, and
therefore, we proposed to allocate 27 percent of NAICS 55 expenses to
the labor-related share.
In response to the public comments submitted, we have revisited the
home office cost allocation method and determined that a revision of
the approach is appropriate. As an alternative to using provider counts
(where each provider counts evenly) as the means by which home office
costs are apportioned to the labor-related share, or deemed nonlabor-
related, for this final rule, we are weighting the providers by home
office compensation costs as reported in Worksheet S-3, part II, line
11 of the hospital MCR. (The Medicare cost report includes, but does
not explicitly itemize, all home office costs. However, it does contain
a line item for home office compensation costs.) We believe that this
revised methodology of weighting the providers based on home office
compensation costs provides a more technically appropriate estimate of
the proportion of NAICS 55 expenses that should be allocated to the
labor-related share.
As proposed, we are still continuing to use the same data sources
and methodology to determine whether a hospital's home office is
located in their respective MSA. Once we determined whether the
hospital's home office is located in their respective MSA, we used
additional data on home office compensation costs from the Medicare
cost report to assign weights to the providers. Using this revised
methodology, we determined that 57 percent of hospitals' home office
costs are paid into their respective local labor markets--defined as
being in the same MSA.
As was published in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24159 through 24161), below is a more detailed explanation on
our methodology used to determine whether a hospital's home office was
located in their respective MSA. In addition to the number of providers
that appeared in the proposed rule, we have also included our weighted
results.
The Medicare cost report requires hospitals to report their home
office provider numbers. Using the HOMER database to determine the home
office location for each home office provider number, we compared the
location of the hospital with the location of the hospital's home
office. We then placed hospitals into one of the following three
groups:
Group 1--Hospital and home office are located in different
States;
Group 2--Hospital and home office are located in the same
State and same city; and
Group 3--Hospital and home office are located in the same
State and different city.
We found that 59 percent of the hospitals with home offices (34
percent of total home office compensation costs for hospitals with home
offices) were classified into Group 1 (that is, different State) and,
thus, these hospitals were determined to not be located in the same
local labor market as their home office.
We found that 12 percent of all hospitals with home offices (35
percent of total home office compensation costs for hospitals with home
offices) were classified into Group 2 (that is, same State and same
city and, therefore, the same MSA). Consequently, these hospitals were
determined to be located in the same local labor market as their home
offices.
We found that 29 percent of all hospitals with home offices (30
percent of total home office compensation costs for hospitals with home
offices) were classified into Group 3 (that is, same State and
different city). Using data from the Census Bureau to determine the
specific MSA for both the hospital and its home office, we found that
16 percent of all hospitals with home offices (22 percent of total home
office compensation costs for hospitals with home offices) were
identified as being in the same State, a different city, but the same
MSA.
Pooling these results, we were able to determine that approximately
28 percent of hospitals with home offices (57 percent of total home
office compensation costs for hospitals with home offices) had home
offices located within their local labor market (that is, 12 percent of
hospitals with home offices (35 percent of total home office
compensation costs for hospitals with home offices) had their home
offices in the same State and city (and, thus, the same MSA), and 16
percent of hospitals with home offices (22 percent of total
[[Page 43852]]
home office compensation costs for hospitals with home offices) had
their home offices in the same State, a different city, but the same
MSA). We note that due to data anomalies associated with home office
compensation cost data on the Medicare cost report, we trimmed the data
and, thus, the number of providers classified in each of the groups is
slightly different than we had published in the proposed regulation.
The aforementioned trim resulted in excluding hospitals whose home
office costs as a percent of total hospital costs were in the top and
bottom five percent of that ratio. In the proposed rule, we had
determined that 27 percent of providers had a home office located in
their respective MSA. Applying our trimming method resulted in 28
percent of providers having a home office located in their respective
MSA. Therefore, using the results of our weighting methodology, we are
classifying 57 percent of the NAICS 55 costs into the professional
fees: labor-related cost category and the remaining 43 percent into the
professional fees: nonlabor-related cost category.
Comment: Several commenters suggested that CMS maintain the labor-
related share from the FY 2002-based market basket (69.7 percent) for
hospitals with an area wage index greater than 1.0 until a
statistically valid approach for changing the labor-related share can
be implemented. In addition, some commenters stated that, although CMS
is required to rebase the hospital market basket, the proposal to
revise the labor-related share is not required by statute and, thus,
represents a discretionary decision by CMS.
Response: As a matter of practice, CMS typically rebases and
revises the market basket and the labor-related share simultaneously.
We believe that doing so results in a more technically accurate market
basket that has the effect of more precisely updating payments to
Medicare's providers. We believe that revising the labor-related share
is based on empirical research and relies on more recent data,
representing a technical improvement to the construction of the market
basket. The methodology relies, in part, on the results of a survey of
professional fees that was nationally representative and inclusive of
large, urban-based hospitals and whose results were estimated using
widely accepted survey estimation techniques. It also is dependent on
data from the Medicare cost reports and the HOMER database that showed
43 percent of total home office compensation costs for hospitals with
home offices had home offices located in different MSAs. Therefore, we
disagree with the commenter's suggestion to continue to use a labor-
related share of 69.7 percent.
Comment: Several commenters disagreed with the proposal to only
allocate a portion of home office costs to the labor-related share
based on whether these costs were incurred in the local labor market.
One commenter stated that it is generally understood that there is a
significant degree of correlation between the location of a
multihospital system and the geographic locations of its member
hospitals. All systems except the limited number of truly national
hospital chains tend to be clustered in subareas of the country.
Therefore, the commenters claimed that an assumption that 73 percent of
home office labor costs more closely resemble national versus regional
wage patterns is not necessarily supported by the methodology CMS
proposed. Second, the commenter stated that it is generally the case
that home office operations of multihospital systems and chains tend to
be located in urban areas, even if the hospitals in the system or chain
are nonurban or rural. The commenter further stated that this implies
that average wage costs in these system headquarters may be
systematically higher than the national average wage cost, making a
national pricing proxy suspect in this case, as well.
Response: In rebasing the labor-related share, we have identified
new methodologies and newly available empirical evidence to estimate
the portion of the standardized payment amount that is subject to the
hospital area wage index. In determining what proportion of that amount
should be apportioned to the labor-related share and what proportion
should be deemed nonlabor-related, we referenced the following:
Section 1886(d)(3)(E)(i) of the Act states that ``in general.--
Except as provided in clause (ii), the Secretary shall adjust the
proportion (as estimated by the Secretary from time to time) of
hospitals' costs which are attributable to wages and wage-related
costs, of the DRG prospective payment rates computed under subparagraph
(D) 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.''
Because the labor-related share determined through the market
basket is linked to the hospital area wage index, for this rebasing, we
have identified new methodologies and newly available empirical
evidence to determine a labor-related share that more precisely
reflects the wage and wage-related proportion of activities purchased
where the individual hospital is located. Services purchased beyond the
boundaries of the local labor market of the individual hospital are
thereby excluded from the labor-related share.
In order to distribute the appropriate proportion of home office
costs to the labor-related share, we constructed a methodology that is
similar to that undertaken to determine the area wage index. That is,
we analyzed the locations of the individual hospitals and their
respective home offices (at the MSA-level) as well as the home office
compensation costs of the individual hospitals. The proportion of home
office costs that we do not include in the labor-related share was not
based on assumption, but rather it was based on Medicare cost report
data and the HOMER database. Those data showed 43 percent of home
office compensation costs were purchased from a different MSA than
where the individual hospital is located and, thus, that proportion of
home office costs are excluded from the labor-related share. The
remaining 57 percent of home office compensation costs were purchased
in the same MSA as the hospital; therefore, that proportion of home
office costs is included in the labor-related share.
