[Federal Register Volume 78, Number 160 (Monday, August 19, 2013)]
[Rules and Regulations]
[Pages 50496-51040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-18956]
[[Page 50495]]
Vol. 78
Monday,
No. 160
August 19, 2013
Part II
Department of Health and Human Services
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Center for Medicare & Medicaid Services
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42 CFR Parts 412, 413, 414, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long Term Care; Hospital Prospective
Payment System and Fiscal Year 2014 Rates; Quality Reporting
Requirements for Specific Providers; Hospital Conditions of
Participation; Payment Policies Related to Patient Status; Final Rule
Federal Register / Vol. 78, No. 160 / Monday, August 19, 2013 / Rules
and Regulations
[[Page 50496]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 414, 419, 424, 482, 485, and 489
[CMS-1599-F; CMS-1455-F]
RINs 0938-AR53 and 0938-AR73
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Fiscal Year 2014 Rates; Quality Reporting
Requirements for Specific Providers; Hospital Conditions of
Participation; Payment Policies Related to Patient Status
AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.
ACTION: Final rules.
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SUMMARY: We are revising the Medicare hospital inpatient prospective
payment systems (IPPS) for operating and capital-related costs of acute
care hospitals to implement changes arising from our continuing
experience with these systems. Some of the changes implement certain
statutory provisions contained in the Patient Protection and Affordable
Care Act and the Health Care and Education Reconciliation Act of 2010
(collectively known as the Affordable Care Act) and other legislation.
These changes will be applicable to discharges occurring on or after
October 1, 2013, unless otherwise specified in this final rule. We also
are updating the rate-of-increase limits for certain hospitals excluded
from the IPPS that are paid on a reasonable cost basis subject to these
limits. The updated rate-of-increase limits will be effective for cost
reporting periods beginning on or after October 1, 2013.
We also are updating the payment policies and the annual payment
rates for the Medicare prospective payment system (PPS) for inpatient
hospital services provided by long-term care hospitals (LTCHs) and
implementing certain statutory changes that were applied to the LTCH
PPS by the Affordable Care Act. Generally, these updates and statutory
changes will be applicable to discharges occurring on or after October
1, 2013, unless otherwise specified in this final rule.
In addition, we are making a number of changes relating to direct
graduate medical education (GME) and indirect medical education (IME)
payments. We are establishing new requirements or have revised
requirements for quality reporting by specific providers (acute care
hospitals, PPS-exempt cancer hospitals, LTCHs, and inpatient
psychiatric facilities (IPFs)) that are participating in Medicare.
We are updating policies relating to the Hospital Value-Based
Purchasing (VBP) Program and the Hospital Readmissions Reduction
Program. In addition, we are revising the conditions of participation
(CoPs) for hospitals relating to the administration of vaccines by
nursing staff as well as the CoPs for critical access hospitals
relating to the provision of acute care inpatient services.
We are finalizing proposals issued in two separate proposed rules
that included payment policies related to patient status: payment of
Medicare Part B inpatient services; and admission and medical review
criteria for payment of hospital inpatient services under Medicare Part
A.
DATES: Effective Date: These final rules are effective on October 1,
2013.
FOR FURTHER INFORMATION CONTACT:
Tzvi Hefter, (410) 786-4487, and Ing-Jye Cheng, (410) 786-4548,
Operating Prospective Payment, MS-DRGs, Hospital-Acquired Conditions
(HAC), Wage Index, New Medical Service and Technology Add-On Payments,
Hospital Geographic Reclassifications, Graduate Medical Education,
Capital Prospective Payment, Excluded Hospitals, and Medicare
Disproportionate Share Hospital (DSH) Issues.
Michele Hudson, (410) 786-4487, and Judith Richter, (410) 786-2590,
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Mollie Knight, (410) 786-7948 and Bridget Dickensheets, (410) 786-8670,
Market Basket for IPPS Hospitals and LTCHs Issues.
Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital
Demonstration Program Issues.
James Poyer, (410) 786-2261, Hospital Inpatient Quality Reporting and
Hospital Value-Based Purchasing--Program Administration, Validation,
and Reconsideration Issues.
Shaheen Halim, (410) 786-0641, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare
Providers and Systems Issues; and Readmission Measures for Hospitals
Issues.
Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality
Reporting--Hospital Consumer Assessment of Healthcare Providers and
Systems Measures Issues.
Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing
Efficiency Measures Issues.
James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality
Reporting Issues.
Allison Lee, (410) 786-8691 and Jeffrey Buck, (410) 786-0407, Inpatient
Psychiatric Facility Quality Reporting Issues.
Sarah Fahrendorf, (410) 786-3112, Conditions of Participation (CoPs)
for CAHs Issues.
Commander Scott Cooper, USPHS, (410) 786-9465, Hospital Conditions of
Participation (CoPs)--Pneumococcal Vaccine Issues.
Ann Marshall, (410) 786-3059, Medicare Part B Inpatient Billing:
Payable Part B Inpatient and Part B Outpatient Services and Beneficiary
Utilization Days; and Physician Order and Certification for Payment of
Hospital Inpatient Services under Medicare Part A Issues.
Susanne Seagrave, (410) 786-0044, Physician Order and Certification for
Payment of Inpatient Rehabilitation Facility Services under Medicare
Part A Issues.
Jennifer Dupee, (410) 786-6537, and Jennifer Phillips, (410) 786-1023,
Medical Review Criteria for Payment of Hospital Inpatient Services
under Medicare Part A Issues.
David Danek, (617) 565-2682, Medicare Part B Inpatient Billing:
Hospital and Beneficiary Appeals Issues.
Fred Grabau, (410) 786-0206, Medicare Part B Inpatient Billing: Time
Limits for Filing Claims Issues.
Brian Pabst, (410) 786-2487, Medicare Part B Inpatient Billing:
Coordination of Benefits Issues.
Anthony Hodge, (410) 786-6645, Qualification for Coverage of Skilled
Nursing Facilities Services Issues.
SUPPLEMENTARY INFORMATION:
Electronic Access
This Federal Register document is also available from the Federal
Register online database through Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the Internet at: http://www.gpo.gov/fdsys.
Tables Available Only Through the Internet on the CMS Web Site
In the past, a majority of the tables referred to throughout this
preamble and in the Addendum to the proposed rule and the final rule
were published in the Federal Register as part of the annual proposed
and final rules. However, beginning in FY 2012, some of
[[Page 50497]]
the IPPS tables and LTCH PPS tables are no longer published in the
Federal Register. Instead, these tables will be available only through
the Internet. The IPPS tables for this final rule are available only
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Click on the link on the left side of the screen titled, ``FY 2014 IPPS
Final Rule Home Page'' or ``Acute Inpatient--Files for Download''. The
LTCH PPS tables for this FY 2014 final rule are available only through
the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html
under the list item for Regulation Number CMS-1599-F. For complete
details on the availability of the tables referenced in this final
rule, we refer readers to section VI. of the Addendum to this final
rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS Web sites identified above should contact
Michael Treitel at (410) 786-4552.
Acronyms
3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
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
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public
Law 107-105
ASITN American Society of Interventional and Therapeutic
Neuroradiology
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Public
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Benefits Improvement and Protection Act of 2000,
Public Law 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law
99-272
COLA Cost-of-living adjustment
CoP [Hospital] condition of participation
CPI Consumer price index
CRNA Certified registered nurse anesthetist
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
ECI Employment cost index
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law
99-272
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FUH Follow-up after hospitalization for mental illness
FY Fiscal year
GAAP Generally Accepted Accounting Principles
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HBIPS Hospital-based inpatient psychiatric services
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996,
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
ICD-9-CM International Classification of Diseases, Ninth Revision,
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision,
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision,
Procedure Coding System
ICR Information collection requirement
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
IVR Interactive voice response
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCHQR Long-Term Care Hospital Quality Reporting
MA Medicare Advantage
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
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
[[Page 50498]]
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public
Law 110-173
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
NHSN National Healthcare Safety Network
NOP Notice of Participation
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 1986, 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
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting 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
SCIP Surgical Care Improvement Project
SFY State fiscal year
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, 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
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism
Table of Contents
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
2. Summary of the Major Provisions
3. Summary of Costs and Benefits
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System
(IPPS)
2. Hospitals and Hospital Units Excluded from the IPPS
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
4. Critical Access Hospitals (CAHs)
5. Payments for Graduate Medical Education (GME)
C. Provisions of the Patient Protection and Affordable Care Act
(Pub. L. 111-148), the Health Care and Education Reconciliation Act
of 2010 (Pub. L. 111-152), and the American Taxpayer Relief Act of
2012 (Pub. L. 112-240)
D. Issuance of a Notice of Proposed Rulemaking
E. Public Comments Received in Response to the FY 2014 IPPS/LTCH
PPS Proposed Rule
F. Finalization of the Proposed Rule on Medicare Part B
Inpatient Billing in Hospitals
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
B. MS-DRG Reclassifications
C. Adoption of the MS-DRGs in FY 2008
D. FY 2014 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
2. Adjustment to the Average Standardized Amounts Required by
Public Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of
Public Law 110-90
b. Recoupment or Repayment Adjustments in FYs 2010 through 2012
Required by Section 7(b)(1)(B) Public Law 110-90
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
5. Recoupment or Repayment Adjustment Authorized by Section
7(b)(1)(B) of Public Law 110-90
6. Recoupment or Repayment Adjustment Authorized by Section 631
of the American Taxpayer Relief Act of 2012 (ATRA).
7. Additional Prospective Adjustments for the MS-DRG
Documentation and Coding Effect through FY 2010 Authorized under
Section 1886(d)(3)(A)(vi) of the Act
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
2. Discussion and Policies for FY 2014
F. Adjustment to MS-DRGs for Preventable Hospital-Acquired
Conditions (HACs), Including Infections
1. Background
2. HAC Selection
3. Present on Admission (POA) Indicator Reporting
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
5. Current HACs and Previously Considered Candidate HACs
6. RTI Program Evaluation
7. Current and Previously Considered Candidate HACs--RTI Report
on Evidence-Based Guidelines
G. Changes to Specific MS-DRG Classifications
1. Pre-Major Diagnostic Categories (Pre-MDCs): Heart Transplants
and Liver Transplants
2. MDC 1(Diseases and Disorders of the Nervous System): Tissue
Plasminogen Activator (tPA) (rtPA) Administration within 24 Hours
Prior to Admission
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and
Throat)
a. Endoscopic Placement of a Bronchial Valve
b. Pulmonary Thromboendarterectomy (PTE) with Full Circulatory
Arrest
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Discharge/Transfer to Designated Disaster Alternative Care
Site
b. Discharges/Transfers with a Planned Acute Care Hospital
Inpatient Readmission
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System
and Connective Tissue)
a. Reverse Shoulder Procedures
b. Total Ankle Replacement Procedures
6. MDC 15 (Newborns and Other Neonates with Conditions
Originating in the Perinatal Period)
[[Page 50499]]
a. Persons Encountering Health Services for Specific Procedures,
Not Carried Out
b. Discharges/Transfers of Neonates with a Planned Acute Care
Hospital Inpatient Readmission
7. Medicare Code Editor (MCE) Changes
a. Age Conflict Edit
b. Discharge Status Code Updates
8. Surgical Hierarchies
9. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusion List
b. CC Exclusions List for FY 2014
10. Review of Procedure Codes in MS-DRGs 981 through 983, 984
through 986, and 987 through 989
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-
DRGs 987 through 989 into MDCs
b. Reassignment of Procedures among MS-DRGs 981 through 983, 984
through 986, and 987 through 989
c. Adding Diagnosis or Procedure Codes to MDCs
11. Changes to the ICD-9-CM Coding System, Including Discussion
of the Replacement of the ICD-9-CM System with the ICD-10-CM and
ICD-10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
b. Code Freeze
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on
Hospital Inpatient Claims
d. ICD-10 MS-DRGs
H. Recalibration of FY 2014 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
2. Methodology for Calculation of the Relative Weights
3. Development of National Average CCRs
4. Bundled Payments for Care Improvement (BPCI) Initiative
I. Add-On Payments for New Services and Technologies
1. Background
2. Public Input Before Publication of a Notice of Proposed
Rulemaking on Add-On Payments
3. FY 2014 Status of Technology Approved for FY 2013 Add-On
Payments
a. AutoLaser Interstitial Therapy (Auto LITT[supreg]) System
b. Glucarpidase (Trade Brand Voraxaze[supreg])
c. DIFICID[supreg] (Fidaxomicin) Tablets
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
4. FY 2014 Applications for New Technology Add-On Payments
a. Kcentra[supreg]
b. Argus[supreg] II Retinal Prosthesis System
c. Responsive Neurostimulator (RNS) System
d. Zilver[supreg] PTX[supreg] Drug Eluting Stent
e. MitraClip[supreg] System
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
B. Core-Based Statistical Areas for the Hospital Wage Index
C. Worksheet S-3 Wage Data for the FY 2014 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
D. Verification of Worksheet S-3 Wage Data
E. Method for Computing the FY 2014 Unadjusted Wage Index
F. Occupational Mix Adjustment to the FY 2014 Wage Index
1. Development of Data for the FY 2014 Occupational Mix
Adjustment Based on the 2010 Occupational Mix Survey
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
3. Calculation of the Occupational Mix Adjustment for FY 2014
G. Analysis and Implementation of the Occupational Mix
Adjustment and the FY 2014 Occupational Mix Adjusted Wage Index
1. Analysis of the Occupational Mix Adjustment and the
Occupational Mix Adjusted Wage Index
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
b. Imputed Floor
c. Frontier Floor
3. FY 2014 Wage Index Tables
H. Revisions to the Wage Index Based on Hospital Redesignations
and Reclassifications
1. General Policies and Effects of Reclassification/
Redesignation
2. FY 2014 MGCRB Reclassifications
a. FY 2014 Reclassification Requirements and Approvals
b. Applications for Reclassifications for FY 2015
3. Redesignations of Hospitals under Section 1886(d)(8)(B) of
the Act
4. Reclassifications under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
5. Waiving Lugar Redesignation for the Out-Migration Adjustment
I. FY 2014 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
J. Process for Requests for Wage Index Data Corrections
K. Labor-Related Share for the Proposed FY 2014 Wage Index
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
2. Cost Category Computation
3. Selection of Price Proxies
4. Labor-Related Share
C. Market Basket for Certain Hospitals Presently Excluded from
the IPPS
D. Rebasing and Revising the Capital Input Price Index (CIPI)
V. Other Decisions and Changes to the IPPS for Operating Costs and
Graduate Medical Education (GME) Costs
A. Inpatient Hospital Updates for FY 2014 (Sec. Sec. 412.64(d)
and 412.211(c))
1. FY 2014 Inpatient Hospital Update
2. FY 2014 Puerto Rico Hospital Update
B. Rural Referral Centers (RRCs): Annual Update to Case-Mix
Index (CMI) and Discharge Criteria (Sec. 412.96)
1. Case-Mix Index (CMI)
2. Discharges
C. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Background
a. Original Implementation of the Low-Volume Hospital Payment
Adjustment
b. Affordable Care Act Provisions for FYs 2011 and 2012
2. Provisions of the ATRA for FY 2013
a. Background
b. Conforming Regulatory Changes
3. Low-Volume Hospital Definition and Payment Adjustment for FY
2014 and Subsequent Years
D. Indirect Medical Education (IME) Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2014
2. Other Policy Changes Affecting GME
E. Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) Sec. 412.106)
1. Background
2. Counting of Patient Days Associated with Patients Enrolled in
Medicare Advantage Plans in the Medicare and Medicaid Fractions of
the Disproportionate Share Patient Percentage (DPP) Calculation
3. New Payment Adjustment Methodology for Medicare DSH under
Section 3133 of the Affordable Care Act
F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Background
2. Provisions of the ATRA for FY 2013
a. Background
b. Conforming Regulatory Changes
c. Expiration of the MDH Program
G. Hospital Readmissions Reduction Program (Sec. Sec. 412.150
through 412.154)
1. Statutory Basis for the Hospital Readmissions Reduction
Program
2. Overview
3. FY 2014 Policies for the Hospital Readmissions Reduction
Program
a. Overview
b. Refinement of the Readmission Measures and Related
Methodology for FY 2014 and Subsequent Years Payment Determinations
c. Expansion of the Applicable Conditions for FY 2015
d. Hospitals Paid under Section 1814(b)(3) of the Act, Including
the Process to be Exempt from the Hospital Readmissions Reduction
Program and Definition of ``Base Operating DRG Payment Amount'' for
Such Hospitals (Sec. 412.152 and Sec. 412.154(d))
e. Floor Adjustment Factor for FY 2014 (Sec. 412.154(c)(2))
f. Applicable Period for FY 2014
g. Refinements of the Methodology to Calculate the Aggregate
Payments for Excess Readmissions
h. Clarification of Reporting Hospital-Specific Information,
Including Opportunity to Review and Submit Corrections
H. Hospital Value-Based Purchasing Program (Sec. Sec. 412.160
through 412.165)
1. Statutory Background
2. Overview of the FY 2013 Hospital VBP Program
3. FY 2014 Payment Details
[[Page 50500]]
4. FY 2014 Hospital VBP Program Measures
5. FY 2015 Hospital VBP Program Measures
6. FY 2016 Hospital VBP Program Measures
a. Measures Previously Adopted and Removal of AMI-8a, PN-3b, and
HF-1 Measures
b. New Measures for the FY 2016 Hospital VBP Program
c. Future Measures for the Efficiency Domain
7. Performance Periods and Baseline Periods
a. Background
b. Clinical Process of Care Domain Performance Period and
Baseline Periods for the FY 2016 Hospital VBP Program
c. Experience of Care Domain Performance Period and Baseline
Period for the FY 2016 Hospital VBP Program
d. Efficiency Domain Measure Performance Period and Baseline
Period for the FY 2016 Hospital VBP Program
e. Outcome Domain Performance Periods and Baseline Periods for
the FY 2017 through FY 2019 Hospital VBP Programs
8. Performance Standards for the Hospital VBP Program
a. Background
b. Performance Standards for the FY 2016 Hospital VBP Program
Measures
c. Certain Performance Standards for the FY 2017, FY 2018, and
FY 2019 Hospital VBP Programs
9. FY 2016 Hospital VBP Program Scoring Methodology
a. General Hospital VBP Program Scoring Methodology
b. Domain Weighting for the FY 2016 Hospital VBP Program for
Hospitals That Receive a Score on All Domains
c. Domain Weighting for the FY 2016 Hospital VBP Program for
Hospitals Receiving Scores on Fewer than Four Domains
d. Domain Reclassification and Domain Weighting for the FY 2017
Hospital VBP Program
e. Disaster/Extraordinary Circumstance Waivers under the
Hospital VBP Program
10. Applicability of the Hospital VBP Program to Hospitals
a. Background
b. Minimum Numbers of Cases and Measures for the FY 2016
Hospital VBP Program Outcome Domain
c. Hospitals Paid under Section 1814(b)(3) of the Act
I. Hospital-Acquired Condition (HAC) Reduction Program
1. Background
2. Statutory Basis for the HAC Reduction Program
3. Implementation of the HAC Reduction Program
a. Definitions
b. Payment Adjustment under the HAC Reduction Program, Including
Exemptions
c. Measure Selection and Conditions, Including a Proposed Risk-
Adjustment Scoring Methodology
d. Criteria for Applicable Hospitals and Performance Scoring
e. Reporting Hospital-Specific Information, Including the Review
and Correction of Information
f. Limitation on Administrative and Judicial Review
J. Payment for Graduate Medical Education (GME) and Indirect
Medical Education (IME) Costs (Sec. Sec. 412.105, 413.75 through
413.83)
1. Background
2. Inclusion of Labor and Delivery Days in the Calculation of
Medicare Utilization for Direct GME Payment Purposes and for Other
Medicare Purposes
3. Notice of Closure of Teaching Hospital and Opportunity to
Apply for Available Slots
4. Payments for Residents Training in Approved Residency
Programs at CAHs
a. Background
b. Residents in Approved Medical Residency Training Programs
That Train at CAHs
5. Expiration of Inflation Update Freeze for High Per Resident
Amounts (PRAs)
K. Rural Community Hospital Demonstration Program
1. Background
2. FY 2014 Budget Neutrality Offset Amount
L. Hospital Emergency Services under EMTALA: Technical Change
(Sec. 489.24(f))
M. Hospital Services Furnished under Arrangements
VI. Changes to the IPPS for Capital-Related Costs
A. Overview
B. Additional Provisions
1. Exception Payments
2. New Hospitals
3. Hospitals Located in Puerto Rico
C. Other Changes for FY 2014--Adjustment to Offset the Cost of
the Policy Proposal on Admission and Medical Review Criteria for
Hospital Inpatient Services under Medicare Part A
D. Annual Update for FY 2014
VII. Changes for Hospitals Excluded from the IPPS
A. Rate-of-Increase in Payments to Excluded Hospitals for FY
2014
B. Report of Adjustment (Exceptions) Payments
C. Critical Access Hospitals (CAHs): Changes to Conditions of
Participation (CoPs)
1. Background
2. Policy Changes
VIII. Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2014
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 for FY 2014
1. Background
2. Patient Classifications into MS-LTC-DRGs
a. Background
b. Changes to the MS-LTC-DRGs for FY 2014
3. Development of the FY 2014 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG
Relative Weights
b. Development of the MS-LTC-DRG Relative Weights for FY 2014
c. Data
d. Hospital-Specific Relative Value (HSRV) Methodology
e. Treatment of Severity Levels in Developing the MS-LTC-DRG
Relative Weights
f. Low-Volume MS-LTC-DRGs
g. Steps for Determining the FY 2014 MS-LTC-DRG Relative Weights
C. LTCH PPS Payment Rates for FY 2014
1. Overview of Development of the LTCH Payment Rates
2. FY 2014 LTCH PPS Annual Market Basket Increase
a. Overview
b. Revision of Certain Market Basket Updates as Required by the
Affordable Care Act
c. Adjustment to the Annual Update to the LTCH PPS Standard
Federal Rate under the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
1. Background
2. Reduction to the Annual Update to the LTCH PPS Standard
Federal Rate under the LTCHQR Program
d. Market Basket Under the LTCH PPS for FY 2014
e. Annual Market Basket Update for LTCHs for FY 2014
3. Adjustment for the Second Year of the Phase-In of the One-
Time Prospective Adjustment to the Standard Federal Rate under Sec.
412.523(d)(3)
D. Expiration of Certain Payment Rules for LTCH Services--The
25-Percent Threshold Payment Adjustment
E. Research on the Development of a Patient Criteria-Based
Payment Adjustment under the LTCH PPS
1. Overview
2. MedPAC's 2004 Report to Congress
3. LTCHs in the Medicare Program
4. CMS' Research: The RTI Report
5. CMS' Report to Congress: Determining Medical Necessity and
Appropriateness of Care for Medicare Long-Term Care Hospitals
6. Current Practices in LTCHs
7. Identification of Chronically Critically Ill/Medically
Complex (CCI/MC) Patients
8. LTCH PPS Payments for CCI/MC Patients
IX. Quality Data Reporting Requirements for Specific Providers and
Suppliers
A. Hospital Inpatient Quality Reporting (IQR) Program
1. Background
a. History of Measures Adopted for the Hospital IQR Program
b. Maintenance of Technical Specifications for Quality Measures
c. Public Display of Quality Measures
2. Removal and Suspension of Hospital IQR Program Measures
[[Page 50501]]
a. Considerations in Removing Quality Measures from the Hospital
IQR Program
b. Hospital IQR Program Measures Removed in Previous Rulemaking
c. Removal of Hospital IQR Program Measures for the FY 2016
Payment Determination and Subsequent Years
d. Suspension of Data Collection for the FY 2014 Payment
Determination and Subsequent Years
3. Process for Retaining Previously Adopted Hospital IQR Program
Measures for Subsequent Payment Determinations
4. Additional Considerations in Expanding and Updating Quality
Measures under the Hospital IQR Program
5. Changes to Hospital IQR Program Measures Previously Adopted
for the FY 2015 and FY 2016 Payment Determinations and Subsequent
Years
a. Previously Adopted Hospital IQR Program Measures for the FY
2015 Payment Determination and Subsequent Years
b. Refinements to Existing Measures in the Hospital IQR Program
6. Additional Hospital IQR Program Measures for the FY 2016
Payment Determination and Subsequent Years
a. Hospital 30-Day, All-Cause, Risk-Standardized Readmission
Rate (RSRR) Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization Measure (NQF 1891)
b. Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate
(RSMR) Following Chronic Obstructive Pulmonary Disease (COPD)
Hospitalization Measure (NQF 1893)
c. Hospital 30-day, All-Cause Risk-Standardized Rate of
Readmission Following Acute Ischemic Stroke (Stroke Readmission)
Measure
d. Hospital 30-Day, All-Cause Risk-Standardized Rate of
Mortality Following an Admission for Acute Ischemic Stroke (Stroke
Mortality) Measure
e. Hospital Risk-Standardized Payment Associated with a 30-day
Episode-of-Care for Acute Myocardial Infarction (AMI) Measure
7. Electronic Clinical Quality Measures
8. Possible New Quality Measures and Measure Topics for Future
Years
9. Form, Manner, and Timing of Quality Data Submission
a. Background
b. Procedural Requirements for the FY 2016 Payment Determination
and Subsequent Years
c. Data Submission Requirements for Chart-Abstracted Measures
d. Data Submission Requirements for Quality Measures That May be
Voluntarily Electronically Reported for the FY 2016 Payment
Determination
e. Sampling and Case Thresholds for the FY 2016 Payment
Determination and Subsequent Years
f. HCAHPS Requirements for the FY 2017 Payment Determination and
Subsequent Years
g. Data Submission Requirements for Structural Measures for the
FY 2015 and FY 2016 Payment Determinations
h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
10. Modifications to the Validation Process for Chart-Abstracted
Measures under the Hospital IQR Program
a. Timing and Number of Quarters Included in Validation
b. Selection of Measures and Sampling of Charts to be Included
in Validation
c. Procedures for Scoring Records for Validation
d. Procedures to Select Hospitals for Validation
e. Procedures for Submitting Records for Validation
11. Data Accuracy and Completeness Acknowledgement Requirements
for the FY 2015 Payment Determination and Subsequent Years
12. Public Display Requirements for the FY 2016 Payment
Determination and Subsequent Years
13. Reconsideration and Appeal Procedures for the FY 2015
Payment Determination and Subsequent Years
14. Hospital IQR Program Extraordinary Circumstances Extensions
or Waivers
B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
1. Statutory Authority
2. Covered Entities
3. Previously Finalized Quality Measures for PCHs for the FY
2014 Program Year and Subsequent Years
4. Considerations in the Selection of the Quality Measures
5. New Quality Measures
a. New Measure Beginning for the FY 2015 Program Year and
Subsequent Years--NHSN Healthcare-Associated Infection (HAI)
Measure: Surgical Site Infection (SSI) (NQF 0753)
b. New Measures Beginning for the FY 2016 PQHQR Program Year and
Subsequent Years
6. Possible New Quality Measure Topics for Future Years
7. Maintenance of Technical Specifications for Quality Measures
8. Public Display Requirements for the FY 2014 Program Year and
Subsequent Years
9. Form, Manner, and Timing of Data Submission Beginning with FY
2015 Program Year and Subsequent Years
a. Background
b. Waivers from Program Requirements
c. Reporting Periods and Submission Timelines for the Finalized
SSI Measure
d. Exceptions to Reporting and Data Submission for HAI Measures
(CAUTI, CLABSI, and SSI)
e. Reporting and Data Submission Requirements for the Finalized
Clincial Process/Oncology Care Measures
f. Reporting and Data Submission Requirements for the Finalized
SCIP Measures
g. HCAHPS Requirements
C. Long-Term Care Hospital Quality Reporting (LTCHQR) Program
1. Statutory History
2. General Considerations Used for Selection of Quality Measures
for the LTCHQR Program
3. Process for Retention of LTCHQR Program Measures Adopted in
Previous Payment Determinations
4. Process for Adopting Changes to LTCHQR Program Measures
5. Previously Adopted Quality Measures for the FY 2014 and FY
2015 Payment Determinations and Subsequent Years
6. Previously Adopted Quality Measures for the FY 2016 Payment
Determination and Subsequent Years
7. Revisions to Previously Adopted Quality Measures
a. Revisions for Influenza Vaccination Coverage among Healthcare
Personnel (NQF 0431)
b. Revisions for Percent of Residents or Patients Who Were
Assessed and Appropriately Given the Seasonal Influenza Vaccine
(Short-Stay) (NQF 0680) for the FY 2016 Payment
Determination and Subsequent Years
c. Revisions for Percent of Residents or Patients with Pressure
Ulcers That Are New or Worsened (Short-Stay) (NQF 0678) for
the FY 2015 Payment Determination and Subsequent Years
8. New LTCHQR Program Quality Measures Affecting the FY 2017 an
FY 2018 Payment Determinations and Subsequent Years
a. Considerations in Updating and Expanding Quality Measures
under the LTCHQR Program for the FY 2017 Payment Determination and
Subsequent Years
b. New LTCHQR Program Quality Measures for the FY 2017 Payment
Determination and Subsequent Years
c. New LTCHQR Program Quality Measure for the FY 2018 Payment
Determination and Subsequent Years
d. LTCHQR Program Quality Measures and Concepts under
Consideration for Future Years Payment Determinations
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2016 Payment Determination and Subsequent Years
a. Background
b. Finalized Timeline for Data Submission under the LTCHQR
Program for the FY 2016 Payment Determination
c. Timeline for Data Submission for the NQF 0431
Influenza Vaccination Coverage Among Healthcare Personnel Measure
for the FY 2016 Payment Determination and Subsequent Years
d. Timeline for Data Submission for the NQF 0680
Percent of Residents or Patients Who Were Assessed and Appropriately
Given the Seasonal Influenza Vaccine (Short Stay) Measure for the FY
2016 Payment Determination and Subsequent Years
e. Timeline for Data Submission under the LTCHQR Program for the
FY 2017 Payment Determination and Subsequent Years
f. Timeline for Data Submission under the LTCHQR Program for the
FY 2018 Payment Determination and Subsequent Years
10. Public Display of Data Quality Measures for the LTCHQR
Program
[[Page 50502]]
11. LTCHQR Program Submission Waiver Requirements for the FY
2015 Payment Determination and Subsequent Years
12. LTCHQR Program Reconsideration and Appeals for the FY 2015
Payment Determination and Subsequent Years
a. LTCHQR Program Reconsideration and Appeals for the FY 2014
Payment Determination
b. LTCHQR Program Reconsideration and Appeals for the FY 2015
Payment Determination
D. Inpatient Psychiatric Facilities Quality Reporting (IPFQR)
Program
1. Statutory Authority
2. Application of the Payment Update Reduction for Failure to
Report for the FY 2014 Payment Determination and Subsequent Years
3. Covered Entities
4. Considerations in Selecting Quality Measures
5. Quality Measures for the FY 2015 Payment Determination and
Subsequent Years
a. Background
b. New Quality Measures for the FY 2016 Payment Determination
and Subsequent Years
c. Maintenance of Technical Specifications for Quality Measures
6. Request for Voluntary Information--IPF Assessment of Patient
Experience of Care
7. Request for Recommendations for New Quality Measures for
Future Years
8. Public Display Requirements for the FY 2014 Payment
Determination and Subsequent Years
9. Form, Manner, and Timing of Quality Data Submission for the
FY 2014 Payment Determination and Subsequent Years
a. Background
b. Procedural Requirements
c. Submission Requirements for the FY 2016 Payment Determination
and Subsequent Years
d. Reporting Requirements for the FY 2016 Payment Determination
and Subsequent Years
e. Population, Sampling, and Minimum Case Threshold for the FY
2016 Payment Determination and Subsequent Years
f. Data Accuracy and Completeness Acknowledgement (DACA)
Requirements
10. Reconsideration and Appeals Procedures for the FY 2014
Payment Determination and Subsequent Years
11. Waivers from Quality Reporting Requirements for the FY 2014
Payment Determination and Subsequent Years
12. Electronic Health Records (EHRs)
E. Electronic Health Records (EHRs) Incentive Program and
Meaningful Use (MU)
1. Background
2. Expanded Electronic Submission Period for CQMs
3. Quality Reporting Data Architecture Category III (QRDA-III)
Option in 2014
4. Case Number Threshold Exemption--Requirements Regarding Data
Submission
X. Change to the Medicare Hospital Conditions of Participation
(CoPs) Relating to the Administration of Pneumococcal Vaccines
XI. Payment Policies Related to Patient Status
A. Background
B. Payment of Medicare Part B Hospital Inpatient Services
1. Payable Medicare Part B Inpatient Services
a. Payment Methodology
b. Other Revisions Resulting from Our Review of the Regulations
2. Billing for Part B Outpatient Services in the 3-Day Payment
Window
3. Applicability: Hospital Self-Audit
4. Applicability: Types of Hospitals
5. Beneficiary Liability under Section 1879 of the Act
6. Applicable Beneficiary Liability: Hospital Services
7. Applicable Beneficiary Liability: Skilled Nursing Facility
Services
8. Time Limits for Filing Claims
9. Appeal Procedures
10. Coordination of Benefits with Supplemental Insurers
11. Public Comments on Other Issues
a. Application to Disproportionate Share Hospital (DSH)
Payments, Indirect Medical Education (IME) and Graduate Medical
Education (GME) Payments, and Other IPPS Adjustments
b. Application to Beneficiary Utilization Days under Medicare
Part A
c. Applicability to the Medicare Advantage (MA) Program
12. Regulatory Impact Analysis: Final Part B Inpatient Payment
Policy
a. Statement of Need
b. Overall Impact
c. Estimated Impacts of the Final Part B Inpatient Payment
Policy
d. Alternatives Considered
e. Accounting Statement and Table
f. Conclusion
13. Collection of Information Requirements
C. Admission and Medical Review Criteria for Hospital Inpatient
Services under Medicare Part A
1. Background
2. Requirements for Physician Orders and Physician Certification
a. Applicability for All Hospitals
b. Applicability to Inpatient Rehabilitation Facilities (IRFs)
3. Inpatient Admission Guidelines
a. Correct Coding Reviews
b. Complete and Accurate Documentation
c. Medical Necessity Reviews
4. Impacts of Changes in Admission and Medical Review Criteria
XII. MedPAC Recommendations
XIII. Other Required Information
A. Requests for Data from the Public
B. Collection of Information Requirements
1. Statutory Requirement for Solicitation of Comments
2. ICRs for Add-On Payments for New Services and Technologies
3. ICRs for the Occupational Mix Adjustment to the FY 2014 Wage
Index (Hospital Wage Index Occupational Mix Survey)
4. Hospital Applications for Geographic Reclassifications by the
MGCRB
5. ICRs for Application for GME Resident Slots
6. ICRs for the Hospital Inpatient Quality Reporting (IQR)
Program
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR)
Program
8. ICRs for Hospital Value-Based Purchasing (VBP) Program
9. ICRs for the Long-Term Care Hospital Quality Reporting
(LTCHQR) Program
10. ICRs for the Inpatient Psychiatric Facilities Quality
Reporting (IPFQR) Program
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, 2013 and Payment Rates for LTCHs
Effective with Discharges Occurring on or after October 1, 2013
I. Summary and Background
II. Changes to the Prospective Payment Rates for Hospital Inpatient
Operating Costs for Acute Care Hospitals for FY 2014
A. Calculation of the Adjusted Standardized Amount
B. Adjustments for Area Wage Levels and Cost-of-Living
C. Calculation of the Prospective Payment Rates
III. Changes to Payment Rates for Acute Care Hospital Inpatient
Capital-Related Costs for FY 2014
A. Determination of Federal Hospital Inpatient Capital-Related
Prospective Payment Rate Update
B. Calculation of the Inpatient Capital-Related Prospective
Payments for FY 2014
C. Capital Input Price Index
IV. Changes to Payment Rates for Excluded Hospitals: Rate-of-
Increase Percentages for FY 2014
V. Updates to the Payment Rates for the LTCH PPS for FY 2014
A. LTCH PPS Standard Federal Rate for FY 2014
B. Adjustment for Area Wage Levels under the LTCH PPS for FY
2014
1. Background
2. Geographic Classifications/Labor Market Area Definitions
3. LTCH PPS Labor-Related Share
4. LTCH PPS Wage Index for FY 2014
5. Budget Neutrality Adjustment for Changes to the Area Wage
Level Adjustment
C. LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs Located
in Alaska and Hawaii
D. Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases
E. Computing the Adjusted LTCH PPS Federal Prospective Payments
for FY 2014
VI. Tables Referenced in this Final Rulemaking and Available through
the Internet on the CMS Web site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
A. Introduction
B. Need
C. Objectives of the IPPS
D. Limitations of Our Analysis
E. Hospitals Included in and Excluded from the IPPS
F. Effects on Hospitals and Hospital Units Excluded from the
IPPS
[[Page 50503]]
G. Quantitative Effects of the Policy Changes under the IPPS for
Operating Costs
1. Basis and Methodology of Estimates
2. Analysis of Table I
3. Impact Analysis of Table II
H. Effects of Other Policy Changes
1. Effects of Policy on MS-DRGs for Preventable HACs, Including
Infections
2. Effects of Policy Relating to New Medical Service and
Technology Add-On Payments
3. Effects of Payment Adjustment for Low-Volume Hospitals for FY
2014
4. Effects of Extension of the MDH Program
5. Effects of Changes under the FY 2014 Hospital Value-Based
Purchasing (VBP) Program
6. Effects of the Implementation of the HAC Reduction Program
7. Effects of Policy Changes Relating to Payments for Direct GME
and IME Costs
8. Effects of Implementation of Rural Community Hospital
Demonstration Program
9. Effects of the Extended Effective Date for Policy on Hospital
Services Furnished under Arrangements
I. Effects of Policy Relating to the Furnishing of Acute Care
Inpatient Services by CAHs
J. Effects of Changes to the COPs for Hospitals Relating to the
Administration of Pneumococcal Vaccines
K. Effects of Changes in the Capital IPPS
1. General Considerations
2. Results
L. Effects of Payment Rate Changes and Policy Changes under the
LTCH PPS
1. Introduction and General Considerations
2. Impact on Rural Hospitals
3. Anticipated Effects of LTCH PPS Payment Rate Changes and
Policy Changes
4. Effect on the Medicare Program
5. Effect on Medicare Beneficiaries
M. Effects of Requirements for Hospital Inpatient Quality
Reporting (IQR) Program
N. Effects of Changes in the PPS-Exempt Cancer Hospital Quality
Reporting (PCHQR) Program
O. Effects of Changes in the LTCH Quality Reporting (LTCHQR)
Program
P. Effects of Changes in the Requirements for the Inpatient
Psychiatric Facilities Quality Reporting (IPFQR) Program
II. Alternatives Considered
III. Overall Conclusion
1. Acute Care Hospitals
2. LTCHs
IV. Accounting Statements and Tables
A. Acute Care Hospitals
B. LTCHs
C. Part B Inpatient Hospital Services
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost
Rates of Payment for Inpatient Hospital Services
I. Background
II. Inpatient Hospital Update for FY 2014
A. FY 2014 Inpatient Hospital Update
B. Update for SCHs for FY 2014
C. FY 2014 Puerto Rico Hospital Update
D. Update for Hospitals Excluded from the IPPS
E. Update for LTCHs for FY 2014
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and
Updating Payments in Traditional Medicare
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This final rule makes payment and policy changes under the Medicare
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals as well as for certain hospitals
and hospital units excluded from the IPPS. In addition, it makes
payment and policy changes for inpatient hospital services provided by
long-term care hospitals (LTCHs) under the long-term care hospital
prospective payment system (LTCH PPS). It also makes policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs.