Based on data published by the BEA, we determined that the share of
total hospital costs attributable to home office costs in 2006 was 5.8
percent. Applying the aforementioned shares to the 5.8 percent figure,
we determined that 2.494 percentage points of total costs represent
home office costs that are not incurred in the same local labor market
as the hospital itself and, thus, are removed from the labor-related
share. The remaining 3.306 percentage points remain in the labor-
related share.
Comment: Several commenters addressed the survey CMS conducted
regarding certain professional fees purchased by hospitals, stating
that CMS used this survey to impute a 2.631 percentage point reduction
in the labor-related share. These commenters stated that CMS failed to
share data on the characteristics of the hospitals that responded,
possible selection bias, or survey methodology. They also cited that
the survey only received 108 respondents, which could lead to a high
margin of error. The commenters stated that CMS provides no indication
that it assessed for response bias in its survey nor did it explain how
(or whether) it assured that the survey respondents were representative
of all hospitals or of hospitals in wage areas greater than 1.0.
Another commenter stated that the CMS survey assumed that such
professional
[[Page 43853]]
services should be available in the local labor market and ignored some
hospital's unavoidable need to incur those costs in order to comply
with Federal and State requirements. The commenters requested CMS not
remove a portion of professional fees from the labor-related share
based on the results of this survey.
Response: We disagree with the commenters' suggestion that we
ignore the survey results and continue to assign 100 percent of
nonmedical professional fees to the labor-related share, as has been
done historically. We believe a method that distributes these fees
based on empirical research and data represents a technical improvement
to the construction of the market basket. Our intent to survey for this
purpose was announced in the Federal Register on December 9, 2005 (70
FR 73250). We received no public comment at that time.
Although several commenters indicated that the professional fees
survey was used to decrease the labor-related share by 2.631 percentage
points, that indication is not correct. In the FY 2006-based IPPS
market basket, nonmedical professional fees that were subject to
allocation based on the survey results represent 2.114 percent of total
costs (and are limited to those fees related to Accounting & Auditing,
Legal, Engineering, and Management Consulting services). Based on our
survey results, we are apportioning 1.335 percentage points of the
2.114 percentage point figure into the labor-related share and
designating the remaining 0.779 percentage point as nonlabor-related.
The survey's methods unfolded in the following manner: A small
sample of 12 hospitals was initially pre-tested in order to ensure the
understandability of the survey questions. The survey prompted sample
institutions to select from multiple choice answers the proportions of
their professional fees that are purchased from firms located outside
of their respective local labor market. The multiple choice answers for
each type of professional service included the following options: 0
percent of fees; 1-20 percent of fees; 21-40 percent of fees; 41-60
percent of fees; 61-80 percent of fees; 81-99 percent of fees; and 100
percent of fees. All respondents were assured that the information they
provided would be kept strictly confidential.
Understanding that larger, urban-based hospitals (and those located
in areas with area wage indexes greater than 1.0) are most likely to be
impacted by the survey's results, we used data on full-time equivalents
(FTEs) to represent the sizes of hospitals and selected hospitals with
probability proportional to their sizes across strata when drawing the
full sample. Strata were formed by Census Region and Urban/Rural
Status. The distributions of the hospital population, as well as
weighted distributions for the responders, by Urban/Rural Status
(including data on hospital size) and Census Region were as follows:
------------------------------------------------------------------------
Responding
All hospitals hospitals
percent percent
distribution & distribution &
average FTE size average FTE size
------------------------------------------------------------------------
Total............................... 100%/994 100%/1,156
Total Rurals........................ 30%/388 25%/449
Total Urbans........................ 70%/1,255 75%/1,460
Total Northeast Region.............. 15%/1,442 20%/1,078
Total Mid-West Region............... 23%/1,062 24%/1,656
Total South Region.................. 42%/843 37%/944
Total West Region................... 20%/899 19%/1,081
------------------------------------------------------------------------
Sample weights were calculated as the inverse of the selection
probability and were subsequently adjusted for nonresponse bias by
strata and post-stratified to derive final weights. This type of
application represents a common survey approach and is based on valid
and widely-accepted statistical techniques.
For the estimates of the nationwide proportion of nonmedical
professional services fees purchased outside of the local labor market,
we first examined the data on multiple levels. First, we found that
fewer than 30 percent of the responding hospitals paid 100 percent of
their professional fees to vendors located within their local labor
market. Conversely, we found that roughly 20 percent of responding
hospitals reported 81 percent or more of their professional services
fees are paid to vendors located outside of their local labor market.
In determining the specific and appropriate proportions of
professional fees to consider labor-related and nonlabor-related, we
generated weighted averages from the data in the following manner:
For any multiple choice answer where the standard error
associated with the weighted counts for that answer was less than 30
percent, we multiplied the weighted counts associated with that answer
by the midpoint of the range within that answer. For example, for
Accounting and Auditing services, if a weighted count of 500 hospitals
responded that they pay ``1 to 20 percent'' of their professional fees
for these services to firms located outside of their local labor
market, we would multiply 500 times 10 percent. We repeat this for each
possible multiple choice answer.
For any multiple choice answer where the standard error
associated with the weighted counts for that answer exceeded 30
percent, we multiplied the weighted hospital counts by the low point of
the range. Using a similar example as above, if a weighted count of 300
hospitals responded that they pay ``1 to 20 percent'' of their
professional fees for these services to firms located outside of their
local labor market, and the standard error on that estimate was greater
than 30 percent, we would multiply 300 times 1 percent.
After applying one of these two techniques to each answer,
dependent on its associated standard error, we took a weighted average
of the results to determine the final proportion to be excluded from
the labor-related share for each of the four types of professional
services surveyed.
We do not assume that access to professional services such as those
included in this survey should be available to all hospitals within
their respective local labor market and we understand that, in some
cases, hospitals may have to obtain these services from vendors beyond
those boundaries. However, for purposes of estimating the labor-related
share of the market basket, in accordance with the
[[Page 43854]]
aforementioned section 1886(d)(3)(E)(i) of the Act, we have used the
newly available empirical evidence to determine the wage and wage-
related costs in the labor-related share that are incurred within the
geographic location of the hospital itself.
Comment: Several commenters questioned why CMS chose to conduct a
survey to determine which proportion of professional fees is purchased
in the local labor market when they could have conducted a study of
Medicare cost reports for hospitals which, on line 22.01 of Worksheet
S-3, part II, contains hospitals' average annual wage for professional
services. In addition, one commenter suggested that instead of a
survey, CMS should have proposed a change to the cost report in order
to collect accurate data for all facilities.
Response: The Medicare cost report data do provide an average
hourly wage for administrative and general (A&G) services (including
those professional services included in the CMS survey) under contract.
However, the data do not distinguish whether these services were
purchased in the local labor market. In addition, a comparison of the
average hourly wage for A&G services performed by hospital staff (as
reported in line 22 of Worksheet S-3, part II) and the average hourly
wage for A&G services under contract (as reported on line 22.01 of
Worksheet S-3, part II) would not be sufficient to determine whether
the contracted services were purchased in the local or national labor
market. The reason for this is that the average A&G wages reported for
hospital staff could represent a different occupational mix than the
average A&G wages under contract. For example, a hospital could choose
to employ staff to perform their bookkeeping and tax preparation
services, but contract out their legal services. The higher average
annual wage rate for the contracted A&G services compared to the in-
house A&G services would not necessarily be a result of purchasing
services in differing geographic areas, but rather a reflection of the
different skill-mix represented in each group.
At the time this survey was initiated, it was not a viable option
to alter the Medicare cost report in such a way as to collect this
information due to the long periods of time between when the Medicare
cost report questions are updated.
Comment: One commenter stated that it is inappropriate to restrict
the wage index adjustment to labor-related costs that vary with the
local labor market without recognizing that there are significant
nonlabor costs that vary with the local market, of which professional
liability insurance is but one obvious example. The commenter cited a
regression analysis which showed that 85 percent of the variation in
the estimated total unit costs of Medicare fee-for-service cases was
explained by local input prices.
Response: For purposes of estimating the labor-related share of the
market basket, in accordance with the aforementioned section
1886(d)(3)(E)(i) of the Act, we include only wage and wage-related
costs in that proportion. The law does not call for the inclusion of
nonlabor-related costs to be included in the labor-related share.
As described in the FY 2006 IPPS final rule (70 FR 47394), we
previously performed regression analyses to reevaluate the assumptions
used in determining the labor-related share. Using several regression
specifications, we attempted to determine the proportion of costs that
are influenced by the area wage index. We note that the results
obtained for the relevant coefficients (roughly equivalent to the labor
share) using the various specifications were less than 85 percent.
Comment: Many commenters disagreed with CMS removing any portion of
professional fees from the labor-related share. The commenters stated
that CMS did not appear to take into account the prevailing wages of
areas from which hospitals typically purchase professional fees. They
believe that it is uncommon for hospitals to purchase professional
services from firms located in areas with lower prevailing wages than
their own wage area. Therefore, they claimed that CMS failed to
recognize the premium that hospitals must pay professionals from
similar or higher prevailing wage areas.
Several commenters also believed that CMS' assertion that a portion
of professional fees is nonlabor-related is invalid because
professional fees do, in fact, vary across regions and localities. The
commenters indicated that even if a professional services firm is not
based in the local area, professional fees are modified in response to
local market factors. They added that rates and fees are set in a
competitive market and must reflect the conditions of that market. In
addition, several commenters stated that professional services are
highly labor-intensive and constitute a necessary business expense.
Finally, one commenter indicated that even though these services may be
purchased from another entity, they represent substitutes for hospital-
employed staff and, thus, should be regarded by CMS as labor-related.
Response: We disagree with the commenters' assertion that CMS
should include all professional fees in the labor-related share. We
recognize that hospitals may often purchase professional services from
geographic areas with higher prevailing wages than their own. We
further recognize that the prices for these services vary across
regions and localities and that the services themselves are labor-
intensive. However, because we now have empirical evidence we can use
to establish what portion of these professional fees are actually
incurred in the local labor market, in accordance with section
1886(d)(3)(E)(i) of the Act, we are including only such wage and wage-
related costs in the labor-related share. To the extent the evidence
shows that the fees paid do not vary with, or are not influenced by,
the local labor market, we are not including them in the labor-related
share and are not subjecting them to the wage index adjustment.
Comment: Several commenters stated that the proposed change to the
labor-related share will only affect hospitals in areas with a wage
index over 1.0. However, the commenters claimed that these higher-wage
hospitals are much more likely to hire professional firms that are
actually located in their local labor market and, thus, are paying
higher wages. The commenters stated that most urban areas have an
excellent supply of professional services firms, thereby enabling urban
hospitals to purchase such services from a local or regional market
rather than a national market. In addition, some commenters claimed
that this proposal will have an adverse effect on urban hospitals in
general. One commenter stated that the proposed labor-related share
reduction would most seriously affect large urban teaching hospitals.
One commenter stated that CMS' proposed change to the labor-related
share is counter-intuitive to CMS's policy goal and would actually
dampen the sensitivity of the IPPS payment methodology to area wage
variations. The commenter cited that academic medical centers located
in large urban markets are the most likely hospitals to be in markets
with substantial local competition for professional services--markets
in which professional services fees are most likely to be influenced by
local labor market conditions. The commenter stated that the proposed
methodology premised on the assumption that 73 percent of home office
costs reflect national average wage patterns produces a substantial
downward payment bias for teaching hospitals. Thus, the commenter urged
CMS to only use more recent data and hold all other aspects constant,
which
[[Page 43855]]
would result in a labor-related share of 72.1 percent. The commenter
stated that, at a minimum, the current labor-related share of 69.7
percent should be retained, pending further study and analysis.
Response: We recognize that many hospitals could be affected
differently by a change in the labor-related share. However, we believe
the law calls for this proportion to be based on a national average and
does not distinguish between types of hospitals for purposes of
estimating or applying the labor-related share.
We disagree with the suggestions that the FY 2006-based market
basket's labor-related share should be set to 72.1 percent (as a result
of holding all other aspects constant from the FY 2002-based market
basket) or that it should be held to its current 69.7 percent level. We
believe that incorporating more recent data, as well as the results of
our research, represents a technical improvement to the accuracy of the
market basket.
Comment: One commenter stated that in order for hospitals to become
more efficient and cost effective, they often use contract employees.
The commenter further stated that in order to obtain the best price and
service, these employees are located outside the local labor market.
The commenter claimed that disallowing these services to be included in
the wage index survey would reduce their labor-related payment rate and
not adequately reimburse for care of Medicare patients.
Response: We do include direct patient contract labor expenses in
the labor-related share of the IPPS market basket. These costs are
included in the Wages & Salaries and Benefits cost weights. We only
exclude from the labor-related share those contract labor costs
associated with professional fees and home office costs that were
purchased outside of the local labor market. As stated previously, the
purpose of the labor-related share is to determine which portion of the
standardized payment amount that is subject to the hospital wage index.
Therefore, we define the labor-related share as those expenses that are
labor-intensive and vary with, or are influenced by, the local labor
market.
Comment: One commenter stated that without survey detail, they were
unsure of CMS' treatment of professional fees paid for by a home
office. The commenter stated that currently CMS excludes this expense
for wage index purposes as the ``home office cost center is not
included in the current definition of contract services for the wage
index.'' The commenter believed that this created an inconsistency
among the independent hospitals, which can include the professional fee
costs/hours while health systems cannot. The commenter asked CMS to
comment on its treatment of professional fees paid for by a home office
and its use of such data in its survey.
Response: The CMS survey asked the responding hospitals to share
what proportion of their professional services were purchased from
vendors located beyond their local labor market. We expected that,
irrespective of the mechanism of the purchase (that is, purchased
directly by the hospital or purchased by the hospital's home office on
the hospital's behalf), the approach to answering the questions remains
the same. Therefore, we believe independent hospitals, as well as
hospital groups, were captured appropriately.
Comment: One commenter questioned the conclusion from CMS'
methodology, which implicitly assumes that the labor costs associated
with ``non-local'' services, or those that are not adjusted at all for
area wage variations, more closely reflects the national average than
labor market conditions in the local area of the hospital receiving the
services. The commenter described the market for professional services
provided to hospitals as those that can be divided into the following
categories: (1) Truly local firms whose clientele is comprised of the
hospitals in a specific geographic area; (2) local offices of regional
or national firms that will staff local assignments with some mix of
local and non-local professionals; (3) firms that are ``regional'' in
the sense of serving multiple geographic markets from a centralized
location; and (4) truly national firms that operate nationwide from a
single headquarters office and that serve local hospitals without
assistance from locally based practitioners. The commenter claimed that
CMS implicitly assumed that any firm that does not fall into the first
category would experience labor costs indistinguishable from those that
fall in the last category. However, the commenter stated that, in
reality all such firms compete against each other in each local market.
Therefore, the commenter added, local labor market conditions drive the
prices local hospitals will pay for professional services even if those
services wind up being rendered by professionals from out of town. The
commenter stated that there is substantial regional variation in
salaries paid to entry-level and early-career professionals who
represent the lion's share of the cost that will be billed to
hospitals. The commenter concluded that a payment methodology premised
on the notion of a national professional services market with uniform
prices fails to reflect the reality of what hospitals pay for
professional services. The commenter also states that CMS did not
disclose how professional services firms were identified as being
``national'' firms in its survey. The commenter believed that
determining the location of a contract based on the mailing address of
the contractor could materially understate the volume of services
rendered by national or regional firms with a local presence, which
would be fully subject to local labor market conditions. Thus, the
commenter concluded the effect of reducing the labor-related share
would be to dampen the sensitivity of the IPPS payment methodology to
area wage variations.