Under various statutory authorities, we are making changes to the
Medicare IPPS, to the LTCH PPS, and to other related payment
methodologies and programs for FY 2014 and subsequent fiscal years.
These statutory authorities include, but are not limited to, the
following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; and cancer
hospitals. Religious nonmedical health care institutions (RNHCIs) are
also excluded from the IPPS.
Sections 123(a) and (c) of Public Law 106-113 and section
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1)
of the Act), which provide for the development and implementation of a
prospective payment system for payment for inpatient hospital services
of long-term care hospitals (LTCHs) described in section
1886(d)(1)(B)(iv) of the Act.
Sections 1814(l), 1820, and 1834(g) of the Act, which
specifies that payments are made to critical access hospitals (CAHs)
(that is, rural hospitals or facilities that meet certain statutory
requirements) for inpatient and outpatient services and that these
payments are generally based on 101 percent of reasonable cost.
Section 1866(k) of the Act, as added by section 3005 of
the Affordable Care Act, which establishes a quality reporting program
for hospitals described in section 1886(d)(1)(B)(v) of the Act,
referred to as ``PPS-Exempt Cancer Hospitals.''
Section 1886(d)(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.
Section 1886(d)(4)(D) of the Act, which addresses certain
hospital-acquired conditions (HACs), including infections. Section
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Section 1886(d)(4)(D)(iii) of the Act requires that hospitals,
effective with discharges occurring on or after October 1, 2007, submit
information on Medicare claims specifying whether diagnoses were
present on admission (POA). Section 1886(d)(4)(D)(i) of the Act
specifies that effective for discharges occurring on or after October
1, 2008, Medicare no longer assigns an inpatient hospital discharge to
a higher paying MS-DRG if a selected condition is not POA.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage
[[Page 50504]]
increase in payments to a subsection (d) hospital for a fiscal year if
the hospital does not submit data on measures in a form and manner, and
at a time, specified by the Secretary.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program under
which value-based incentive payments are made in a fiscal year to
hospitals meeting performance standards established for a performance
period for such fiscal year.
Section 1886(p) of the Act, as added by section 3008 of
the Affordable Care Act, which establishes an adjustment to hospital
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions, effective for discharges beginning on
October 1, 2014.
Section 1886(q) of the Act, as added by section 3025 of
the Affordable Care Act and amended by section 10309 of the Affordable
Care Act, which establishes the ``Hospital Readmissions Reduction
Program'' effective for discharges from an ``applicable hospital''
beginning on or after October 1, 2012, under which payments to those
hospitals under section 1886(d) of the Act will be reduced to account
for certain excess readmissions.
Section 1886(r) of the Act, as added by section 3313 of
the Affordable Care Act, which provides for a reduction to
disproportionate share payments under section 1886(d)(5)(F) of the Act
and for a new uncompensated care payment to eligible hospitals.
Specifically, section 1886(r) of the Act now requires that, for
``fiscal year 2014 and each subsequent fiscal year,'' ``subsection (d)
hospitals'' that would otherwise receive a ``disproportionate share
payment . . . made under subsection (d)(5)(F)'' will receive two
separate payments: (1) 25 percent of the amount they previously would
have received under subsection (d)(5)(F) for DSH (``the empirically
justified amount''), and (2) an additional payment for the DSH
hospital's proportion of uncompensated care, determined as the product
of three factors. These three factors are: (1) 75 percent of the
payments that would otherwise be made under subsection (d)(5)(F); (2) 1
minus the percent change in the percent of individuals under the age of
65 who are uninsured (minus 0.1 percentage points for FY 2014, and
minus 0.2 percentage points for FY 2015 through FY 2017); and (3) a
hospital's uncompensated care amount relative to the uncompensated care
amount of all DSH hospitals expressed as a percentage.
Section 1886(s)(4) of the Act, as added and amended by
section 3401(f) and 10322(a) of the Affordable Care Act, respectively,
which requires the Secretary to implement a quality reporting program
for inpatient psychiatric hospitals and psychiatric units. Under this
program, known as the Inpatient Psychiatric Facility Quality Reporting
(IPFQR) Program, beginning with FY 2014, the Secretary must reduce any
annual update to a standard Federal rate for discharges occurring
during a fiscal year by 2.0 percentage points for any inpatient
psychiatric hospital or psychiatric unit that does not comply with
quality data submission requirements with respect to an applicable
fiscal year.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the
Secretary to make a recoupment adjustment to the standardized amount of
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016,
and 2017. This adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimate that a -9.3 percent adjustment to the
standardized amount would be necessary if CMS were to fully recover the
$11 billion recoupment required by section 631 of the ATRA in FY 2014,
it is often our practice to delay or phase in rate adjustments over
more than one year, in order to moderate the effects on rates in any
one year. Therefore, consistent with the policies that we have adopted
in many similar cases, we are making a -0.8 percent recoupment
adjustment to the standardized amount in FY 2014. Although we are not
making an additional prospective adjustment in FY 2014 for the
cumulative MS-DRG documentation and coding effects through FY 2010, we
solicited public comments as to whether any portion of the proposed -
0.8 percent recoupment adjustment to the operating IPPS standardized
amount should be reduced and instead applied as a prospective
adjustment to the operating IPPS standardized amount (and hospital-
specific rates) for the cumulative MS-DRG documentation and coding
effect through FY 2010. The public comments that we received are
addressed in section II.C. of the preamble of this final rule.
b. Refinement of the MS-DRG Relative Weight Calculation
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. To address the
issue of charge compression (the hospital practice of applying higher
charges to lower cost items and applying lesser charges to higher cost
items) when using cost report data to set the MS-DRG relative weights,
in FYs 2009 and 2010, we created additional cost centers on the
Medicare cost report to distinguish implantable devices from other
medical supplies, MRIs and CT scans, respectively, from other radiology
services, and cardiac catheterization from other cardiology services.
As compared to previous years, we currently have a significant volume
of hospitals completing all, or some, of these new cost centers on the
Medicare cost report. Therefore, beginning in FY 2014, we are
calculating the MS-DRG relative weights using 19 CCRs, creating
distinct CCRs from cost report data for implantable devices, MRIs, CT
scans, and cardiac catheterization.
c. Rebasing and Revision of the Hospital Market Baskets for Acute Care
Hospitals
In section IV. of the preamble of this final rule, we are rebasing
and revising the acute care hospital operating and capital market
baskets used to update IPPS payment rates. For both market baskets, we
are updating the base year cost weights from a FY 2006 base year to a
FY 2010 base year. We also are recalculating the labor-related share
using the FY 2010-based hospital market basket, for discharges
occurring on or after October 1, 2013. We used the FY 2010-based market
baskets in developing the FY 2014 update factor for the operating and
capital prospective payment rates and the FY 2014 update factor for the
excluded hospital rate-of-increase limits. We also are setting forth
the data sources used to determine the revised market basket costs
weights.
d. Reduction of Hospital Payments for Excess Readmissions
We are making a number of changes in policies to implement section
1886(q) of the Act, as added by section 3025 of the Affordable Care
Act, which
[[Page 50505]]
establishes the Hospital Readmissions Reduction Program. The Hospital
Readmissions Reduction Program requires a reduction to a hospital's
base operating DRG payment to account for excess readmissions of
selected applicable conditions. For FYs 2013 and 2014, these conditions
are acute myocardial infarction, heart failure, and pneumonia. For FY
2014, we are establishing additional exclusions to the three existing
readmission measures (that is, the excess readmission ratio) to account
for additional planned readmissions. We also are establishing
additional readmissions measures to be used in the Hospital
Readmissions Reduction Program for FY 2015. In addition, we are
specifying that the readmissions payment adjustment factors for FY 2014
can be no more than a 2-percent reduction (there is a 1-percent cap in
FY 2013), in accordance with the statute. We are making a change in the
methodology we use to calculate the readmissions payment adjustment
factors to make it more consistent with the calculation of the excess
readmissions ratio.
e. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital Value-Based Purchasing (VBP) Program under which value-based
incentive payments are made in a fiscal year to hospitals meeting
performance standards established for a performance period for such
fiscal year. Both the performance standards and the performance period
for a fiscal year are to be established by the Secretary.
In this final rule, we are outlining payment details for the FY
2014 Hospital VBP Program. In addition, we are establishing numerous
policies for the FY 2016 Hospital VBP Program, including measures,
performance standards, and performance and baseline periods. We also
are establishing a disaster/extraordinary circumstances exceptions
process, domain reclassification and weighting based on CMS' National
Quality Strategy for the FY 2017 Hospital VBP Program, and certain
measures, performance and baseline periods, and performance standards
for the FY 2017 through FY 2019 Programs.
f. Hospital-Acquired Condition (HAC) Reduction Program
In this final rule, we are establishing measures, scoring, and risk
adjustment methodology to implement the FY 2015 payment adjustment
under the HAC Reduction Program. Section 1886(p) of the Act, as added
under section 3008(a) of the Affordable Care Act, establishes an
adjustment to hospital payments for HACs, or a HAC Reduction program,
under which payments to applicable hospitals are adjusted to provide an
incentive to reduce HACs, effective for discharges beginning on October
1, 2014 and for subsequent program years. The amount of payment shall
be equal to 99 percent of the amount of payment that would otherwise
apply to such discharges under section 1886(d) or 1814(b)(3) of the
Act, as applicable.
g. Counting of Inpatient Days for Medicare Payment or Eligibility
Purposes
In response to a comment we received on the FY 2013 IPPS/LTCH PPS
final rule and consistent with the inpatient day counting rules for DSH
as clarified in the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we are
providing that patient days associated with maternity patients who were
admitted as inpatients and were receiving ancillary labor and delivery
services at the time the inpatient routine census is taken, regardless
of whether the patient actually occupied a routine bed prior to
occupying an ancillary labor and delivery bed and regardless of whether
the patient occupies a ``maternity suite'' in which labor, delivery
recovery, and postpartum care all take place in the same room, would be
included in the Medicare utilization calculation. We understand that
including labor and delivery inpatient days in the Medicare utilization
calculation invariably will reduce direct GME payments because direct
GME payments are based, in part, on a hospital's Medicare utilization
ratio and the denominator of that ratio, which includes the hospital's
total inpatient days, will increase at a higher rate than the numerator
of the ratio, which includes the hospital's Medicare inpatient days.
However, because the Medicare utilization ratio is a comparison of a
hospital's total Medicare inpatient days to its total inpatient days,
we believe that revising the ratio to include labor and delivery days
is appropriate because they are inpatient days and therefore should be
counted as such. We are including labor and delivery days as inpatient
days in the Medicare utilization calculation effective for cost
reporting periods beginning on or after October 1, 2013.
h. Changes to the DSH Payment Adjustment and the Provision of
Additional Payment for Uncompensated Care
Section 3133 of the Affordable Care Act modified the Medicare
disproportionate share hospital (DSH) payment methodology beginning in
FY 2014. Currently, Medicare DSHs qualify for a DSH payment adjustment
under a statutory formula that considers their Medicare utilization due
to beneficiaries who also receive Supplemental Security Income benefits
and their Medicaid utilization. Under section 1886(r) of the Act, which
was added by section 3133 of the Affordable Care Act, starting in FY
2014, DSHs will receive 25 percent of the amount they previously would
have received under the current statutory formula for Medicare DSH
payments. The remaining amount, equal to 75 percent of what otherwise
would have been paid as Medicare DSH payments, will be paid as
additional payments after the amount is reduced for changes in the
percentage of individuals that are uninsured. Each Medicare DSH
hospital will receive its additional amount based on its share of the
total amount of uncompensated care for all Medicare DSH hospitals for a
given time period. In this final rule, we are implementing these
statutory changes.
i. Medicare Part B Inpatient Billing in Hospitals
We are finalizing our proposal that when a Medicare Part A claim
for hospital inpatient services is denied because the inpatient
admission was determined not reasonable and necessary, or if a hospital
determines under 42 CFR 482.30(d) or Sec. 485.641 after a beneficiary
is discharged that his or her inpatient admission was not reasonable
and necessary, the hospital may be paid for the Part B services that
would have been reasonable and necessary if the beneficiary had been
treated as a hospital outpatient rather than admitted as an inpatient,
provided the beneficiary is enrolled in Medicare Part B. We are
finalizing our proposal to continue applying the timely filing
restriction to the billing of all Part B inpatient services, under
which claims for Part B services must be filed within 1 year from the
date of service. However, we are modifying what we stated in the
preamble of the proposed rule regarding the applicability of the CMS
Ruling 1455-R to certain claims. We will permit hospitals to follow the
Part B billing timeframes established in the Ruling after the effective
date of this rule, provided (1) the Part A claim denial was one to
which the Ruling originally applied; or (2) the Part A inpatient claims
has a date of admission before October 1, 2013, and is denied after
September 30, 2013 on the grounds that although the medical care was
reasonable and necessary, the inpatient admission was not. In this
final rule, we
[[Page 50506]]
also describe the beneficiary liability and other impacts of our final
policies.
j. Admission and Medical Review Criteria for Hospital Inpatient
Services Under Medicare Part A
To reduce uncertainty regarding the requirements for payments to
hospitals and CAHs under Medicare Part A related to when a Medicare
beneficiary should be admitted as a hospital inpatient, in this final
rule, we are clarifying the rules governing physician orders of
hospital inpatient admissions for payment under Medicare Part A. We are
clarifying and specifying in the regulations that an individual becomes
an inpatient of a hospital, including a CAH, when formally admitted as
such pursuant to an order for inpatient admission by a physician or
other qualified practitioner described in the final regulations. The
order is required for payment of hospital inpatient services under
Medicare Part A. We are specifying that for those hospital stays in
which the physician expects the beneficiary to require care that
crosses 2 midnights and admits the beneficiary based upon that
expectation, Medicare Part A payment is generally appropriate.
Conversely, we are specifying that hospital stays in which the
physician expects the patient to require care less than 2 midnights,
payment under Medicare Part A is generally inappropriate. This will
revise our guidance to hospitals and physicians relating to when
hospital inpatient admissions are determined reasonable and necessary
for payment under Part A. We also are using our exceptions and
adjustments authority under section 1886(d)(5)(I)(i) of the Act to
offset the additional IPPS expenditures under this policy change by
reducing the standardized amount, the hospital-specific amount, and the
Puerto Rico-specific standardized amount by 0.2 percent.
LTCH PPS Standard Federal Rate
In section VIII.A. of the preamble of this final rule, we present
the LTCH PPS standard Federal rate for FY 2014, which includes an
adjustment factor of 0.98734 for the second year of the 3-year phase-in
of the permanent one-time adjustment to the standard Federal rate. In
addition, under the LTCH Quality Reporting (LTCHQR) Program, the annual
update to the standard Federal rate will be reduced by 2 percentage
points for LTCHs that fail to submit data for FY 2014 on specific
measures under section 3004 of the Affordable Care Act.
l. Expiration of Certain Payment Rules for LTCH Services and Research
on the Development of a Patient Criteria-Based Payment Adjustment Under
the LTCH PPS
In section VIII.D. of the preamble of this final rule, we note the
expiration of the moratorium on the full implementation of the ``25
percent threshold'' payment adjustment to LTCHs under the LTCH PPS for
cost reporting periods beginning on or after October 1, 2013.
In section VIII.E. of the preamble of this final rule, we discuss
the ongoing research being done by a CMS contractor, Kennell and
Associates (Kennell) and its subcontractor, Research Triangle
Institute, International (RTI), on the development of a payment
adjustment under the LTCH PPS based on the establishment of LTCH
patient criteria that was described in the proposed rule.
m. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, hospitals are
required to report data on measures selected by the Secretary for the
Hospital IQR Program in order to receive the full annual percentage
increase. In past rules, we have established measures for reporting and
the process for submittal and validation of the data.
In this final rule, we are making several changes to: (1) The
measure set, including the removal of some measures, the suspension of
one measure, the refinement of some measures, and the adoption of
several new measures; (2) the administrative processes; and (3) the
validation methodologies. We also are allowing hospitals the option of
reporting up to four measure sets electronically for the FY 2016
payment determination. These changes will improve the timeliness and
efficiency of the Hospital IQR Program and begin the process of
incorporating electronic reporting into the Hospital IQR Program.
n. Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program
Section 1886(s)(4) of the Act authorizes the Secretary to implement
a quality reporting program for inpatient psychiatric hospitals and
psychiatric units. Section 1886(s)(4) of the Act, as added and amended
by sections 3401(f) and 10322(a) of the Affordable Care Act, requires
the Secretary to implement a quality reporting program for inpatient
psychiatric hospitals and psychiatric units. Section 1886(s)(4)(A)(i)
of the Act requires that, for rate year 2014 and each subsequent rate
year, the Secretary shall reduce any annual update to a standard
Federal rate for discharges occurring during such rate year by 2.0
percentage points for any inpatient psychiatric hospital or psychiatric
unit that does not comply with quality data submission requirements
with respect to an applicable rate year.
In this final rule, we are establishing new measures and related
policies for the IPFQR Program beginning with FY 2016.
3. Summary of Costs and Benefits
Adjustment for MS-DRG Documentation and Coding Changes. We
are making a -0.8 percent recoupment adjustment to the standardized
amount for FY 2014 to implement, in part, the requirement of section
631 of the ATRA that the Secretary make an adjustment totaling $11
billion over a 4-year period of FYs 2014, 2015, 2016, and 2017. This
recoupment adjustment represents the amount of the increase in
aggregate payments as a result of not completing the prospective
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90
until FY 2013. Prior to the ATRA, this amount could not have been
recovered under Public Law 110-90.
While our actuaries estimate that a -9.3 percent recoupment
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014, it is often our practice to delay or phase in rate
adjustments over more than one year, in order to moderate the effects
on rates in any one year. Therefore, consistent with the policies that
we have adopted in many similar cases, we are making a -0.8 percent
recoupment adjustment to the standardized amount in FY 2014. We
estimate that this level of adjustment would recover $0.96 billion in
FY 2014, with approximately $10.04 billion remaining to be addressed.
We are not making any future adjustments at this time but note that if
recoupment adjustments of approximately -0.8 percent are implemented in
FYs 2014, 2015, 2016, and 2017, we estimate that the entire $11 billion
will be recovered by the end of the statutory 4-year timeline.
Refinement of the MS-DRG Relative Weight Calculation. We
refer readers to section VI.C. of Appendix A of this final rule for the
overall IPPS operating impact, which includes the impact for the
refinement of the MS-DRG relative weight calculation. This impact
models payments to various hospital types using relative weights
developed from 19 CCRs as compared to 15 CCRs. As
[[Page 50507]]
with other changes to the MS-DRGs, these changes are to be implemented
in a budget neutral manner.
Rebasing and Revision of the Hospital Market Baskets for
Acute Care Hospitals.
The finalized FY 2010-based IPPS market basket update (as measured
by percentage increase) for FY 2014 is currently forecasted to be the
same as the market basket update based on the FY 2006-based IPPS market
basket at 2.5 percent (currently used under the IPPS). Therefore, we
are projecting that there will be no fiscal impact on the IPPS
operating payment rates in FY 2014 as a result of the rebasing and
revision of the IPPS market basket.
The FY 2010-based IPPS capital input price index update (as
measured by percentage increase) for FY 2014 is currently forecasted to
be 1.2 percent, 0.2 percentage point lower than the update based on the
FY 2006-based capital input price index. Therefore, we are projecting
that there will be a fiscal impact of -$16 million to the IPPS capital
payments in FY 2014 as a result of this policy (0.2 percentage point *
annual capital IPPS payments of approximately $8 billion).
In addition, we are updating the labor-related share under the IPPS
for FY 2014 based on the final FY 2010-based IPPS market basket, which
will result in a labor-related share of 69.6 percent (compared to the
FY 2013 labor-related share of 68.8 percent) or 62 percent, depending
on which results in higher payments to the hospital. For FY 2014, the
labor-related share for the Puerto Rico-specific standardized amount
will be either 63.2 percent or 62 percent, depending on which results
in higher payments to the hospital. We are projecting that there will
be no impact on aggregate IPPS payments as a result of this policy due
to the statutory requirement that any changes to the IPPS area wage
adjustment (including the labor-related share) are adopted in a budget
neutral manner.
Reduction to Hospital Payments for Excess Readmissions.
The provisions of section 1886(q) of the Act which establishes the
Hospital Readmissions Reduction Program are not budget neutral. For FY
2014, a hospital's readmissions payment adjustment factor is the higher
of a ratio of a hospital's aggregate payments for excess readmissions
to its aggregate payments for all discharges, or 0.98 (that is, or a 2-
percent reduction). In this final rule, we estimate that the reduction
to a hospital's base operating DRG payment amount to account for excess
readmissions of selected applicable conditions under the Hospital
Readmissions Reduction Program will result in a 0.2 percent decrease,
or approximately -$227 million, in payments to hospitals for FY 2014.
Value-Based Incentive Payments under the Hospital Value-
Based Purchasing (VBP) Program. We estimate that there will be no net
financial impact to the Hospital VBP Program for FY 2014 in the
aggregate because, by law, the amount available for value-based
incentive payments under the program in a given fiscal year must be
equal to the total amount of base operating DRG payment amount
reductions for that year, as estimated by the Secretary. The estimated
amount of base operating DRG payment amount reductions for FY 2014, and
therefore the estimated amount available for value-based incentive
payments for FY 2014 discharges, is approximately $1.1 billion. We
believe that the program's benefits will be seen in improved patient
outcomes, safety, and in the patient's experience of care. However, we
cannot estimate these benefits in actual dollar and patient terms.
Implementation of the HAC Reduction Program for FY 2014.
We note that there is no payment impact for FY 2014 for implementing
the HAC Reduction Program. For FY 2015, we are presenting the overall
impact of the HAC Reduction Program provision along with other IPPS
payment provision impacts in section I.G. of Appendix A of this final
rule.
Counting of Inpatient Days in the Medicare Utilization
Calculation. We believe our policy change to include labor and delivery
days as inpatient days in the Medicare utilization calculation will
result in a savings of approximately $19 million for FY 2014.
Changes to the Medicare DSH Payment Adjustment and
Provision of Additional Payment for Uncompensated Care. Under section
1886(r) of the Act (as added by section 3313 of the Affordable Care
Act), disproportionate share payments to hospitals under section
1886(d)(5)(F) of the Act are reduced and an additional payment to
eligible hospitals will be made beginning in FY 2014. Hospitals that
receive Medicare DSH payments will receive 25 percent of the amount
they previously would have received under the current statutory formula
for Medicare DSH payments. The remainder, equal to 75 percent of what
otherwise would have been paid as Medicare DSH payments, will be the
basis for additional payments after the amount is reduced for changes
in the percentage of individuals that are uninsured and additional
statutory adjustments. Each hospital that receives Medicare DSH
payments will receive an additional payment based on its share of the
total uncompensated care amount reported by Medicare DSHs. The
reduction to Medicare DSH payments is not budget neutral.
We are specifying that 75 percent of what otherwise would have been
paid for Medicare DSH payments is adjusted to 94.3 percent of that
amount for changes in the percentage of individuals that are uninsured
and additional statutory adjustments. In other words, Medicare DSH
payments prior to the application of section 3133 of the Affordable
Care Act are adjusted to 70.7 percent (the product of 75 percent and
94.3 percent) and that resulting payment amount is used to create an
additional payment for a hospital's relative uncompensated care. As a
result, we project that the reduction of Medicare DSH payments and the
inclusion of the additional payments will reduce payments overall by
0.4 percent as compared to Medicare DSH payments prior to the
implementation of section 3133 of the Affordable Care Act. The
additional payments have redistributive effects based on a hospital's
uncompensated care amount relative to the uncompensated care amount for
all hospitals that are estimated to receive Medicare DSH payments.
These additional payments will be made through the claims processing
system for each hospital discharge.
Part B Hospital Inpatient Payment Policy. In this final
rule, we are revising Medicare's policy for payment of Part B hospital
inpatient services following the denial of a Part A hospital inpatient
claim on the basis that the inpatient admission was not reasonable and
necessary, but hospital outpatient services would have been reasonable
and necessary in treating the beneficiary. We estimate that the final
policy will result in an approximately $4.6 billion decrease in
Medicare program expenditures over 5 years. In section XI. of the
preamble of this final rule, we set forth a detailed analysis of the
regulatory and Federalism impacts that the policy changes are expected
to have on affected entities and beneficiaries.
Admission and Medical Review Criteria for Hospital
Inpatient Services under Medicare Part A. In this final rule, we are
making changes relating to admission and medical review criteria for
hospital inpatient admissions under Medicare Part A. One aspect of
these changes is that hospital inpatient admissions spanning 2
midnights in the hospital will generally qualify as appropriate for
payment under Medicare Part A. Our actuaries estimate
[[Page 50508]]
that the change will increase IPPS expenditures by approximately $220
million due to an expected net increase in inpatient encounters. We are
using our exceptions and adjustments authority under section
1886(d)(5)(I)(i) of the Act to make a reduction of 0.2 percent to the
standardized amount, the Puerto Rico standardized amount, and the
hospital-specific payment rate to offset this estimated $200 million in
additional IPPS expenditures. We also are applying that 0.2 percent
reduction to the capital Federal rates using our authority under
section 1886(g) of the Act.
Hospital Inpatient Quality Reporting (IQR) Program. We are
providing that hospitals participating in the Hospital IQR Program will
have the option to report a subset of measures electronically in CY
2014 for the FY 2016 payment determination. Under this policy,
hospitals may choose to report the measures in four measure sets
electronically or as chart-abstracted measures in CY 2014. For the FY
2016 payment determination, we also are removing seven measures (six
chart-abstracted measures and one structural measure) and suspending
one measure. We also are adopting five new claims-based measures for
the FY 2016 payment determination and subsequent years. For the FY 2016
payment determination and subsequent years, we will validate two
additional chart-abstracted HAI measures: MRSA bacteremia, and C.
difficile. We also are reducing the number of records used for HAI
validation from 48 records per year to 36 records per year beginning
with the FY 2015 payment determination. Finally, we are allowing
hospitals to submit patient charts for purposes of validation either in
paper form or by means of electronic transmission. We believe the
changes to the measure set, processes, and validation methodologies,
the electronic submission of records for validation, as well as
allowing hospitals to report certain measures electronically for the FY
2016 payment determination will result in improved program efficiency
and begin the process of incorporating electronic reporting into the
program. We estimate that the combination of these changes and the
reduction in measures mentioned above will reduce burden hours by
700,000 hours annually.
Update to the LTCH PPS Standard Federal Rate and Other
Payment Factors. Based on the best available data for the 425 LTCHs in
our database, we estimate that the changes we are presenting in the
preamble and Addendum of this final rule, including the update to the
standard Federal rate for FY 2014, the changes to the area wage
adjustment for FY 2014, and the changes to short-stay outliers and
high-cost outliers, will result in an increase in estimated payments
from FY 2013 of approximately $72 million (or 1.3 percent). Although we
generally project an increase in payments for all LTCHs in FY 2014 as
compared to FY 2013, we expect rural LTCHs to experience slightly lower
increases than the national average due to decreases in their wage
index for FY 2014 compared to FY 2013. In addition, under current law,
our moratoria on the full implementation of the ``25-percent
threshold'' payment adjustment policy will expire for certain LTCHs for
cost reporting periods beginning on or after October 1, 2013. These
regulatory moratoria extended, for an additional year, the 5-year
statutory moratorium on the application of the ``25-percent threshold''
payment adjustment policy as provided by section 114(c) of the MMSEA,
as amended by section 4302(a) of the ARRA and sections 3106(a) and
10312(a) of the Affordable Care Act, which expired for cost reporting
periods beginning on or after October 1, 2012 (``October LTCHs''), and
for other LTCHs and LTCH satellite facilities for cost reporting
periods beginning on or after July 1, 2012 (``July LTCHs'') (77 FR
53483 through 53484, as amended by the FY 2013 IPPS/LTCH PPS correcting
amendment (77 FR 63751 through 63753)), as explained in section VIII.D.
of the preamble of this proposed rule. We estimate that the expiration
of the regulatory moratoria will result in a reduction in payments of
$90 million to LTCHs. Overall, we estimate that the effect of the
changes we are making for FY 2014 in conjunction with the expiration of
the regulatory moratoria would result in a decrease in aggregate LTCH
PPS payments in FY 2014 relative to FY 2013 of approximately -$18
million (that is, the estimated increase of $72 million plus the
estimated reduction of $90 million, as described above).
B. Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Social Security Act (the Act) sets forth a
system of payment for the operating costs of acute care hospital
inpatient stays under Medicare Part A (Hospital Insurance) based on
prospectively set rates. Section 1886(g) of the Act requires the
Secretary to use a prospective payment system (PPS) to pay for the
capital-related costs of inpatient hospital services for these
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for
hospital inpatient operating and capital-related costs is made at
predetermined, specific rates for each hospital discharge. Discharges
are classified according to a list of diagnosis-related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the
DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income patients. For
qualifying hospitals, the amount of this adjustment varies based on the
outcome of the statutory calculations. The Affordable Care Act revised
the Medicare DSH payment methodology and provides for a new additional
Medicare payment that considers the amount of uncompensated care
beginning on October 1, 2013.
If the hospital is an approved teaching hospital, it receives a
percentage add-on payment for each case paid under the IPPS, known as
the indirect medical education (IME) adjustment. This percentage
varies, depending on the ratio of residents to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. To qualify, a new technology or medical service must
demonstrate that it is a substantial clinical improvement over
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments.
[[Page 50509]]
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. 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, 2013, an MDH will
receive the higher of the Federal rate or the Federal rate plus 75
percent of the amount by which the Federal rate is exceeded by the
highest of its FY 1982, FY 1987, or FY 2002 hospital-specific rate. (We
note that the statutory provision for payments to MDHs expires at the
end of FY 2013, that is, on September 30, 2013.) SCHs are the sole
source of care in their areas, and MDHs are a major source of care for
Medicare beneficiaries in their areas. Specifically, section
1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is
located more than 35 road miles from another hospital or that, by
reason of factors such as isolated location, weather conditions, travel
conditions, or absence of other like hospitals (as determined by the
Secretary), is the sole source of hospital inpatient services
reasonably available to Medicare beneficiaries. In addition, certain
rural hospitals previously designated by the Secretary as essential
access community hospitals are considered SCHs. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area, has not more than 100 beds, is not an SCH, and
has a high percentage of Medicare discharges (not less than 60 percent
of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). Both of these categories of hospitals
are afforded this special payment protection in order to maintain
access to services for beneficiaries.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services ``in accordance
with a prospective payment system established by the Secretary.'' The
basic methodology for determining capital prospective payments is set
forth in our regulations at 42 CFR 412.308 and 412.312. Under the
capital IPPS, payments are adjusted by the same DRG for the case as
they are under the operating IPPS. Capital IPPS payments are also
adjusted for IME and DSH, similar to the adjustments made under the
operating IPPS. In addition, hospitals may receive outlier payments for
those cases that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR Part 412, Subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Rehabilitation hospitals and units; long-term
care hospitals (LTCHs); psychiatric hospitals and units; children's
hospitals; and cancer hospitals. Religious nonmedical health care
institutions (RNHCIs) are also excluded from the IPPS. Various sections
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare,
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs
for rehabilitation hospitals and units (referred to as inpatient
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and
units (referred to as inpatient psychiatric facilities (IPFs)). (We
note that the annual updates to the LTCH PPS are now included as part
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS
are issued as separate documents.) Children's hospitals, cancer
hospitals, and RNHCIs continue to be paid solely under a reasonable
cost-based system subject to a rate-of-increase ceiling on inpatient
operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR Parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (as codified under section
1886(m)(1) of the Act). During the 5-year (optional) transition period,
a LTCH's payment under the PPS was based on an increasing proportion of
the LTCH Federal rate with a corresponding decreasing proportion based
on reasonable cost principles. Effective for cost reporting periods
beginning on or after October 1, 2006, all LTCHs are paid 100 percent
of the Federal rate. The existing regulations governing payment under
the LTCH PPS are located in 42 CFR Part 412, Subpart O. Beginning
October 1, 2009, we issue the annual updates to the LTCH PPS in the
same documents that update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v)(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.
C. Provisions of the Patient Protection and Affordable Care Act (Pub.
L. 111-148), the Health Care and Education Reconciliation Act of 2010
(Pub. L. 111-152), and the American Taxpayer Relief Act of 2012 (ATRA)
(Pub. L. 112-240)
The Patient Protection and Affordable Care Act (Pub. L. 111-148),
enacted on March 23, 2010, and the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30,
2010, made a number of changes that affect the IPPS and the LTCH PPS.
(Pub. L. 111-148 and Pub. L. 111-152 are collectively referred to as
the ``Affordable Care Act.'') A number of
[[Page 50510]]
the provisions of the Affordable Care Act affect the updates to the
IPPS and the LTCH PPS and providers and suppliers. The provisions of
the Affordable Care Act that were applicable to the IPPS and the LTCH
PPS for FYs 2010, 2011, and 2012 were implemented in the June 2, 2010
Federal Register notice (75 FR 31118), the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50042) and the FY 2012 IPPS/LTCH PPS final rule (76 FR
51476).
The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240),
enacted on January 2, 2013, also made a number of changes that affect
the IPPS. We announced changes related to certain IPPS provisions for
FY 2013 pursuant to sections 605 and 606 of Public Law 112-240 in a
notice issued in the Federal Register on March 7, 2013 (78 FR 14689).
1. The Patient Protection and Affordable Care Act (Pub. L. 111-148) and
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152)
In this final rule, we are implementing, or continuing in FY 2014
to implement, the following provisions (or portions of the following
provisions) of the Affordable Care Act that are applicable to the IPPS,
the LTCH PPS, and PPS-exempt cancer hospitals:
Section 3001(a) of Public Law 111-148, which requires the
establishment of a hospital inpatient value-based purchasing program
under which value-based incentive payments are made in a fiscal year to
hospitals that meet performance standards for the performance period
for that fiscal year.
Section 3004 of Public Law 111-148, which provides for the
submission of quality data by LTCHs in order for them to receive the
full annual update to the payment rates beginning with the FY 2014 rate
year.
Section 3005 of Public Law 111-148, which provides for the
establishment of a quality reporting program for PPS-exempt cancer
hospitals beginning with FY 2014, and for subsequent program years.
Section 3008 of Public Law 111-148, which establishes the
Hospital-Acquired Condition (HAC) Reduction Program and requires the
Secretary to make an adjustment to hospital payments for applicable
hospitals, effective for discharges beginning on October 1, 2014, and
for subsequent program years.
Section 3025 of Public Law 111-148, which establishes a
hospital readmissions reduction program and requires the Secretary to
reduce payments to applicable hospitals with excess readmissions
effective for discharges beginning on or after October 1, 2012.
Section 3133 of Public Law 111-148, as amended by section
10316 of Public Law 111-148 and section 1104 of Pub. L. 111-152, which
modifies the methodologies for determining Medicare DSH payments and
creates a new additional payment for uncompensated care.
Section 3401 of Public Law 111-148, which provides for the
incorporation of productivity adjustments into the market basket
updates for IPPS hospitals and LTCHs.
Section 10324 of Public Law 111-148, which provides for a
wage adjustment for hospitals located in frontier States.