Response: We recognize that fees paid for professional services
provided by firms not located in the same local labor market as the
hospital may be purchased in local labor markets and not always in a
national market. However, given that we now have empirical evidence
that can be used to estimate the portion of costs that varies based on
the local labor market, we believe it is in keeping with section
1886(d)(3)(E)(i) of the Act to only assign that portion that does vary
to the labor-related share. Section 1886(d)(3)(E)(i) of the Act states
that ``in general.--Except as provided in clause (ii), the Secretary
shall adjust the proportion (as estimated by the Secretary from time to
time) of hospitals' costs which are attributable to wages and wage-
related costs, of the DRG prospective payment rates computed under
subparagraph (D) 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.''
Comment: One commenter stated that the treatment of contract labor
has a direct influence on the labor-related share, which in turn
affects the area wage index adjusted portion of the payments.
Conversely, the commenter stated, because the labor-related share now
includes accounting and auditing services, it is not clear whether the
data currently used to develop the area wage index are inclusive of the
costs for accounting and auditing because consideration of these costs
for area wage index purposes is only a current CMS wage data policy
convention. Therefore, the commenter added, there could be a mismatch
between the data CMS is using for the labor-related share
[[Page 43856]]
determination and the data CMS utilizes for developing the area wage
index.
Response: We are not changing our methodology on how contract labor
costs are included in the IPPS market basket. As has been done
historically, the market basket includes all contract labor services
purchased by the hospital. Direct patient contract labor costs are
included in the Wage & Salaries and Benefits cost weights, whereas
other nondirect patient contract labor costs are represented in the
other cost weights.
Also, we interpret the commenter's statement to imply that
accounting and auditing services were previously excluded from the
labor-related share. Historically, 100 percent of the accounting and
auditing services expenses were included in the labor-related share. We
proposed to only include 66 percent of the accounting and auditing
costs in the labor-related share because the remaining 34 percent of
these costs were determined to have been purchased outside of the local
labor market.
With respect to a possible mismatch between the labor-related share
and the area wage index, data from Worksheet S-3, part II, of the
Medicare cost report are used to estimate both. Those data provide
information on wage and wage-related costs incurred by the hospital but
are not detailed enough to distinguish between costs incurred via
purchase and costs incurred via direct hire. In estimating the labor-
related share, we incorporate data from other data sources to
supplement the Medicare cost report data to more accurately capture and
apportion wage and wage-related costs that are purchased.
Comment: One commenter questioned whether the proposed revision of
the labor-related share of the operating IPPS rates would affect the
capital IPPS geographic adjustment factor (GAF), which is derived from
the hospital wage index. The commenter requested that CMS review
whether the formula used to determine the capital GAF should be revised
based on the update of the operating IPPS labor-related share.
Response: In determining payments under the capital IPPS, the
capital rate is adjusted for differences in local cost variations by a
factor (the GAF) that is equal to the hospital's applicable wage index
raised to the 0.6848 power (Sec. 412.316(a) of our regulations). The
formula for the GAF was developed using a regression analysis and the
exponential form of this factor is used in order to apply a single
factor to the entire capital rate rather than splitting the capital
rate into labor-related share and nonlabor-related share (56 FR 43375).
The formula for the GAF is independent of the operating IPPS labor-
related share and, therefore, requires no adjustment based on the
revision of the operating IPPS labor-relate share. The GAF will
continue to be computed as the hospital's applicable wage index raised
to the 0.6848 power.
After consideration of the public comments received, in this final
rule, we are revising our labor-related share that we proposed in the
FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24159-24161) to
incorporate a revision to our methodology for allocating NAICS 55
expenses to the labor-related share.
Below is a chart comparing the FY 2006-based labor-related share
and the FY 2002-based labor-related share.
Chart 5--Comparison of the FY 2006-Based Labor-Related Share and the FY
2002-Based Labor-Related Share
------------------------------------------------------------------------
FY 2002-based FY 2006-based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries.................. 48.171 47.213
Employee Benefits................... 11.822 12.414
Professional Fees: Labor-Related.... 5.510 5.356
Administrative and Business Support ................ 0.626
Services...........................
All Other: Labor-Related Services... 4.228 3.193
-----------------------------------
Total Labor-Related Share....... 69.731 68.802
------------------------------------------------------------------------
Using the cost category weights from the FY 2006-based IPPS market
basket, we calculated a labor-related share of 68.802 percent,
approximately 0.9 percentage points lower than the current labor-
related share of 69.731.
We continue to believe, as we have stated in the past, that these
operating cost categories are related to, influenced by, or vary with
the local markets. Therefore, our definition of the labor-related share
continues to be consistent with section 1886(d)(3) of the Act.
Using the cost category weights that we determined in section
IV.B.1. of this preamble, we calculated a labor-related share of 68.802
percent, using the FY 2006-based IPPS market basket. Accordingly, we
are implementing a labor-related share of 68.8 percent for discharges
occurring on or after October 1, 2009. We note that section 403 of
Public Law 108-173 amended sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv)
of the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this employment ``would result in lower
payments than would otherwise be made.''
As we proposed, we also are updating the labor-related share for
Puerto Rico. Consistent with our methodology for determining the
national labor-related share, we add the Puerto Rico-specific relative
weights for wages and salaries, employee benefits, and contract labor.
Because there are no Puerto Rico-specific relative weights for
professional fees and labor intensive services, we use the national
weights.
Below is a chart comparing the FY 2006-based Puerto Rico-specific
labor-related share and the FY 2002-based Puerto Rico-specific labor-
related share.
[[Page 43857]]
Chart 6--Comparison of the FY 2006-Based Puerto Rico-Specific Labor-
Related Share and FY 2002-Based Puerto Rico-Specific Labor-Related Share
------------------------------------------------------------------------
FY 2002-based FY 2006-based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries.................. 40.201 44.221
Benefits............................ 8.782 8.691
Professional Fees: Labor-Related.... 5.510 5.356
Administrative and Business Support ................ 0.626
Services...........................
All Other: Labor-Related Services... 4.228 3.193
-----------------------------------
Total Labor-Related Share....... 58.721 62.087
------------------------------------------------------------------------
Using the FY 2006-based Puerto Rico cost category weights, we
calculated a labor-related share of 62.087 percent, approximately 3.4
percentage points higher than the current Puerto-Rico specific labor-
related share of 58.721. Accordingly, we are adopting an updated Puerto
Rico labor-related share of 62.1 percent.
C. Separate Market Basket for Certain Hospitals Presently Excluded from
the IPPS
In the FY 2006 IPPS final rule (70 FR 47396), we adopted the use of
the FY 2002-based IPPS operating market basket to update the target
amounts for children's and cancer hospitals and religious nonmedical
health care institutions (RNHCIs). Children's and cancer hospitals and
RNHCIs are still reimbursed solely under the reasonable cost-based
system, subject to the rate-of-increase limits. Under these limits, an
annual target amount (expressed in terms of the inpatient operating
cost per discharge) is set for each hospital based on the hospital's
own historical cost experience trended forward by the applicable rate-
of-increase percentages.
As we proposed (74 FR 24161), under the broad authority in sections
1886(b)(3)(A) and (B), 1886(b)(3)(E), and 1871 of the Act and section
4454 of the BBA, consistent with our use of the IPPS operating market
basket percentage increase to update target amounts, we are using the
FY 2006-based IPPS operating market basket percentage increase to
update the target amounts for children's and cancer hospitals and
RNHCIs.
Due to the small number of children's and cancer hospitals and
RNHCIs that receive, in total, less than 1 percent of all Medicare
payments to hospitals and because these hospitals provide limited
Medicare cost report data, we are unable to create a separate market
basket specifically for these hospitals. Based on the limited data
available, we believe that the FY 2006-based IPPS operating market
basket most closely represents the cost structure of children's and
cancer hospitals and RNHCIs. Therefore, we believe that the percentage
change in the FY 2006-based IPPS operating market basket is the best
available measure of the average increase in the prices of the goods
and services purchased by cancer and children's hospitals and RNHCIs in
order to provide care.
We did not receive any public comments on the provisions of this
section.
D. Rebasing and Revising the Capital Input Price Index (CIPI)
The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final payment rules. The FY 2006
IPPS final rule (70 FR 47387) discussed the most recent rebasing and
revision of the CIPI to a FY 2002 base year, which reflected the
capital cost structure of the hospital industry in that year.
As we proposed in the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule
(74 FR 24161), we are rebasing and revising the CIPI to a FY 2006 base
year to reflect the more current structure of capital costs in
hospitals. As with the FY 2002-based index, we developed two sets of
weights in order to calculate the FY 2006-based CIPI. The first set of
weights identifies the proportion of hospital capital expenditures
attributable to each expenditure category, while the second set of
weights is a set of relative vintage weights for depreciation and
interest. The set of vintage weights is used to identify the proportion
of capital expenditures within a cost category that is attributable to
each year over the useful life of the capital assets in that category.
A more thorough discussion of vintage weights is provided later in this
section.
Both sets of weights are developed using the best data sources
available. In reviewing source data, we determined that the Medicare
cost reports provided accurate data for all capital expenditure cost
categories. We used the FY 2006 Medicare cost reports for IPPS
hospitals to determine weights for all three cost categories:
depreciation, interest, and other capital expenses.
Lease expenses are unique in that they are not broken out as a
separate cost category in the CIPI, but rather are proportionally
distributed among the cost categories of depreciation, interest, and
other, reflecting the assumption that the underlying cost structure of
leases is similar to that of capital costs in general. As was done in
previous rebasings of the CIPI, we first assumed 10 percent of lease
expenses represents overhead and assigned them to the other capital
expenses cost category accordingly. The remaining lease expenses were
distributed across the three cost categories based on the respective
weights of depreciation, interest, and other capital not including
lease expenses.
Depreciation contains two subcategories: (1) Building and fixed
equipment; and (2) movable equipment. The apportionment between
building and fixed equipment and movable equipment was determined using
the Medicare cost reports. This methodology was also used to compute
the apportionment used in the FY 2002-based index.
The total interest expense cost category is split between
government/nonprofit interest and for-profit interest. The FY 2002-
based CIPI allocated 75 percent of the total interest cost weight to
government/nonprofit interest and proxied that category by the average
yield on domestic municipal bonds. The remaining 25 percent of the
interest cost weight was allocated to for-profit interest and was
proxied by the average yield on Moody's Aaa bonds (70 FR 47387).
For this rebasing, we derived the split using the relative FY 2006
Medicare cost report data on interest expenses for government/nonprofit
and for-profit hospitals. Based on these data, we calculated an 85/15
split between
[[Page 43858]]
government/nonprofit and for-profit interest. We believe it is
important that this split reflects the latest relative cost structure
of interest expenses.
Chart 7 presents a comparison of the FY 2006-based CIPI cost
weights and the FY 2002-based CIPI cost weights.
Chart 7--FY 2006-Based CIPI Cost Categories, Weights, and Price Proxies With FY 2002-Based CIPI Included for
Comparison
----------------------------------------------------------------------------------------------------------------
FY 2002 FY 2006
Cost categories weights weights Price proxy
----------------------------------------------------------------------------------------------------------------
Total......................................... 100.00 100.00 ......................................
Total depreciation............................ 74.583 75.154 ......................................
Building and fixed equipment depreciation..... 36.234 35.789 BEA chained price index for
nonresidential construction for
hospitals and special care
facilities--vintage weighted (25
years).
Movable equipment depreciation................ 38.349 39.365 PPI for machinery and equipment--
vintage weighted (12 years).
Total interest................................ 19.863 17.651 ......................................
Government/nonprofit interest................. 14.896 15.076 Average yield on domestic municipal
bonds (Bond Buyer 20 bonds)--vintage-
weighted (25 years).
For-profit interest........................... 4.967 2.575 Average yield on Moody's Aaa bonds--
vintage-weighted (12 years).
Other......................................... 5.554 7.195 CPI-U for residential rent.
----------------------------------------------------------------------------------------------------------------
Because capital is acquired and paid for over time, capital
expenses in any given year are determined by both past and present
purchases of physical and financial capital. The vintage-weighted CIPI
is intended to capture the long-term consumption of capital, using
vintage weights for depreciation (physical capital) and interest
(financial capital). These vintage weights reflect the proportion of
capital purchases attributable to each year of the expected life of
building and fixed equipment, movable equipment, and interest. We used
the vintage weights to compute vintage-weighted price changes
associated with depreciation and interest expense. Following
publication of the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, and in
order to provide greater transparency, we posted on the CMS market
basket Web page at: http://www.cms.hhs.gov/MedicareProgramRatesStats/05_MarketBasketResearch.asp#TopOfPage an illustrative spreadsheet
that contains an example of how the vintage-weighted price indexes are
calculated.
Vintage weights are an integral part of the CIPI. Capital costs are
inherently complicated and are determined by complex capital purchasing
decisions, over time, based on such factors as interest rates and debt
financing. In addition, capital is depreciated over time instead of
being consumed in the same period it is purchased. The CIPI accurately
reflects the annual price changes associated with capital costs, and is
a useful simplification of the actual capital investment process. By
accounting for the vintage nature of capital, we are able to provide an
accurate, stable annual measure of price changes. Annual nonvintage
price changes for capital are unstable due to the volatility of
interest rate changes and, therefore, do not reflect the actual annual
price changes for Medicare capital-related costs. The CIPI reflects the
underlying stability of the capital acquisition process and provides
hospitals with the ability to plan for changes in capital payments.
To calculate the vintage weights for depreciation and interest
expenses, we needed a time series of capital purchases for building and
fixed equipment and movable equipment. We found no single source that
provides a uniquely best time series of capital purchases by hospitals
for all of the above components of capital purchases. The early
Medicare cost reports did not have sufficient capital data to meet this
need. Data we obtained from the American Hospital Association (AHA) do
not include annual capital purchases. However, AHA does provide a
consistent database back to 1963. We used data from the AHA Panel
Survey and the AHA Annual Survey to obtain a time series of total
expenses for hospitals. We then used data from the AHA Panel Survey
supplemented with the ratio of depreciation to total hospital expenses
obtained from the Medicare cost reports to derive a trend of annual
depreciation expenses for 1963 through 2006.
In order to estimate capital purchases using data on depreciation
expenses, the expected life for each cost category (building and fixed
equipment, movable equipment, and interest) is needed to calculate
vintage weights. We used FY 2006 Medicare cost reports to determine the
expected life of building and fixed equipment and of movable equipment.
The expected life of any piece of equipment can be determined by
dividing the value of the asset (excluding fully depreciated assets) by
its current year depreciation amount. This calculation yields the
estimated useful life of an asset if depreciation were to continue at
current year levels, assuming straight-line depreciation. From the FY
2006 Medicare cost reports, the expected life of building and fixed
equipment was determined to be 25 years, and the expected life of
movable equipment was determined to be 12 years. The FY 2002-based CIPI
was based on an expected life of building and fixed equipment of 23
years. It used 11 years as the expected life for movable equipment.
As we proposed, we used the building and fixed equipment and
movable equipment weights derived from FY 2006 Medicare cost reports to
separate the depreciation expenses into annual amounts of building and
fixed equipment depreciation and movable equipment depreciation (74 FR
24162). Year-end asset costs for building and fixed equipment and
movable equipment were determined by multiplying the annual
depreciation amounts by the expected life calculations from the FY 2006
Medicare cost reports. We then calculated a time series back to 1963 of
annual capital purchases by subtracting the previous year asset costs
from the current year asset costs. From this capital purchase time
series, we were able to calculate the vintage weights for building and
fixed equipment and for movable equipment. Each of these sets of
vintage weights is explained in more detail below.