Sections 3401 and 10319 of Public Law 111-148 and section
1105 of Public Law 111-152, which revise certain market basket update
percentages for IPPS and LTCH PPS payment rates for FY 2014.
Section 5506 of Public Law 111-148, which added a
provision to the Act that instructs the Secretary to establish a
process by regulation under which, in the event a teaching hospital
closes, the Secretary will permanently increase the FTE resident caps
for hospitals that meet certain criteria up to the number of the closed
hospital's FTE resident caps. The Secretary is directed to ensure that
the aggregate number of FTE resident cap slots distributed is equal to
the amount of slots in the closed hospital's direct GME and IME FTE
resident caps, respectively.
2. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
In this final rule, we are implementing or making conforming
changes to regulation text in accordance with the following provisions
(or portions of the following provisions) of the American Taxpayer
Relief Act of 2012 that are applicable to the IPPS:
Section 605, which amended sections 1886(d)(12)(B),
(C)(i), and (D) of the Act to extend changes to the payment methodology
for the Medicare inpatient hospital payment adjustment for low-volume
hospitals through September 30, 2013 (FY 2013). Beginning with FY 2014,
the preexisting low-volume hospital qualifying criteria and payment
adjustment, as implemented in FY 2005, will resume.
Section 606(a), which amended sections 1886(d)(5)(G)(i)
and (ii)(II) of the Act to extend the MDH program through September 30,
2013 (FY 2013), and section 606(b), which made conforming amendments to
sections 1886(b)(3)(D)(i) and (iv) of the Act and amended section
13501(e)(2) of the Omnibus Budget Reconciliation Act of 1993 to permit
hospitals to decline reclassification through FY 2013.
Section 631, which amended section 7(b)(1)(B) of Public
Law 110-90 and requires a recoupment adjustment to the standardized
amounts under section 1886(d) of the Act based upon the Secretary's
estimates for discharges occurring in FY 2014 through FY 2017 to fully
offset $11 billion (which represents the amount of the increase in
aggregate payments from FYs 2008 through 2013 for which an adjustment
was not previously applied).
D. Issuance of a Notice of Proposed Rulemaking
On May 10, 2013, we published in the Federal Register (78 FR 27486)
a proposed rule that set forth proposed changes to the Medicare IPPS
for operating costs and for capital-related costs of acute care
hospitals for FY 2014. We also set forth proposed changes relating to
payments for IME and GME costs and payments to certain hospitals that
continue to be excluded from the IPPS and paid on a reasonable cost
basis. In addition, in the proposed rule, we set forth proposed changes
to the payment rates, factors, and other payment rate policies under
the LTCH PPS for FY 2014.
Below is a summary of the major changes that we proposed to make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of the proposed rule, we included--
Proposed changes to MS-DRG classifications based on our
yearly review.
Proposed application of the documentation and coding
adjustment for FY 2014 resulting from implementation of the MS-DRG
system.
A discussion of the Research Triangle Institute,
International (RTI) reports and analyses relating to charge
compression, including a proposal to calculate the MS-DRG relative
weights using 19 CCRs.
Proposed recalibrations of the MS-DRG relative weights.
Proposed changes to hospital-acquired conditions (HACs)
and a listing and discussion of HACs, including infections, that would
be subject to the statutorily required adjustment in MS-DRG payments
for FY 2014.
A discussion of the FY 2014 status of new technologies
approved for add-on payments for FY 2013 and a presentation of our
evaluation and
[[Page 50511]]
analysis of the FY 2014 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:
The proposed FY 2014 wage index update using wage data
from cost reporting periods beginning in FY 2010.
Analysis and implementation of the proposed FY 2014
occupational mix adjustment to the wage index for acute care hospitals,
including the proposed application of the rural floor, the imputed
rural floor calculated under the original and alternative
methodologies, and the frontier State floor.
Proposed revisions to the wage index for acute care
hospitals based on hospital redesignations and reclassifications.
The proposed adjustment to the wage index for acute care
hospitals for FY 2014 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 2014 hospital wage index.
Determination of the labor-related share for the proposed
FY 2014 wage index.
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 2014 update factor for the
operating and capital prospective payment rates and the FY 2014 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 costs 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
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR Parts 412 and 413, including the following:
Proposed changes to the inpatient hospital update for FY
2014, including incorporation of a productivity adjustment.
The proposed updated national and regional case-mix values
and discharges for purposes of determining RRC status.
Proposed payment adjustment for low-volume hospitals for
FY 2014.
The statutorily required IME adjustment factor for FY
2014.
Proposed changes to the methodologies for determining
Medicare DSH payments and proposals to implement the new additional
payments for uncompensated care.
Discussion of the extension of the MDH program through FY
2013.
Proposed changes to the rules for payment adjustments
under the Hospital Readmissions Reduction Program based on hospital
readmission measures and the process for hospital review and correction
of those rates.
Proposed changes to the requirements and provision of
value-based incentive payments under the Hospital Value-Based
Purchasing Program.
Proposed requirements for payment adjustments to hospitals
under the HAC Reduction Program.
Proposal for counting labor and delivery inpatient days in
the calculation of Medicare utilization for direct GME purposes and for
other payment and eligibility purposes.
Announcement of an additional closed hospital and
redistribution of resident cap slots relating to direct GME and IME
payments.
Proposed clarifications of policies on payments for
residents training in approved residency programs at CAHs.
Announcement of the expiration of the inflation update
freeze for high per resident amounts (PRAs).
Discussion of the Rural Community Hospital Demonstration
Program and a proposal for making a budget neutrality adjustment for
the demonstration program.
Extending the effective date of policies relating to
hospital services furnished under arrangements.
Proposed medical review policy that hospital stays in
which the physician expects the patient to require a stay that crosses
2 midnights are generally appropriate for payment under Medicare Part
A, while hospital stays in which the physician expects the patient to
require a stay that does not cross 2 midnights are generally
inappropriate for payment under Medicare Part A.
5. Proposed FY 2014 Policy Governing the IPPS for Capital-Related Costs
In section VI. of the preamble to the proposed rule, we discussed
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2014 and other related proposed
policy changes.
6. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VII. of the preamble of the proposed rule, we
discussed--
Proposed changes to payments to certain excluded hospitals
for FY 2014.
Proposed changes to the conditions of participation (CoPs)
relating to administration of pneumococcal vaccine and CAH payment for
acute care inpatient services.
7. Proposed Changes to the LTCH PPS
In section VIII. of the preamble of the proposed rule, we set forth
proposed changes to the payment rates, factors, and other payment rate
policies under the LTCH PPS for FY 2014. We also noted that the
moratorium on the full implementation of the ``25-percent threshold''
payment adjustment will expire for certain cost reporting periods
beginning on or after October 1, 2013. In addition, in this section, we
discussed the research being done by Kennell and Associates (Kennell)
and its subcontractor, Research Triangle Institute, International
(RTI), under a contract with CMS that is intended to inform the
development of a payment adjustment under the LTCH PPS based on the
establishment of LTCH patient criteria which were described in the
proposed rule at 78 FR 27668 through 27676.
8. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section IX. of the preamble of the proposed rule, we addressed--
Proposed requirements for the Hospital Inpatient Quality
Reporting (IQR) Program as a condition for receiving the full
applicable percentage increase.
Proposed changes to the requirements for the quality
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
Proposed changes to the requirements under the LTCH
Quality Reporting (LTCHQR) Program.
Proposed changes to the requirements under the Inpatient
Psychiatric Facility Quality Reporting (IPFQR) Program.
9. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In the Addendum to the proposed rule, we set forth proposed changes
to
[[Page 50512]]
the amounts and factors for determining the proposed FY 2014
prospective payment rates for operating costs and capital-related costs
for acute care hospitals. We proposed to establish the threshold
amounts for outlier cases. In addition, we addressed the proposed
update factors for determining the rate-of-increase limits for cost
reporting periods beginning in FY 2014 for certain hospitals excluded
from the IPPS.
10. Determining Prospective Payment Rates for LTCHs
In the Addendum to the proposed rule, we set forth proposed changes
to the amounts and factors for determining the proposed FY 2014
prospective standard Federal rate. We proposed to establish the
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.
11. Impact Analysis
In Appendix A of the proposed rule, we set forth an analysis of the
impact that the proposed changes would have on affected acute care
hospitals, LTCHs, PCHs, and IPFs.
12. 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 2014 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The standard Federal rate for hospital inpatient services
furnished by LTCHs.
13. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2013 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We addressed these recommendations in Appendix B of the proposed rule.
For further information relating specifically to the MedPAC March 2013
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.
E. Public Comments Received in Response to the FY 2014 IPPS/LTCH PPS
Proposed Rule
We received approximately 721 timely pieces of correspondence
containing multiple comments on the FY 2014 IPPS/LTCH PPS proposed
rule. We note that some of these public comments were outside of the
scope of the proposed rule. These out-of-scope public comments are not
addressed with policy responses in this final rule. Summaries of the
public comments that are within the scope of the proposed rule and our
responses to those public comments are set forth in the various
sections of this final rule under the appropriate heading.
F. Finalization of the Proposed Rule on Medicare Part B Inpatient
Billing in Hospitals
On March 18, 2013, we issued in the Federal Register (78 FR 16632)
a proposed rule that proposed to revise Medicare's payment policies
under Part B when a Part A hospital inpatient claim is denied because
the inpatient admission was not reasonable and necessary, but hospital
outpatient services would have been reasonable and necessary in
treating the beneficiary. We received 392 timely pieces of
correspondence in response to this proposed rule. In section XI. of
this document, we summarize and respond to these public comments and
discuss our final policies after taking into consideration the public
comments we received.
II. Changes to Medicare Severity Diagnosis-Related Group (MS-DRG)
Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Congress recognized that it would be necessary to recalculate the
DRG relative weights periodically to account for changes in resource
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires
that the Secretary adjust the DRG classifications and relative weights
at least annually. These adjustments are made to reflect changes in
treatment patterns, technology, and any other factors that may change
the relative use of hospital resources.
B. MS-DRG Reclassifications
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485
through 51487), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273).
C. Adoption of the MS-DRGs in FY 2008
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
D. FY 2014 MS-DRG Documentation and Coding Adjustment
1. Background on the Prospective MS-DRG Documentation and Coding
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
In the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189), we adopted the MS-DRG patient classification system for
the IPPS, effective October 1, 2007, to better recognize severity of
illness in Medicare payment rates for acute care hospitals. The
adoption of the MS-DRG system resulted in the expansion of the number
of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, there are
751 MS-DRGs.) By increasing the number of MS-DRGs and more fully taking
into account patient severity of illness in Medicare payment rates for
acute care hospitals, MS-DRGs encourage hospitals to improve their
documentation and coding of patient diagnoses.
[[Page 50513]]
In the FY 2008 IPPS final rule with comment period (72 FR 47175
through 47186), we indicated that the adoption of the MS-DRGs had the
potential to lead to increases in aggregate payments without a
corresponding increase in actual patient severity of illness due to the
incentives for additional documentation and coding. In that final rule
with comment period, we exercised our authority under section
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget
neutrality by adjusting the national standardized amount, to eliminate
the estimated effect of changes in coding or classification that do not
reflect real changes in case-mix. Our actuaries estimated that
maintaining budget neutrality required an adjustment of -4.8 percent to
the national standardized amount. We provided for phasing in this -4.8
percent adjustment over 3 years. Specifically, we established
prospective documentation and coding adjustments of -1.2 percent for FY
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
On September 29, 2007, Congress enacted the TMA [Transitional
Medical Assistance], Abstinence Education, and QI [Qualifying
Individuals] Programs Extension Act of 2007, Public Law 110-90. Section
7(a) of Public Law 110-90 reduced the documentation and coding
adjustment made as a result of the MS-DRG system that we adopted in the
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008
and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment
through rulemaking, effective October 1, 2007 (72 FR 66886).
For FY 2009, section 7(a) of Public Law 110-90 required a
documentation and coding adjustment of -0.9 percent, and we finalized
that adjustment through rulemaking (73 FR 48447). The documentation and
coding adjustments established in the FY 2008 IPPS final rule with
comment period, which reflected the amendments made by Public Law 110-
90, are cumulative. As a result, the -0.9 percent documentation and
coding adjustment for FY 2009 was in addition to the -0.6 percent
adjustment for FY 2008, yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Public
Law 110-90
a. Prospective Adjustment 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.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012
Required by Section 7(b)(1)(B) 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, in the case of underpayments) spending in excess of (or less
than) spending that would have occurred had the prospective adjustments
for changes in documentation and coding applied in FY 2008 and FY 2009
precisely matched the changes that occurred in those years. Public Law
110-90 requires that the Secretary only make these recoupment or
repayment adjustments for discharges occurring during FYs 2010, 2011,
and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
In order to implement the requirements of section 7 of Public Law
110-90, we performed a retrospective evaluation of the FY 2008 data for
claims paid through December 2008 using the methodology first described
in the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and
later discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43768 through 43772). We performed the same analysis for FY 2009 claims
data using the same methodology as we did for FY 2008 claims (75 FR
50057 through 50068). The results of the analysis for the FY 2011
proposed and final rules, and subsequent evaluations in FY 2012,
supported that the 5.4 percent estimate accurately reflected the FY
2009 increases in documentation and coding under the MS-DRG system. We
were persuaded by both MedPAC's analysis (as discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own
review of the methodologies recommended by various commenters that the
methodology we employed to determine the required documentation and
coding adjustments was sound.
As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files
are available to the public to allow independent analysis of the FY
2008 and FY 2009 documentation and coding effects. Interested
individuals may still order these files through the Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-Hospital
(National). This 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.
[[Page 50514]]
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by
Section 7(b)(1)(A) of Public Law 110-90
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767
through 43777), we opted to delay the implementation of any
documentation and coding adjustment until a full analysis of case-mix
changes based on FY 2009 claims data could be completed. We refer
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed
description of our proposal, responses to comments, and finalized
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total
prospective documentation and coding effect of 1.054 percent. After
accounting for the -0.6 percent and the -0.9 percent documentation and
coding adjustments in FYs 2008 and 2009, we found a remaining
documentation and coding effect of 3.9 percent. As we have discussed,
an additional cumulative adjustment of -3.9 percent would be necessary
to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to
make an adjustment to the average standardized amounts in order to
eliminate the full effect of the documentation and coding changes that
do not reflect real changes in case-mix on future payments. Unlike
section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not
specify when we must apply the prospective adjustment, but merely
requires us to make an ``appropriate'' adjustment. Therefore, as we
stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we
believe the law provided some discretion as to the manner in which we
applied the prospective adjustment of -3.9 percent. As we discussed
extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our
practice to moderate payment adjustments when necessary to mitigate the
effects of significant downward adjustments on hospitals, to avoid what
could be widespread, disruptive effects of such adjustments on
hospitals. Therefore, we stated that we believed it was appropriate to
not implement the -3.9 percent prospective adjustment in FY 2011
because we finalized a -2.9 percent recoupment adjustment for that
year. Accordingly, we did not propose a prospective adjustment under
section 7(b)(1)(A) of Public Law 110-90 for FY 2011 (75 FR 23868
through 23870). We note that, as a result, payments in FY 2011 (and in
each future year until we implemented the requisite adjustment) would
be higher than they would have been if we had implemented an adjustment
under section 7(b)(1)(A) of Public Law 110-90.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we
indicated that, because further delay of this prospective adjustment
will result in a continued accrual of unrecoverable overpayments, it
was imperative that we implement a prospective adjustment for FY 2012,
while recognizing CMS' continued desire to mitigate the effects of any
significant downward adjustments to hospitals. Therefore, we
implemented a -2.0 percent prospective adjustment to the standardized
amount to partially eliminate the full effect of the documentation and
coding changes that do not reflect real changes in case-mix on future
payments.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through
53276), we completed the prospective portion of the adjustment required
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9
percent adjustment to the standardized amount for FY 2013. We stated
that this adjustment would remove the remaining effect of the
documentation and coding changes that do not reflect real changes in
case-mix that occurred in FY 2008 and FY 2009. We believe it was
imperative to implement the full remaining adjustment, as any further
delay would result in an overstated standardized amount in FY 2013 and
any future years until a full adjustment is made.
We note again that delaying full implementation of the prospective
portion of the adjustment required under section 7(b)(1)(A) of Public
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY
2012 being overstated. These overpayments could not be recovered by CMS
as section 7(b)(1)(B) of Public Law 110-90 limited recoupments to
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B)
of Public Law 110-90
As discussed in section II.D.3. of the preamble of this final rule,
section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to make
an adjustment to the standardized amounts under section 1886(d) of the
Act to offset the estimated increase or decrease in aggregate payments
for FY 2008 and FY 2009 (including interest) resulting from the
difference between the estimated actual documentation and coding effect
and the documentation and coding adjustments applied under section 7(a)
of Public Law 110-90. This determination must be based on a
retrospective evaluation of claims data. Our actuaries estimated that
this 5.8 percentage point increase resulted in an increase in aggregate
payments of approximately $6.9 billion. Therefore, as discussed in the
FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 50067), we
determined that an aggregate adjustment of -5.8 percent in FYs 2011 and
2012 would be necessary in order to meet the requirements of section
7(b)(1)(B) of Public Law 110-90 to adjust the standardized amounts for
discharges occurring in FYs 2010, 2011, and/or 2012 to offset the
estimated amount of the increase in aggregate payments (including
interest) in FYs 2008 and 2009.
It is often our practice to phase in rate adjustments over more
than one year in order to moderate the effect on rates in any one year.
Therefore, consistent with the policies that we have adopted in many
similar cases, in the FY 2011 IPPS/LTCH PPS final rule, we made an
adjustment to the standardized amount of -2.9 percent, representing
approximately half of the aggregate adjustment required under section
7(b)(1)(B) of Public Law 110-90, for FY 2011. An adjustment of this
magnitude allowed us to moderate the effects on hospitals in one year
while simultaneously making it possible to implement the entire
adjustment within the timeframe required under section 7(b)(1)(B) of
Public Law 110-90 (that is, no later than FY 2012). For FY 2012, in
accordance with the timeframes set forth by section 7(b)(1)(B) of
Public Law 110-90, and consistent with the discussion in the FY 2011
IPPS/LTCH PPS final rule, we completed the recoupment adjustment by
implementing the remaining -2.9 percent adjustment, in addition to
removing the effect of the -2.9 percent adjustment to the standardized
amount finalized for FY 2011 (76 FR 51489 and 51498). Because these
adjustments, in effect, balanced out, there was no year-to-year change
in the standardized amount due to this recoupment adjustment for FY
2012. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53276), we made a
final +2.9 percent adjustment to the standardized amount, completing
the recoupment portion of section 7(b)(1)(B) of Public Law 110-90. We
note that with this positive adjustment, according to our estimates,
all overpayments made in FY 2008 and FY 2009 have been fully recaptured
with appropriate interest, and the standardized amount has been
returned to the appropriate baseline.
[[Page 50515]]
6. Recoupment or Repayment Adjustment Authorized by Section 631 of the
American Taxpayer Relief Act of 2012 (ATRA)
Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law
110-90 to require the Secretary to make a recoupment adjustment or
adjustments totaling $11 billion by FY 2017. This adjustment represents
the amount of the increase in aggregate payments as a result of not
completing the prospective adjustment authorized under section
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier,
this delay in implementation resulted in overstated payment rates in
FYs 2010, 2011, and 2012. The resulting overpayments could not have
been recovered under Public Law 110-90.
Similar to the adjustments authorized under section 7(b)(1)(B) of
Public Law 110-90, the adjustment required under section 631 of the
ATRA is a one-time recoupment of a prior overpayment, not a permanent
reduction to payment rates. Therefore, any adjustment made to reduce
rates in one year would eventually be offset by a positive adjustment,
once the necessary amount of overpayment is recovered.
As we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27504 through 27505), our actuaries estimate that a -9.3 percent
adjustment to the standardized amount would be necessary if CMS were to
fully recover the $11 billion recoupment required by section 631 of the
ATRA in FY 2014. In its March 2013 ``Report to Congress: Medicare
Payment Policy,'' MedPAC estimates that a -2.4 percent adjustment made
in FY 2014, and not removed until FY 2018, also would recover the
required recoupment amount. It is often our practice to delay or phase
in rate adjustments over more than one year, in order to moderate the
effect on rates in any one year. Therefore, consistent with the
policies that we have adopted in many similar cases, in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27504 through 27505), we proposed a
-0.8 percent recoupment adjustment to the standardized amount in FY
2014. As we stated in the proposed rule, we estimate that this level of
adjustment would recover up to $0.96 billion in FY 2014, with at least
$10.04 billion remaining to be recovered by FY 2017. If adjustments of
approximately -0.8 percent are implemented in FYs 2014, 2015, 2016, and
2017, using standard inflation factors, we estimate that the entire $11
billion would be accounted for by the end of the statutory 4-year
timeline. As estimates of any future adjustments are subject to slight
variations in total savings, we did not propose specific adjustments
for FYs 2015, 2016, or 2017 at that time. We stated that we believe
that this level of adjustment for FY 2014 is a reasonable and fair
approach that satisfies the requirements of the statute while
mitigating extreme annual fluctuations in payment rates. In addition,
we again noted that this -0.8 percent recoupment adjustment, and future
adjustments under this authority, will be eventually offset by an
equivalent positive adjustment once the full $11 billion recoupment
requirement has been realized.
We discuss the comments we received on this proposal and our final
policy for FY 2014 in the section below.
7. Additional Prospective Adjustments for the MS-DRG Documentation and
Coding Effect Through FY 2010 Authorized 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 if the Secretary determines such
adjustments to be necessary for any subsequent fiscal years in order to
eliminate the effect of coding or classification changes that do not
reflect real changes in case-mix. After review of comments and
recommendations received in a FY 2012 public comment letter from MedPAC
(available on the Internet at: http://www.medpac.gov/documents/06172011_FY12IPPS_MedPAC_COMMENT.pdf), we analyzed claims data in FY
2010 to determine whether any additional adjustment would be
appropriate to ensure that the introduction of MS-DRGs was implemented
in a budget neutral manner. We analyzed FY 2010 data on claims paid
through December 2011 using the same claims-based methodology as
described in previous rulemaking (73 FR 43768 and 43775). We determined
a total additional prospective documentation and coding effect of 0.8
percent through FY 2010 and found that this effect was present for both
IPPS hospitals paid with the standardized amount and IPPS hospitals
paid using their hospital-specific payment rates.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27890), we
proposed an additional -0.8 percent prospective adjustment to the
standardized amount to account for this effect. We indicated that this
additional prospective adjustment of -0.8 percent, when combined with
the other prospective MS-DRG documentation and coding adjustments
already made or proposed would eliminate the future effect of MS-DRG
documentation and coding that did not reflect real changes in case-mix
for discharges occurring through FY 2010. As discussed in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53278 through 53280), numerous
commenters objected to the CMS proposal to make an adjustment to
account for payment increases due to MS-DRG documentation and coding
that did not reflect real changes in case-mix for discharges occurring
through FY 2010. Many commenters continued to assert that our estimates
of documentation and coding were overstated, and could be explained by
other factors. These commenters also focused on part of the analysis
provided by MedPAC in its FY 2012 public comment letter indicating that
a slightly smaller additional prospective adjustment of -0.55 percent
rather than -0.8 percent might be required to offset the cumulative MS-
DRG documentation and coding effect through FY 2010. Specifically,
while MedPAC supported the overall methodology, it suggested that it
was possible that changes in documentation and coding to optimize
payments under the MS-DRG GROUPERs and relative weights may have
resulted in slightly less than optimal payments under the FY 2007
GROUPER and relative weights (the denominator of the documentation and
coding change estimate). Many commenters requested that, given the
MedPAC analysis, if CMS were to apply an additional prospective
adjustment to the MS-DRG documentation and coding effect through FY
2010, it should subtract 0.25 percentage points from its estimate, for
an adjustment of -0.55 percent.
After considering the public comments, we recognized that the issue
of the estimate to use for the cumulative MS-DRG documentation and
coding effect through FY 2010 may merit further consideration.
Therefore, as discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53278 through 53280), we decided not to finalize the proposed -0.8
percent adjustment to the standardized amount and the hospital-specific
rate until more analysis could be completed.
CMS is continuing to consider whether MedPAC's recommendation that
an adjustment to offset the cumulative documentation and coding effects
through FY 2010 under section 1886(d)(3)(A)(vi) of the Act is
appropriate and supported by a review of the claims data. After further
consideration of the MedPAC analysis and the request by many public
commenters, if we were to apply an additional prospective adjustment
for the cumulative MS-DRG documentation
[[Page 50516]]
and coding effect through FY 2010, we believe the most appropriate
additional adjustment is -0.55 percent.
As discussed in section II.D.6. of the preamble of the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27505), because we proposed a -0.8
percent recoupment adjustment, we did not propose a prospective
adjustment in FY 2014 for the cumulative MS-DRG documentation and
coding effect through FY 2010. However, we solicited public comments as
to whether any portion of the proposed -0.8 percent recoupment
adjustment should be reduced and instead applied to a prospective
adjustment for the cumulative MS-DRG documentation and coding effect
through FY 2010. For example, we could apply a -0.25 percent recoupment
adjustment, and a -0.55 prospective adjustment, for a total FY 2014
adjustment of -0.8 percent. Reducing the recoupment adjustment in FY
2014 would require relatively larger adjustments for FYs 2015, 2016,
and/or 2017, but making a prospective adjustment of -0.55 percent would
eliminate future payment increases due to MS-DRG documentation and
coding that did not reflect real changes in case-mix for discharges
occurring through FY 2010. As we discuss above, because the
documentation and coding effect through FY 2010 was found for both IPPS
hospitals paid with the standardized amount and IPPS hospitals paid
under their hospital-specific payment rate, if we were to apply a
prospective adjustment to remove this effect, we also would apply such
an adjustment to the hospital-specific payment rate, using the
Secretary's broad authority under section 1886(d)(5)(I)(i) of the Act
(77 FR 53276 through 53277). Therefore, if we attribute a portion of
the -0.8 percent adjustment for FY 2014 to the prospective adjustment,
we also would make appropriate adjustments to the hospital-specific
payment rates. Puerto Rico-specific rates would not be affected, as we
previously found no significant additional MS-DRG documentation and
coding effect for FY 2010 that would warrant any additional adjustment
to the Puerto Rico-specific rate (77 FR 53279).
Comment: The majority of commenters were satisfied with CMS'
proposal to phase in the $11 billion adjustment required under section
631 of the ATRA. Commenters encouraged CMS to continue to implement the
required adjustment gradually through FY 2017.
Response: We concur with commenters that a gradual implementation
of this adjustment is the most prudent course of action. We believe
that the proposed level of adjustment for FY 2014 is a reasonable and
fair approach that satisfies the requirements of the statute while
mitigating extreme annual fluctuations in payment rates. Therefore, we
are finalizing a -0.8 percent documentation and coding adjustment to
the standardized amount for FY 2014.
Comment: Many commenters, including a national hospital
association, were appreciative that CMS has reduced its original
estimate of FY 2010 documentation and coding effects from 0.8 percent
to 0.55 percent and believed that the 0.8 estimate was overstated.
However, some commenters contended that this overstatement was not
limited to FY 2010 alone. These commenters, while continuing to
fundamentally disagree with the validity of underlying methodology
employed by CMS, as previously described in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53274-53275), requested that a prospective adjustment
for any documentation and coding effect determined to have occurred in
FY 2010 be partially or wholly offset by any similar overstatement that
occurred in the adjustments made for documentation and coding effects
that occurred during FY 2008 and FY 2009.
Response: In the proposed rule (78 FR 27505), we acknowledged that,
after further consideration of the MedPAC analysis of claims data, if
we were to apply an additional prospective adjustment for the
cumulative MS-DRG documentation and coding effect through FY 2010, we
believe the most appropriate additional adjustment is -0.55 percent,
rather than the adjustment proposed in prior rulemaking of -0.8
percent. With respect to our previously finalized recoupment
adjustments for documentation and coding effects in FY 2008 and FY
2009, however, we note, as discussed earlier, that section 7(b)(1)(B)
of Public Law 110-90 required the Secretary to make the FY 2008 and FY
2009 recoupment adjustments based on estimates and also required that
the Secretary make these adjustments for discharges occurring only in
FYs 2010, 2011, and/or 2012. The Secretary made the FY 2008 and FY 2009
recoupment adjustments to the standardized amounts for discharges
occurring in FY 2011 and FY 2012 based on the best estimates available
at the time. We also note that section 631 of the ATRA states that the
$11 billion recoupment figure ``represents the amount of the increase
in aggregate payments from fiscal years 2008 through 2013 for which an
adjustment was not previously applied.'' Any adjustment to the FY 2008
and FY 2009 recoupment, therefore, is subsumed in the $11 billion
recoupment figure.
Comment: Many commenters requested that CMS not apply any of the
proposed -0.8 percent recoupment adjustment as a prospective adjustment
to account for any MS-DRG documentation and coding effect that occurred
in FY 2010. In addition to overall concerns with CMS' methodology,
commenters indicated that any prospective adjustment in addition to the
recoupment required by section 631 of the ATRA would be too financially
burdensome, and would be contrary to the agency's stated goal of
mitigating extreme fluctuations in payment rates.
MedPAC recommended that CMS implement the full -0.55 percent
prospective adjustment for FY 2010 documentation and coding in FY 2014,
reducing the FY 2014 recoupment adjustment to -0.25 percent. While
MedPAC acknowledged that such an action would require relatively larger
adjustments in FYs 2015 through 2017 to satisfy the $11 billion
recoupment requirement, it pointed out that further delay of FY 2010
documentation and coding adjustments would lead to overpayments in
future fiscal years, and that, in general, prospective adjustments
should be prioritized over retroactive adjustments.
Response: We have considered all of the comments received. While we
are firmly committed to ensuring that changes in documentation and
coding do not lead to increases in payments, we have decided not to
apply a prospective adjustment to account for any documentation and
coding effect that occurred in FY 2010 at this time. We note that the
$11 billion recoupment required by section 631 of the ATRA will require
additional documentation and coding adjustments between FY 2014 and FY
2017. If we were to apply a -0.55 percent prospective documentation and
coding adjustment for FY 2014, we would be concerned that additional
larger adjustments will be needed in future years to recoup the $11
billion required by ATRA. We will continue to take into account public
input and any future legislation on this issue.
Comment: Several commenters opposed the implementation of any
prospective adjustment to the hospital-specific rate. Similar to
comments submitted in response to the FY 2013 IPPS/LTCH PPS proposed
rule, as summarized in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53277),
[[Page 50517]]
commenters stated that the broad authority granted to the Secretary in
section 1886(d)(5)(I)(i) of the Act is not so broad as to extend the
scope of a legislative directive that was specifically limited to
hospitals paid under a prospective payment system. Commenters also
contended that the plain language of section 7(b)(1) of Public Law 110-
90, as amended by the ATRA, provides clear instructions that the
documentation and coding adjustment is only intended to apply to the
standardized amounts.
Response: We continue to disagree that we do not have the authority
to make prospective documentation and coding adjustments to the
hospital-specific rates. We do not believe that the language in section
7(b)(1) of Public Law 110-90, as amended by the ATRA, or in section
1886(d)(3)(A)(iv) of the Act creates a limit on the broad authority
granted under section 1886(d)(5)(I) of the Act. We have discussed the
basis for applying any such prospective adjustment to the hospital-
specific rate in our prior rules, beginning with the FY 2009 IPPS/LTCH
PPS final rule (73 FR 48448). We also note that the proposed -0.8
percent recoupment adjustment for FY 2014 pursuant to section 631 of
ATRA, which we are finalizing in this final rule, applies only to the
standardized amount and not to the hospital-specific rates. Section 631
of the ATRA does not provide authority for a recoupment adjustment to
the hospital-specific rate. However, as discussed in the FY 2010 IPPS/
LTCH final rule (74 FR 24098), the FY 2011 IPPS/LTCH PPS final rule (75
FR 50067 through 50071), the FY 2012 IPPS/LTCH PPS (76 FR 51498 through
51499), and the FY 2013 IPPS/LTCH PPS final rule (75 FR 53277 through
53278), we continue to believe that any prospective documentation and
coding adjustments applied to the standardized amount should also be
similarly applied to the hospital-specific rate. As discussed in the
previous response, we are not making any prospective adjustment in FY
2014 to account for FY 2010 documentation and coding effects.
Therefore, no documentation and coding adjustment will be applied to
the hospital-specific rate in FY 2014.
E. Refinement of the MS-DRG Relative Weight Calculation
1. Background
Beginning in FY 2007, we implemented relative weights for DRGs
based on cost report data instead of charge information. We refer
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed
discussion of our final policy for calculating the cost-based DRG
relative weights and to the FY 2008 IPPS final rule with comment period
(72 FR 47199) for information on how we blended relative weights based
on the CMS DRGs and MS-DRGs.
As we implemented cost-based relative weights, some public
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 the Research
Triangle Institute, International (RTI) to study the effects of charge
compression in calculating the relative weights and to consider methods
to reduce the variation in the cost-to-charge ratios (CCRs) across
services within cost centers. For a detailed summary of RTI's findings,
recommendations, and public comments that we received on the report, we
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452
through 48453). In addition, we refer readers to RTI's July 2008 final
report titled ``Refining Cost to Charge Ratios for Calculating APC and
MS-DRG Relative Payment Weights'' (http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
In the FY 2009 IPPS/LTCH PPS final rule (73 FR 48458 through
48467), in response to the RTI's recommendations concerning cost report
refinements, we discussed our decision to pursue changes to the cost
report to split the cost center for Medical Supplies Charged to
Patients into one line for ``Medical Supplies Charged to Patients'' and
another line for ``Implantable Devices Charged to Patients.'' We
acknowledged, as RTI had found, that charge compression occurs in
several cost centers that exist on the Medicare cost report. However,
as we stated in the FY 2009 IPPS/LTCH PPS final rule, we focused on the
CCR for Medical Supplies and Equipment because RTI found that the
largest impact on the MS-DRG relative weights could result from
correcting charge compression for devices and implants. In determining
the items that should be reported in these respective cost centers, we
adopted the commenters' recommendations that hospitals should use
revenue codes established by the AHA's National Uniform Billing
Committee to determine the items that should be reported in the
``Medical Supplies Charged to Patients'' and the ``Implantable Devices
Charged to Patients'' cost centers. Accordingly, a new subscripted line
for ``Implantable Devices Charged to Patients'' was created in July
2009. This new subscripted cost center has been available for use for
cost reporting periods beginning on or after May 1, 2009.
As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527), in addition to the findings regarding implantable
devices, RTI also found that the costs and charges of computed
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac
catheterization differ significantly from the costs and charges of
other services included in the standard associated cost center. RTI
also concluded that both the IPPS and the OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
cost centers for CT scans, MRIs, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080), we finalized our proposal to create
standard cost centers for CT scans, MRIs, and cardiac catheterization,
and to require that hospitals report the costs and charges for these
services under new cost centers on the revised Medicare cost report
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50075 through 50080) for a detailed discussion of the
reasons for the creation of standard cost centers for CT scans, MRIs,
and cardiac catheterization.) The new standard cost centers for CT
scans, MRIs, and cardiac catheterization are effective for cost
reporting periods beginning on or after May 1, 2010, on the revised
cost report Form CMS-2552-10.
In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due
to what is typically a 3-year lag between the reporting of cost report
data and the availability for use in ratesetting, we anticipated that
we might be able to use data from the new ``Implantable Devices Charged
to Patients'' cost center to develop a CCR for ``Implantable Devices
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle.
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74
FR
[[Page 50518]]
43782), due to delays in the issuance of the revised cost report Form
CMS 2552-10, we determined that a new CCR for ``Implantable Devices
Charged to Patients'' might not be available before FY 2013. Similarly,
when we finalized the decision in the FY 2011 IPPS/LTCH PPS final rule
to add new cost centers for CT scans, MRIs, and cardiac
catheterization, we explained that data from any new cost centers that
may be created will not be available until at least 3 years after they
are first used (75 FR 50077). In preparation for the FY 2012 IPPS
rulemaking, we checked the availability of data in the ``Implantable
Devices Charged to Patients'' cost center on the FY 2009 cost reports,
but we did not believe that there was a sufficient amount of data from
which to generate a meaningful analysis in this particular situation.
Therefore, we did not propose to use data from the ``Implantable
Devices Charged to Patients'' cost center to create a distinct CCR for
``Implantable Devices Charged to Patients'' for use in calculating the
MS-DRG relative weights for FY 2012. We indicated that we would
reassess the availability of data for the ``Implantable Devices Charged
to Patients'' cost center for the FY 2013 IPPS/LTCH PPS rulemaking
cycle and, if appropriate, we would propose to create a distinct CCR at
that time.
During the development of the FY 2013 IPPS/LTCH PPS proposed and
final rules, hospitals were still in the process of transitioning from
the previous cost report Form CMS-2552-96 to the new cost report Form
CMS-2552-10. Therefore, we were able to access only those cost reports
in the FY 2010 HCRIS with fiscal year begin dates on or after October
1, 2009, and before May 1, 2010; that is, those cost reports on Form
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not
available because cost reports filed on the Form CMS-2552-10 were not
accessible in the HCRIS. Further complicating matters was that, due to
additional unforeseen technical difficulties, the corresponding
information regarding charges for implantable devices on hospital
claims was not yet available to us in the MedPAR file. Without the
breakout in the MedPAR file of charges associated with implantable
devices to correspond to the costs of implantable devices on the cost
report, we believed that we had no choice but to continue computing the
relative weights with the current CCR that combines the costs and
charges for supplies and implantable devices. We stated in the FY 2013
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do
have the necessary data for supplies and implantable devices on the
claims in the MedPAR file to create distinct CCRs for the respective
cost centers for supplies and implantable devices, we hoped that we
would also have data for an analysis of creating distinct CCRs for CT
scans, MRIs, and cardiac catheterization, which could then be finalized
through rulemaking.
2. Discussion of Proposed and Final Policy for FY 2014
As we stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27506-27507), to calculate the proposed FY 2014 MS-DRG relative
weights, we proposed to continue our current methodology of using the
two most recent data sources: The December 2012 update of the FY 2012
MedPAR file as the claims data source and the December 2012 update of
FY 2011 HCRIS as the cost data source. At the time of the development
of the proposed rule, we had a substantial number of hospitals
completing all, or some, of these new cost centers on the FY 2011
Medicare cost reports, compared to prior years. Specifically, using the
December 2012 update of FY 2011 HCRIS, we were able to calculate a
valid implantable device CCR for 2,285 IPPS hospitals, a valid MRI CCR
for 1,402 IPPS hospitals, a valid CT scan CCR for 1,470 IPPS hospitals,
and a valid cardiac catheterization CCR for 1,022 IPPS hospitals. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53281), we stated that
prior to proposing to create these CCRs, we would first thoroughly
analyze and determine the impacts of the data, and that distinct CCRs
for these new cost centers would be used in the calculation of the
relative weights only if they were first finalized through rulemaking.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), we stated
that we believe that there is a sufficient amount of data in the FY
2011 cost reports from which to generate a meaningful analysis of using
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. In addition, the corresponding charge data on hospital
claims for implantable devices, MRIs, CT scans, and cardiac
catheterization are available in the FY 2012 MedPAR file. Therefore, in
the proposed rule, we provided various data analyses based on
comparison of the FY 2014 relative weights computed using 15 CCRs, as
we have done in the past, and the FY 2014 relative weights computed
using 19 CCRs, with distinct CCRs for implantable devices, MRIs, CT
scans, and cardiac catheterization. Specifically, rather than having a
single CCR for ``Supplies and Equipment'' which includes low-cost
supplies and high-cost implantable devices, we proposed that a distinct
CCR would be carved out of the ``Supplies and Equipment'' CCR, leaving
one CCR for ``Supplies'' and one CCR for ``Implantable Devices.''
Regarding the Radiology CCR, which currently is comprised of general
radiology ancillary services and MRIs and CT scans, we proposed that
the costs for MRIs and CT scans would be separated from general
radiology, creating two distinct CCRs, one for MRIs and one for CT
scans, respectively. Finally, by separating the costs of cardiac
catheterization out of the CCR for general cardiology, we proposed that
a distinct CCR would be created for cardiac catheterization. Thus, by
breaking out these 4 additional CCRs, the number of CCRs used to
calculate the relative weights would increase from 15 to 19.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507), for
comparison purposes, we included the following table to show the final
FY 2013 CCRs, the potential FY 2014 CCRs computed with the existing 15
cost centers, and the potential FY 2014 CCRs computed with 19 cost
centers, with 4 new CCRs for implantable devices, MRIs, CT scans, and
cardiac catheterization.
----------------------------------------------------------------------------------------------------------------
Final FY 2013 15 Potential FY Potential FY
Group CCRs 2014 15 CCRs 2014 19 CCRs
----------------------------------------------------------------------------------------------------------------
Routine days.............................................. 0.514 0.502 0.502
Intensive days............................................ 0.442 0.423 0.423
Drugs..................................................... 0.199 0.193 0.193
Supplies & Equipment...................................... 0.335 0.327 0.293
Implantable Devices....................................... n/a n/a 0.361
Therapy Services.......................................... 0.370 0.355 0.355
Laboratory................................................ 0.143 0.133 0.133
[[Page 50519]]
Operating Room............................................ 0.238 0.225 0.225
Cardiology................................................ 0.145 0.134 0.132
Cardiac Catheterization................................... n/a n/a 0.135
Radiology................................................. 0.136 0.128 0.170
MRI....................................................... n/a n/a 0.091
CT Scans.................................................. n/a n/a 0.045
Emergency Room............................................ 0.226 0.207 0.207
Blood..................................................... 0.389 0.371 0.371
Other Services............................................ 0.397 0.399 0.399
Labor & Delivery.......................................... 0.450 0.445 0.445
Inhalation Therapy........................................ 0.189 0.187 0.187
Anesthesia................................................ 0.109 0.120 0.120
----------------------------------------------------------------------------------------------------------------
In order to model the effects on the relative weights in medical
MS-DRGs versus surgical MS-DRGs, in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27507-8), we compared a set of relative weights calculated
with 15 CCRs and 19 CCRs. Based on the data available at the time of
the development of the proposed rule, overall, if the 19 CCRs would be
used to calculate the proposed relative weights for FY 2014, relative
weights for medical MS-DRGs would be expected to decrease by
approximately 1.1 percent, and those for surgical MS-DRGs would be
expected to increase by approximately 1.2 percent. In addition, as
shown in the table below included in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27508), at the MDC level, we expected payments to increase
by approximately 0.64 percent (0.39+0.25) within orthopedic and cardiac
MDCs, with most of the reductions in payment resulting to the medical
MS-DRGs in the nervous system, digestive system, and respiratory system
MDCs.
------------------------------------------------------------------------
Estimated
percentage
MDC Description change within
MDC
------------------------------------------------------------------------
08........................ Musculoskeletal System And 0.39
Connective Tissue.
05........................ Circulatory System........ 0.25
01........................ Nervous System............ -0.16
06........................ Digestive System.......... -0.10
04........................ Respiratory System........ -0.08
------------------------------------------------------------------------
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508), we stated
that the largest estimated increase in MS-DRG relative weights would
likely occur for MS-DRGs associated with cardiac catheterization and
implantable cardiac devices. We also stated that the largest estimated
reductions in MS-DRG relative weights would likely occur for MS-DRGs
associated with traumatic head injury and concussion, which are high
users of CT scanning and MRI services. We included in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27508) the table below, which showed,
based on data available at the time of the development of the proposed
rule, the top 10 (nonlabor and delivery) MS-DRGs that we predicted
would experience the largest increases and decreases in relative
weights through use of the expanded 19 CCRs, as compared to previous 15
CCRs.
----------------------------------------------------------------------------------------------------------------
Potential Potential
relative relative Percentage
MS-DRG Type Title weight with 15 weights with change
CCRs 19 CCRs
----------------------------------------------------------------------------------------------------------------
MS-DRGS THAT WOULD EXPERIENCE THE LARGEST DECREASE IN RELATIVE WEIGHT
----------------------------------------------------------------------------------------------------------------
090.......................... MED............. Concussion 0.7614 0.7013 -7.9
without CC/MCC.
084.......................... MED............. Traumatic 0.9137 0.8516 -6.8
Stupor & Coma,
Coma >1 Hour
without CC/MCC.
087.......................... MED............. Traumatic 0.7899 0.7369 -6.7
Stupor & Coma,
Coma <1 Hour
without CC/MCC.
965.......................... MED............. Other Multiple 1.0450 0.980 -6.1
Significant
Trauma without
CC/MCC.
185.......................... MED............. Major Chest 0.7281 0.6845 -6.0
Trauma without
CC/MCC.
089.......................... MED............. Concussion with 0.9959 0.9366 -6.0
CC.
123.......................... MED............. Neurological 0.7355 0.6920 -5.9
Eye Disorder.
343.......................... SURG............ Appendectomy 0.9880 0.9517 -5.7
without
Complicated
Principal
Diagnosis
without CC/MCC.
053.......................... MED............. Spinal 0.9355 0.8825 -5.7
Disorders &
Injuries
without CC/MCC.
066.......................... MED............. Intracranial 0.8034 0.7579 -5.7
Hemorrhage or
Cerebral
Infarction
without CC/MCC.
----------------------------------------------------------------------------------------------------------------
[[Page 50520]]
MS-DRGS THAT WOULD EXPERIENCE THE LARGEST INCREASE IN RELATIVE WEIGHT
----------------------------------------------------------------------------------------------------------------
454.......................... SURG............ Combined 7.6399 8.0563 5.5
Anterior/
Posterior
Spinal Fusion
with CC.
455.......................... SURG............ Combined 5.9862 6.3133 5.5
Anterior/
Posterior
Spinal Fusion
Without CC/MCC.
484.......................... SURG............ Major Joint & 2.1211 2.2380 5.5
Limb
Reattachment
Procedure of
Upper
Extremity
without CC/MCC.
225.......................... SURG............ Cardiac 5.6298 5.9530 5.7
Defibrillator
Implant with
Cardiac
Catheterizatio
n without AMI/
HF/Shock
without MCC.
223.......................... SURG............ Cardiac 6.0956 6.4482 5.8
Defibrillator
Implant with
Cardiac
Catheterizatio
n with AMI/HF/
Shock without
MCC.
458.......................... SURG............ Spinal Fusion 4.8794 5.1630 5.8
Except
Cervical with
Spinal Curve/
Malignant/
Infection OR
9+ Fusion
without CC/MCC.
245.......................... SURG............ AICD Generator 4.4627 4.7320 6.0
Procedures.
849.......................... MED............. Radiotherapy... 1.3423 1.4258 6.2
946.......................... MED............. Rehabilitation 1.1295 1.2024 6.5
without CC/MCC.
227.......................... SURG............ Cardiac 5.2193 5.5714 6.7
Defibrillator
Implant
without
Cardiac
Catheterizatio
n without MCC.
----------------------------------------------------------------------------------------------------------------
During development of the FY 2014 proposed rule, after computing
the analyses described above by comparing both sets of MS-DRG relative
weights computed with FY 2011 cost report data, we revisited RTI's July
2008 final report. We noted that the impacts on relative weight and at
the MDC level are generally consistent with those estimated by RTI in
its modeling. RTI found that disaggregating the CCRs for medical
supplies and devices would have the most impact on reducing charge
compression, and that the largest impact was for MS-DRG 227. Similarly,
as shown in the chart above, we estimated that the potential relative
weight for MS-DRG 227 would experience the largest increase, 6.7
percent. Cardiac implants and spinal fusion procedures accounted for
most of the 10 MS-DRGs with the largest incremental increases. In
addition, RTI's July 2008 final report (pages 103 through 107)
indicates that among the largest expected reductions are the MS-DRG
relative weights for MS-DRGs associated with traumatic head injury and
concussion, which are high users of CT scanning and MRI services. RTI's
analyses were highly predictive for many of the MS-DRGs most sensitive
to the effects of charge compression.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27508), we
indicated that as we stated in prior rulemaking (77 FR 53281 through
53283), once we determined that cost report data were available for
analysis, we would propose, if appropriate, to use the distinct CCRs
described above in the calculation of the MS-DRG relative weights. We
believed that the analytic findings described above using the FY 2011
cost report data and FY 2012 claims data supported our original
decision to break out and create new cost centers for implantable
devices, MRIs, CT scans, and cardiac catheterization, and we saw no
reason to further delay proposing to implement the CCRs of each of
these cost centers. Therefore, beginning in FY 2014, we proposed to
calculate the MS-DRG relative weights using 19 CCRs, creating distinct
CCRs from cost report data for implantable devices, MRIs, CT scans, and
cardiac catheterization. We welcomed public comments on the proposal
and the impacts that it may have. We referred readers to section VI.C.
of Appendix A of the proposed rule for the overall IPPS operating
impact of our proposal, which modeled payments to various hospital
types using relative weights developed from 19 CCRs (as compared to the
previous 15 CCRs). In addition, as part of the FY 2014 IPPS/LTCH PPS
proposed rule, in addition to providing Table 5, which listed the
proposed MS-DRGs and their relative weights using 19 CCRs (available on
the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp; click on the link on the left side of the screen titled
``FY 2014 IPPS Proposed Rule Home Page'' or ``Acute Inpatient--Files
for Download''), we provided a separate table that listed all MS-DRGs
and their relative weights if computed using 15 CCRs (available at the
same CMS Web site cited above). We believed that these two formats
would allow readers to compare our proposal to calculate the MS-DRG
relative weights using 19 CCRs with the relative weights of MS-DRGs if
computed using 15 CCRs.
Comment: Several commenters noted that CMS concluded that there is
sufficient data in the FY 2011 cost reports to support a meaningful
analysis of using distinct CCRs, but did not share how it arrived at
that conclusion. In particular, the commenters were unclear if 1,022
hospitals reporting cardiac catheterization are a representative
sample, because they make up less than a third of the total hospitals.
The commenters urged CMS to clarify how it determined the level of
reporting on these new cost centers is sufficient.
Response: In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27507),
we stated that, as compared to previous years, we have a substantial
number of hospitals completing all, or some, of the MRI, CT scan, and
cardiac catheterization cost centers on the FY 2011 Medicare cost
reports. For the FY 2014 IPPS/LTCH PPS proposed rule, we used cost
report data from the December 2012 update of the FY 2011 HCRIS, and
found that ``we were able to calculate a valid implantable device CCR
for 2,285 IPPS hospitals, a valid MRI CCR for 1,402 IPPS hospitals, a
valid CT scan CCR for 1,470 IPPS hospitals, and a valid cardiac
catheterization CCR for 1,022 IPPS hospitals (78 FR 27507).'' As part
of our methodology for calculating the proposed relative weights, we
first apply various trims to the cost report data of all IPPS hospitals
(we refer readers to the description of the calculation of the relative
weights in the FY 2014 IPPS LTCH PPS proposed rule
[[Page 50521]]
(78 FR 27529 through 27530)). After applying these data trims, the CCRs
in the proposed rule were based on data from 2,697 remaining IPPS
hospitals. Therefore, our use of the term ``valid'' CCRs in the FY 2014
proposed rule meant that these CCRs were the ones associated with the
2,697 IPPS hospitals remaining after the usual trims were applied.
Although the number of hospitals with valid cardiac catheterization
CCRs is less than the number of hospitals with ``valid'' implantable
device, MRI, or CT scan CCRs, it still represented about 38 percent of
the available IPPS hospitals after application of our usual data trims
(that is, 1,022/2,697 = .38). We note that many smaller hospitals do
not separately report cardiac catheterization costs and charges. (This
issue was raised in the FY 2011 IPPS/LTCH PPS final rule, (75 FR
50078), where, in recognition of the fact that not all hospitals
separately account for cardiac catheterization costs and charges, we
stated that hospitals that do not currently maintain distinct
departments or accounts in their internal accounting systems for CT
scanning, MRI, or cardiac catheterization are not required to create
distinct departments or accounts.) Given that not all hospitals would
even have a cardiac catheterization CCR, we considered 38 percent to be
a substantial number, albeit, not a majority, of IPPS hospitals, from
which to base our FY 2014 proposal to calculate the relative weights
with a distinct cardiac catheterization CCR.
We reviewed our data analyses from previous years and note that
typically, because the proposed CCRs for a given year are based on cost
report data from the December update of the applicable HCRIS year, the
proposed CCRs are based on data from less than 3,000 IPPS hospitals.
Then, once the data for each final rule are available, which are
derived from the subsequent March update of the applicable HCRIS year,
the final CCRs are typically based on cost report data of more than
3,000 IPPS hospitals. This is the case for FY 2014 as well. Although
the proposed CCRs were based on data of 2,697 IPPS hospitals, the March
2013 update of FY 2011 HCRIS yields: 3,207 IPPS hospitals (after
various trims are applied--we refer readers to the description of the
relative weight calculation in section II.H. of the preamble of this
final rule); 2,707 IPPS hospitals with an implantable device CCR; 1,717
IPPS hospitals with an MRI CCR; 1,785 IPPS hospitals with a CT scan
CCR; and 1,263 IPPS hospitals with a cardiac catheterization CCR. For
this FY 2014 final rule, although the number of hospitals with cardiac
catheterization CCRs is less than the number of hospitals with
``valid'' implantable device, MRI, or CT scan CCRs, it still represents
approximately 39 percent of the available IPPS hospitals after
application of our usual data trims (that is, 1,263/3,207 = .39).
Accordingly, we believe it is appropriate to use the cardiac
catheterization CCR in the calculation of the FY 2014 relative weights.
Comment: Commenters were generally supportive of the proposals to
implement additional CCRs for implantable devices and cardiac
catheterization. However, many commenters requested that CMS
``reconsider the impact of'' distinct CCRs for MRIs and CT scans
``before adopting them.'' Various commenters representing the medical
imaging industry opposed implementation of distinct MRI and CT scan
CCRs at this point, expressing concern that doing so would result in
very low CCRs for these services because of hospital cost reporting
practices that allocate capital costs for MRIs and CT scan across the
entire hospital, rather than to the appropriate individual radiology
cost centers. Specifically, the commenters reported that some hospitals
currently use an imprecise ``square footage'' allocation methodology
for the costs of large moveable equipment like CT scan and MRI
machines. They indicated that while CMS recommends using two
alternative allocation methods, ``direct assignment'' or ``dollar
value,'' as a more accurate methodology for directly assigning
equipment costs, industry analysis suggests that approximately only
half of the reported cost centers for CT scan and MRI rely on these
preferred methodologies. The commenters expressed concern that ``square
footage'' allocation results in CCRs that ``lack face validity,''
because the proposed CCRs for CT scans and MRIs are less than the
proposed CCR for general radiology, inaccurately reflecting the higher
resources used for MRIs and CT scans relative to the less expensive
plain film x-rays. Commenters asserted that more time is needed by
hospitals to modify their cost reporting practices, and urged CMS to
explore how to develop more accurate data without unduly increasing the
complexity of the cost report. Some other commenters suggested that if
CMS were to finalize the new CCRs, CMS should only use cost report data
that meet minimum data quality standards. For example, these commenters
recommended that CMS adopt the following standards for assuring
validity of CT and MRI cost data:
Check that the hospital uses direct assignment or dollar
value allocation of capital costs.
Check that the hospital's CT scan and MRI cost centers
each have total costs of at least $250,000.
Check that there is evidence that the hospital
reclassified overhead costs from the diagnostic radiology cost center
to the CT scan and/or MRI cost centers.
A different commenter's analysis used cost report data from
hospitals that employ ``procedural accounting,'' also known as
``activity-based costing,'' which the commenter stated is a more
accurate way to determine costs. The commenter's analysis showed
results that were in ``close agreement'' with CMS' proposed CCRs,
giving ``some comfort that the new cost centers are capturing costs as
intended.'' Nevertheless, the commenter urged caution before
proceeding, noting large swings in certain DRG relative weights, and
that many of the negatively affected DRGs are trauma related, and many
of the positively affected DRGs are cardiac and orthopedic related. The
commenter was concerned that specific types of hospitals have more to
gain or lose under the policy based on their mix of services, and CMS
should consider whether finalizing 19 CCRs ``would unduly incent volume
growth'' in certain procedures. The commenter requested that CMS
implement a ``dampening policy'' or a 70/30 transition blend for FY
2014 to give hospitals an opportunity to budget for such shifts and
avoid unintended consequences.
Although many commenters expressed concern about the impact of
implementing distinct CCRs for MRIs and CT scans under the IPPS, they
noted that since MS-DRGs are bundled services, only a fraction of the
negative impact would be manifested in the IPPS MS-DRGs, and that
payment rates for the Ambulatory Patient Classifications (APCs) under
the Hospital Outpatient Prospective Payment System (OPPS) would be
affected more dramatically by the use of inaccurate CCRs. The
commenters mentioned that the Deficit Reduction Act (DRA) of 2005 sets
the technical component (TC) of advanced imaging services to the lesser
of: (1) The Medicare Physician Fee Schedule (MPFS); or (2) the OPPS.
The commenters stated that, as proposed, the separate cost centers for
MRIs and CT scans would result in significant cuts to the MPFS
technical component payments. Another commenter noted
[[Page 50522]]
that as CMS proceeds with cost center refinement, services become
unbundled, and may cause payment swings from year to year. The
commenters urged CMS not to use the proposed CCRs for MRIs and CT scans
in the IPPS, the OPPS, or the MPFS until the effects on all three
systems have been thoroughly analyzed.
Response: We thank the commenters for their analyses and
suggestions regarding use of distinct CCRs for implantable devices,
MRIs, CT scans, and cardiac catheterization. We appreciate the support
for our proposal to use distinct CCRs for implantable devices and
cardiac catheterization, and we have carefully reviewed the comments
objecting to implementation of distinct CCRs for MRIs and CT scans. The
new standard cost centers for CT scans, MRIs, and cardiac
catheterization have been in effect since cost reporting periods
beginning on or after May 1, 2010, on the revised cost report Form CMS-
2552-10. Thus, FY 2011, which is the cost reporting year that CMS is
using to calculate the CCRs for the FY 2014 MS-DRG relative weights,
was either the first or the second opportunity for hospitals to submit
cost reports with the new CT scan and MRI cost centers (lines 57 and 58
of Worksheets A and C, Part I of the Form CMS-2552-10), depending on
the hospital's fiscal year end (FYE). (For example, a hospital with a
June 30 FYE would have completed these lines on its FY 2010 July 1,
2010-June 30, 2011 cost report, and again on its FY 2011 July 1, 2011-
June 30, 2012 cost report, whereas a hospital with a December 31 FYE
would have first completed these cost centers on its FY 2011 January 1,
2011-December 31, 2011 cost report). However, simultaneous with first
implementing the new CT scan and MRI cost centers in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50077), we also notified hospitals of the
need and importance of properly reporting the capital costs of moveable
equipment on the Medicare cost report. Specifically, in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50078), we explained that, in
accordance with Section 104 of CMS Pub. 15-1, Chapter 1, CT scans and
MRIs are major moveable equipment, and the costs should be reported
together with the rest of the hospital's major moveable equipment cost
in the Capital-Related Costs--Moveable Equipment cost centers on
Worksheet A (lines 2 and 4 on the Form CMS-2552-96 and line 2 on the
Form CMS-2552-10). The costs in these cost centers are allocated to all
the hospital's cost centers that use major moveable equipment
(including CT and MRI), using ``dollar value'' (which is the
``recommended'' or default statistical basis, per the cost reporting
instructions at CMS Pub. 15-2, Section 4095 for the Form CMS 2552-10).
Alternatively, the hospital may have obtained the contractor's approval
under Section 2313 of CMS Pub. 15-1 to use the simplified cost
allocation methodology, ``square feet.'' However, a hospital that
historically has been using ``square feet'' and is concerned that this
method of allocation may result in inaccurate CCRs (on Worksheet C,
Part I) for the CT scan, MRI, and other ancillary cost centers may
request contractor approval in accordance with Section 2307 of the CMS
Pub. 15-1 to use the ``direct assignment'' allocation method, and
directly assign the cost of moveable equipment to all of the hospital's
cost centers that use moveable equipment, including CT and MRIs, using
the provider's routine accounting process. This would ensure that the
high cost of the CT scanning and MRI equipment would be reflected in
the CCR that would be calculated for those departments and that would
be used to estimate the cost of CT scanning and MRI services. In any
case, hospitals should correct their cost reporting practices to come
into compliance with CMS' longstanding policy regarding the ``Capital-
Related Costs--Moveable Equipment'' cost center, by either using the
recommended statistical allocation method of ``dollar value'' for costs
in Worksheet A, Column 2 for Capital-Related Costs--Moveable Equipment,
or by requesting contractor approval in accordance with Section 2307 of
CMS Pub. 15-1 to use the ``direct assignment'' allocation method. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53283), we reiterated this
policy, and added that ``Hospitals that still need to correct their
cost reporting practices in this regard should do so soon, so that when
we propose distinct CCRs for MRI and CT scans, hopefully for FY 2014,
these CCRs will represent fairly accurately the cost of these radiology
services.'' Therefore, while the CCRs for CT scan and MRIs may appear
to ``lack face validity,'' as the commenters asserted, these CCRs
nevertheless reflect the cost reporting practices of many IPPS
hospitals as of FY 2011, the cost reports used to calculate the CCRs
for the FY 2014 MS-DRG relative weights. Furthermore, we are unsure of
how the cost reporting practices of hospitals that employ the square
feet allocation method result in CCRs that ``lack face validity'' when
CCRs are calculated separately for CT scan, MRI, and radiology, but
would result in CCRs that are more ``valid'' when aggregated into a
single CCR for all radiology services.
We have considered the public comments recommending that if CMS
does finalize distinct CCRs for CT scans and MRIs for the IPPS MS-DRG
relative weights, CMS should adopt certain minimum quality standards,
such as using only cost report data of hospitals that use either direct
assignment or the dollar value statistical allocation method, have at
least $250,000 of cost in the CT scan or MRI cost center, and have
reclassified overhead costs from the diagnostic radiology cost center
to the CT scan and/or MRI cost centers. We do not agree with adoption
of these minimum data standards because doing so would ignore the fact
that many hospitals have chosen (at least up to this point) to employ
the square feet statistical allocation methodology, perhaps for reasons
unrelated to the costs of MRIs and CT scans, and, therefore, these data
reflect, in large part, the best available data that we have. It also
is not administratively feasible for CMS to determine, using HCRIS
data, whether hospitals have reclassified overhead costs from the
diagnostic radiology cost center to the CT scan and/or MRI cost
centers. However, we appreciate the one commenter's analysis of cost
reports using procedural accounting (another more precise method) that
yielded CCRs that were close to the CCRs that CMS proposed.
We took note of the many comments regarding the ramifications of CT
scan and MRI CCRs under the OPPS and the MPFS. Specifically, commenters
seemed even more concerned about an impending proposal to implement
distinct MRI and CT scan CCRs under the OPPS, which, they asserted,
when coupled with recent payment reductions to MRI and CT scan services
under the Deficit Reduction Act of 2005, are detrimental to hospitals.
(We note that at the time of the comment period for the FY 2014 IPPS/
LTCH PPS proposed rule, the CY 2014 OPPS/ASC proposed rule had not yet
been issued.) We understand that any such change could have significant
payment impacts under the MPFS where the technical component payment
for many imaging services is capped at the OPPS payment. While we
appreciate the concern regarding other Medicare payment systems, we
wish to point out that our decision to implement additional CCRs in
this FY 2014 IPPS/LTCH PPS final rule does not predict what CMS may
finalize for the CY 2014 OPPS/ASC relative payment weights. We will
separately evaluate the impacts of
[[Page 50523]]
implementing any additional CCRs under the OPPS as part of the OPPS
rulemaking process. We note that the public comment periods for both
the CY 2014 MPFS proposed rule and the CY 2014 OPPS/ASC proposed rule
end on September 6, 2013.
We appreciate the concerns expressed by the commenters related to
the swings in the relative weights of certain MS-DRGs, and the
importance of not providing an incentive for hospitals to furnish, or
not furnish, certain services. However, we are not convinced that
further delay or further trimming of CCR values is necessary in order
to implement all of the proposed CCRs. This is consistent with our
historical approach to use cost report data from HCRIS that is 3 years
prior to the IPPS fiscal year that is under development (that is, for
the FY 2014 IPPS relative weights, the CCRs are calculated from FY 2011
HCRIS). Although hospitals have been permitted to use the alternative
basis cost allocation (that is, ``square feet'') under Section 2313 of
CMS Pub. 15-1, this methodology does not ensure precise CCRs for CT
scans and MRIs. Therefore, we encouraged hospitals over the past
several years to use the most precise cost reporting methods in
response to the new cost report lines. Specifically, the longstanding
cost report instructions at CMS Pub. 15-2, Section 4020 (previously at
Section 3617), state that ``The statistical basis shown at the top of
each column on Worksheet B-1 is the recommended basis of allocation of
the cost center indicated which must be used by all providers
completing this form (Form CMS-2552-10), even if a basis of allocation
other than the recommended basis of allocation was used in the previous
iteration of the cost report (Form CMS-2552-96).'' Under Table 1 of the
Medicare cost report, which lists the Record Specifications for the
cost centers on Worksheet B-1, ``dollar value'' is specified as the
recommended statistical allocation method for Column 2, Capital-Related
Costs--Moveable Equipment. While the ``dollar value'' statistical
allocation method is more precise than ``square feet,'' to ensure even
more precise CCRs for CT scans and MRIs, 90 days prior to the beginning
of their next cost reporting period, hospitals may request permission
from their Medicare contractors in accordance with Section 2307 of CMS
Pub. 15-1 to use the ``direct assignment'' allocation method on
Worksheet B, Part II, Column 0. Although ``direct assignment'' is the
preferred and most precise allocation method, hospitals that do not
have the resources to directly assign the costs of every cost center
are strongly encouraged to instead use the ``dollar value'' statistical
allocation method. (We note that, under Section 2313 of CMS Pub. 15-1,
hospitals not currently using ``dollar value'' should notify their
contractor of their intention to switch their statistical allocation
basis to ``dollar value'' at least 90 days prior to the end of a cost
reporting period.) We also intend to communicate with the Medicare
contractors to facilitate approval of hospitals' requests to switch
from the square feet statistical allocation method to the ``direct
assignment'' or ``dollar value'' allocation method for the costs of
major moveable equipment. We believe that by adopting more refined
CCRs, we are fostering more careful cost reporting. Therefore, we do
not believe that the concerns expressed by the commenters warrant
further delay in implementing the proposed CCRs for CT scans and MRIs
for the FY 2014 IPPS/LTCH PPS final rule, nor do we believe that any
type of phase-in methodology is warranted.
As we have stated in prior rulemaking (77 FR 53281 through 53283),
once we determined that cost report data were available for analysis,
we would propose, and finalize, if appropriate, the use of the distinct
CCRs described above in the calculation of the MS-DRG relative weights.
We believe that the analytic findings described in the proposed rule,
and the volume of hospitals that have ``valid'' CCRs described above,
computed using the March 2013 update of FY 2011 HCRIS and the March
2013 update of the FY 2012 MedPAR claims data, support our original
decision to break out and create new cost centers for implantable
devices, MRIs, CT scans, and cardiac catheterization, and we see no
reason to further delay implementation of the CCRs of each of these
cost centers. Therefore, beginning in FY 2014, as we proposed, we are
calculating the MS-DRG relative weights using 19 CCRs, creating
distinct CCRs for implantable devices, MRIs, CT scans, and cardiac
catheterization. We refer readers to section I.G. of Appendix A of this
final rule for the overall IPPS operating impact of our policy, which
models payments to various hospital types using relative weights
developed from 19 CCRs (as compared to the previous 15 CCRs). The
description of the calculation of the CCRs and the MS-DRG relative
weights, including the final 19 CCRs used to calculate the relative
weights for FY 2014, is included in section II.H. of the preamble of
this final rule.
F. Adjustment to MS-DRGs for Preventable Hospital-Acquired Conditions
(HACs), Including Infections
1. Background
Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is
part of an array of Medicare tools that we are using to promote
increased quality and efficiency of care. Under the IPPS, hospitals are
encouraged to treat patients efficiently because they receive the same
DRG payment for stays that vary in length and in the services provided,
which gives hospitals an incentive to avoid unnecessary costs in the
delivery of care. In some cases, conditions acquired in the hospital do
not generate higher payments than the hospital would otherwise receive
for cases without these conditions. To this extent, the IPPS encourages
hospitals to avoid complications.
However, the treatment of certain conditions can generate higher
Medicare payments in two ways. First, if a hospital incurs
exceptionally high costs treating a patient, the hospital stay may
generate an outlier payment. Because the outlier payment methodology
requires that hospitals experience large losses on outlier cases before
outlier payments are made, hospitals have an incentive to prevent
outliers. Second, under the MS-DRG system that took effect in FY 2008
and that has been refined through rulemaking in subsequent years,
certain conditions can generate higher payments even if the outlier
payment requirements are not met. Under the MS-DRG system, there are
currently 261 sets of MS-DRGs that are split into 2 or 3 subgroups
based on the presence or absence of a CC or an MCC. The presence of a
CC or an MCC generally results in a higher payment.
Section 1886(d)(4)(D) specifies that, by October 1, 2007, the
Secretary was required to select, in consultation with the Centers for
Disease Control and Prevention (CDC), at least two conditions that: (a)
Are high cost, high volume, or both; (b) are assigned to a higher
paying MS-DRG when present as a secondary diagnosis (that is,
conditions under the MS-DRG system that are CCs or MCCs); and (c) could
reasonably have been prevented through the application of evidence-
based guidelines. Section 1886(d)(4)(D) of the Act also specifies that
the list of conditions may be revised, again in consultation with CDC,
from time to time as long as the list contains at least two conditions.
Effective for discharges occurring on or after October 1, 2008,
under the
[[Page 50524]]
authority of section 1886(d)(4)(D) of the Act, Medicare no longer
assigns an inpatient hospital discharge to a higher paying MS-DRG if a
selected condition is not present on admission (POA). Thus, if a
selected condition that was not POA manifests during the hospital stay,
it is considered a HAC and the case is paid as though the secondary
diagnosis was not present. However, even if a HAC manifests during the
hospital stay, if any nonselected CC/MCC appears on the claim, the
claim will be paid at the higher MS-DRG rate. In addition, Medicare
continues to assign a discharge to a higher paying MS-DRG if a selected
condition is POA. When a HAC is not POA, payment can be affected in a
manner shown in the diagram below.
[GRAPHIC] [TIFF OMITTED] TR19AU13.000
BILLING CODE 4120-01-C
2. HAC Selection
Beginning in FY 2007, we have set forth proposals, and solicited
and responded to public comments, to implement section 1886(d)(4)(D) of
the Act through the IPPS annual rulemaking process. For specific
policies addressed in each rulemaking cycle, including a detailed
discussion of the collaborative interdepartmental process and public
input regarding selected and potential candidate HACs, we refer readers
to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100)
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed
rule (72 FR 24716 through 24726) and final rule with comment period (72
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547)
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080);
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and
final rule (76 FR 51504 through 51522); and the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283
through 53303). A complete list of the 11 current categories of HACs is
included on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
Collection of POA indicator data is necessary to identify which
conditions were acquired during hospitalization for the HAC payment
provision as well as for broader public health uses of Medicare data.
In previous rulemaking, we provided both CMS and CDC Web site resources
that are available to hospitals for assistance in this reporting
effort. For detailed information regarding these sites and materials,
including the application and use of POA indicators, we refer the
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through
51507).
Currently, as we discussed in the prior rulemaking cited above, the
POA indicator reporting requirement only applies to IPPS hospitals
because they are subject to this HAC provision. Non-IPPS hospitals,
including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, children's
hospitals, hospitals in Maryland operating under waivers, RNHCIs, and
the Department of Veterans Affairs/Department of Defense hospitals, are
exempt from POA reporting. We note that hospitals in Maryland operating
under their waiver are not paid under the IPPS but rather are paid
under the provisions of section 1814(b)(3) of the Act. This waiver
applies to the amount paid to providers of services, and does not
extend to billing requirements and other reporting requirements. In
fact, hospitals in Maryland are required to submit Medicare claims for
Medicare payment and also to submit the same information on their
Medicare claims as hospitals in other parts of the country paid under
the IPPS. Therefore, we believe it is inappropriate to continue to
exempt hospitals in Maryland from the POA indicator reporting
requirement. Under current policy, hospitals in Maryland will continue
to be exempt from the application of this HAC provision so long as they
are not paid under the IPPS. However, we believe it is appropriate to
require them to use POA indicator reporting on their claims so that we
can include their data and have as complete a dataset as possible when
we analyze trends and make further payment policy determinations, such
as those authorized under section 1886(p) of the Act. (We refer readers
to section V.I. of the preamble of this final rule for a discussion of
our FY 2014 proposals and final policies to implement section 1886(p)
of the Act.) Therefore, in the FY 2014 IPPS/LTCH
[[Page 50525]]
PPS proposed rule (78 FR 27510), we proposed that hospitals in Maryland
operating under their waiver under section 1814(b)(3) of the Act would
no longer be exempted from the POA indicator reporting requirement
beginning with claims submitted on or after October 1, 2013, including
all claims for discharges on or after October 1, 2013. We invited
public comment regarding this proposal.
Comment: Commenters supported the CMS proposal. One commenter noted
that Maryland hospitals have been required to report accurate and
complete POA information on secondary diagnoses in the quarterly
discharge abstract data they submit to the state for discharges
beginning on July 1, 2007.
Response: We appreciate the commenters' support. Accordingly, we
are finalizing our proposal to require hospitals in Maryland currently
paid under section 1814(b)(3) to report the POA indicator on their
claims beginning with discharges on October 1, 2013. We note that while
this requirement will not be effective until that date, hospitals in
Maryland may submit data with present on admission indicators before
that time with the expectation that these data will be accepted by
Medicare's claims processing systems.
As discussed in previous IPPS proposed and final rules, there are
five POA indicator reporting options, as defined by the ICD-9-CM
Official Guidelines for Coding and Reporting. Under the HAC policy, we
treat HACs coded with ``Y'' and ``W'' indicators as POA and allow the
condition on its own to cause an increased payment at the CC/MCC level.
We treat HACs coded with ``N'' and ``U'' indicators as Not Present on
Admission (NPOA) and do not allow the condition on its own to cause an
increased payment at the CC/MCC level. We refer readers to the
following rules for a detailed discussion: The FY 2009 IPPS proposed
rule (73 FR 23559) and final rule (73 FR 48486 through 48487); the FY
2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final rule
(74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed rule
(75 FR 23881 through 23882) and final rule (75 FR 50081 through 50082);
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 25813) and
final rule (76 FR 51506 through 51507); and the FY 2013 IPPS/LTCH PPS
proposed rule (77 FR 27893 through 27894) and final rule (77 FR 53284
through 53285).