For building and fixed equipment vintage weights, we used the real
annual capital purchase amounts for building and fixed equipment to
capture the actual amount of the physical acquisition, net of the
effect of price inflation. This real annual purchase amount for
building and fixed equipment was produced by deflating the nominal
annual purchase amount by
[[Page 43859]]
the building and fixed equipment price proxy, BEA's chained price index
for nonresidential construction for hospitals and special care
facilities. Because building and fixed equipment have an expected life
of 25 years, the vintage weights for building and fixed equipment are
deemed to represent the average purchase pattern of building and fixed
equipment over 25-year periods. With real building and fixed equipment
purchase estimates available back to 1963, we averaged nineteen 25-year
periods to determine the average vintage weights for building and fixed
equipment that are representative of average building and fixed
equipment purchase patterns over time. Vintage weights for each 25-year
period are calculated by dividing the real building and fixed capital
purchase amount in any given year by the total amount of purchases in
the 25-year period. This calculation is done for each year in the 25-
year period, and for each of the nineteen 25-year periods. We used the
average of each year across the nineteen 25-year periods to determine
the average building and fixed equipment vintage weights for the FY
2006-based CIPI.
For movable equipment vintage weights, the real annual capital
purchase amounts for movable equipment were used to capture the actual
amount of the physical acquisition, net of price inflation. This real
annual purchase amount for movable equipment was calculated by
deflating the nominal annual purchase amounts by the movable equipment
price proxy, the PPI for machinery and equipment. Based on our
determination that movable equipment has an expected life of 12 years,
the vintage weights for movable equipment represent the average
expenditure for movable equipment over a 12-year period. With real
movable equipment purchase estimates available back to 1963, thirty-two
12-year periods were averaged to determine the average vintage weights
for movable equipment that are representative of average movable
equipment purchase patterns over time. Vintage weights for each 12-year
period are calculated by dividing the real movable capital purchase
amount for any given year by the total amount of purchases in the 12-
year period. This calculation was done for each year in the 12-year
period and for each of the thirty-two 12-year periods. We used the
average of each year across the thirty-two 12-year periods to determine
the average movable equipment vintage weights for the FY 2006-based
CIPI.
For interest vintage weights, the nominal annual capital purchase
amounts for total equipment (building and fixed, and movable) were used
to capture the value of the debt instrument. Because we have determined
that hospital debt instruments have an expected life of 25 years, the
vintage weights for interest are deemed to represent the average
purchase pattern of total equipment over 25-year periods. With nominal
total equipment purchase estimates available back to 1963, nineteen 25-
year periods were averaged to determine the average vintage weights for
interest that are representative of average capital purchase patterns
over time. Vintage weights for each 25-year period are calculated by
dividing the nominal total capital purchase amount for any given year
by the total amount of purchases in the 25-year period. This
calculation is done for each year in the 25-year period and for each of
the nineteen 25-year periods. We used the average of each year across
the nineteen 25-year periods to determine the average interest vintage
weights for the FY 2006-based CIPI.
The vintage weights for the FY 2002-based CIPI and the FY 2006-
based CIPI are presented in Chart 8.
Chart 8--FY 2002 Vintage Weights and FY 2006 Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year FY 2002 23 FY 2006 25 FY 2002 11 FY 2006 12 FY 2002 23 FY 2006 25
years years years years years years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.021 0.021 0.065 0.063 0.010 0.010
2....................................................... 0.022 0.023 0.071 0.067 0.012 0.012
3....................................................... 0.025 0.025 0.077 0.071 0.014 0.014
4....................................................... 0.027 0.027 0.082 0.075 0.016 0.016
5....................................................... 0.029 0.029 0.086 0.079 0.019 0.018
6....................................................... 0.031 0.031 0.091 0.082 0.023 0.020
7....................................................... 0.033 0.032 0.095 0.085 0.026 0.023
8....................................................... 0.035 0.033 0.100 0.086 0.029 0.025
9....................................................... 0.038 0.036 0.106 0.090 0.033 0.028
10...................................................... 0.040 0.038 0.112 0.093 0.036 0.031
11...................................................... 0.042 0.040 0.117 0.102 0.039 0.034
12...................................................... 0.045 0.042 .............. 0.106 0.043 0.038
13...................................................... 0.047 0.044 .............. .............. 0.048 0.041
14...................................................... 0.049 0.045 .............. .............. 0.053 0.044
15...................................................... 0.051 0.046 .............. .............. 0.056 0.047
16...................................................... 0.053 0.047 .............. .............. 0.059 0.050
17...................................................... 0.056 0.048 .............. .............. 0.062 0.053
18...................................................... 0.057 0.050 .............. .............. 0.064 0.057
19...................................................... 0.058 0.050 .............. .............. 0.066 0.059
20...................................................... 0.060 0.050 .............. .............. 0.070 0.060
21...................................................... 0.060 0.048 .............. .............. 0.071 0.060
22...................................................... 0.061 0.048 .............. .............. 0.074 0.062
23...................................................... 0.061 0.047 .............. .............. 0.076 0.063
24...................................................... .............. 0.049 .............. .............. .............. 0.068
25...................................................... .............. 0.048 .............. .............. .............. 0.069
-----------------------------------------------------------------------------------------------
Total............................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
[[Page 43860]]
After the capital cost category weights were computed, it was
necessary to select appropriate price proxies to reflect the rate-of-
increase for each expenditure category. As we proposed, in this final
rule, we used the same price proxies for the FY 2006-based CIPI that
were used in the FY 2002-based CIPI, with the exception of the Boeckh
Construction Index (74 FR 24164). We replaced the Boeckh Construction
Index with BEA's chained price index for nonresidential construction
for hospitals and special care facilities. The BEA index represents
construction of facilities such as hospitals, nursing homes, hospices,
and rehabilitation centers. Although these price indices move similarly
over time, we believe that it is more technically appropriate to use an
index that is more specific to the hospital industry. We believe these
are the most appropriate proxies for hospital capital costs that meet
our selection criteria of relevance, timeliness, availability, and
reliability. The rationale for selecting the price proxies, excluding
the building and fixed equipment price proxy, was explained more fully
in the FY 1997 IPPS final rule (61 FR 46196).
The price proxies are presented in Chart 7.
Chart 9 below compares both the historical and forecasted percent
changes in the FY 2002-based CIPI and the FY 2006-based CIPI.
Chart 9--Comparison of FY 2002-Based and FY 2006-Based Capital Input
Price Index, Percent Change, FY 2004 Through FY 2012
------------------------------------------------------------------------
CIPI, FY CIPI, FY
Fiscal year 2002-based 2006-based
------------------------------------------------------------------------
FY 2004......................................... 0.5 0.8
FY 2005......................................... 0.6 0.9
FY 2006......................................... 0.9 1.1
FY 2007......................................... 1.2 1.3
FY 2008......................................... 1.4 1.4
Forecast:
FY 2009....................................... 1.7 1.5
FY 2010....................................... 1.5 1.2
FY 2011......................................... 1.4 1.3
FY 2012......................................... 1.6 1.4
Average:
FYs 2004-2008................................. 0.9 1.1
FYs 2009-2012................................. 1.6 1.4
------------------------------------------------------------------------
Source: IHS Global Insight, Inc, 2nd Quarter 2009; USMACRO/
CONTROL0609@CISSIM/TL0509.SIM.
IHS Global Insight, Inc. forecasts a 1.2 percent increase in the FY
2006-based CIPI for FY 2010, as shown in Chart 9. The underlying
vintage-weighted price increases for depreciation (including building
and fixed equipment and movable equipment) and interest (including
government/nonprofit and for-profit) are included in Chart 10.