------------------------------------------------------------------------
Indicator Descriptor
------------------------------------------------------------------------
Y........................ Indicates that the condition was present on
admission.
W........................ Affirms that the hospital has determined
that, based on data and clinical judgment,
it is not possible to document when the
onset of the condition occurred.
N........................ Indicates that the condition was not present
on admission.
U........................ Indicates that the documentation is
insufficient to determine if the condition
was present at the time of admission.
1........................ Signifies exemption from POA reporting. CMS
established this code as a workaround to
blank reporting on the electronic 4010A1. A
list of exempt ICD-9-CM diagnosis codes is
available in the ICD-9-CM Official
Guidelines for Coding and Reporting.
------------------------------------------------------------------------
Beginning on or after January 1, 2011, hospitals were required to
begin reporting POA indicators using the 5010 electronic transmittal
standards format. The 5010 format removes the need to report a POA
indicator of ``1'' for codes that are exempt from POA reporting. We
have issued CMS instructions on this reporting change as a One-Time
Notification, Pub. No. 100-20, Transmittal No. 756, Change Request
7024, effective on August 13, 2010, which can be located at the
following link on the CMS Web site: http://www.cms.gov/manuals/downloads/Pub100_20.pdf.
In addition, as discussed elsewhere in section III.G.10. of the
preamble of this final rule, the 5010 format allows the reporting and
effective January 1, 2011, the processing of up to 25 diagnoses and 25
procedure codes. As such, it is necessary to report a valid POA
indicator for each diagnosis code, including the principal and all
secondary diagnoses up to 25.
4. HACs and POA Reporting in ICD-10-CM and ICD-10-PCS
As we stated in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506
and 51507), in preparation for the transition to the ICD-10-CM and ICD-
10-PCS code sets, further information regarding the use of the POA
indicator with the ICD-10-CM/ICD-10-PCS classifications as they pertain
to the HAC policy will be discussed in future rulemaking.
At the March 5, 2012 and the September 19, 2012 meetings of the
ICD-9-CM Coordination and Maintenance Committee, an announcement was
made with regard to the availability of the ICD-9-CM HAC list
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were
informed that the list of the current ICD-9-CM selected HACs has been
translated into codes using the ICD-10-CM and ICD-10-PCS classification
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the current selected HACs available
on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The translations can be found under
the link titled ``ICD-10-CM/PCS MS-DRG v30 Definitions Manual Table of
Contents--Full Titles--HTML Version in Appendix I--Hospital Acquired
Conditions (HACs).'' The above CMS Web site regarding the ICD-10-MS-DRG
Conversion Project is also available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html. We encourage the public to submit comments on these
translations through the HACs Web page using the CMS ICD-10-CM/PCS HAC
Translation Feedback Mailbox that has been set up for this purpose
under the Related Links section titled ``CMS HAC Feedback.'' The final
HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-PCS will be
subject to formal rulemaking.
In the meantime, we continue to encourage readers to review the
educational materials and draft code sets currently available for ICD-
10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/ICD10/. In
addition, the draft ICD-10-CM/ICD-10-PCS coding guidelines can be
viewed on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10cm.htm.
5. Current HACs and Previously Considered Candidate HACs
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27511), 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 by written stakeholder comments about both previously selected
and potential candidate HACs. We refer readers to section II.F.6. of
the FY 2008 IPPS final
[[Page 50526]]
rule with comment period (72 FR 47202 through 47218) and to section
II.F.7. of the FY 2009 IPPS final rule (73 FR 48774 through 48491) for
detailed discussion supporting our determination regarding each of
these conditions. We also refer readers to section III.F.5. of the FY
2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 27898) and the FY
2013 IPPS/LTCH PPS final rule (77 FR 53285 through 53292) for the HAC
policy for FY 2013, which will continue for FY 2014. In addition,
readers may find updated information on evidence-based guidelines on
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
Comment: Some commenters stated they were pleased that CMS did not
propose to expand the list of categories or conditions subject to the
Deficit Reduction Act of 2005 provisions that would reduce payment for
hospital acquired conditions not present on admission. However,
commenters made the following suggestions and recommendations:
One commenter recommended CMS expand the HAC list in
future IPPS rulemaking to include iatrogenic pneumothorax with
paracentesis and thoracentesis.
One commenter requested that CMS reconsider its decision
to include ``Surgical Site Infections (SSIs) Following Cardiac
Implantable Electronic Device (CIED)'' under this program. The
commenter also urged CMS to explore how information learned from POA
coding and other data sources, such as EHRs and clinical data
registries, could be used to better understand and prevent HACs.
One commenter suggested that CMS include ``diaper rash''
as a DRA HAC.
One commenter suggested that CMS include ``Surgical Site
Infections (SSIs) Following Hip and Knee Replacement'' as a DRA HAC.
One commenter suggested that CMS include ``Surgical Site
Infections (SSIs) Following Cesarean Section Births'' as a DRA HAC.
Although existing colon and hysterectomy surgical site
infections are not current DRA HACs, one commenter requested that
additional consideration be given to include the following exclusions
for existing colon and hysterectomy surgical site infections:
Chemotherapy for cancer diagnosis, penetrating trauma, obesity, and
transplant. The commenter also requested that additional consideration
be given to excluding trauma (de-gloving/avulsion wounds, burns,
penetrating trauma), chemotherapy, and transplants from the following
HAC categories: post CABG mediastinitis, orthopedic surgery of the
spine/neck/shoulder/elbow and the three existing gastric bypass
surgeries. The commenter indicated that these additional exclusions
will better meet the intent of identifying appropriate HACs, without
unnecessary penalization.
One commenter recommended that ``. . . Where medical
technology can play a role in supporting the goals of improving patient
care in a cost effective manner, such consideration should be made when
reflecting on whether to expand upon the list of preventable HACs,
particularly in relation to infection control prevention and
management.''
Response: We value and appreciate these public comments regarding
the DRA HACs, and we will take all of the public comments and
suggestions we received into consideration in future rulemaking.
Comment: One commenter recommended that two titles of the current
DRA HACs be revised: that ``Catheter-Associated Urinary Tract Infection
(UTI)'' be revised to ``Symptomatic Urinary Tract Infection due to an
Indwelling Urinary Catheter'' and ``Vascular Catheter-Associated
Infection'' be revised to ``Infections due to Central Venous
Catheter'', with the ICD-9-CM codes shown in the following table.
------------------------------------------------------------------------
DRA HACs CC/MCC (ICD-9-CM Codes)
------------------------------------------------------------------------
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), 999.32 (CC),
999.33 (CC).
------------------------------------------------------------------------
Response: We appreciate the commenter's recommendations. However,
we believe the titles correctly identify the selected HACs, as
reflected in the chart above, particularly because we have included the
specified codes within the HAC logic.
Comment: One commenter recommended that CMS remove the DRA HAC
category ``Falls and Trauma.'' The commenter stated that ``Falls,
particularly for the vulnerable older population, can be reduced
through interventions; however, they cannot be completely avoided.''
Another commenter noted that some patients, particularly high-risk,
comorbid individuals, may still develop the conditions on the HAC list.
Response: We refer readers to section 1886(d)(4)(D) of the Act
which states that a DRA HAC is one that ``(c) could reasonably have
been prevented through the application of evidence-based guidelines.''
We believe in the appropriate use of guidelines that we have adopted to
support our DRA HAC policy. These evidence-based guidelines are posted
on the DRA HAC Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/Evidence-Based-Guidelines.pdf and are reviewed regularly to ensure that if there are
any changes in the status of these guidelines, they are reflected in
the DRA HAC policy.
Comment: One commenter noted that, ``In previous rulemaking cycles,
CMS has proposed adding delirium to the list of HACs [FY 2009 IPPS
proposed rule]. While we support reasonable steps to provide hospitals
with incentives to recognize and treat delirium, we continue to have
significant concerns about adding delirium to the list of `preventable'
HACs to be excluded from the calculation of a hospital's MS-DRG
reimbursement rate.''
Response: We note that this comment regarding delirium is outside
of the scope of the proposals included in the FY 2014 IPPS/LTCH PPS
proposed rule. In the FY 2009 IPPS final rule (73 FR 48482), regarding
delirium, we stated that ``After consideration of the public comments
received, we have decided not to select delirium as an HAC in this
final rule. We will continue to monitor the evidence-based guidelines
surrounding prevention of delirium. If evidence warrants, we may
consider proposing delirium as an HAC in the future.''
6. RTI Program Evaluation
On September 30, 2009, a contract was awarded to RTI to evaluate
the
[[Page 50527]]
impact of the Hospital-Acquired Condition-Present on Admission (HAC-
POA) provisions on the changes in the incidence of selected conditions,
effects on Medicare payments, impacts on coding accuracy, unintended
consequences, and infection and event rates. This was an intra-agency
project with funding and technical support from CMS, OPHS, AHRQ, and
CDC. The evaluation also examined the implementation of the program and
evaluated additional conditions for future selection. The contract with
RTI ended on November 30, 2012. Summary reports of RTI's analysis of
the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-POA program
evaluation were included in the FY 2011 IPPS/LTCH PPS final rule (75 FR
50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51512
through 51522), and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53292
through 53302). Summary and detailed data also were made publicly
available on the CMS Web site at: http://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web site at: http://www.rti.org/reports/cms/.
In addition to the evaluation of HAC and POA MedPAR claims data,
RTI also conducted analyses on readmissions due to HACs, the
incremental costs of HACs to the healthcare system, a study of
spillover effects and unintended consequences, as well as an updated
analysis of the evidence-based guidelines for selected and previously
considered HACs. Reports on these analyses have been made publicly
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html.
7. Current and Previously Considered Candidate HACs--RTI Report on
Evidence-Based Guidelines
The RTI program evaluation includes a report that provides
references for all evidence-based guidelines available for each of the
selected and previously considered candidate HACs that provide
recommendations for the prevention of the corresponding conditions.
Guidelines were primarily identified using the AHRQ National Guidelines
Clearing House (NGCH) and the CDC, along with relevant professional
societies. Guidelines published in the United States were used, if
available. In the absence of U.S. guidelines for a specific condition,
international guidelines were included.
Evidence-based guidelines that included specific recommendations
for the prevention of the condition were identified for each of the
selected conditions. In addition, evidence-based guidelines also were
found for the previously considered candidate conditions. RTI prepared
a final report to summarize its findings regarding evidence-based
guidelines. This report can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html. Subsequent to this final report,
RTI has been awarded an FY 2014 Evidence-Based Guidelines Monitoring
contract. Under the contract, RTI will provide a summary report of all
evidence-based guidelines available for each of the selected and
previously considered candidate HACs that provide recommendations for
the prevention of the corresponding conditions. Updates to the
guidelines will be made available to the public.
G. Changes to Specific MS-DRG Classifications
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27512 through
27529), we invited public comment on each of the MS-DRG classification
proposed changes described below, as well as our proposals to maintain
certain existing MS-DRG classifications, which also are discussed
below. In some cases, we proposed changes to the MS-DRG classifications
based on our analysis of claims data. In other cases, we proposed to
maintain the existing MS-DRG classification based on our analysis of
claims data. The public comments that we received on each of the
proposals and our response, with statements of final policies, are
included below.
CMS encourages input from our stakeholders concerning the annual
IPPS updates when that input is made available to us by early December
of the year prior to the next annual proposed rule update. For example,
to be considered for any updates or changes in FY 2014, comments and
suggestions should have been submitted by early December 2012. The
comments that were submitted in a timely manner are discussed below in
this section.
1. Pre-Major Diagnostic Categories (Pre-MDCs): Heart Transplants and
Liver Transplants
We received a request from an organization that represents
transplant surgeons to eliminate the severity levels for the heart and
liver transplants MS-DRGs. The MS-DRGs for heart transplants are: MS-
DRG 001 (Heart Transplant or Implant of Heart Assist System with MCC)
and MS-DRG 002 (Heart Transplant or Implant of Heart Assist System
without MCC). The MS-DRGs for liver transplants are: MS-DRG 005 (Liver
Transplant with MCC or Intestinal Transplant) and MS-DRG 006 (Liver
Transplant without MCC). We received this comment during the comment
period for the FY 2013 IPPS/LTCH PPS proposed rule. We referred to this
comment briefly in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53325),
but we did not address the issue because we considered this comment
outside of the scope of the proposed rule. However, we addressed this
issue in the FY 2014 IPPS/LTCH PPS proposed rule.
The commenter stated that there are no ``uncomplicated'' heart
transplants or liver transplants, and indicated that all of these
transplant procedures are highly complex, involving numerous
complicating conditions, only some of which may be recognized by the
MS-DRGs. The commenter expressed concern that the continued bifurcation
of the MS-DRGs for heart and liver transplants will result in
unsustainable payment for these cases that are assigned to the
``without MCC'' MS-DRGs 002 and 006. According to the commenter, in
light of the relatively small number of Medicare patients involved and
the significant cost variation involved, it would be preferable to
eliminate the bifurcation of these procedures, thereby increasing the
stability of the DRG weights for these procedures.
For the FY 2014 IPPS/LTCH PPS proposed rule, we examined claims
data from the FY 2012 MedPAR file for heart and liver transplant cases
assigned to MS-DRGs 001, 002, 005, and 006. The following table
illustrates our findings:
----------------------------------------------------------------------------------------------------------------
Number of Average
MS-DRGs cases length of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 001...................................................... 1,247 33.27 $158,556
MS-DRG 002...................................................... 284 18 97,932
MS-DRGs 001 and 002--All cases.................................. 1,531 30.4 147,310
MS-DRG 005...................................................... 828 19 66,746
[[Page 50528]]
MS-DRG 006...................................................... 282 8.75 30,873
MS-DRGs 005 and 006--All cases.................................. 1,110 16.3 57,632
----------------------------------------------------------------------------------------------------------------
The data showed that the majority of the heart transplant cases, a
total of 1,247, are assigned to MS-DRG 001, with average costs of
approximately $158,556 and an average length of stay of approximately
33.27 days. There were 284 cases assigned to MS-DRG 002, with average
costs of approximately $97,932 and an average length of stay of
approximately 18 days.
This table shows that there are significant differences in average
lengths of stay and average costs for the severity level for the heart
transplant MS-DRGs that justify the existing split in MS-DRGs 001 and
002. If we were to combine the heart transplant cases in MS-DRGs 001
and 002 as suggested by the commenter, the payment for the majority of
cases with an MCC would be lower.
The majority of the liver transplant cases, 828 cases, were
assigned to MS-DRG 005, with average costs of approximately $66,746 and
an average length of stay of approximately 19 days. There were 282
cases assigned to MS-DRG 006, with average costs of approximately
$30,873 and an average length of stay of approximately 8.75 days. The
data showed that there are significant differences in average costs and
average lengths of stay in the severity levels for the liver transplant
MS-DRGs. Again, if we were to combine all the liver transplant cases
into one MS-DRG as requested by the commenter, the majority of the
cases would receive lower payment.
Based on these findings, we stated in the proposed rule that we
believe that it would not be prudent to eliminate the severity levels
for the heart and liver transplant MS-DRGs. Our clinical advisors
concurred with this analysis that two severity levels are justified for
the heart and liver transplant MS-DRGs. Therefore, for FY 2014, we did
not propose to make any changes to the severity levels for heart and
liver transplant MS-DRGs 001, 002, 005, and 006. We invited public
comments on this issue.
Comment: Several commenters agreed with CMS' proposal to maintain
the current structure for heart and liver transplant MS-DRGs. The
commenters stated that the proposal seems reasonable based on the data
and information provided. One commenter agreed with CMS that creating
only one MS-DRG for heart transplants or implants of heart assist
systems, regardless of whether or not there is a major complication or
comorbidity (MCC) present, would greatly underpay the complex cases
which currently represent the majority of the volume and overpay for
those less severe cases.
Response: We appreciate the commenters' support for maintaining the
severity levels for the heart and liver transplant MS-DRGs based on
data and our analysis.
After consideration of the public comments we received, we are not
making any changes to MS-DRGs 001, 002, 005, and 006 for FY 2014.
2. MDC 1 (Diseases and Disorders of the Nervous System): Tissue
Plasminogen Activator (tPA) (rtPA) Administration Within 24 Hours Prior
to Admission
During the comment period for the FY 2013 IPPS/LTCH PPS proposed
rule, we received a public comment that we considered to be outside the
scope of that proposed rule. We stated in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53325) that we would consider this issue in future
rulemaking as part of our annual review process. The commenter
requested that CMS conduct an analysis of diagnosis code V45.88 (Status
post administration of tPA (rtPA) in a different facility within the
last 24 hours prior to admission to current facility). Diagnosis code
V45.88 was created for use beginning October 1, 2008, to identify
patients who are given tissue plasminogen activator (tPA) at one
institution and then transferred and admitted to a comprehensive stroke
center for further care. This situation has been referred to as the
``drip-and-ship'' issue and was discussed at length in the FY 2009 IPPS
proposed rule (73 FR 23563 through 23564) and final rule (73 FR 48493
through 48495), as well as the FY 2011 IPPS/LTCH PPS proposed rule (75
FR 23899 through 23900) and final rule (75 FR 50102 through 50106). We
refer readers to these previous discussions for detailed background
information regarding this topic.
Similar to previous requests, according to the commenter, the
concern at the receiving facilities is that the costs associated with
[caring for] more complex stroke patients that receive tPA are much
higher than the cost of the drug, presumably because stroke patients
initially needing tPA have more complicated strokes and outcomes.
However, because these patients do not receive the tPA at the second or
transfer hospital, the receiving hospital will not be able to assign
the case to one of the higher-weighted tPA stroke MS-DRGs when it
admits these patients whose care requires the use of intensive
resources. The MS-DRGs that currently include the diagnosis code for
the use of tPA are: MS-DRG 061 (Acute Ischemic Stroke with Use of
Thrombolytic Agent with MCC); MS-DRG 062 (Acute Ischemic Stroke with
Use of Thrombolytic Agent with CC); and MS-DRG 063 (Acute Ischemic
Stroke with Use of Thrombolytic Agent without CC/MCC). These MS-DRGs
have higher relative weights than the other MS-DRGs relating to stroke
or cerebral infarction. The commenter requested an analysis of
diagnosis code V45.88 to determine whether new claims data warrant any
change in the MS-DRG structure.
For the FY 2014 IPPS/LTCH PPS proposed rule, we analyzed MedPAR
claims data from FY 2012. We included claims for patient cases assigned
to the following MS-DRGs:
061 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with MCC)
062 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with CC)
063 (Acute Ischemic Stroke with Use of Thrombolytic Agent
without CC/MCC)
064 (Intracranial Hemorrhage or Cerebral Infarction with
MCC)
065 (Intracranial Hemorrhage or Cerebral Infarction with
CC)
066 (Intracranial Hemorrhage or Cerebral Infarction
without CC/MCC).
Our data analysis included MS-DRGs 064, 065, and 066 because claims
involving diagnosis code V45.88 also would be properly reported in the
data for these MS-DRGs. The following table reflects the results of our
analysis of the MedPAR data in which diagnosis code V45.88 was reported
as a secondary diagnosis for FY 2012.
[[Page 50529]]
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 061--All cases........................................... 3,369 7.48 $18,556
MS-DRG 061--Cases with secondary diagnosis code V45.88.......... 140 7.51 19,008
MS-DRG 062--All cases........................................... 5,277 4.92 12,935
MS-DRG 062--Cases with secondary diagnosis code V45.88.......... 179 5.03 13,317
MS-DRG 063--All cases........................................... 1,709 3.45 10,363
MS-DRG 063--Cases with secondary diagnosis code V45.88.......... 48 3.15 9,372
MS-DRG 064--All cases........................................... 64,095 6.30 11,654
MS-DRG 064--Cases with secondary diagnosis code V45.88.......... 955 7.06 14,432
MS-DRG 065--All cases........................................... 101,011 4.29 7,414
MS-DRG 065--Cases with secondary diagnosis code V45.88.......... 1,259 4.91 9,471
MS-DRG 066--All cases........................................... 56,620 2.92 5,414
MS-DRG 066--Cases with secondary diagnosis code V45.88.......... 493 3.28 6,682
----------------------------------------------------------------------------------------------------------------
Based on our review of the data for all of the cases in MS-DRGs
064, 065, and 066, compared to the subset of cases containing diagnosis
code V45.88 as the secondary diagnosis, we again concluded that the
movement of cases with diagnosis code V45.88 as a secondary diagnosis
from MS-DRGs 064, 065, and 066 to MS-DRGs 061, 062, and 063 is not
warranted. We determined that the differences in the average lengths of
stay and the average costs are too small to warrant an assignment to
the higher-weighted MS-DRGs.
However, the data do reflect that the average costs for cases
reporting diagnosis code V45.88 as a secondary diagnosis in MS-DRG 066
are more similar to the average costs of higher severity level cases in
MS-DRG 065. Therefore, for FY 2014, we proposed to move cases with
diagnosis code V45.88 from MS-DRG 066 to MS-DRG 065, and to revise the
title of MS-DRG 065 to reflect the patients status post tPA
administration within 24 hours (78 FR 27513 through 27514). The
proposed revised MS-DRG title was: MS-DRG 065 (Intracranial Hemorrhage
or Cerebral Infarction with CC or tPA in 24 Hours). We invited public
comments on our proposal.
Comment: Several commenters supported CMS' proposal to reassign
cases reporting ICD-9-CM diagnosis code V45.88 from MS-DRG 66 to MS-DRG
65. The commenters stated this proposal would allow for more
appropriate payment and recognition of the resources required to care
for stroke patients who are transferred. Several other commenters
stated that the proposal was reasonable considering the data and
clinical information provided.
Response: We appreciate the commenters' support. We agree that this
modification to the MS-DRGs involving stroke patients will better
reflect the increased costs of caring for these transfer cases.
Comment: One commenter who supported the proposal to reassign cases
reporting ICD-9-CM diagnosis code V45.88 from MS-DRG 66 to MS-DRG 65
also urged CMS to move cases reporting ICD-9-CM diagnosis code V45.88
from MS-DRG 64 (Intracranial Hemorrhage or Cerebral Infarction with
MCC) to MS-DRG 62 (Acute Ischemic Stroke with Use of Thrombolytic Agent
with CC). The commenter noted that ``It is essential that hospitals are
fairly reimbursed for the additional resources associated with caring
for patients treated with IV tPA even when the tPA is administered at
another hospital before transfer. Without adequate reimbursement
through the MS-DRG system, receiving hospitals are financially
penalized for accepting patients and giving them advanced stroke care
which is detrimental to stroke systems and patients suffering
strokes.''
Response: We also acknowledge the commenter's concern regarding
appropriate payment for the additional resources required in caring for
patients treated with tPA and subsequently transferred to another
facility. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27513), we concluded that the movement of cases with diagnosis code
V45.88 as a secondary diagnosis from MS-DRGs 064, 065, and 066 to MS-
DRGs 061, 062, and 063 is not warranted based on our review of the
data. In addition, our clinical advisors did not support movement of
these non-tPA cases into the MS-DRGs where tPA is administered as it
violates the clinical cohesiveness of these two sets of DRGs.
After consideration of the public comments we received, we are
adopting as final policy for FY 2014, our proposal to move cases with
diagnosis code V45.88 from MS-DRG 066 to MS-DRG 065 and to revise the
title to MS-DRG 065 (Intracranial Hemorrhage or Cerebral Infarction
with CC or tPA in 24 Hours).
3. MDC 4 (Diseases and Disorders of the Ear, Nose, Mouth and Throat)
a. Endoscopic Placement of a Bronchial Value
In response to the FY 2013 IPPS/LTCH PPS proposed rule, we received
a request to modify the MS-DRG assignment for bronchial valve(s)
insertion, which we considered to be outside of the scope of that
proposed rule (77 FR 53325 through 53326). The requestor asked that
cases in MS-DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary
Disease with MCC, with CC, and without MCC/CC, respectively) that
involve insertion of a bronchial valve be assigned instead to MS-DRGs
163, 164, and 165 (Major Chest Procedures with MCC, with CC, and
without MCC/CC, respectively). The procedures are captured by procedure
codes 33.71 (Endoscopic insertion or replacement of bronchial valve(s),
single lobe) and 33.73 (Endoscopic insertion or replacement of
bronchial valve(s), multiple lobes), which are considered nonoperating
procedures and do not affect the MS-DRG assignment. When reported
without any other operating room (OR) procedure code, the admission
would be assigned to a medical MS-DRG.
The Spiration[supreg] IBV Valve System device, a bronchial valve,
was approved for new technology add-on payments in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43819 through 43823) with a maximum
payment rate of $3,437.50. In the FY 2012 IPPS/LTCH PPS final rule, the
new technology add-on payments were discontinued for FY 2012 (76 FR
51575 through 51576). The bronchial valve device 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, and thereby reducing the amount of air
that enters
[[Page 50530]]
the pleural space. The device is intended to control prolonged air
leaks following three specific surgical procedures: lobectomy,
segmentectomy, or lung volume reduction surgery (LVRS). According to
Spiration[supreg], 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.
New technology add-on payments were limited to cases involving
prolonged air leaks following lobectomy, segmentectomy, and LVRS in MS-
DRGs 163, 164, and 165 in the FY 2010 IPPS/RY 2010 LTCH PPS final rule
(74 FR 43823). This limitation was based on the indications for use
approved by the FDA in the FDA Humanitarian Device Exemption (HDE)
approval process set forth in section 520(m) of the Federal Food, Drug
& Cosmetic Act. A humanitarian use device (HUD) is a device that is
intended to benefit patients by treating or diagnosing a disease or
condition that affects or is manifested in fewer than 4,000 individuals
in the United States per year. Devices that receive HUD designation may
be eligible for marketing approval, subject to certain restrictions,
under an HDE application. To obtain marketing approval for an HUD, an
HDE application must be submitted to the FDA. An HDE application is a
premarket approval (PMA) application submitted to the FDA under 21 CFR
814.104 that seeks exemption from the PMA requirement under 21 CFR
814.20 demonstrating a reasonable assurance of effectiveness. A device
that has received HUD designation may receive HDE approval if, among
other things, the FDA determines that the device will not expose
patients to an unreasonable or significant risk of illness or injury
and the probable benefit to health from use of the device outweighs the
risk of injury or illness from its use, taking into account the
probable risks and benefits of currently available devices or
alternative forms of treatment. In addition, the applicant must
demonstrate that no comparable devices are available to treat or
diagnose the disease or condition (other than another device approved
under an HDE application or a device under an approved Investigational
Device Exemption), and that the device would not otherwise be available
unless an HDE is granted. An approved HDE authorizes marketing of the
HUD. However, an HUD generally may be used in facilities only after
prior approval by an Institutional Review Board (IRB).
FDA's approval of the HDE application limited the use of the
Spiration[supreg] IBV Valve System device to cases involving prolonged
air leaks following lobectomy, segmentectomy, or LVRS.
The requested MS-DRG change would initiate the same payment for
chronic obstructive pulmonary disease (COPD) cases with a bronchial
valve inserted without a major chest procedure as for cases where both
a major chest procedure and a bronchial valve insertion were performed.
The following table shows the COPD cases that involved the insertion of
a bronchial valve as well as data on cases assigned to MS-DRGs 163,
164, and 165.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRGs Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
COPD Cases
----------------------------------------------------------------------------------------------------------------
MS-DRG 190--All cases........................................... 133,566 5.07 $7,815
MS-DRG 190--Cases with procedure code 33.71..................... 0 0 0
MS-DRG 190--Cases with procedure code 33.73..................... 2 14.0 47,034
MS-DRG 191--All cases........................................... 129,231 4.18 6,245
MS-DRG 191--Cases with procedure code 33.71..................... 0 0 0
MS-DRG 191--Cases with procedure code 33.73..................... 0 0 0
MS-DRG 192--All cases........................................... 93,507 3.32 4,776
MS-DRG 192--Cases with procedure code 33.71..................... 0 0 0
MS-DRG 192--Cases with procedure code 33.73..................... 0 0 0
----------------------------------------------------------------------------------------------------------------
Major Chest Procedures
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases........................................... 11,287 13.33 32,728
MS-DRG 164--All cases........................................... 16,113 6.69 17,494
MS-DRG 165--All cases........................................... 9,280 3.94 12,209
----------------------------------------------------------------------------------------------------------------
Based on our analysis of FY 2012 Medicare claims data, there were
only two COPD cases that had bronchial valves inserted in MS-DRGs 190,
191, and 192. While the charges were high, these cases were assigned to
the highest severity level MS-DRG (MS-DRG 190 with MCC). Given the
small number of cases, it is not possible to determine if the high
average costs were due to the bronchial valve insertion or to other
factors such as other secondary diagnoses. The average length of stay
for these two cases was approximately 14 days compared to approximately
5.07 days for all other cases within MS-DRG 190. Because the additional
10 days cannot be clinically attributed to the bronchial valve
insertion, our clinical advisors have determined that other factors
must have impacted these two cases.
Cases in MS-DRGs 163, 164, and 165 include those cases with a major
chest procedure and those cases with both a major chest procedure as
well as a bronchial valve insertion as discussed above. Our clinical
advisors do not support moving COPD cases that have only a bronchial
valve insertion and no other major chest procedure from MS-DRGs 190,
191, and 192 to MS-DRGs 163, 164, and 165. They do not believe the
bronchial valve procedures are clinically similar to other major chest
procedures that require significantly more resources to perform. Our
clinical advisors pointed out that the limited circumstances where this
procedure would be used led the sponsor to seek HDE approval from the
FDA rather than a standard PMA. The indications for use approved by the
FDA are still limited to post-surgery. Our clinical advisors
recommended that we not modify the
[[Page 50531]]
MS-DRG logic so that COPD cases with bronchial valve insertions would
be assigned to MS-DRGs 163, 164, and 165.
Given the limited number of cases for this procedure and the advice
from our clinical advisors, in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27514 through 27515), we did not propose any MS-DRG changes for
bronchial valve(s) insertion for FY 2014. We also did not propose to
change the MS-DRG assignment for procedures involving bronchial
valve(s) insertion (procedure codes 33.71 and 33.73) within MS-DRGs
190, 191, and 192. We invited public comment on this issue.
Comment: A number of commenters supported CMS' proposal not to
change the MS-DRG assignment for procedures involving bronchial
valve(s) insertion (procedure codes 33.71 and 33.73) which are
currently assigned to MS DRGs 190, 191, and 192 and to move them to MS-
DRGs 163, 164, and 165. Several of these commenters stated that the
proposal not to propose any MS-DRG changes for bronchial valve(s)
insertion was reasonable given the data and information provided. Other
commenters agreed with the proposal not to change the MS-DRG assignment
for bronchial valve insertions.
Response: We appreciate the commenters' support.
Comment: One commenter disagreed with the proposal not to change
the MS-DRG assignment for bronchial valves. The commenter recommended
reclassifying bronchial valve procedure codes 33.71 and 33.73 as
operating room procedures rather than nonoperating procedures so that
they will map to a surgical MS-DRG for inpatient hospitalizations. The
commenter also recommended reassigning cases that currently map to
medical MS-DRGs 190, 191, and 192 (Chronic Obstructive Pulmonary
Disease with MCC, with CC, and without MCC/CC, respectively) that
involve insertion of bronchial valves (ICD-9 CM procedures codes 33.71
and 33.73) to surgical MS-DRGs 163, 164, and 165 (Major Chest
Procedures with MCC, with CC, or without MCC/CC, respectively). The
commenter stated that currently, bronchial valve procedures are
performed under a Humanitarian Device Exemption (HDE) under the Food
and Drug Administration (FDA) and indicated for patients with a
prolonged air leak, or air leak likely to become prolonged, following
lobectomy, segmentectomy, or lung volume reduction surgery. The
commenter stated that bronchial valves also are being investigated for
emphysema, but this indication has not yet been approved by the FDA.
The commenter stated that bronchial valve cases are more clinically
complex and costly compared to other types of cases with MS-DRGs 190-
192 and are more appropriately assigned to MS-DRGs 163, 164, and 165.
The commenter acknowledged that there were only two cases involving
bronchial valves within MS-DRGs 190, 191, and 192. However, the
commenter stated that other MS-DRGs such as those for deep brain
stimulation therapy in MS-DRGs 023 and 024 (Craniotomy with Major
Device Implant/Acute Complex CNS PDX with MCC or Chemo Implant and
Craniotomy with Major Device Implant/Acute Complex CNS PDX with MCC or
Chemo Implant without MCC, respectively) and liver and intestinal
transplantation in MS-DRG 005 and 006 (Liver Transplant and/or
Intestinal Transplant with MCC and Liver Transplant and/or Intestinal
Transplant without MCC) contain a small number of cases. The commenter
believed that the two bronchial valve cases currently assigned to the
medical MS-DRG 190 would be better aligned in terms of complexity,
length of stay, and costs to a surgical MS-DRG set.
Response: As stated earlier, our clinical advisors do not believe
the bronchial valve procedures are clinically similar to other major
chest procedures that require significantly more resources to perform.
We once again point out the limited circumstances where the FDA has
approved the bronchial valve are still limited to postsurgery use. The
two cases that were assigned to MS-DRG 190 could have had higher costs
due to a number of other factors other than the bronchial valve. Our
clinical advisors noted the long length of stay for these two cases,
which would not have been the result of the bronchial valve. Therefore,
we do not believe it is appropriate to reclassify the bronchial valve
procedure codes as operating room procedures and reassign the cases
from MS-DRGs 190, 191, and 192 to MS-DRGs 163, 164, and 165.
After consideration of the public comments we received, we are
finalizing our proposal not to change the MS-DRG assignments for
procedures involving bronchial valve(s) insertion (procedure codes
33.71 and 33.75) within MS-DRGs 190, 191, and 192.
b. Pulmonary Thromboendarterectomy (PTE) With Full Circulatory Arrest
We received a request from a university medical center to create a
new MS-DRG or to reassign cases reporting a unique approach to
pulmonary thromboendarterectomy (PTE) surgery performed with full
cardiac arrest and hypothermia. The requestor asked that we move cases
from MS-DRGs 163, 164, and 165 (Major Chest Procedures with MCC, with
CC, and without CC/MCC, respectively) to MS-DRGs 228, 229, and 230
(Other Cardiothoracic Procedures with MCC, with CC, and without CC/MCC,
respectively). Currently, MS-DRGs 163, 164, and 165 are grouped within
MDC 4 (Diseases and Disorders of the Respiratory System) while MS-DRGs
228, 229, and 230 are grouped within MDC 5 (Diseases and Disorders of
the Circulatory System).
The requestor identified two conditions for which a pulmonary
endarterectomy procedure is typically performed. These conditions are
identified by ICD-9-CM diagnosis codes 415.19 (Other pulmonary embolism
and infarction) and 416.2 (Chronic pulmonary embolism). However, the
requestor noted that diagnosis code 415.19 is usually associated with
traditional PTE for acute pulmonary embolism while diagnosis code 416.2
is associated with the medical center's unique approach to PTE
performed with full cardiac arrest and hypothermia.
Currently, there is not a specific ICD-9-CM procedure code to
accurately describe PTE surgery performed with full cardiac arrest and
hypothermia. Rather, a subset of existing ICD-9-CM procedure codes may
be used to identify the various components involved in this unique
approach to PTE surgery; for example, ICD-9-CM procedure codes 38.15
(Endarterectomy, other thoracic vessels); 39.61 (Extracorporeal
circulation auxiliary to open heart surgery); 39.62 (Hypothermia
(systemic) incidental to open heart surgery); and 39.63 (Cardioplegia).
However, it is not clear if the requestor reports any of these codes or
a combination of these codes to identify its unique approach to the
procedure.
According to the requestor, its approach to PTE surgery is
significantly different from traditional pulmonary endarterectomy
procedures in terms of complexity, resource use, and the population for
which the procedure is performed. The requestor noted that the surgery
is ``conducted under profound hypothermia and circulatory arrest which
involves placing the patient on cardiopulmonary bypass and cooling the
body to 20 degrees centigrade or lower.'' In addition, the requestor
explained that ``during this period of cooling and cardiac arrest, the
heart is arrested and all of the patient's blood is removed from the
body.'' Following this, circulation is stopped completely allowing for
``optimal and extensive dissection of the pulmonary arteries and
[[Page 50532]]
identification of an endarterectomy plane which can be delicately
incised into the deepest pulmonary vasculature.'' The requestor further
noted that ``due to the complexity of the surgical technique, a very
high degree of skill is required and the procedure is currently only
performed by a handful of surgeons world-wide.'' Lastly, the requestor
stated the average operating time for a traditional PTE is
approximately 3 to 4 hours compared to the university medical center's
approach to PTE, which averages approximately 10 to 12 hours.
For the FY 2014 IPPS/LTCH PPS proposed rule, we analyzed claims
data from the FY 2012 MedPAR file for cases reporting a principal
diagnosis code of 415.19 or a principal diagnosis code of 416.2 along
with procedure codes 38.15, 39.61, 39.62, and 39.63. As displayed in
the table below, there were a total of 11,287 cases in MS-DRG 163 with
an average length of stay of approximately 13.33 days and average costs
of approximately $32,728. Using the combination of diagnosis and
procedure codes as described above, the total number of cases found in
MS-DRG 163 was 12, with average costs ranging from approximately
$46,959 to $53,048 and an average length of stay ranging from
approximately 13.50 days to 16.20 days. We acknowledge that the average
length of stay and average costs for these cases are somewhat higher in
comparison to the average lengths of stay and average costs of all the
other cases in MS-DRG 163. However, the volume of cases was very low.
The data reflect similar results for MS-DRG 164. Only 4 cases were
identified in the analysis, with average costs ranging from
approximately $21,669 to $37,447 and average lengths of stay ranging
from approximately 7 days to 10 days.
In total, there were only 16 cases reflected in the data using the
combination of diagnosis codes and proxy procedure codes. We believe
there may be other factors contributing to the increased lengths of
stay and costs. (We note that there were no cases found for a principal
diagnosis code of 415.19 with procedure code 38.15 only. There also
were no cases found in MS-DRG 165 using the combination of diagnosis
and procedure codes.)
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 163--All cases........................................... 11,287 13.33 $32,728
MS-DRG 163--Cases with principal diagnosis code 415.19 with 4 13.50 46,959
procedure code 38.15 and 39.61 or 39.62 or 39.63...............
MS-DRG 163--Cases with principal diagnosis code 416.2 with 3 14.33 53,048
procedure code 38.15 only......................................
MS-DRG 163--Cases with principal diagnosis code 416.2 with 5 16.20 50,393
procedure code 38.15 and 39.61 or 39.62 or 39.63...............
MS-DRG 164--All cases........................................... 16,113 6.69 17,494
MS-DRG 164--Cases with principal diagnosis code 415.19 with 2 10.00 37,447
procedure code 38.15 with 39.61 or 39.62 or 39.63..............
MS-DRG 164--Cases with principal diagnosis code 416.2 with 0 0 0
procedure code 38.15 only......................................
MS-DRG 164--Cases with principal diagnosis code 416.2 with 2 7.00 21,669
procedure code 38.15 and 39.61 or 39.62 or 39.63...............
----------------------------------------------------------------------------------------------------------------
As stated in previous rulemaking discussion, the MS-DRG
classification system on which the IPPS is based comprises a system of
averages. As such, it is understood that, in any particular MS-DRG, it
is not unusual for a small number of cases to demonstrate higher than
average costs, nor is it unusual for a small number of cases to
demonstrate lower than average costs. Upon review of the MedPAR data,
our clinical advisors agree that the current MS-DRG assignment for this
unique procedure is appropriate.
We also analyzed claims data from the FY 2012 MedPAR file for MS-
DRGs 228, 229, and 230 as illustrated below.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 228--Other cardiothoracic procedures with MCC............ 1,643 13.26 $46,758
MS-DRG 229--Other cardiothoracic procedures with CC............. 1,841 7.77 30,432
MS-DRG 230--Other cardiothoracic procedures without CC/MCC...... 506 5.08 25,068
----------------------------------------------------------------------------------------------------------------
ICD-9-CM procedure code 38.15 is designated as an operating room
(OR) procedure code and currently groups to MS-DRGs 163, 164, and 165
in MDC 4 when either diagnosis code 415.19 or 416.2 are reported as the
principal diagnosis. As diagnosis codes can only be assigned to one MDC
within the GROUPER logic, it is not possible for a patient to have
diagnosis code 415.19 or diagnosis code 416.2 reported along with
procedure code 38.15 and grouped to MDC 5, which is where MS-DRGs 228,
229, and 230 are assigned.
Therefore, another aspect of this MS-DRG request involved the
evaluation of moving ICD-9-CM diagnosis code 416.2 from MDC 4 to MDC 5.
Our clinical advisors do not support moving diagnosis code 416.2 from
MDC 4 to MDC 5 in order to accommodate this rare procedure performed by
only a small number of physicians worldwide. They pointed out that a
basic change such as moving diagnosis code 416.2 from MDC 4 to MDC 5
would impact a large number of patients who do not undergo this
procedure. It also would disrupt trend data from over 30 years of DRG
and MS-DRG reporting. Given the very small number of potential cases,
and the advice of our clinical advisors, we determined that an MS-DRG
modification was not warranted for FY 2014. Therefore, we did not
propose to create a new MS-DRG or to reassign cases reporting this
university medical center's approach to pulmonary
thromboendarterectomy. We invited public comments on this issue.
Comment: Several commenters supported CMS' proposal to not create a
new MS-DRG or to reassign cases for this alternative approach to
pulmonary
[[Page 50533]]
thromboendarterectomy. The commenters stated that the proposal was
reasonable, given the data and information provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to not create a new MS-DRG or to reassign cases
for this alternative approach to pulmonary thromboendarterectomy.
4. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Discharge/Transfer to Designated Disaster Alternative Care Site
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27516), we
proposed to add new patient discharge status code 69 (Discharged/
transferred to a designated disaster alternative care site) to the MS-
DRG GROUPER logic for MS-DRGs 280 (Acute Myocardial Infarction
Discharged Alive with MCC), 281 (Acute Myocardial Infarction Discharged
Alive with CC), and 282 (Acute Myocardial Infarction Discharged Alive
without CC/MCC) to identify patients who are discharged or transferred
to an alternative site that will provide basic patient care during a
disaster response. As discussed in section II.G.7. of the preamble of
the proposed rule, we also proposed to add this new discharge status
code to the Medicare Code Editor (MCE) software. We invited public
comments on this proposal.
Comment: Several commenters supported CMS' proposal to add the new
patient discharge status code 69 to the MS-DRG GROUPER logic for MS-
DRGs 280, 281, and 282 to identify patients who are discharged or
transferred to an alternative site that will provide basic patient care
during a disaster response. One commenter noted that this discharge
status code would seldom be used. However, the commenter believed that
the code is needed.
Response: We appreciate the commenters' support. We agree that this
new discharge status code will be beneficial to identify patients who
are involved in those disaster situations.
Comment: One commenter expressed concern with the proposal and
questioned the purpose of implementing the new patient discharge status
code 69 to only MS-DRGs 280, 281, and 282 within MDC 5.
Response: We take this opportunity to point out that the new
discharge status code 69 was created and approved by the National
Uniform Billing Committee (NUBC) for implementation on October 1, 2013.
The purpose of adding this discharge status code 69 specifically to the
GROUPER logic for MS-DRGs 280, 281, and 282 is to identify those
patients diagnosed with an acute myocardial infarction (AMI) who were
discharged/transferred to a designated disaster alternative care site
alive. The GROUPER logic for these MS-DRGs differs from the GROUPER
logic for MS-DRGs 283, 284, and 285 (Acute Myocardial Infarction,
Expired with MCC, with CC, and without CC/MCC, respectively) where the
patient has expired.
To further clarify, as discussed in section II.G.7.b. of the
preamble of the proposed rule (78 FR 27520), this new discharge status
code was also proposed to be added to the GROUPER and MCE logic.
Therefore, it may be assigned to other MS-DRGs.
However, when the logic for an MS-DRG is defined by specific
requirements, such as discharge status designation, the logic must be
updated if a new discharge status is created to appropriately group a
claim. Within MDC 5, for MS-DRGs 280, 281, and 282, the software logic
is specifically defined by a patient who has been diagnosed with an AMI
and is discharged alive. Assignment of the proposed new discharge
status code 69 would not be valid for MS-DRGs 283, 284, and 285 where
the patient has been diagnosed with an AMI and has expired. In other
words, an AMI patient who has expired would not be discharged/
transferred to a designated disaster alternative care site. Therefore,
the addition of discharge status code 69 to the software logic for
those MS-DRGs (283, 284, and 285) is not applicable within MDC 5.
Alternatively, a patient who has been diagnosed with an AMI and is
discharged alive would clearly have the opportunity to be discharged/
transferred to a designated disaster alternative care site in a given
disaster scenario or circumstance. Therefore, to ensure proper MS-DRG
assignment, we proposed to add discharge status code 69 to MS-DRGs 280,
281, and 282 within MDC 5.
After consideration of the public comments we received, we are
finalizing our proposal to add new patient discharge status code 69 to
the MS-DRG GROUPER logic for MS-DRGs 280, 281, and 282.
b. Discharges/Transfers With a Planned Acute Care Hospital Inpatient
Readmission
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27516), we also
proposed to add 15 new discharge status codes to the MS-DRG GROUPER
logic for MS-DRGs 280, 281, and 282 that will identify patients who are
discharged with a planned acute care hospital inpatient readmission. As
discussed in section II.G.7.b. of the preamble of the proposed rule,
these new discharge status codes was proposed for addition to the MCE
as well.
Shown in the table below are the current discharge status codes
that are assigned to the GROUPER logic for MS-DRGs 280, 281, and 282,
along with the proposed new discharge status codes and their titles.
------------------------------------------------------------------------
New
Current code code Discharge status code title
------------------------------------------------------------------------
01.................. 81 Discharged to home or self-care with a
planned acute care hospital inpatient
readmission.
02.................. 82 Discharged/transferred to a short term
general hospital for inpatient care with
a planned acute care hospital inpatient
readmission.
03.................. 83 Discharged/transferred to a skilled
nursing facility (SNF) with Medicare
certification with a planned acute care
hospital inpatient readmission.
04.................. 84 Discharged/transferred to a facility that
provides custodial or supportive care
with a planned acute care hospital
inpatient readmission.
05.................. 85 Discharged/transferred to a designated
cancer center or children's hospital with
a planned acute care hospital inpatient
readmission.
06.................. 86 Discharged/transferred to home under care
of organized home health service
organization with a planned acute care
hospital inpatient readmission.
21.................. 87 Discharged/transferred to court/law
enforcement with a planned acute care
hospital inpatient readmission.
43.................. 88 Discharged/transferred to a federal health
care facility with a planned acute care
hospital inpatient readmission.
61.................. 89 Discharged/transferred to a hospital-based
Medicare approved swing bed with a
planned acute care hospital inpatient
readmission.
[[Page 50534]]
62.................. 90 Discharged/transferred to an inpatient
rehabilitation facility (IRF) including
rehabilitation distinct part units of a
hospital with a planned acute care
hospital inpatient readmission.
63.................. 91 Discharged/transferred to a Medicare
certified long term care hospital (LTCH)
with a planned acute care hospital
inpatient readmission.
64.................. 92 Discharged/transferred to a nursing
facility certified under Medicaid but not
certified under Medicare with a planned
acute care hospital inpatient
readmission.
65.................. 93 Discharged/transferred to a psychiatric
distinct part unit of a hospital with a
planned acute care hospital inpatient
readmission.
66.................. 94 Discharged/transferred to a critical
access hospital (CAH) with a planned
acute care hospital inpatient
readmission.
70.................. 95 Discharged/transferred to another type of
health care institution not defined
elsewhere in this code list with a
planned acute care hospital inpatient
readmission.
------------------------------------------------------------------------
We invited public comments on our proposal to add the above listed
new discharge status codes to the GROUPER logic for MS-DRGs 280, 281,
and 282.
Comment: Commenters supported CMS' proposal to add the 15 new
discharge status codes to the MS-DRG GROUPER logic for MS-DRGs 280,
281, and 282 that will identify patients who are discharged with a
planned acute care hospital inpatient readmission. The commenters noted
that these new discharge status codes will enable providers to better
track AMI patients with planned versus unplanned readmissions.
Response: We appreciate the commenters' support. We agree that
these new discharge status codes will assist in tracking patients
diagnosed with an acute myocardial infarction who are discharged alive
and expect to be readmitted at a later date.
Comment: One commenter stated that the addition of these 15 new
discharge status codes to MS-DRGs 280-282 is unwarranted and believed
that it will create a burden for providers to report and update
systems. The commenter questioned if there is a timeframe associated
with the use of these new discharge status codes and if this timeframe
involves reporting a new discharge status code if the planned
readmission is to treat the same condition as the current stay. In
addition, the commenter questioned how CMS would verify that providers
are applying these proposed discharge status codes appropriately. The
commenter stated there are ``plenty of descriptive discharge status
codes that describe where the patient is going upon discharge. To add
more to clarify what is planned seems burdensome and unnecessary.''
Another commenter expressed concern with ``targeting only a small
number of DRGs for a large increase in applicable discharge status
codes.''
Response: The new discharge status codes related to a planned acute
care hospital inpatient readmission were developed and approved by the
National Uniform Billing Committee (NUBC) in response to a request by
the provider community. The purpose of the new codes is to allow
providers to track these types of situations when they occur. According
to meeting notes from the NUBC, there is not a designated timeframe (or
limitation) in reporting these new codes.
With respect to ensuring that providers apply these proposed new
discharge status codes correctly, we would like to point out that the
American Health Information Management Association (AHIMA) has
promulgated Standards of Ethical Coding that require accurate coding
that includes the reporting of all health care data elements (for
example, diagnosis and procedure codes, present on admission indicator,
discharge status) required for external reporting purposes (for
example, reimbursement and other administrative uses, population
health, quality and patient safety measurement, and research)
completely and accurately, in accordance with regulatory and
documentation standards and requirements and applicable official coding
conventions, rules, and guidelines. In addition, Medicare program
integrity initiatives closely monitor for inaccurate coding, as well as
coding inconsistent with medical record documentation.
In regard to the commenter's concern with targeting a small number
of MS-DRGs with a large increase in discharge status codes, the
discharge status codes were proposed to be added specifically to the
GROUPER logic for MS-DRGs 280, 281, and 282 to identify those patients
diagnosed with an acute myocardial infarction (AMI) who were
discharged/transferred to another facility with a planned acute care
hospital inpatient readmission alive. The GROUPER logic for these MS-
DRGs differs from the GROUPER logic for MS-DRGs 283, 284, and 285
(Acute Myocardial Infarction, Expired with MCC, with CC, and without
CC/MCC, respectively) where the patient has expired.
Similar to the discussion of discharge status code 69 in section
II.G.4.a. of the preamble of this final rule, the planned readmission
discharge status codes can also be reported for other MS-DRGs. We
reiterate that, as discussed in section II.G.7.b. of the preamble of
the proposed rule (78 FR 27520), these new discharge status codes were
proposed for addition to the GROUPER and MCE logic as well.
When the logic for an MS-DRG is defined by specific requirements,
such as a discharge status designation, the logic must be updated if a
new discharge status is created to appropriately group a claim. Within
MDC 5, for MS-DRGs 280, 281, and 282, the software logic is
specifically defined by a patient who has been diagnosed with an AMI
and is discharged alive. As such, the GROUPER logic requires that these
discharge status codes for planned readmissions be added to the
specific AMI DRGs where the patient has been discharged alive. An AMI
patient who expired would not have a planned readmission. Therefore,
these discharge status codes would not apply to MS-DRGs 283, 284, and
285 within MDC 5. Therefore, to ensure proper MS-DRG assignment, we
proposed to add the 15 discharge status codes describing a planned
readmission to MS-DRGs 280, 281, and 282 within MDC 5.
After consideration of the public comments we received, we are
finalizing our proposal to add the above listed 15 new patient
discharge status codes describing a planned acute care hospital
inpatient readmission to the MS-DRG GROUPER logic for MS-DRGs 280, 281,
and 282, effective October 1, 2013.
5. MDC 8 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Reverse Shoulder Procedures
We received a request to change the MS-DRG assignment for reverse
shoulder replacement procedures which
[[Page 50535]]
is captured with procedure code 81.88 (Reverse total shoulder
replacement). The requestor did not suggest a specific new MS-DRG
assignment, but requested that reverse shoulder replacement procedures
be reassigned from MS-DRGs 483 and 484 (Major Joint/Limb Reattachment
Procedure of, Upper Extremities with CC/MCC and without CC/MCC,
respectively) or that we create a new MS-DRG for reverse shoulder
replacement procedures.
Biomechanically, the reverse shoulder devices move the center of
rotation of the arm laterally and change the direction of the pull of
the deltoid muscle, allowing the deltoid muscle to elevate the arm
without functioning rotator cuff tendons. The requestor stated that the
use of traditional total shoulder devices in patients with a
nonfunctioning rotator cuff frequently leads to long-term complications
and unsatisfactory functional results. Patients with damaged rotator
cuffs or rotator cuff syndrome have poor outcomes with traditional
shoulder replacement devices. The reverse shoulder replacement
procedure was created to address the clinical needs for patients who
would have poor outcomes with a traditional shoulder replacement. The
requestor stated that reverse shoulder replacement devices were
designed to provide a superior functionality and outcomes for patients
with damaged rotator cuffs.
The requestor stated that the reverse shoulder replacement
procedure is technically more complex and requires a higher level of
expertise than traditional shoulder procedures and involves several
issues that make the surgery more complex. Patients who have had prior
rotator cuff surgery have anchors and scar tissue that must be
surgically addressed. Often, there also are severe deformities that
must be addressed in order to establish stability.
The requestor acknowledged that the reverse shoulder replacement
procedure is an upper extremity procedure like other procedures
assigned to MS-DRGs 483 and 484. These MS-DRGs include the longstanding
total shoulder replacement procedures as well as partial shoulder
replacements. While the procedure is similar to other procedures in MS-
DRGs 483 and 484, the requestor stated there are significant
differences between the technical complexity and indications for usage
from the other procedures. The requestor stated there are significant
differences in resource usage and clinical coherence between
longstanding approaches to shoulder replacement and other procedures
assigned to MS-DRGs 483 and 484 and the reverse shoulder replacement
procedure. The requestor stated not only was the resource consumption
significantly higher, the individual supply costs for reserve shoulder
replacement procedures were higher than the costs of other procedures
assigned to MS-DRGs 483 and 484.
MS-DRGs 483 and 484 contain the following procedures:
81.73 (Total wrist replacement)
81.80 (Other total shoulder replacement)
81.81 (Partial shoulder replacement)
81.84 (Total elbow replacement)
81.88 (Reverse total shoulder replacement)
84.23 (Forearm, wrist, or hand reattachment)
84.24 (Upper arm reattachment).
As can be seen from this list, MS-DRGs 483 and 484 contain total
and partial shoulder replacements, as well as replacement and
attachment procedures on the wrist and upper arm. Both the newer
shoulder replacement techniques as well as the longstanding shoulder
replacement techniques are included in these MS-DRGs.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 483--All cases........................................... 13,113 3.33 $17,039
MS-DRG 483--Cases with procedure code 81.88..................... 5,690 3.30 19,023
MS-DRG 484--All cases........................................... 21,073 2.01 14,448
MS-DRG 484--Cases with procedure code 81.88..................... 7,505 2.08 16,890
----------------------------------------------------------------------------------------------------------------
As the above table illustrates, the average costs for reverse total
shoulder replacement are approximately $2,000 higher than the average
costs for all other procedures within MS-DRGs 483 and 484 and have
similar average lengths of stays. While the average costs were higher,
each MS-DRG has some cases that are higher and some cases that are
lower than the average costs for the entire MS-DRG. We believe the
average costs for the reverse shoulder replacement procedures are not
inappropriately high compared to other procedures grouped within MS-
DRGs 483 and 484. Therefore, the claims data do not support reassigning
these cases or creating a new MS-DRG.
Our clinical advisors reviewed this issue and determined that the
cases are appropriately assigned to MS-DRGs 483 and 484. As stated
earlier, MS-DRGs 483 and 484 contain other types of shoulder
replacements. Our clinical advisors believe it is appropriate to have
all total shoulder replacement procedures within the same set of MS-
DRGs. They do not believe it is appropriate to reassign those that use
a different technique to accomplish the same goal, a total shoulder
replacement. Therefore, our clinical advisors determined that this is
an appropriate assignment for reverse shoulder replacement procedures
from a clinical perspective. They also do not believe it is appropriate
to move these cases to any other surgical, orthopedic MS-DRGs because
of differences in the clinical makeup of the other surgical orthopedic
MS-DRGs. Our clinical advisors recommended not creating a new MS-DRG
for reverse shoulder replacement procedures because they believe the
procedures are appropriately assigned to MS-DRGs 483 and 484.
Therefore, based on claims data and clinical analysis, in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27517 through 27518), we did not
propose to reassign these cases to any other MS-DRGs or to create a new
MS-DRG.
Based on the claims data and our clinical analysis, we did not
propose to reassign cases reporting procedure code 81.88 from their
current assignment to MS-DRGs 483 and 484 or to create a new MS-DRG. We
invited public comments on this issue.
Comment: Several commenters supported CMS' proposal not to reassign
reverse shoulder procedure cases reporting procedure code 81.88 from
their current assignment to MS DRGs 483 and 484 or to create a new MS-
DRG. Several commenters stated the proposal was reasonable given the
data and information provided.
Other commenters disagreed with our recommendation of making no MS-
DRG modifications for reverse shoulder procedures. One commenter stated
that the procedure is unique enough in approach and cost to justify
reassignment, or as an alternative, reassignment of all reverse
shoulder cases to MS-DRG 483, even if the cases do not have a CC or MCC
as a secondary
[[Page 50536]]
diagnosis. The commenter stated that it is important to take into
consideration the high volume of reverse shoulder procedures cases that
have occurred in a very short period of time since this code was
created. The commenter stated that, in the first year of this new code,
more than one-third of the cases in each MS-DRG (483 and 484) are
reverse shoulder procedures. For a newly created code, the commenter
believed that this was extraordinary utilization and should indicate
the importance of this unique procedure. The commenter stated that,
without an examination of each case and the reason why some cases
showed lower costs, it does not seem reasonable to dismiss the
substantially higher average costs of the procedures. The commenter
further stated that while CMS clinical advisors stated that reverse
shoulder is a simply a different technique to accomplish the same goal
of a total shoulder replacement, the procedure (and the device used in
the procedure) is meeting an unmet need, uses significantly different
techniques to implant the device, and requires additional skill,
experience, and time to implant. Another commenter recommended that CMS
create a new MS-DRG for reverse shoulder procedures because the
procedure is used to treat some of the most complex patients and use
greater resources.
Response: We agree with the commenters who stated that the data and
our clinical analysis support the recommendation of making no MS-DRG
changes for reverse shoulder procedures. Our clinical advisors continue
to believe the procedure is a different technique to accomplish the
same goal, a total shoulder replacement. We do not believe the data or
a clinical analysis would support moving all reverse shoulder
procedures into a new MS-DRG or moving all the reverse shoulder
procedures to MS DRG 483. The difference in average costs for reverse
shoulder procedures with a CC/MCC versus those without a CC/MCC is
$2,133. The difference in average costs for all cases in MS-DRG 483 and
MS-DRG 484 is $2,591. Clearly the presence of a CC or MCC has a
consistent impact on the average costs of shoulder replacements. Our
clinical advisors believe that it is important to maintain the clinical
cohesion of MS-DRGs 483 and 484 to maintain severity levels for all
shoulder replacement procedures.
The commenter who disagreed with our proposal pointed out that this
procedure is being adopted at a rapid rate with one-third of the
shoulder replacements using this new technique. Any growth in this
approach of performing total shoulder replacements will be reflected in
our claims data and will impact relative weights. Because the data and
clinical analysis support keeping the reverse shoulder procedure in the
same MS-DRG as other shoulder replacements, we are not modifying the
MS-DRGs for reverse shoulder procedures.
After consideration of the public comments we received, we are
finalizing our proposal to not reassign reverse shoulder cases
reporting procedure code 81.88 from their current assignment in MS DRGs
483 and 484 or to create a new MS-DRG.
b. Total Ankle Replacement Procedures
In response to the FY 2013 IPPS/LTCH PPS proposed rule, we received
a request to develop a new MS-DRG for total ankle replacements, which
we considered to be outside the scope of that proposed rule (77 FR
53325). We are addressing this request as part of the FY 2014 IPPS/LTCH
PPS rulemaking. The cases are captured by procedure code 81.56 (Total
ankle replacement) and are assigned to MS-DRGs 469 and 470 (Major Joint
Replacement or Reattachment of Lower Extremity with MCC and without
MCC, respectively).
The commenter stated that total ankle procedures are much more
clinically complex than total hip or total knee replacement procedures,
which have their own distinct MS-DRGs. The commenter also stated that
total ankle replacement is surgery that involves the replacement of the
damaged parts of the three bones that make up the ankle joint, as
compared to two bones in most other total joint procedures such as hip
or knee replacement. The commenter stated that average costs of total
ankle replacements are higher than those for total knee and hip
replacements. Therefore, the commenter recommended that a new MS-DRG
should be created for total ankle replacements. As an alternative, the
commenter suggested that these cases be reassigned to MS-DRG 469 even
if the cases do not have an MCC as a secondary diagnosis.
MS-DRGs 469 and 470 include a variety of procedures of the lower
extremities including the procedures listed below. This group of lower
extremity joint replacement and reattachment procedures was developed
because they were considered to be clinically cohesive and to have
similar resource consumptions.
00.85 (Resurfacing hip, total, acetabulum and femoral
head)
00.86 (Resurfacing hip, partial, femoral head)
00.87 (Resurfacing hip, partial, acetabulum)
81.51 (Total hip replacement)
81.52 (Partial hip replacement)
81.54 (Total knee replacement)
81.56 (Total ankle replacement)
84.26 (Foot reattachment)
84.27 (Lower leg or ankle reattachment)
84.28 (Thigh reattachment)
As the table below shows, there were 1,275 cases reporting total
ankle replacements with 21 cases in MS-DRG 469 and 1,254 cases in MS-
DRG 470. The 1,254 cases in MS-DRG 470 have higher costs than other
cases in MS-DRG 470 (approximately $17,242 compared to approximately
$13,984). The 21 cases in MS-DRG 469 had average costs of approximately
$23,360 compared to approximately $21,186 in average costs for all
cases within MS-DRG 469. While these procedures are higher in average
costs than other procedures within the MS-DRGs, we point out that cases
are grouped together based on similar clinical and resource criteria.
Some cases will have average costs higher than the overall average
costs for the MS-DRG, while other cases will have lower average costs.
Total ankle replacements represent 0.3 percent of the total number of
cases within MS-DRGs 469 and 470.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 469--All cases........................................... 25,618 7.33 $21,186
MS-DRG 469--Cases with procedure code 81.56..................... 21 6.81 23,360
MS-DRG 470--All cases........................................... 390,518 3.37 13,984
MS-DRG 470--Cases with procedure code 81.56..................... 1,254 2.19 17,242
Total--All cases............................................ .............. .............. 416,136
Total--Cases with procedure code 81.56...................... .............. .............. 1,275
----------------------------------------------------------------------------------------------------------------
[[Page 50537]]
Our clinical advisors reviewed this issue and determined that the
total ankle replacements are appropriately classified within MS-DRGs
469 and 470. They do not support the commenter's contention that these
cases are significantly more complex than knee and hip replacements.
They believe that total ankle replacements are clinically consistent
with other types of lower extremity joint replacements within MS-DRGs
469 and 470. Our clinical advisors do not support creating a new MS-DRG
for total ankle replacements. After considering the results of
examination of the claims data, the recommendations from our clinical
advisors, and the small number of total ankle replacements, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27518 through 27519), we did
not propose to create a new MS-DRG.
We also examined the request to move all total ankle replacements
to the highest severity level, MS-DRG 469, even when no secondary
diagnosis on the MCC list was reported. Moving all total ankle
replacements to MS-DRG 469 would lead to overpayments of approximately
$3,944 per case because the average costs of total ankle replacements
in MS-DRG 470 was approximately $17,242, while the average costs of all
cases in MS-DRG 469 was approximately $21,186. After considering the
claims data as well as the input from our clinical advisors, in the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27518 through 27519), we did
not propose that all total ankle procedures be assigned to MS-DRG 469
even when the case does not have an MCC reported as a secondary
diagnosis. We believe the current MS-DRGs are appropriate for total
ankle replacements.
In the FY 2014 IPPS/LTCH PPS proposed rule, we did not propose to
create a new total ankle replacement MS-DRG or to reassign all total
ankle replacements to MS DRG 469. We proposed to maintain the current
MS-DRG assignments for total ankle replacements. We invited public
comment on our proposals.
Comment: Several commenters supported CMS' recommendation to
maintain the current MS-DRG assignments for total ankle replacements.
Several commenters stated that the proposal not to create a new total
ankle replacement MS-DRG or to reassign all total ankle replacements to
MS DRG 469 was reasonable given the data and information provided.
Other commenters offered support for our recommendation to maintain the
current MS-DRG assignments for total ankle replacements.
Response: We appreciate the commenters' support.
Comment: Several commenters disagreed with the proposal. One
commenter stated that total ankle procedures are more clinically
complex than total hip or total knee replacement procedures, and that
the higher average cost for total ankle procedures should qualify it
for reassignment. Another commenter stated that the proposed policy is
detrimental to hospitals' ability to provide in a cost effective manner
clinically-proven intervention, and thus jeopardizes beneficiary access
to total ankle replacement procedures. The commenter pointed out that
CMS suggests that under the MS-DRG system in general, some cases will
have average costs higher than the overall average costs for the MS-
DRG, while other cases will have lower average costs. However, the
commenter believed that, due to the wide variation of procedures that
map to MS-DRGs 469 and 470, this is an insufficient rationale to
systematically underpay for the average cost of the vast majority of
total knee procedures by 28 percent. The commenter stated that total
ankle replacement is a complex surgical procedure involving the
replacement of the damaged parts of the three bones (talus, tibia and
fibula) that make up the articulations of the ankle, as compared to two
bones in most other total joint replacement procedures (for example,
hip or knee). The commenter stated that establishing a separate MS-DRG
for total ankle procedures is the best solution to ensuring that all
joint replacement MS-DRGs are clinically coherent, and similar in
resource use. The commenter recommended that if a separate MS-DRG could
not be created, CMS reassign all total ankle replacements to MS-DRG 469
even if the cases do not report a MCC. Other commenters asked that
total ankle replacements be reassigned to higher paying MS-DRGs because
the procedures were clinically more complex and have higher average
costs than other procedures within the current MS-DRGs.
Response: We disagree with the commenters who stated that the
clinical complexity of total ankle procedures justifies reassigning the
cases. As stated earlier, our clinical advisors reviewed this issue and
determined that the total ankle replacements are appropriately
classified with other lower joint procedures within MS-DRGs 469 and
470. They do not support the commenters' contention that these cases
are significantly more complex than knee and hip replacements. Our
clinical advisors believe that total ankle replacements are clinically
consistent with other types of lower extremity joint replacements
within MS-DRGs 469 and 470. As we also mentioned earlier, moving all
total ankle replacements to MS-DRG 469 would lead to overpayments of
approximately $3,944 per case because the average costs of total ankle
replacements in MS-DRG 470 was approximately $17,242, while the average
costs of all cases in MS DRG 469 was approximately $21,186. Our
clinical advisors do not support creating a new MS-DRG for total ankle
procedures or moving the cases to MS-DRG 469.
After consideration of the public comments we received, we are
finalizing our proposal to maintain the current MS-DRG assignments for
total ankle replacements captured by procedure code 81.56 and assigned
to MS-DRGs 469 and 470.
6. MDC 15 (Newborns and Neonates With Conditions Originating in the
Neonatal Period)
a. Persons Encountering Health Services for Specific Procedures, Not
Carried Out
We received a request to evaluate the MS-DRG assignment of ICD-9-CM
diagnosis codes V64.00 through V64.04, and V64.06 through V64.43 in MS-
DRG 794 (Neonate with Other Significant Problems) under MDC 15. The
requestor noted that the assignment of diagnosis code V64.05
(Vaccination not carried out because of caregiver refusal) was
addressed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50111 through
50112). We removed diagnosis code V64.05 from MS-DRG 794 and added it
to the ``only secondary diagnosis'' list for MS-DRG 795 (Normal
Newborn). The requestor asked that we consider the reassignment of
these diagnosis codes from MS-DRG 794 to MS-DRG 795. The codes under
existing MS-DRG 794 include:
V64.00 (Vaccination not carried out, unspecified reason)
V64.01 (Vaccination not carried out because of acute
illness)
V64.02 (Vaccination not carried out because of chronic
illness or condition)
V64.03 (Vaccination not carried out because of immune
compromised state)
V64.04 (Vaccination not carried out because of allergy to
vaccine or component)
V64.06 (Vaccination not carried out because of patient
refusal)
V64.07 (Vaccination not carried out for religious reasons)
V64.08 (Vaccination not carried out because patient had
disease being vaccinated against)
V64.09 (Vaccination not carried out for other reason)
[[Page 50538]]
V64.1 (Surgical or other procedure not carried out because
of contraindication)
V64.2 (Surgical or other procedure not carried out because
of patient's decision)
V64.3 (Procedure not carried out for other reasons)
V64.41 (Laparoscopic surgical procedure converted to open
procedure)
V64.42 (Thoracoscopic surgical procedure converted to open
procedure)
V64.43 (Arthroscopic surgical procedure converted to open
procedure).
In a newborn case with one of these diagnosis codes reported as a
secondary diagnosis, the case would be assigned to MS-DRG 794. The
commenter believed that these diagnosis codes, when reported as a
secondary diagnosis for a newborn case, should be assigned to MS-DRG
795 instead of MS-DRG 794.
Our clinical advisors reviewed this request and concur with the
commenter that diagnosis codes V64.00 through V64.04, and V64.06
through V64.3 should not continue to be assigned to MS-DRG 794, as
there is no clinically usable information reported in those codes
identifying significant problems. However, our clinical advisors
recommend that diagnosis codes V64.41, V64.42, and V64.43, which
identify that a surgical procedure converted to an open procedure,
continue to be assigned to MS-DRG 794. These diagnosis codes may
indicate a more significant encounter that required a surgical
intervention.
Therefore, for FY 2014, we proposed to reassign diagnosis codes
V64.00 through V64.04, and V64.06 through V64.3 from MS-DRG 794 to MS-
DRG 795 (78 FR 27519). Diagnosis codes V64.00 through V64.04, and
V64.06 through V64.3 would be added to the ``only secondary diagnosis''
list for MS-DRG 795. Diagnosis codes V64.41, V64.42, and V64.43 would
continue to be assigned to MS-DRG 794. We invited public comments on
this proposal.
Comment: Several commenters supported CMS' proposal to reassign
diagnosis codes V64.00 through V64.04 and V64.06 through V64.3 from MS-
DRG 794 to MS-DRG 795. The commenters stated that the proposed
reassignments were reasonable given the data and information provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal of reassigning diagnosis codes V64.00 through
V64.04 and V64.06 through V64.3 from MS-DRG 794 to MS-DRG 795.
b. Discharges/Transfers of Neonates With a Planned Acute Care Hospital
Inpatient Readmission
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27519 and 27520),
we proposed to add the patient discharge status codes shown in the
table below to the MS-DRG GROUPER logic for MS-DRG 789 (Neonates, Died
or Transferred to Another Acute Care Facility) to identify neonates
that are transferred to a designated facility with a planned acute care
hospital inpatient readmission.
------------------------------------------------------------------------
New code Title
------------------------------------------------------------------------
82........................... Discharged/transferred to a short term
general hospital for inpatient care with
a planned acute care hospital inpatient
readmission.
85........................... Discharged/transferred to a designated
cancer center or children's hospital
with a planned acute care hospital
inpatient readmission.
94........................... Discharged/transferred to a critical
access hospital (CAH) with a planned
acute care hospital inpatient
readmission.
------------------------------------------------------------------------
Currently, the GROUPER logic for MS-DRG 789 contains discharge
status codes 02 (Discharged/transferred to a short term general
hospital for inpatient care), 05 (Discharged/transferred to a
designated cancer center or children's hospital), and 66 (Discharged/
transferred to a critical access hospital (CAH)).
As discussed in section II.G.7. of the preamble of the proposed
rule, these new discharge status codes were also proposed for addition
to the Medicare Code Editor (MCE). We invited public comments on our
proposal.
Comment: Several commenters supported CMS' proposal to add the
three new discharge status codes to the MS-DRG GROUPER logic for MS-DRG
789 (Neonates, Died or Transferred to Another Acute Care Facility) to
identify neonates that are transferred to a designated facility with a
planned acute care hospital inpatient readmission. The commenters noted
the proposal was reasonable given the data and information provided.
Response: We appreciate the commenters' support.
Comment: One commenter expressed concern that the addition of these
new discharge status codes to MS-DRG 789 would create a burden to
providers in updating their systems and was unnecessary.
Response: As noted in the previous section, these new discharge
status codes related to a planned acute care hospital inpatient
readmission were developed and approved by the NUBC in response to a
request by the provider community. For the commenters' benefit, we
would like to point out how the GROUPER logic for MS-DRG 789 is
designed. When the logic for an MS-DRG is defined by specific
requirements, such as a discharge status designation, the logic must be
updated if a new discharge status is created to appropriately group a
claim.
With regard to the burden on providers for updating their systems,
effective October 1 of each year, providers have gone through the
process of updating their systems based on changes that were approved
and finalized for the upcoming IPPS fiscal year.
After consideration of the public comments we received, we are
finalizing our proposal to add new discharge status codes 82, 85, and
94 to the MS-DRG GROUPER logic for MS-DRG 789 for FY 2014.
7. Medicare Code Editor (MCE) Changes
The Medicare Code Editor (MCE) is a software program that detects
and reports errors in the coding of Medicare claims data. Patient
diagnoses, procedure(s), and demographic information are entered into
the Medicare claims processing systems and are subjected to a series of
automated screens. The MCE screens are designed to identify cases that
require further review before classification into an MS-DRG.
a. Age Conflict Edit
We received a request to review three ICD-9-CM diagnosis codes
currently listed under the age conflict edit within the MCE. The age
conflict edit detects inconsistencies between a patient's age and any
diagnosis on the patient's record. Specifically, the requestor
recommended that CMS consider the removal of diagnosis codes 751.1
(Atresia and stenosis of small intestine), 751.2 (Atresia and stenosis
of large intestine, rectum, and anal canal), and 751.61 (Biliary
atresia) from the
[[Page 50539]]
pediatric age conflict edit. Generally, diagnoses included in the list
for the pediatric age conflict edit are applicable for ages 0 through
17.