Chart 10--CMS Capital Input Price Index Percent Changes, Total and Depreciation and Interest Components, FYs
2004 Through 2012
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
FY 2004......................................................... 0.8 1.5 -2.6
FY 2005......................................................... 0.9 1.7 -3.1
FY 2006......................................................... 1.1 2.0 -3.2
FY 2007......................................................... 1.3 2.1 -3.4
FY 2008......................................................... 1.4 2.1 -2.6
Forecast:
FY 2009..................................................... 1.5 2.1 -2.0
FY 2010..................................................... 1.2 1.8 -2.1
FY 2011..................................................... 1.3 1.7 -1.4
FY 2012..................................................... 1.4 1.7 -0.7
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc, 2nd Quarter 2009; USMACRO/CONTROL0609@CISSIM/TL0509.SIM.
Rebasing the CIPI from FY 2002 to FY 2006 decreased the percent
change in the FY 2010 forecast by 0.3 percentage point, from 1.5 to
1.2, as shown in Chart 9. The difference in the forecast of the FY 2010
market basket increase is primarily due to the proposed change in the
price proxy for building and fixed equipment as well as the proposed
change in the vintage weights applied to the price proxy for interest.
As mentioned above, we are changing the price proxy used for building
and fixed equipment to BEA's chained price index for nonresidential
construction for hospitals and special care facilities. We believe this
change represents a technical improvement as the BEA price index is an
index that is more representative of the hospital industry. For the FY
2010 update, the result of this change is a forecasted price change in
total depreciation of 1.8 percent in the FY 2006-based CIPI compared to
2.0 percent in the FY 2002-based CIPI. The other primary factor
contributing to the difference is the change in the vintage weights
used to calculate the vintage-weighted price proxy for interest. The
forecasted price change in total interest is -2.1 percent in the FY
2006-based CIPI compared to -1.5 percent in the FY 2002-based CIPI.
This is a result of changing the expected life of hospital debt
instruments from 23 years to 25 years. We did not receive any public
comments on our proposed methodological changes to the capital input
price index published in the FY 2010 IPPS/RY 2010 LTCH PPS proposed
rule (74 FR 24154). Therefore, we are adopting as final, without
modification, the proposed FY 2006-based CIPI for FY 2010 in this final
rule.
V. Other Decisions and Changes to the IPPS for Operating Costs and GME
Costs
A. Reporting of Hospital Quality Data for Annual Hospital Payment
Update
1. Background
a. Overview
CMS is seeking to promote higher quality and more efficient health
care for Medicare beneficiaries. This effort is supported by the
adoption of an increasing number of widely-agreed upon quality
measures. CMS has worked with relevant stakeholders to define measures
of quality in almost every setting and currently measures some aspect
of care for almost all Medicare beneficiaries. These measures assess
structural aspects of care, clinical processes, patient experiences
with care, and, increasingly, outcomes.
[[Page 43861]]
CMS has implemented quality measure reporting programs for multiple
settings of care. The Reporting Hospital Quality Data for Annual
Payment Update (RHQDAPU) program implements a quality reporting program
for hospital inpatient services. In addition, CMS has implemented
quality reporting programs for hospital outpatient services, the
Hospital Outpatient Quality Data Reporting Program (HOP QDRP), and for
physicians and other eligible professionals, the Physician Quality
Reporting Initiative (PQRI). CMS has also implemented quality reporting
programs for home health agencies and skilled nursing facilities that
are based on conditions of participation, and an end-stage renal
disease quality reporting program that is based on conditions for
coverage.
b. Hospital Quality Data Reporting Under Section 501(b) of Public Law
108-173
Section 501(b) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), Public Law 108-173, added section
1886(b)(3)(B)(vii) to the Act. This section established the authority
for the RHQDAPU program and revised the mechanism used to update the
standardized payment amount for inpatient hospital operating costs.
Specifically, section 1886(b)(3)(B)(vii)(I) of the Act, before it was
amended by section 5001(a) of Public Law 109-171, provided for a
reduction of 0.4 percentage points to the update percentage increase
(also known as the market basket update) for FY 2005 through FY 2007
for any subsection (d) hospital that did not submit data on a set of 10
quality indicators established by the Secretary as of November 1, 2003.
It also provides that any reduction would apply only to the fiscal year
involved, and would not be taken into account in computing the
applicable percentage increase for a subsequent fiscal year. The
statute thereby established an incentive for IPPS hospitals to submit
data on the quality measures established by the Secretary, and also
built upon the previously established Voluntary Hospital Quality Data
Reporting Program that we described in the FY 2009 IPPS final rule (73
FR 48598).
We implemented section 1886(b)(3)(B)(vii) of the Act in the FY 2005
IPPS final rule (69 FR 49078) and codified the applicable percentage
change in Sec. 412.64(d) of our regulations. We adopted additional
requirements under the RHQDAPU program in the FY 2006 IPPS final rule
(70 FR 47420).
c. Hospital Quality Data Reporting under Section 5001(a) of Public Law
109-171
Section 5001(a) of the Deficit Reduction Act of 2005 (DRA), Public
Law 109-171, further amended section 1886(b)(3)(B) of the Act to revise
the mechanism used to update the standardized payment amount for
hospital inpatient operating costs, in particular, by adding new
section 1886(b)(3)(B)(viii) to the Act. Specifically, sections
1886(b)(3)(B)(viii)(I) and (II) of the Act provide that the payment
update for FY 2007 and each subsequent fiscal year be reduced by 2.0
percentage points for any subsection (d) hospital that does not submit
quality data in a form and manner, and at a time, specified by the
Secretary. Section 1886(b)(3)(B)(viii)(I) of the Act also provides that
any reduction in a hospital's payment update will apply only with
respect to the fiscal year involved, and will not be taken into account
for computing the applicable percentage increase for a subsequent
fiscal year. In the FY 2007 IPPS final rule (71 FR 48045), we amended
our regulations at Sec. 412.64(d)(2) to reflect the 2.0 percentage
point reduction in the payment update for FY 2007 and subsequent fiscal
years for subsection (d) hospitals that do not comply with requirements
for reporting quality data, as provided for under section
1886(b)(3)(B)(viii) of the Act.
(1) Quality Measures
Section 1886(b)(3)(B)(viii)(III) of the Act requires that the
Secretary expand the ``starter set'' of 10 quality measures that was
established by the Secretary as of November 1, 2003, as the Secretary
determines to be appropriate for the measurement of the quality of care
furnished by a hospital in inpatient settings. In expanding this set of
measures, section 1886(b)(3)(B)(viii)(IV) of the Act requires that,
effective for payments beginning with FY 2007, the Secretary begin to
adopt the baseline set of performance measures as set forth in a report
issued by the Institute of Medicine (IOM) of the National Academy of
Sciences under section 238(b) of Public Law 108-173.\8\
---------------------------------------------------------------------------
\8\ Institute of Medicine, ``Performance Measurement:
Accelerating Improvement,'' December 1, 2005, available at: http://www.iom.edu/CMS/3809/19805/31310.aspx. IOM set forth these baseline
measures in a November 2005 report. However, the IOM report was not
released until December 1, 2005 on the IOM Web site.
---------------------------------------------------------------------------
The IOM measures include: 21 Hospital Quality Alliance (HQA)
quality measures (including the ``starter set'' of 10 quality
measures); the Hospital Consumer Assessment of Health Providers and
Systems (HCAHPS) patient experience of care survey; and 3 structural
measures.\9\ The structural measures are: (1) Adoption of computerized
provider order entry for prescriptions; (2) staffing of intensive care
units with intensivists; and (3) evidence-based hospital referrals.
These structural measures constitute the Leapfrog Group's original
``three leaps,'' and are part of the National Quality Forum's (NQF's)
30 Safe Practices for Better Healthcare. The HCAHPS survey is part of
the Consumer Assessment of Healthcare Providers and Systems (CAHPS)
program, which develops and supports the use of a comprehensive and
evolving family of standardized surveys that ask consumers and patients
to report on and evaluate their experiences with health care. These
surveys cover topics that are important to consumers, such as the
communication skills of providers and the accessibility of services.