The requestor noted that diagnosis code 751.1 was removed from the
Integrated Outpatient Code Editor (IOCE) effective January 1, 2006. Our
clinical advisors agree that patients described with any one of the
above listed codes, although congenital anomalies, may require a
revision procedure in adulthood. Therefore, we believe that the removal
of these codes appears appropriate and also would be consistent with
the IOCE.
We invited public comments on our proposal to remove diagnosis
codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit
effective October 1, 2013.
Comment: Commenters supported the proposal to remove diagnosis
codes 751.1, 751.2, and 751.61 from the pediatric age conflict edit
effective October 1, 2013.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to remove diagnosis codes 751.1, 751.2, and
751.61 from the pediatric age conflict edit effective October 1, 2013.
b. Discharge Status Code Updates
To reflect changes in the UB-04 code set maintained by the National
Uniform Billing Committee (NUBC), in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27520), we proposed to add the following new discharge
status codes to the CMS GROUPER and the MCE logic effective October 1,
2013.
One of the new discharge status codes corresponds to an alternative
care site. This alternative care site discharge status code is intended
to identify patients being discharged or transferred to an alternative
site that will provide basic patient care during a disaster response.
The new discharge status code is 69 (Discharged/transferred to a
designated disaster alternative care site).
In addition, 15 new discharge status codes correspond with
identifying planned acute care hospital inpatient readmissions. Shown
below are the existing ``base'' discharge status codes and the new
codes that will better identify patients who are discharged with a
planned readmission.
----------------------------------------------------------------------------------------------------------------
Base code New code Title
----------------------------------------------------------------------------------------------------------------
01................................... 81..................... Discharged to home or self-care with a planned
acute care hospital inpatient readmission.
02................................... 82..................... Discharged/transferred to a short term general
hospital for inpatient care.
03................................... 83..................... Discharged/transferred to a skilled nursing
facility (SNF) with Medicare certification with
a planned acute care hospital inpatient
readmission.
04................................... 84..................... Discharged/transferred to a facility that
provides custodial or supportive care with a
planned acute care hospital inpatient
readmission.
05................................... 85..................... Discharged/transferred to a designated cancer
center or children's hospital with a planned
acute care hospital inpatient readmission.
06................................... 86..................... Discharged/transferred to home under care of
organized home health service organization with
planned acute care hospital inpatient
readmission.
21................................... 87..................... Discharged/transferred to court/law enforcement
with a planned acute care hospital inpatient
readmission.
43................................... 88..................... Discharged/transferred to federal health care
facility with a planned acute care hospital
inpatient readmission.
61................................... 89..................... Discharged/transferred to a hospital-based
Medicare approved swing bed with a planned
acute care hospital inpatient readmission.
62................................... 90..................... Discharged/transferred to an inpatient
rehabilitation facility (IRF) including
rehabilitation distinct part units of a
hospital with a planned acute care hospital
inpatient readmission.
63................................... 91..................... Discharged/transferred to a Medicare certified
long term care hospital (LTCH) with a planned
acute care hospital inpatient readmission.
64................................... 92..................... Discharged/transferred to a nursing facility
certified under Medicaid but not certified
under Medicare with a planned acute care
hospital inpatient readmission.
65................................... 93..................... Discharged/transferred to a psychiatric distinct
part unit of a hospital with a planned acute
care hospital inpatient readmission.
66................................... 94..................... Discharged/transferred to a critical access
hospital (CAH) with a planned acute care
hospital inpatient readmission.
70................................... 95..................... Discharged/transferred to another type of health
care institution not defined elsewhere in this
code list with a planned acute care hospital
inpatient readmission.
----------------------------------------------------------------------------------------------------------------
We invited public comments on our proposal to add the above listed
new discharge status codes to the GROUPER and the MCE logic effective
October 1, 2013 (FY 2014).
Comment: Several commenters supported CMS' proposal to add the
above listed discharge status codes to the GROUPER and the MCE logic.
However, some commenters asked CMS to clarify how it intends to use the
new discharge status codes for planned acute care hospital inpatient
readmissions. One commenter stated that, based on the description of a
planned readmission algorithm in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27595), it appears that CMS is planning to use an algorithm
to identify planned readmissions for part of the Hospital Readmissions
Reduction Program, rather than relying on the proposed new planned
readmission discharge status codes reported on claims. This commenter
suggested that CMS work with the NUBC to develop additional guidance on
the proper use of the discharge status codes. The commenter noted:
``for example, it is not clear if there is a limitation on the
timeframe when the planned readmission is expected to occur in order to
use these discharge status codes. It is also not clear whether these
codes are limited to planned readmissions related to the current
admission. For example, the plan of care might mention that the patient
is returning in the future for scheduled treatment of a condition
unrelated to the current hospitalization.''
Response: We appreciate the commenters' support. The new discharge
status codes related to a planned acute care hospital inpatient
readmission were developed and approved by the NUBC in response to a
request by the provider community. Currently, the purpose of the new
codes is to allow providers to track these types of situations when
they occur.
[[Page 50540]]
According to meeting notes from the NUBC, there is not a designated
timeframe (or limitation) in reporting these new codes, and they define
a readmission as ``an intentional readmission after discharge from an
acute care hospital that is a scheduled part of a patient's plan of
care.''
The commenter is correct in its understanding that, under the
Hospital Readmissions Reduction Program, CMS proposed in the FY 2014
IPPS/LTCH PPS proposed rule, and is finalizing in this final rule, an
algorithm to identify planned versus unplanned readmissions and will
continue to utilize this algorithm for the program. Therefore, at this
time, these new discharge status codes are not related in any way to
the Hospital Readmissions Reduction Program and will not be taken into
account in the readmissions measures for that program.
After consideration of the public comments received, we are
finalizing our proposal to add new discharge status code 69
(Discharged/transferred to a designated disaster alternative care
site), as well as the 15 new discharge status codes related to a
planned acute care hospital inpatient readmission listed above.
8. Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
Because the relative resource intensity of surgical classes can
shift as a function of MS-DRG reclassification and recalibrations, for
FY 2014, we reviewed the surgical hierarchy of each MDC, as we have for
previous reclassifications and recalibrations, to determine if the
ordering of classes coincides with the intensity of resource
utilization.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact on
more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average resource utilization to that with the
lowest, with the exception of ``other O.R. procedures'' as discussed
below.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC, but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed limited
changes to the MS-DRG classifications for FY 2014, as discussed in
sections II.G.2. and 5. of the preamble of the proposed rule. In our
review of these proposed changes, we did not identify any needed
changes to the surgical hierarchy. Therefore, in the proposed rule (78
FR 27521), we did not propose any changes to the surgical hierarchy for
Pre-MDCs and MDCs for FY 2014.
Comment: Several commenters stated that the CMS proposal to make no
changes to the surgical hierarchy seems reasonable given the data and
information provided.
Response: Based on these public comments and our review of the
proposal to make no revisions to the surgical hierarchy using the March
2013 update of the FY 2012 MedPAR file and the revised GROUPER
software, we found that the proposal to make no revisions is still
supported by the data. Therefore, in this final rule, we are making no
changes to the surgical hierarchy for FY 2104.
9. Complications or Comorbidity (CC) Exclusions List
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length of stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (non-CC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY
[[Page 50541]]
2008 IPPS final rule with comment period for a discussion of the
refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 (72
FR 47152 through 47171).
b. CC Exclusions List for FY 2014
In the September 1, 1987 final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) To preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair. As we indicated above, we
developed a list of diagnoses, using physician panels, to include those
diagnoses that, when present as a secondary condition, would be
considered a substantial complication or comorbidity. In previous
years, we have made changes to the list of CCs, either by adding new
CCs or deleting CCs already on the list.
In the May 19, 1987 proposed notice (52 FR 18877) and the September
1, 1987 final notice (52 FR 33154), we explained that the excluded
secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another;
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another;
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another;
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another; and
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC.\1\
---------------------------------------------------------------------------
\1\ We refer readers to the FY 1989 final rule (53 FR 38485,
September 30, 1988) for the revision made for the discharges
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR
36126, September 4, 1990) for the FY 1991 revision; the FY 1992
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision;
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY
1993 revision; the FY 1994 final rule (58 FR 46278, September 1,
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996
final rule (60 FR 45782, September 1, 1995) for the FY 1996
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR
51542); and the FY 2013 final rule (77 FR 53315). In the FY 2000
final rule (64 FR 41490, July 30, 1999), we did not modify the CC
Exclusions List because we did not make any changes to the ICD-9-CM
codes for FY 2000.
---------------------------------------------------------------------------
(1) No Revisions Based on Changes to the ICD-9-CM Diagnosis Codes for
FY 2014
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522), we stated
that, for FY 2014, there were no changes made to the ICD-9-CM coding
system effective October 1, 2013, due to the partial code freeze.
However, we did note that there may be ICD-9-CM coding changes
finalized after the proposed rule (78 FR 27526). We are finalizing, for
FY 2014, there were no changes made to the ICD-9-CM diagnosis codes.
However, there are changes made to the ICD-9-CM procedure codes for FY
2014 due to new technology. (We refer readers to section II.G.11. of
the preamble of the FY 2014 IPPS/LTCH PPS proposed rule and this final
rule for a discussion of the ICD-9-CM coding system.)
(2) Changes to the MS-DRG Diagnosis Codes for FY 2014
(A) Coronary Atherosclerosis Due to Calcified Coronary Lesion
We received a request that we consider changing the severity levels
for the following ICD-9-CM diagnosis code: 414.4 (Coronary
atherosclerosis due to calcified coronary lesion). The requestor
suggested that we change the severity level for diagnosis code 414.4
from a non-CC to an MCC.
The following chart shows the analysis of the MedPAR claims data
for FY 2012 for ICD-9-CM diagnosis code 414.4.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Diagnosis
Code description CC level Cnt 1 Cnt 1 impact Cnt 2 Cnt 2 impact Cnt 3 Cnt 3 impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.4......................... Coronary Non-CC........... 1,390 1.58 2,174 2.31 2,001 3.11
atherosclerosis
due to calcified
lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We ran the above data as described in the FY 2008 IPPS final rule
with comment period (72 FR 47158 through 47161). The C1 value reflects
a patient with no other secondary diagnosis or with all other secondary
diagnoses that are non-CCs. The C2 value reflects a patient with at
least one other secondary diagnosis that is a CC, but none that is an
MCC. The C3 value reflects a patient with at least one other secondary
diagnosis that is an MCC.
The chart above shows that the C1 finding is 1.58. A value close to
1.0 in the C1 field suggests that the diagnosis produces the same
expected value as a non-CC. A value close to 2.0 suggests the condition
is more like a CC than a non-CC, but not as significant in resource
usage as an MCC. A value close to 3.0 suggests the condition is
expected to consume resources more similar to an MCC than a CC or a
non-CC.
The C2 finding was 2.31. A C2 value close to 2.0 suggests the
condition is more like a CC than a non-CC, but not as significant in
resource usage as an MCC when there is at least one other secondary
diagnosis that is a CC but none that is an MCC.
While the C1 value of 1.58 is above the 1.0 value for a non-CC, it
does not support reclassification to an MCC. As stated earlier, a value
close to 3.0 suggests the condition is expected to
[[Page 50542]]
consume resources more similar to an MCC than a CC or a non-CC. The C2
finding of 2.31 also does not support reclassifying this diagnosis code
to an MCC. We also considered reclassifying the severity level of
diagnosis code 414.4 to a CC; however, the C1 finding of 1.58 also does
not support reclassifying the severity level to a CC. Our clinical
advisors reviewed the data and evaluated this condition. They
recommended that we not change the severity level of diagnosis code
414.4 from a non-CC to an MCC or a CC. They did not believe that this
diagnosis would increase the severity level of patients. They pointed
out that a similar code, diagnosis code 414.2 (Chronic total occlusion
of coronary artery), is a non-CC. Our clinical advisors believe that
diagnosis code 414.4 represents patients who are less severe than
diagnosis code 414.2. Considering the C1 and C2 ratings and the input
from our clinical advisors, in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27522), we did not propose to reclassify diagnosis code 414.4 to
an MCC; the diagnosis code would continue to be considered a non-CC.
Therefore, based on the data and clinical analysis, we proposed to
maintain diagnosis code 414.4 as a non-CC. We invited public comment on
our proposal.
Comment: Commenters supported the CMS proposal not to change
diagnosis code 414.4 from a non-CC to an MCC. Several commenters stated
that the changes seem reasonable given the data and information
provided.
Response: We appreciate the commenters' support.
Comment: Several commenters disagreed with the proposal, stating
that these patients are more expensive to treat.
Response: The claims data mentioned above do not support that
patients with this condition require treatment with average costs at
the MCC level. As stated above, the claims data support maintaining
this code as a non-CC. Our clinical advisors once again reviewed this
issue after reviewing the public comments. Based on their clinical
review, our clinical advisors continue to support our proposal not to
change diagnosis code 414.4 from a non-CC to an MCC.
Comment: One commenter asked CMS to rerun the data but did not
provide a reason why it believed the data are in error nor point out
any errors in the methodology. The commenter purchased the FY 2012
MedPAR data file and tried to replicate this analysis. The commenter
found more cases in its data analysis. The commenter asked for
clarification as to whether CMS used average costs or average charges
in its computations, and why its findings might have been different.
Response: Our analysis is based on average costs. As we stated
earlier, the December 2012 update of the FY 2012 MedPAR file is the
claims data source for our data analysis. Because the commenter used a
later file (the March 2013 update), its data included more cases.
However, our data and clinical analysis support maintaining diagnosis
code 414.4 as a non-CC and not changing it to a MCC.
After consideration of the public comments we received, we are
finalizing our proposal to maintain diagnosis code 414.4 as a non-CC
for FY 2014.
(B) Acute Cholecystitis Diagnosis Code
We received a comment recommending that we add diagnosis code 575.0
(Acute cholecystitis) to the CC Exclusion List when reported as a
secondary diagnosis code with a principal diagnosis code 574.00
(Calculus of gallbladder with acute cholecystitis without mention of
obstruction). We note that there is an ``excludes note'' under
diagnosis code 575.0 which excludes ``that with cholelithiasis
(574.00)''. Therefore, diagnosis codes 575.0 and 574.00 should not be
reported on the same claim. However, the commenter stated that there
may be double reporting.
Our clinical advisors agree with the commenter that diagnosis codes
575.0 and 574.00 capture the same clinical context. Therefore, in the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27522), we proposed to add
diagnosis code 575.0 to the CC Exclusion List when reported as a
secondary diagnosis code with a principal diagnosis code 574.00. We
invited public comments on our proposal.
Comment: Several commenters stated that the proposal to add
diagnosis code 575.0 to the CC Exclusion List when reported as a
secondary diagnosis code with principal diagnosis code 574.00 seems
reasonable given the data and information provided.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to add diagnosis code 575.0 to the CC Exclusion
List when reported as a secondary diagnosis code with principal
diagnosis code 574.00 for FY 2014.
(C) Chronic Total Occlusion (CTO) of Artery of the Extremities
Diagnosis Code
We received a request to consider removing atherosclerosis and
aneurysm codes from the CC Exclusion List for diagnosis code 440.4
(Chronic total occlusion of artery of the extremities). For FY 2013, we
changed the designation of diagnosis code 440.4 from a non-CC level to
a CC level. The CC Exclusion List for diagnosis code 440.4 includes the
following diagnosis codes:
------------------------------------------------------------------------
Diagnosis code Code description
------------------------------------------------------------------------
440.20....................... Atherosclerosis of native arteries of the
extremities, unspecified.
440.21....................... Atherosclerosis of native arteries of the
extremities with intermittent
claudication.
440.22....................... Atherosclerosis of native arteries of the
extremities with rest pain.
440.23....................... Atherosclerosis of native arteries of the
extremities with ulceration.
440.24....................... Atherosclerosis of native arteries of the
extremities with gangrene.
440.29....................... Other atherosclerosis of native arteries
of the extremities.
440.30....................... Atherosclerosis of unspecified bypass
graft of the extremities.
440.31....................... Atherosclerosis of autologous vein bypass
graft of the extremities.
440.32....................... Atherosclerosis of nonautologous
biological bypass graft of the
extremities.
440.4........................ Chronic total occlusion of artery of the
extremities.
441.00....................... Dissection of aorta, unspecified site.
441.01....................... Dissection of aorta, thoracic.
441.02....................... Dissection of aorta, abdominal.
441.03....................... Dissection of aorta, thoracoabdominal.
441.1........................ Thoracic aneurysm, ruptured.
441.2........................ Thoracic aneurysm without mention of
rupture.
441.3........................ Abdominal aneurysm, ruptured.
441.4........................ Abdominal aneurysm without mention of
rupture.
[[Page 50543]]
441.5........................ Aortic aneurysm of unspecified site,
ruptured.
441.6........................ Thoracoabdominal aneurysm, ruptured.
441.7........................ Thoracoabdominal aneurysm, without
mention of rupture.
441.9........................ Aortic aneurysm of unspecified site
without mention of rupture.
442.0........................ Aneurysm of artery of upper extremity.
442.2........................ Aneurysm of iliac artery.
442.3........................ Aneurysm of artery of lower extremity.
442.9........................ Aneurysm of unspecified site.
443.22....................... Dissection of iliac artery.
443.29....................... Dissection of other artery.
443.81....................... Peripheral angiopathy in diseases
classified elsewhere.
443.82....................... Erythromelalgia.
443.89....................... Other specified peripheral vascular
diseases.
443.9........................ Peripheral vascular disease, unspecified.
444.01....................... Saddle embolus of abdominal aorta.
444.09....................... Other arterial embolism and thrombosis of
abdominal aorta.
444.1........................ Embolism and thrombosis of thoracic
aorta.
444.21....................... Arterial embolism and thrombosis of upper
extremity.
444.22....................... Arterial embolism and thrombosis of lower
extremity.
444.81....................... Embolism and thrombosis of iliac artery.
444.89....................... Embolism and thrombosis of other
specified artery.
444.9........................ Embolism and thrombosis of unspecified
artery.
445.01....................... Atheroembolism of upper extremity.
445.02....................... Atheroembolism of lower extremity.
445.81....................... Atheroembolism of kidney.
445.89....................... Atheroembolism of other site.
447.0........................ Arteriovenous fistula, acquired.
447.1........................ Stricture of artery.
447.2........................ Rupture of artery.
447.5........................ Necrosis of artery.
447.6........................ Arteritis, unspecified.
447.70....................... Aortic ectasia, unspecified site.
447.71....................... Thoracic aortic ectasia.
447.72....................... Abdominal aortic ectasia.
447.73....................... Thoracoabdominal aortic ectasia.
449.......................... Septic arterial embolism.
------------------------------------------------------------------------
Diagnosis code 440.4 is a CC except if one of the diagnosis codes
listed above is reported as a principal diagnosis. If one of the
diagnosis codes listed above is reported on a claim as a principal
diagnosis and code 440.4 is reported as a secondary diagnosis, code
440.4 would not be counted as a CC. The commenter requested that we
remove atherosclerosis codes 440.20 through 440.32, 443.22, 443.29,
443.81 through 443.9, and aneurysm codes 441.00 through 441.03, 441.1
through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC
Exclusion List for diagnosis code 440.4.
According to the commenter, aneurysm diagnoses are not closely
related clinically to peripheral CTOs. Aneurysm physiology, clinical
symptomology, and patient risk profile are fundamentally different than
CTOs. Aneurysms result from the weakening of an artery wall and
manifest in an out-pouched pocket of the lumen. Conversely, patients
with CTOs present with extended segments of diseased and narrowed
vessels and in most cases, complex lesions containing fibro-calcified
plaques.
The commenter stated that CTOs represent a high severity
complication, which is not closely related to basic atherosclerosis.
Our clinical advisors agree with the commenter that the aneurysm
and most of the atherosclerosis codes should be removed from the CC
Exclusion List for diagnosis code 440.4. A case with a principal
diagnosis of aneurysm with CTO adds substantial complexity and does not
necessarily have the same immediate cause. A case with a principal
diagnosis of atherosclerosis with CTO reported represents a more severe
form of the disease and, therefore, is more complex. Our clinical
advisors do not agree with the commenter that diagnosis codes 443.81
through 443.9 (Other and unspecified peripheral vascular diseases)
should be removed from the CC Exclusion List. These cases are more
likely related to CTO and meet one of the principles for exclusion that
we previously outlined above.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27524), we proposed to remove the following diagnosis codes from the CC
Exclusion List for diagnosis code 440.4 for FY 2014: atherosclerosis
codes 440.20 through 440.32, 443.22, and 443.29, and aneurysm codes
441.00 through 441.03, 441.1 through 441.7, 441.9, 442.0, 442.2, 442.3,
and 442.9. Diagnosis codes 443.81 through 443.9 would remain on the CC
Exclusion List for diagnosis code 440.4. We invited public comments on
this proposal.
Comment: Several commenters supported CMS' proposal to remove
atherosclerosis codes 440.20 through 440.32, 443.22, and 443.29, and
aneurysm codes 441.00 through 441.03, 441.1 through 441.7, 441.9,
442.0, 442.2, 442.3, and 442.9 from the CC Exclusion List for diagnosis
code 440.4. Several commenters agreed with CMS' clinical advisors'
assessment on aneurysm and atherosclerosis cases with CTO in that a
case with a principal diagnosis of aneurysm with CTO adds substantial
complexity and does not necessarily have the same immediate cause, and
a case with a principal diagnosis of atherosclerosis with CTO reported
represents a more severe form of the disease and, therefore, is more
complex. Several commenters stated that this proposed change will
compensate hospitals appropriately for the high cost
[[Page 50544]]
and resource use associated with CTO treatment. Several commenters
stated that the proposal seems reasonable given the data and
information provided.
Response: We appreciate the commenters' support and agree that the
change is warranted for these cases.
After consideration of the public comments we received, we are
finalizing our proposal to remove atherosclerosis codes 440.20 through
440.32, 443.22, and 443.29, and aneurysm codes 441.00 through 441.03,
441.1 through 441.7, 441.9, 442.0, 442.2, 442.3, and 442.9 from the CC
Exclusion List for diagnosis code 440.4. Diagnosis codes 443.81 through
443.9 would remain on the CC Exclusion List for diagnosis code 440.4
for FY 2014.
For FY 2014, we proposed changes to Table 6G (Additions to the CC
Exclusion List) and Table 6H (Deletions from the CC Exclusion List) (78
FR 27524). As we discussed earlier, we are finalizing those changes for
acute cholecystitis and chronic total occlusion of artery of the
extremities diagnosis codes for FY 2014. As we discussed in the FY 2014
IPPS/LTCH PPS proposed rule, we did not propose any changes to the
severity level for diagnosis code 414.4. In this final rule, we are
finalizing our decision to maintain diagnosis code 414.4 as a non-CC.
These two tables, which contain codes that are effective for discharges
occurring on or after October 1, 2013, were not published in the
Addendum to the proposed rule (nor are they 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/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/index.html. Each of these principal diagnosis codes
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 available
through the Internet on the CMS Web site at: http://www.cms.hhs.gov/
Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
Beginning with discharges on or after October 1 of each fiscal year,
the indented diagnoses are not recognized by the GROUPER as valid CCs
for the asterisked principal diagnosis.
There are no new, revised, or deleted diagnosis codes for FY 2014.
Therefore, there are no Tables 6A, 6C, and 6E published for FY 2014.
There are no additions or deletions to the MS-DRG MCC List for FY
2014. There also are no additions or deletions to the MS-DRG CC List
for FY 2014. Therefore, there are no Tables 6I.1 through 6I.2 and 6J.1
through 6J.2 published for FY 2014.
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 30.0, is available on a CD
for $225.00. Version 31.0 of this manual, which includes the final FY
2014 MS-DRG changes, is available on a CD for $225.00. These manuals
may be obtained by writing 3M/HIS at the following address: 100 Barnes
Road, Wallingford, CT 06492; or by calling (203) 949-0303, or by
obtaining an order form at the Web site: http://www.3MHIS.com. Please
specify the revision or revisions requested.
10. Review of Procedure Codes in MS DRGs 981 through 983; 984 through
986; and 987 through 989
Each year, we review cases assigned to former CMS DRG 468
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal
Diagnosis) to determine whether it would be appropriate to change the
procedures assigned among these CMS DRGs. Under the MS-DRGs that we
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC,
with CC, and without CC/MCC, respectively).
MS-DRGs 981 through 983, 984 through 986, and 987 through 989
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for
those cases in which none of the O.R. procedures performed are related
to the principal diagnosis. These MS-DRGs are intended to capture
atypical cases, that is, those cases not occurring with sufficient
frequency to represent a distinct, recognizable clinical group. MS-DRGs
984 through 986 (previously CMS DRG 476) are assigned to those
discharges in which one or more of the following prostatic procedures
are performed and are unrelated to the principal diagnosis:
60.0 (Incision of prostate)
60.12 (Open biopsy of prostate)
60.15 (Biopsy of periprostatic tissue)
60.18 (Other diagnostic procedures on prostate and
periprostatic tissue)
60.21 (Transurethral prostatectomy)
60.29 (Other transurethral prostatectomy)
60.61 (Local excision of lesion of prostate)
60.69 (Prostatectomy, not elsewhere classified)
60.81 (Incision of periprostatic tissue)
60.82 (Excision of periprostatic tissue)
60.93 (Repair of prostate)
60.94 (Control of (postoperative) hemorrhage of prostate)
60.95 (Transurethral balloon dilation of the prostatic
urethra)
60.96 (Transurethral destruction of prostate tissue by
microwave thermotherapy)
60.97 (Other transurethral destruction of prostate tissue
by other thermotherapy)
60.99 (Other operations on prostate)
All remaining O.R. procedures are assigned to MS-DRGs 981 through
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those
discharges in which the only procedures performed are nonextensive
procedures that are unrelated to the principal diagnosis.\2\
---------------------------------------------------------------------------
\2\ The original list of the ICD-9-CM procedure codes for the
procedures we consider nonextensive procedures, if performed with an
unrelated principal diagnosis, was published in Table 6C in section
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173),
and the FY 1998 final rule (62 FR 45981), we moved several other
procedures from DRG 468 to DRG 477, and some procedures from DRG 477
to DRG 468. No procedures were moved in FY 1999, as noted in the
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003
final rule (67 FR 49999), we did not move any procedures from DRG
477. However, we did move procedure codes from DRG 468 and placed
them in more clinically coherent DRGs. In the FY 2004 final rule (68
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and
477 because the procedures are nonextensive. In the FY 2005 final
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In
addition, we added several existing procedures to DRGs 476 and 477.
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009,
2010, 2011, 2012, and 2013, no procedures were moved, as noted in
the FY 2008 final rule with comment period (72 FR 46241), in the FY
2009 final rule (73 FR 48513), in the FY 2010 final rule (74 FR
43796), in the FY 2011 final rule (75 FR 50122), in the FY 2012
final rule (76 FR 51549), and in the FY 2013 final rule (77 FR
53321).
---------------------------------------------------------------------------
[[Page 50545]]
Our review of MedPAR claims data showed that there were no cases
that merited movement or should logically be assigned to any of the
other MDCs. Therefore, for FY 2014, we did not propose to change the
procedures assigned among these MS-DRGs.
We did not receive any public comments on this proposal. Therefore,
as we proposed, we are not making any changes to the procedures
assigned to MS-DRGs 981 through 983, MS-DRGs 984 through 986, and MS-
DRGs 987 through 989 for FY 2014.
a. Moving Procedure Codes from MS-DRGs 981 through 983 or MS-DRGs 987
through 989 into MDCs
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to
principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move procedure codes out of these MS-DRGs into one of
the surgical MS-DRGs for the MDC into which the principal diagnosis
falls. The data are arrayed in two ways for comparison purposes. We
look at a frequency count of each major operative procedure code. We
also compare procedures across MDCs by volume of procedure codes within
each MDC.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
As noted above, there were no cases that merited movement or that
should logically be assigned to any of the other MDCs. Therefore, for
FY 2014, we did not propose to remove any procedures from MS-DRGs 981
through 983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs
for the MDC into which the principal diagnosis is assigned.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not making any changes to the procedures
assigned to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 for FY
2014.
b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984
Through 986, and 987 Through 989
We also annually review the list of ICD-9-CM procedures that, when
in combination with their principal diagnosis code, result in
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R.
procedure unrelated to principal diagnosis with MCC, with CC, or
without CC/MCC, respectively), and 987 through 989, to ascertain
whether any of those procedures should be reassigned from one of these
three MS-DRGs to another of the three MS-DRGs based on average costs
and the length of stay. We look at the data for trends such as shifts
in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to provide payment for the cases in a similar manner. Generally, we
move only those procedures for which we have an adequate number of
discharges to analyze the data.
There were no cases representing shifts in treatment practice or
reporting practice that would make the resulting MS-DRG assignment
illogical, or that merited movement so that cases should logically be
assigned to any of the other MDCs. Therefore, for FY 2014, we did not
propose to move any procedure codes among these MS-DRGs.
We did not receive any public comments on our proposal. Therefore,
as we proposed, we are not moving any procedures assigned to MS-DRGs
981 through 983, MS-DRGs 984 through 986, and MS-DRGs 987 through 989
for FY 2014.
c. Adding Diagnosis or Procedure Codes to MDCs
Based on the review of cases in the MDCs as described above in
sections II.G.1. through 6. of this preamble, we did not propose to add
any diagnosis or procedure codes to MDCs for FY 2014. We did not
receive any public comments on our proposal. Therefore, as we proposed,
we are not adding any diagnosis or procedure codes to MDCs for FY 2014.
11. Changes to the ICD-9-CM Coding System, Including Discussion of the
Replacement of the ICD-9-CM Coding System With the ICD-10-CM and ICD-
10-PCS Systems in FY 2014
a. ICD-9-CM Coding System
The ICD-9-CM is a coding system currently used for the reporting of
diagnoses and procedures performed on a patient. In September 1985, the
ICD-9-CM Coordination and Maintenance Committee was formed. This is a
Federal interdepartmental committee, co-chaired by the National Center
for Health Statistics (NCHS), the Centers for Disease Control and
Prevention, and CMS, charged with maintaining and updating the ICD-9-CM
system. The Committee is jointly responsible for approving coding
changes, and developing errata, addenda, and other modifications to the
ICD-9-CM to reflect newly developed procedures and technologies and
newly identified diseases. The Committee is also responsible for
promoting the use of Federal and non-Federal educational programs and
other communication techniques with a view toward standardizing coding
applications and upgrading the quality of the classification system.
The Official list of valid ICD-9-CM diagnosis and procedure codes
can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html.
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 2014 at a public meeting held on September 19,
2012, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 16, 2012. In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27525), we stated that there
were no changes to the ICD-9-CM coding system for FY 2014. There were
no new,
[[Page 50546]]
revised or deleted diagnosis or procedure codes for FY 2014 identified
at the time of the publication of the proposed rule. However, we noted
that there may be ICD-9-CM coding changes finalized after the proposed
rule based on public comments that we receive after the March 5, 2013
ICD-9-CM Coordination and Maintenance Committee meeting.
The Committee held its 2013 meeting on March 5, 2013. Any new codes
for which there was consensus of public support and for which complete
tabular and indexing changes were made by May 2013 are included in the
October 1, 2013 update to ICD-9-CM. Any code revisions that were
discussed at the March 5, 2013 Committee meeting but that could not be
finalized in time to include them in the tables listed in section VI.
of the Addendum to the proposed rule are included in Table 6B, which is
listed in section VI. of the Addendum to this final rule and available
via the Internet on the CMS Web site, and are marked with an asterisk
(*).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27526), we stated
that, for FY 2014, there were no changes to the ICD-9-CM coding system
due to the partial code freeze or for new technology. However, at the
March 5, 2013 ICD-9-CM Coordination and Maintenance meeting, there were
two requests for codes for new technology. As discussed below, only
codes for new technologies or new diagnoses are being considered during
the partial code freeze. After discussions at the March 5, 2013 meeting
and public comments we received after the meeting, it was decided that
there will be four new procedure codes effective for October 1, 2014.
There are no new, revised, or deleted diagnosis codes and no revised or
deleted procedure codes that are usually announced in Tables 6A (New
Diagnosis Codes), 6C (Invalid Diagnosis Codes), 6D (Invalid Procedure
Codes), 6E (Revised Diagnosis Code Titles), and 6F (Revised Procedure
Codes). The new procedure codes are listed in Table 6B (New Procedure
Codes) for this final rule, which is available via the Internet on the
CMS Web site. Therefore, there are no Tables 6A and 6C through 6F
published as part of this final rule for FY 2014.
Copies of the minutes of the procedure codes discussions at the
Committee's September 19, 2012 meeting and March 5, 2013 meeting can be
obtained from the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/icd9ProviderDiagnosticCodes/03_meetings.asp. The minutes of the
diagnosis codes discussions at the September 19, 2012 meeting and March
5, 2013 meeting are found at: http://www.cdc.gov/nchs/icd.htm. These
Web sites also provide detailed information about the Committee,
including information on requesting a new code, attending a Committee
meeting, and timeline requirements and meeting dates.
We encourage commenters to address suggestions on coding issues
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-9-CM
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo
Road, Hyattsville, MD 20782. Comments may be sent by Email 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 Email to: [email protected].
In the September 7, 2001 final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of Public Law 108-173 included a requirement for
updating ICD-9-CM codes twice a year instead of a single update on
October 1 of each year. This requirement was included as part of the
amendments to the Act relating to recognition of new technology under
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by
adding a clause (vii) which states that the ``Secretary shall provide
for the addition of new diagnosis and procedure codes on April 1 of
each year, but the addition of such codes shall not require the
Secretary to adjust the payment (or diagnosis-related group
classification) . . . until the fiscal year that begins after such
date.'' This requirement improves the recognition of new technologies
under the IPPS system by providing information on these new
technologies at an earlier date. Data will 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 Meeting minutes. The public agreed that there was a need to
hold the fall meetings earlier, in September or October, in order to
meet the new implementation dates. The public provided comment that
additional time would be needed to update hospital systems and obtain
new code books and coding software. There was considerable concern
expressed about the impact this new April update would have on
providers.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for
[[Page 50547]]
the April update, diagnosis and procedure code revisions needed to
describe new technologies and medical services for purposes of the new
technology add-on payment process. We also established the following
process for making these determinations. Topics considered during the
Fall ICD-9-CM Coordination and Maintenance Committee meeting are
considered for an April 1 update if a strong and convincing case is
made by the requester at the Committee's public meeting. The request
must identify the reason why a new code is needed in April for purposes
of the new technology process. The participants at the meeting and
those reviewing the Committee meeting summary report are provided the
opportunity to comment on this expedited request. All other topics are
considered for the October 1 update. Participants at the Committee
meeting are encouraged to comment on all such requests. There were no
requests approved for an expedited April l, 2013 implementation of an
ICD-9-CM code at the September 19, 2012 Committee meeting. Therefore,
there were no new ICD-9-CM codes implemented on April 1, 2013.
Current addendum and code title information is published on the CMS
Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. 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.
Therefore, although we publish the code titles in the IPPS proposed and
final rules, they are not subject to comment in the proposed or final
rules. We will continue to publish the October code updates in this
manner within the IPPS proposed and final rules. For codes that are
implemented in April, we will assign the new procedure code to the same
MS-DRG in which its predecessor code was assigned so there will be no
MS-DRG impact as far as MS-DRG assignment. Any midyear coding updates
will be available through the Web sites indicated above and through the
Coding Clinic for ICD-9-CM. Publishers and software vendors currently
obtain code changes through these sources in order to update their code
books and software systems. We will strive to have the April 1 updates
available through these Web sites 5 months prior to implementation
(that is, early November of the previous year), as is the case for the
October 1 updates.
b. Code Freeze
The International Classification of Diseases, 10th Revision (ICD-
10) coding system applicable to hospital inpatient services was to be
implemented on October 1, 2013, as described in the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) Administrative
Simplification: Modifications to Medical Data Code Set Standards to
Adopt ICD-10-CM and ICD-10-PCS final rule (74 FR 3328 through 3362,
January 16, 2009). However, the Secretary of Health and Human Services
issued a final rule that delays, from October 1, 2013, to October 1,
2014, the compliance date for the International Classification of
Diseases, 10th Edition diagnosis and procedure codes (ICD-10). The
final rule, CMS-0040-F, was published in the Federal Register on
September 5, 2012 (77 FR 54664) and is available for viewing on the
Internet at: http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf.
The ICD-10 coding system includes the International Classification
of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for
diagnosis coding and the International Classification of Diseases, 10th
Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital
procedure coding, as well as the Official ICD-10-CM and ICM-10-PCS
Guidelines for Coding and Reporting. In the January 16, 2009 ICD-10-CM
and ICD-10-PCS final rule (74 FR 3328 through 3362), there was a
discussion of the need for a partial or total freeze in the annual
updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS codes. The public
comment addressed in that final rule stated that the annual code set
updates should cease l year prior to the implementation of ICD-10. The
commenters stated that this freeze of code updates would allow for
instructional and/or coding software programs to be designed and
purchased early, without concern that an upgrade would take place
immediately before the compliance date, necessitating additional
updates and purchases.
HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS
indicated that the issue of consideration of a moratorium on updates to
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the
Committee at a future public meeting.
The code freeze was discussed at multiple meetings of the ICD-9-CM
Coordination and Maintenance Committee and public comment was actively
solicited. The Committee evaluated all comments from participants
attending the Committee meetings as well as written comments that were
received. The Committee also considered the delay in implementation of
ICD-10 until October 1, 2014. There was an announcement at the
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be
implemented as follows:
The last regular annual update to both ICD-9-CM and ICD-10
code sets was made on October 1, 2011.