CAHPS originally stood for the Consumer Assessment of Health Plans
Study, but as the products have evolved beyond health plans, the name
has evolved as well to capture the full range of survey products and
tools.
---------------------------------------------------------------------------
\9\ Structural measures assess characteristics linked to the
capacity of the provider to deliver quality healthcare. Institute of
Medicine: Division of Health Care Services. Measuring the Quality of
Health Care: A Statement by the National Roundtable on Healthcare
Quality. National Academy Press; Washington, DC 1999.
---------------------------------------------------------------------------
Section 1886(b)(3)(B)(viii)(V) of the Act requires that, effective
for payments beginning with FY 2008, the Secretary add other quality
measures that reflect consensus among affected parties, and to the
extent feasible and practicable, have been set forth by one or more
national consensus building entities. The NQF is a voluntary consensus
standard-setting organization with a diverse representation of
consumer, purchaser, provider, academic, clinical, and other health
care stakeholder organizations. The NQF was established to standardize
health care quality measurement and reporting through its consensus
development process. We have generally adopted NQF-endorsed measures.
However, we believe that consensus among affected parties also can be
reflected by other means, including consensus achieved during the
measure development process, consensus shown through broad acceptance
and use of measures, and consensus through public comment.
Section 1886(b)(3)(B)(viii)(VI) of the Act authorizes the Secretary
to replace any quality measures or indicators in
[[Page 43862]]
appropriate cases, such as where all hospitals are effectively in
compliance with a measure, or the measures or indicators have been
subsequently shown to not represent the best clinical practice. Thus,
the Secretary is granted broad discretion to replace measures that are
no longer appropriate for the RHQDAPU program.
In the FY 2007 IPPS final rule, we began to expand the RHQDAPU
program measures by adding 11 quality measures to the 10-measure
starter set to establish an expanded set of 21 quality measures for the
FY 2007 payment determination (71 FR 48033 through 48037, 48045).
In the CY 2007 OPPS/ASC final rule (71 FR 68201), we adopted six
additional quality measures for the FY 2008 payment determination, for
a total of 27 measures. Two of these measures (30-Day Risk Standardized
Mortality Rates for Heart Failure and 30-Day Risk Standardized
Mortality Rates for AMI) were calculated using existing administrative
Medicare claims data; thus, no additional data submission by hospitals
was required for these two measures. The measures used for the FY 2008
payment determination included, for the first time, the HCAHPS patient
experience of care survey.
In the FY 2008 IPPS final rule (72 FR 47348 through 47358) and the
CY 2008 OPPS/ASC final rule with comment period (72 FR 66875 through
66877), we added three additional process measures to the RHQDAPU
program measure set. (These three measures are SCIP-Infection-4:
Cardiac Surgery Patients with Controlled 6AM Postoperative Serum
Glucose, SCIP-Infection-6: Surgery Patients with Appropriate Hair
Removal, and Pneumonia 30-day mortality (Medicare patients).) The
addition of these 3 measures brought the total number of RHQDAPU
program measures to be used for the FY 2009 payment determination to 30
(72 FR 66876). The 30 measures used for the FY 2009 annual payment
determination are listed in the FY 2009 IPPS final rule (73 FR 48600
through 48601).
For the FY 2010 payment determination, we added 15 new measures to
the RHQDAPU program measure set and retired one. Of the new measures,
13 were adopted in the FY 2009 IPPS final rule (73 FR 48602 through
48611) and two additional measures were finalized in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68780 through 68781). This
resulted in an expansion of the RHQDAPU program measures from 30
measures for the FY 2009 payment determination to 44 measures for the
FY 2010 payment determination. The RHQDAPU program measures for the FY
2010 payment determination consist of: 26 chart-abstracted process
measures, which measure care provided for Acute Myocardial Infarction
(AMI), Heart Failure (HF), Pneumonia (PN), or Surgical Care Improvement
(SCIP); 6 claims-based measures, which evaluate 30-day mortality or 30-
day readmission rates for AMI, HF, or PN; 9 AHRQ claims-based patient
safety/inpatient quality indicator measures; 1 claims-based nursing
sensitive measure; 1 structural measure that assesses participation in
a systematic database for cardiac surgery; and the HCAHPS patient
experience of care survey. The measures are listed below.
------------------------------------------------------------------------
RHQDAPU program quality
Topic measures for the FY 2010
payment determination
------------------------------------------------------------------------
Acute Myocardial Infarction (AMI)...... AMI-1 Aspirin at
arrival.
AMI-2 Aspirin
prescribed at discharge.
AMI-3 Angiotensin
Converting Enzyme Inhibitor
(ACE-I) or Angiotensin II
Receptor Blocker (ARB) for
left ventricular systolic
dysfunction.
AMI-4 Adult smoking
cessation advice/counseling.
AMI-5 Beta blocker
prescribed at discharge.
AMI-6 Beta blocker at
arrival.
AMI-7a Fibrinolytic
(thrombolytic) agent received
within 30 minutes of hospital
arrival.
AMI-8a Timing of
Receipt of Primary
Percutaneous Coronary
Intervention (PCI).
Heart Failure (HF)..................... HF-1 Discharge
instructions.
HF-2 Left ventricular
function assessment.
HF-3 Angiotensin
Converting Enzyme Inhibitor
(ACE-I) or Angiotensin II
Receptor Blocker (ARB) for
left ventricular systolic
dysfunction.
HF-4 Adult smoking
cessation advice/counseling.
Pneumonia (PN)......................... PN-2 Pneumococcal
vaccination status.
PN-3b Blood culture
performed before first
antibiotic received in
hospital.
PN-4 Adult smoking
cessation advice/counseling.
PN-5c Timing of
receipt of initial antibiotic
following hospital arrival.
PN-6 Appropriate
initial antibiotic selection.
PN-7 Influenza
vaccination status.
Surgical Care Improvement Project SCIP-1 Prophylactic
(SCIP). antibiotic received within 1
hour prior to surgical
incision.
SCIP-3 Prophylactic
antibiotics discontinued
within 24 hours after surgery
end time.
SCIP-VTE-1: Venous
thromboembolism (VTE)
prophylaxis ordered for
surgery patients.
SCIP-VTE-2: VTE
prophylaxis within 24 hours
pre/post surgery.
SCIP-Infection-2:
Prophylactic antibiotic
selection for surgical
patients.
SCIP-Infection-4:
Cardiac Surgery Patients with
Controlled 6AM Postoperative
Serum Glucose.
SCIP-Infection-6:
Surgery Patients with
Appropriate Hair Removal.
[[Page 43863]]
SCIP-Cardiovascular-2:
Surgery Patients on a Beta
Blocker Prior to Arrival Who
Received a Beta Blocker During
the Perioperative Period.
Mortality Measures (Medicare Patients). MORT-30-AMI: Acute
Myocardial Infarction 30-day
mortality-Medicare patients.
MORT-30-HF: Heart
Failure 30-day mortality--
Medicare patients.
MORT-30-PN: Pneumonia
30-day mortality --Medicare
patients.
Patients' Experience of Care........... HCAHPS survey.
Readmission Measures (Medicare READ-30-HF: Heart
Patients). Failure 30[dash]Day Risk
Standardized Readmission
Measure (Medicare patients).
READ-30-AMI: Acute
Myocardial Infarction
30[dash]Day Risk Standardized
Readmission Measure (Medicare
patients).
READ-30-PN: Pneumonia
30[dash]Day Risk Standardized
Readmission Measure (Medicare
patients).
AHRQ Patient Safety Indicators (PSIs), PSI 04: Death among
Inpatient Quality Indicators (IQIs) surgical patients with
and Composite Measures. treatable serious
complications.
PSI 06: Iatrogenic
pneumothorax, adult.
PSI 14: Postoperative
wound dehiscence.
PSI 15: Accidental
puncture or laceration.