On October 1, 2012 and October 1, 2013, there will be only
limited code updates to both ICD-9-CM and ICD-10 code sets to capture
new technology and new diseases.
On October 1, 2014, there were to be only limited code
updates to ICD-10 code sets to capture new technology and diagnoses as
required by section 503(a) of Public Law 108-173. There were to be no
updates to ICD-9-CM on October 1, 2014, as the system would no longer
be a HIPAA standard and, therefore, no longer be used for reporting.
On October 1, 2015, one year after the implementation of
ICD-10, regular updates to ICD-10 will begin.
The ICD-9-CM Coordination and Maintenance Committee announced that
it would continue to meet twice a year during the freeze. At these
meetings, the public will be encouraged to comment on whether or not
requests for new diagnosis and procedure codes should be created based
on the need to capture new technology and new diseases. Any code
requests that do not meet the criteria will be evaluated for
implementation within ICD-10 on or
[[Page 50548]]
after October 1, 2015, once the partial freeze is ended.
Complete information on the partial code freeze and discussions of
the issues at the Committee meetings can be found on the ICD-9-CM
Coordination and Maintenance Committee Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of the September 19, 2012 Committee meeting,
along with both written and audio transcripts of this meeting, are
posted on the Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
Comment: Several commenters supported the partial code freeze which
is limited to the creation of new ICD-9-CM and ICD-10-CM/PCS codes to
capture new technologies and diseases through FY 2015. The commenters
stated that if new codes can still be introduced into ICD-10-CM/PCS in
FY 2015, it will make the resolution of any issues more complex and
costly. Specifically, they stated that successful implementation of
ICD-10-CM/PCS will require significant planning, education, and systems
modifications. The commenters stated that while the adoption of ICD-10-
CM/PCS is welcome and long overdue, implementation of the new system
must be carefully orchestrated to minimize the administrative burden on
providers. At a time when in the health care field, all payers and
other stakeholders are struggling to meet deadlines to change their
systems and test their changes with all their trading partners, the
commenters believed it would be catastrophic to have to make additional
changes during nationwide implementation of ICD-10.
Response: We agree with the commenters that the partial code freeze
has been extremely beneficial in minimizing the administrative burden
on providers that are preparing for the implementation of ICD-10 on
October 1, 2014. This partial code freeze has dramatically decreased
the number of codes created each year as shown by the following
information.
Total Number of Codes and Changes in Total Number of Codes per Fiscal Year
----------------------------------------------------------------------------------------------------------------
ICD-9-CM Codes ICD-10-CM and ICD-10-PCS Codes
----------------------------------------------------------------------------------------------------------------
Fiscal Year Number Change Fiscal Year Number Change
----------------------------------------------------------------------------------------------------------------
FY 2009 (October 1, 2008): FY 2009:
Diagnoses.................... 14,025 348 ICD-10-CM....... 68,069 +5
Procedures................... 3,824 56 ICD-10-PCS...... 72,589 -14,327
FY 2010 (October 1, 2009): FY 2010:
Diagnoses.................... 14,315 290 ICD-10-CM....... 69,099 +1,030
Procedures................... 3,838 14 ICD-10-PCS...... 71,957 -632
FY 2011 (October 1, 2010):
Diagnoses.................... 14,432 117 ICD-10-CM....... 69,368 +269
Procedures................... 3,859 21 ICD-10-PCS...... 72,081 +124
FY 2012 (October 1, 2011): FY 2012:
Diagnoses.................... 14,567 135 ICD-10-CM....... 69,833 +465
Procedures................... 3,877 18 ICD-10-PCS...... 71,918 -163
FY 2013 (October 1, 2012): FY 2013:
Diagnoses.................... 14,567 0 ICD-10-CM....... 69,832 -1
Procedures................... 3,878 1 ICD-10-PCS...... 71,920 +2
FY 2014 (October 1, 2013): FY 2014:
Diagnoses.................... 14,567 0 ICD-10-CM....... 69,823 -9
Procedures................... 3,882 4 ICD-10-PCS...... 71,924 +4
----------------------------------------------------------------------------------------------------------------
As mentioned earlier, the public is provided the opportunity to
comment on any requests for new diagnosis or procedure codes discussed
at the ICD-9-CM Coordination and Maintenance Committee meeting. The
public has supported only a limited number of new codes during this
partial code freeze, as can be seen by data shown above. We have gone
from creating several hundred new codes each year to creating only a
limited number of new ICD-9-CM and ICD-10 codes. At the September 18-
19, 2013 and March 19-20, 2014 Committee meetings, we will be
discussing any requests for new ICD-10-CM diagnosis and ICD-10-PCS
procedure codes to be implemented on October 1, 2014. We will not be
discussing ICD-9-CM codes because we will not be using ICD-9-CM for
encounters occurring on or after October 1, 2014. The public will be
given the opportunity to comment on whether or not new ICD-10-CM and
ICD-10-PCS codes should be created effective October 1, 2014, based on
the partial code freeze criteria as to whether they are needed to
capture new diagnoses or new technologies, or whether the codes should
be created after the partial code freeze ends on October 1, 2015. We
welcome public comments on any code requests discussed at the September
18-19, 2013 and March 19-20, 2014 Committee meetings for implementation
on October 1, 2014.
Comment: One commenter requested that CMS publish the list of any
new ICD-10-CM and ICD-10-PCS codes in the IPPS final rule. The
commenter pointed out that annual ICD-9-CM updates are currently
included in the IPPS proposed and final rules. The commenter mentioned
that the ICD-9-CM Coordination and Maintenance Committee is addressing
requests for new ICD-10 codes that would be created during the code
freeze as well as codes that would be created after the code freeze
ends. The commenter wanted to receive interim decisions on any new ICD-
10 codes that might be created after the code freeze ends on October 1,
2015. The commenter also requested that CMS assign ICD-9-CM codes or
temporary Healthcare Common Procedure Coding System (HCPCS) codes to
procedures provided in connection with newly approved ICD-10-PCS codes.
Finally, the commenter requested that CMS establish October 1, 2014 as
the effective date for all ICD-10 code set updates.
Response: We will address the commenter's last request first. As
discussed earlier, October 1, 2014 has been established as the
implementation date for ICD-10. This date was established through
rulemaking (77 FR 54664). We have provided this information on our ICD-
10 Web site at:
[[Page 50549]]
http://www.cms.hhs.gov/Medicare/Coding/ICD10/index.html.
CMS currently posts updates of ICD-9-CM procedure codes in June of
each year on its Web page at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html . CMS also includes information
on ICD-9-CM code updates within the IPPS proposed and final rules
because these codes are used to determine the MS-DRG assignment. Any
new, revised, or deleted ICD-9-CM diagnoses or procedure codes are
described in Tables 6A through 6F. We include this information along
with the proposed and final MS-DRG assignment for new ICD-9-CM codes in
our rules because it impacts inpatient payment. CDC posts updates of
ICD-9-CM diagnosis codes in June of each year on its Web site at:
http://www.cdc.gov/nchs/icd/icd9cm.html. We do not include new,
revised, or deleted ICD-10-CM/PCS codes in the current IPPS rule
because the ICD-10 codes are not currently used with the MS-DRGs. Once
ICD-10 is implemented, and the MS-DRGs are based on ICD-10 codes, we
will provide information on new, revised, or deleted ICD-10 codes in
Tables 6A through 6F.
CMS posts annual updates to ICD-10-CM and ICD-10-PCS codes in June
of each year on its ICD-10 Web page at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/index.html. CDC also posts annual updates to ICD-
10-CM codes in June of each year on its Web site at: http://www.cdc.gov/nchs/icd/icd10cm.htm . We believe we provide the public
complete and regular updates on any annual updates to both ICD-9-CM and
ICD-10 codes. Any new, revised, or deleted ICD-10-CM/PCS codes as part
of the FY 2016 (October 1, 2015) updates will be posted on CMS' ICD-10
Web site in June 2015. No final decisions have been made at this time
on the October 1, 2015 ICD-10 code updates.
On the issue of CMS assigning ICD-9-CM codes or temporary HCPCS
codes to procedures provided in connection with newly approved ICD-10-
PCS codes, we would point out that mapping between ICD-10-PCS and ICD-
9-CM procedure codes is provided in the annual updates to the General
Equivalence Mappings (GEMs). The GEMs are updated annually based on
updates to ICD-10 codes and are posted on our ICD-10 Web site in
October of each year. The ICD-10 Web site can be found at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/index.html. The GEMs map between
ICD-9-CM and ICD-10 codes because the ICD-10 codes will replace ICD-9-
CM codes. The GEMs do not map between ICD-10 and HCPCS codes because
ICD-10 will not replace HCPCS codes. HCPCS codes will continue to be
used for reported ambulatory and physician services.
c. Processing of 25 Diagnosis Codes and 25 Procedure Codes on Hospital
Inpatient Claims
CMS is currently processing all 25 diagnosis codes and 25 procedure
codes submitted on electronic hospital inpatient claims. Prior to
January 1, 2011, hospitals could submit up to 25 diagnoses and 25
procedures. However, CMS' system limitations allowed for the processing
of only the first 9 diagnosis codes and 6 procedure codes. We discussed
this change in processing claims in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50127), in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR
25843), in a correction notice issued in the Federal Register on June
14, 2011 (76 FR 24633), and in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51553). As discussed in these prior rules, CMS undertook an
expansion of our internal system capability so that we are able to
process up to 25 diagnoses and 25 procedures on hospital inpatient
claims as part of the HIPAA ASC X12 Technical Reports Type 3, Version
005010 (Version 5010) standards system update. We recognize the value
of the additional information provided by this coded data for multiple
uses such as for payment, quality measures, outcome analysis, and other
important uses. We will continue to process up to 25 diagnosis codes
and 25 procedure codes when received on the 5010 format.
d. ICD-10 MS-DRGs
In response to the FY 2011 IPPS/LTCH PPS proposed rule, we received
comments on the creation of the ICD-10 version of the MS-DRGs, which
will be implemented at the same time as ICD-10 (75 FR 50127 and 50128).
As we stated earlier, the Secretary of Health and Human Services has
delayed the compliance date of ICD-10 from October 1, 2013 to October
1, 2014 (77 FR 54664). While we did not propose an ICD-10 version of
the MS DRGs in the FY 2011 IPPS/LTCH PPS proposed rule, we noted that
we have been actively involved in converting our current MS-DRGs from
ICD-9-CM codes to ICD-10 codes and sharing this information through the
ICD-9-CM Coordination and Maintenance Committee. We undertook this
early conversion project to assist other payers and providers in
understanding how to go about their own conversion projects. We posted
ICD-10 MS-DRGs based on Version 26.0 (FY 2009) of the MS-DRGs. We also
posted a paper that describes how CMS went about completing this
project and suggestions for others to follow. All of this information
can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have continued
to keep the public updated on our maintenance efforts for ICD-10-CM and
ICD 10-PCS coding systems, as well as the General Equivalence Mappings
that assist in conversion through the ICD-9-CM Coordination and
Maintenance Committee. Information on these committee meetings can be
found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
During FY 2011, we developed and posted Version 28.0 of the ICD-10
MS-DRGs based on the FY 2011 MS-DRGs (Version 28.0) that we finalized
in the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-
10 MS-DRGs Version 28.0 also included the CC Exclusion List and the
ICD-10 version of the hospital-acquired conditions (HACs), which was
not posted with Version 26.0. We also discussed this update at the
September 15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM
Coordination and Maintenance Committee. The minutes of these two
meetings are posted on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
We reviewed comments on the ICD-10 MS-DRGs Version 28.0 and made
updates as a result of these comments. We called the updated version
the ICD-10 MS DRGs Version 28 R1. We posted a Definitions Manual of
ICD-10 MS-DRGs Version 28 R1 on our ICD-10 MS-DRG Conversion Project
Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD10-MS-DRG-Conversion-Project.html. To make the review of Version 28 R1 updates
easier for the public, we also made available pilot software on a CD-
ROM that could be ordered through the National Technical Information
Service (NTIS). A link to the NTIS ordering page was provided on the
CMS ICD-10 MS-DRG Web page. We stated that we believed that, by
providing the ICD-10 MS-DRG Version 28 R1 Pilot Software (distributed
on CD-ROM), the public would be able to more easily review and provide
feedback on updates to the ICD-10 MS-DRGs. We discussed the updated
ICD-10 MS-DRGs Version 28 R1 at the September 14, 2011 ICD-9-CM
Coordination and Maintenance Committee meeting. We encouraged the
[[Page 50550]]
public to continue to review and provide comments on the ICD-10 MS-DRGs
so that CMS could continue to update the system.
In FY 2012, we prepared the ICD-10 MS-DRGs Version 29.0, based on
the FY 2012 MS-DRGs (Version 29.0) that we finalized in the FY 2012
IPPS/LTCH PPS final rule. We posted a Definitions Manual of ICD-10 MS-
DRGs Version 29.0 on our ICD-10 MS-DRG Conversion Project Web site. We
also prepared a document that describes changes made from Version 28.0
to Version 29.0 to facilitate a review. The ICD-10 MS-DRGs Version 29.0
was discussed at the ICD-9-CM Coordination and Maintenance Committee
meeting on March 5, 2012. Information was provided on the types of
updates made. Once again the public was encouraged to review and
comment on the most recent update to the ICD-10 MS-DRGs.
CMS prepared the ICD-10 MS-DRGs Version 30.0 based on the FY 2013
MS-DRGs (Version 30.0) that we finalized in the FY 2013 IPPS/LTCH PPS
final rule. We posted a Definitions Manual of the ICD-10 MS-DRGs
Version 30.0 on our ICD-10 MS-DRG Conversion Project Web site at:
http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made
from Version 29.0 to Version 30.0 to facilitate a review. We produced
mainframe and computer software for Version 30.0, which was made
available to the public in February 2013. Information on ordering the
mainframe and computer software through NTIS can be found on the CMS
Web site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This ICD-
10 MS-DRGs Version 30.0 computer software should facilitate additional
review of the ICD-10 MS-DRGs conversion.
We provided information on a study conducted on the impact on
converting MS-DRGs to ICD-10. Information on this study is summarized
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10
MS-DRGs Conversion Project Web site and was distributed and discussed
at the September 15, 2010 ICD-9-CM Coordination and Maintenance
Committee meeting. The paper described CMS' approach to the conversion
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was
undertaken using the ICD-9-CM MS-DRGs Version 27.0 (FY 2010) and
converted to the ICD-10 MS-DRGs Version 27.0. The study estimated the
impact on aggregate payment to hospitals and the distribution of
payments across hospitals. The impact of the conversion from ICD-9-CM
to ICD-10 on Medicare MS-DRG hospital payments was estimated using 2009
Medicare data. The study found a hospital payment increase of 0.05
percent using the ICD-10 MS-DRGs Version 27.0.
CMS provided an overview of this hospital payment impact study at
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee
meeting. This presentation followed presentations on the creation of
ICD-10 MS-DRGs Version 29.0. A summary report of this meeting can be
found on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html. At this March 2012 meeting, CMS
announced that it would produce an update on this impact study based on
an updated version of the ICD 10 MS-DRGs. This update of the impact
study was presented at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting. The updated paper is posted on CMS' Web
site at: http://cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section. Information on
the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee
meeting can be found on the CMS Web site at: http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-10 MS-DRG
Version 30.0 software will provide additional information to the public
who are evaluating the conversion of the MS-DRGs to ICD-10 MS-DRGs.
We will continue to work with the public to explain how we are
approaching the conversion of MS-DRGs to ICD-10 and will post drafts of
updates as they are developed for public review. The final version of
the ICD-10 MS-DRGs will be implemented at the same time as ICD-10 and
will be subject to notice and comment rulemaking. In the meantime, we
will provide extensive and detailed information on this activity
through the ICD-9-CM Coordination and Maintenance Committee.
Comment: Several commenters complimented CMS on making available
the Version 30.0 ICD-10 MS-DRGs software and Definitions Manual. The
commenters found these tools to be useful as hospitals prepare for ICD-
10 implementation. The commenters stated that this information allowed
hospitals to analyze the impact of these changes, including thorough
financial analysis and modeling, and allowed for hands-on training of
medical coders. The commenters stated that information from other
payment systems, such as those for CAHs, IPFs, and IRFs would also be
helpful as hospitals prepare for ICD-10-CM/PCS implementation.
Response: We appreciate the positive feedback on our efforts to
develop an ICD-10 version of the MS-DRGs and to use this approach in
updating other ICD-9-CM based payment systems from ICD-9-CM to ICD-10-
CM/PCS codes.
12. Public Comments on Issues Not Addressed in the Proposed Rule
We received two public comments regarding MS-DRG issues that were
outside of the scope of the proposals included in the FY 2014 IPPS/LTCH
PPS proposed rule. We have summarized these public comments below.
However, because these public comments were outside of the scope of the
proposed rule, we are not addressing them in this final rule. As stated
in section II.G. of the preamble of this final rule, we encourage
individuals with comments about MS-DRG classifications to submit these
comments no later than December of each year so they can be considered
for possible inclusion in the annual proposed rule and, if included,
may be subjected to public review and comment. We will consider these
comments for possible proposals in future rulemaking as part of our
annual review process.
a. Intracerebral Therapies
One commenter requested that CMS create a new MS-DRG for
intracerebral therapies, including implantation of chemotherapeutic
agents.
b. Porphyria
One commenter requested that a new MS-DRG be created for porphyria
cases.
H. Recalibration of the FY 2014 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
In developing the FY 2014 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 2012 MedPAR data used in this final rule include
discharges occurring on October 1, 2011, through September 30, 2012,
based on bills received by CMS through March 31,
[[Page 50551]]
2013, 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 2012 MedPAR file used in
calculating the relative weights includes data for approximately
10,363,200 Medicare discharges from IPPS providers. Discharges for
Medicare beneficiaries enrolled in a Medicare Advantage managed care
plan are excluded from this analysis. These discharges are excluded
when the MedPAR ``GHO Paid'' indicator field on the claim record is
equal to ``1'' or when the MedPAR DRG payment field, which represents
the total payment for the claim, is equal to the MedPAR ``Indirect
Medical Education (IME)'' payment field, indicating that the claim was
an ``IME only'' claim submitted by a teaching hospital on behalf of a
beneficiary enrolled in a Medicare Advantage managed care plan. In
addition, the March 31, 2013 update of the FY 2012 MedPAR file complies
with version 5010 of the X12 HIPAA Transaction and Code Set Standards,
and includes a variable called ``claim type.'' Claim type ``60''
indicates that the claim was an inpatient claim paid as fee-for-
service. Claim types ``61,'' ``62,'' ``63,'' and ``64'' relate to
encounter claims, Medicare Advantage IME claims, and HMO no-pay claims.
Therefore, the calculation of the relative weights for FY 2014 also
excludes claims with claim type values not equal to ``60.'' The data
exclude CAHs, including hospitals that subsequently became CAHs after
the period from which the data were taken. The second data source used
in the cost-based relative weighting methodology is the Medicare cost
report data files from the HCRIS. Normally, we use the HCRIS dataset
that is 3 years prior to the IPPS fiscal year. Specifically, we used
cost report data from the March 31, 2013 update of the FY 2011 HCRIS
for calculating the FY 2014 cost-based relative weights.
2. Methodology for Calculation of the Relative Weights
As we explain in section II.E.2. of the preamble of this final
rule, as we proposed in the FY 2014 IPPS/LTCH PPS proposed rule, we are
calculating the relative weights based on 19 CCRs, instead of the 15
CCRs previously used. The methodology we used to calculate the FY 2014
MS-DRG cost-based relative weights based on claims data in the FY 2012
MedPAR file and data from the FY 2011 Medicare cost reports is as
follows:
To the extent possible, all the claims were regrouped
using the FY 2014 MS-DRG classifications discussed in sections II.B.
and II.G. of the preamble of this final rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2011 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis. Because
these acquisition costs are paid separately from the prospective
payment rate, it is necessary to subtract the acquisition charges from
the total charges on each transplant bill that showed acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $10.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
special equipment charges, therapy services charges, operating room
charges, cardiology charges, laboratory charges, radiology charges,
other service charges, labor and delivery charges, inhalation therapy
charges, emergency room charges, blood charges, and anesthesia charges
were also deleted.
At least 92.7 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted. For FY 2014, as explained in section II.E.2. of the
preamble of this final rule, we are calculating the relative weights
using 19 cost centers instead of the 15 cost centers previously used in
calculating the FY 2013 relative weights. In the FY 2014 IPPS/LTCH PPS
proposed rule, we proposed, in calculating the FY 2014 relative
weights, to continue to remove claims of providers with more than five
blank cost centers from the dataset used to calculate the relative
weights. (We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77
FR 53326) for the edit threshold related to FY 2013 and prior fiscal
years). In recent years, this trim kept approximately 96 percent of
IPPS providers in the MedPAR file upon which we base our relative
weight calculations. (For examples of our FYs 2012 and 2013 relative
weight calculations, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51558) and the FY 2013 IPPS/LTCH PPS final rule 77 FR
53326).) However, under the proposal to add 4 cost centers to the
relative weight calculations, which we are finalizing in this final
rule, this trim kept approximately 92.7 percent of the IPPS providers
in the MedPAR file upon which we base our final FY 2014 relative weight
calculations.
Although this trim is now removing a greater percentage of
providers' claims from the relative weight calculations than were
previously removed in prior years, we stated in the proposed rule our
belief that it is appropriate to propose to continue to remove
providers' claims that do not have charges greater than zero in more
than five cost centers. We stated that we believe that this proposal is
appropriate because we are not introducing new costs into the relative
weight calculation; we are only making use of more refined, granular
costs by breaking out implantable devices from the Supplies and
Equipment CCR, MRIs and CT scans from the Radiology CCR, and cardiac
catheterization from the Cardiology CCR. Furthermore, because we are
making use of more refined cost report data for these cost centers, we
believe that it is also appropriate to edit the claims with a more
refined threshold. We invited public comments on the proposal to trim
the data used in our relative weight calculations. However, we did not
receive any public comments on this proposal. Therefore, for the
reasons described above, we are finalizing this policy as proposed.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a POA indicator field for each diagnosis present on the
claim, only for purposes of relative weight-setting, the POA indicator
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have
an ``N'' (No) or a ``U'' (documentation insufficient to determine if
the
[[Page 50552]]
condition was present at the time of inpatient admission) in the POA
field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower severity MS-DRGs prior to the relative weight-setting process,
the relative weights of these particular MS-DRGs would become
artificially inflated, potentially skewing the relative weights. In
addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
Once the MedPAR data were trimmed and the statistical outliers were
removed, the charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. These charges were then adjusted to cost by applying the
national average CCRs developed from the FY 2011 cost report data.
The 19 cost centers that we used in the final relative weight
calculation are shown in the following table. The table shows the lines
on the cost report and the corresponding revenue codes that we used to
create the 19 national cost center CCRs. (We note that we have made
several changes to the table, most importantly, to remove the columns
listing the cost centers from the CMS Form 2552-96 cost reports.
Because we are using data from FY 2011 cost reports, which were filed
on the CMS Form 2552-10, the columns referencing the CMS Form 2552-96
cost report are no longer relevant. We also have updated and refined
the table to reflect the 19 CCRs, instead of the previous 15 CCRs, and
we have made some minor corrections to revenue codes and cost report
cost centers that are grouped with each CCR.)
BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
[[Page 50569]]
In the table above, revenue code 0274 is listed among the revenue
codes included in the Supplies and Equipment CCR. In the actual
calculation of the Supplies and Equipment CCR for the FY 2014 proposed
rule, we inadvertently included charges from MedPAR associated with
revenue 0274 in the Implantable Devices CCR. For this final rule, we
have corrected this oversight and included the MedPAR charges
associated with revenue code 0274 in the calculation of the Supplies
and Equipment CCR. (We refer readers to the FY 2009 IPPS/LTCH PPS final
rule (73 FR 48462) for a discussion on the revenue codes included in
the Supplies and Equipment and Implantable Devices CCRs, respectively.)
3. Development of National Average CCRs
We developed the national average CCRs as follows:
Using the FY 2011 cost report data, we removed CAHs, Indian Health
Service hospitals, all-inclusive rate hospitals, and cost reports that
represented time periods of less than 1 year (365 days). We included
hospitals located in Maryland because we include their charges in our
claims database. We then created CCRs for each provider for each cost
center (see prior table for line items used in the calculations) and
removed any CCRs that were greater than 10 or less than 0.01. We
normalized the departmental CCRs by dividing the CCR for each
department by the total CCR for the hospital for the purpose of
trimming the data. We then took the logs of the normalized cost center
CCRs and removed any cost center CCRs where the log of the cost center
CCR was greater or less than the mean log plus/minus 3 times the
standard deviation for the log of that cost center CCR. Once the cost
report data were trimmed, we calculated a Medicare-specific CCR. The
Medicare-specific CCR was determined by taking the Medicare charges for
each line item from Worksheet D-3 and deriving the Medicare-specific
costs by applying the hospital-specific departmental CCRs to the
Medicare-specific charges for each line item from Worksheet D-3. Once
each hospital's Medicare-specific costs were established, we summed the
total Medicare-specific costs and divided by the sum of the total
Medicare-specific charges to produce national average, charge-weighted
CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight.
The FY 2014 cost-based relative weights were then normalized by an
adjustment factor of 1.615238977 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
The 19 national average CCRs for FY 2014 are as follows:
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................... 0.500
Intensive Days................................................. 0.414
Drugs.......................................................... 0.193
Supplies & Equipment........................................... 0.300
Implantable Devices............................................ 0.356
Therapy Services............................................... 0.356
Laboratory..................................................... 0.134
Operating Room................................................. 0.221
Cardiology..................................................... 0.130
Cardiac Catheterization........................................ 0.136
Radiology...................................................... 0.171
MRIs........................................................... 0.090
CT Scans....................................................... 0.045
Emergency Room................................................. 0.206
Blood and Blood Products....................................... 0.365
Other Services................................................. 0.400
Labor & Delivery............................................... 0.424
Inhalation Therapy............................................. 0.186
Anesthesia..................................................... 0.119
------------------------------------------------------------------------
Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. In the FY 2014 IPPS/LTCH PPS proposed
rule, we proposed to use that same case threshold in recalibrating the
MS-DRG weights for FY 2014. Using data from the FY 2012 MedPAR file,
there were 7 MS-DRGs that contain fewer than 10 cases. Under the MS-
DRGs, we have fewer low-volume DRGs than under the CMS DRGs because we
no longer have separate DRGs for patients aged 0 to 17 years. With the
exception of newborns, we previously separated some DRGs based on
whether the patient was age 0 to 17 years or age 17 years and older.
Other than the age split, cases grouping to these DRGs are identical.
The DRGs for patients aged 0 to 17 years generally have very low
volumes because children are typically ineligible for Medicare. In the
past, we have found that the low volume of cases for the pediatric DRGs
could lead to significant year-to-year instability in their relative
weights. Although we have always encouraged non-Medicare payers to
develop weights applicable to their own patient populations, we have
received frequent complaints from providers about the use of the
Medicare relative weights in the pediatric population. We believe that
eliminating this age split in the MS-DRGs will provide more stable
payment for pediatric cases by determining their payment using adult
cases that are much higher in total volume. Newborns are unique and
require separate MS-DRGs that are not mirrored in the adult population.
Therefore, it remains necessary to retain separate MS-DRGs for
newborns. All of the low-volume MS-DRGs listed below are for newborns.
In FY 2014, because we do not have sufficient MedPAR data to set
accurate and stable cost weights for these low-volume MS-DRGs, we
proposed to compute weights for the low-volume MS-DRGs by adjusting
their FY 2013 weights by the percentage change in the average weight of
the cases in other MS-DRGs. The crosswalk table is shown below:
------------------------------------------------------------------------
Crosswalk to MS-
Low[dash]volume MS-DRG MS-DRG Title DRG
------------------------------------------------------------------------
789............................. Neonates, Died or FY 2013 FR weight
Transferred to (adjusted by
Another Acute percent change in
Care Facility. average weight of
the cases in
other MS-DRGs).
790............................. Extreme Immaturity FY 2013 FR weight
or Respiratory (adjusted by
Distress percent change in
Syndrome, Neonate. average weight of
the cases in
other MS-DRGs).
791............................. Prematurity with FY 2013 FR weight
Major Problems. (adjusted by
percent change in
average weight of
the cases in
other MS-DRGs).
792............................. Prematurity FY 2013 FR weight
without Major (adjusted by
Problems. percent change in
average weight of
the cases in
other MS-DRGs).
[[Page 50570]]
793............................. Full-Term Neonate FY 2013 FR weight
with Major (adjusted by
Problems. percent change in
average weight of
the cases in
other MS-DRGs).
794............................. Neonate with Other FY 2013 FR weight
Significant (adjusted by
Problems. percent change in
average weight of
the cases in
other MS-DRGs).
795............................. Normal Newborn.... FY 2013 FR weight
(adjusted by
percent change in
average weight of
the cases in
other MS-DRGs).
------------------------------------------------------------------------
We did not receive any public comments on this proposal and,
therefore, are finalizing it for FY 2014 as proposed.
4. Bundled Payments for Care Improvement (BPCI) Initiative
The Bundled Payments for Care Improvement (BPCI) initiative,
developed under the authority of section 3021 of the Affordable Care
Act (codified at section 1115A of the Act), is comprised of four
broadly defined models of care, which link payments for multiple
services beneficiaries receive during an episode of care. Under the
BPCI initiative, organizations enter into payment arrangements that
include financial and performance accountability for episodes of care.
On January 31, 2013, CMS announced the health care organizations
selected to participate in the BPCI initiative. For additional
information on the BPCI initiative, we refer readers to the CMS' Center
for Medicare and Medicaid Innovation's Web site at http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to
section IV.H.4. of the preamble of the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53341 through 53343) for a discussion on the BPCI initiative.
In the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 and subsequent
fiscal years, we finalized a policy to treat hospitals that participate
in the BPCI initiative the same as prior fiscal years for the IPPS
payment modeling and ratesetting process without regard to a hospital's
participation within these bundled payment models (that is, as if a
hospital were not participating in those models under the BPCI
initiative). Therefore, for FY 2014, we proposed to continue to include
all applicable data from subsection (d) hospitals participating in BPCI
Models 1, 2, and 4 in our IPPS payment modeling and ratesetting
calculations. We did not receive any public comments on this proposal
and, therefore, are finalizing it for FY 2014 as proposed. We refer
readers to the FY 2013 IPPS/LTCH PPS final rule for a complete
discussion on our final policy for the treatment of hospitals
participating in the BPCI initiative in our ratesetting process.
I. Add-On Payments for New Services and Technologies
1. Background
Sections 1886(d)(5)(K) and (L) of the Act establish a process of
identifying and ensuring adequate payment for new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, ``based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate.'' We note that
beginning with discharges occurring in FY 2008, CMS transitioned from
CMS-DRGs to MS-DRGs.
The regulations at 42 CFR 412.87 implement these provisions and
specify three criteria for a new medical service or technology to
receive the additional payment: (1) The medical service or technology
must be new; (2) the medical service or technology must be costly such
that the DRG rate otherwise applicable to discharges involving the
medical service or technology is determined to be inadequate; and (3)
the service or technology must demonstrate a substantial clinical
improvement over existing services or technologies. Below we highlight
some of the major statutory and regulatory provisions relevant to the
new technology add-on payment criteria as well as other information.
For a complete discussion on the new technology add-on payment
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51572 through 51574).
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will be considered ``new'' for
purposes of new medical service or technology add-on payments until
such time as Medicare data are available to fully reflect the cost of
the technology in the MS-DRG weights through recalibration. We note
that we do not consider a service or technology to be new if it is
substantially similar to one or more existing technologies. That is,
even if a technology receives a new FDA approval, it may not
necessarily be considered ``new'' for purposes of new technology add-on
payments if it is ``substantially similar'' to a technology that was
approved by FDA and has been on the market for more than 2 to 3 years.
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our
policy regarding substantial similarity in detail.
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to the discharge involving the new medical services or technologies
must be assessed for adequacy. Under the cost criterion, to assess the
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases
involving the new technology exceed certain threshold amounts. Table 10
that was released with the FY 2013 IPPS/LTCH PPS final rule contains
the final thresholds that we used to evaluate applications for new
technology add-on payments for FY 2014. We refer readers to the CMS Web
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2013-IPPS-Final-Rule-Home-Page.html for a complete
viewing of Table 10 from the FY 2013 IPPS/LTCH PPS final rule.
In the September 7, 2001 final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed the
issue of whether the Health Insurance Portability and Accountability
Act (HIPAA) Privacy Rule at 45 CFR Parts 160 and 164 applies to claims
information that providers submit with applications for new technology
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final
rule (76 FR 51573) for complete information on this issue.
[[Page 50571]]
Under the third criterion, Sec. 412.87(b)(1) of our existing
regulations provides that a new technology is an appropriate candidate
for an additional payment when it represents ``an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries.'' For example, a
new technology represents a substantial clinical improvement when it
reduces mortality, decreases the number of hospitalizations or
physician visits, or reduces recovery time compared to the technologies
previously available. (We refer readers to the September 7, 2001 final
rule for a more detailed discussion of this criterion (66 FR 46902).)
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
costs involving eligible new medical services or technologies while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. Under Sec.
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec. 412.84(h)) exceed the full
DRG payment (including payments for IME and DSH, but excluding outlier
payments), Medicare will make an add-on payment equal to the lesser of:
(1) 50 percent of the estimated costs of the new technology (if the
estimated costs for the case including the new technology exceed
Medicare's payment); or (2) 50 percent of the difference between the
full DRG payment and the hospital's estimated cost for the case. Unless
the discharge qualifies for an outlier payment, the additional Medicare
payment is limited to the full MS-DRG payment plus 50 percent of the
estimated costs of the new technology.
Section 503(d)(2) of Public Law 108-173 provides that there shall
be no reduction or adjustment in aggregate payments under the IPPS due
to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of Public Law 108-173,
add-on payments for new medical services or technologies for FY 2005
and later years have not been subjected to budget neutrality.
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulations at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criteria, and only if so, do we then make a determination as to whether
the technology meets the cost threshold and represents a substantial
clinical improvement over existing medical services or technologies. We
also amended Sec. 412.87(c) to specify that all applicants for new
technology add-on payments must have FDA approval or clearance for
their new medical service or technology by July 1 of each year prior to
the beginning of the fiscal year that the application is being
considered.
The Council on Technology and Innovation (CTI) at CMS oversees the
agency's cross-cutting priority on coordinating coverage, coding and
payment processes for Medicare with respect to new technologies and
procedures, including new drug therapies, as well as promoting the
exchange of information on new technologies between CMS and other
entities. The CTI, composed of senior CMS staff and clinicians, was
established under section 942(a) of Public Law 108-173. The Council is
co-chaired by the Director of the Center for Clinical Standards and
Quality (CCSQ) and the Director of the Center for Medicare (CM), who is
also designated as the CTI's Executive Coordinator.
The specific processes for coverage, coding, and payment are
implemented by CM, CCSQ, and the local claims-payment contractors (in
the case of local coverage and payment decisions). The CTI supplements,
rather than replaces, these processes by working to assure that all of
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to
streamline, accelerate, and improve coordination of these processes to
ensure that they remain up to date as new issues arise. To achieve its
goals, the CTI works to streamline and create a more transparent coding
and payment process, improve the quality of medical decisions, and
speed patient access to effective new treatments. It is also dedicated
to supporting better decisions by patients and doctors in using
Medicare-covered services through the promotion of better evidence
development, which is critical for improving the quality of care for
Medicare beneficiaries.
To improve the understanding of CMS' processes for coverage,
coding, and payment and how to access them, the CTI has developed an
``Innovator's Guide'' to these processes. The intent is to consolidate
this information, much of which is already available in a variety of
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in August 2008 and is
available on the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we
invite any product developers or manufacturers of new medical
technologies to contact the agency early in the process of product
development if they have questions or concerns about the evidence that
would be needed later in the development process for the agency's
coverage decisions for Medicare.
The CTI aims to provide useful information on its activities and
initiatives to stakeholders, including Medicare beneficiaries,
advocates, medical product manufacturers, providers, and health policy
experts. Stakeholders with further questions about Medicare's coverage,
coding, and payment processes, or who want further guidance about how
they can navigate these processes, can contact the CTI at
[email protected].
We note that applicants for add-on payments for new medical
services or technologies for FY 2015 must submit a formal request,
including a full description of the clinical applications of the
medical service or technology and the results of any clinical
evaluations demonstrating that the new medical service or technology
represents a substantial clinical improvement, along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. Complete application information, along
with final deadlines for submitting a full application, will be posted
as it becomes available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical
services or technologies under review before the publication of the
proposed rule for FY 2015, the Web site also will post the tracking
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking
on Add-On Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of Public Law 108-173, provides for a mechanism for public
input before publication of a notice of proposed rulemaking regarding
whether a medical service or technology represents a substantial
clinical improvement or advancement. The process for evaluating new
medical service and
[[Page 50572]]
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 2014 prior
to publication of the FY 2014 IPPS/LTCH PPS proposed rule, we published
a notice in the Federal Register on November 23, 2012 (77 FR 70163
through 70165), and held a town hall meeting at the CMS Headquarters
Office in Baltimore, MD, on February 5, 2013. 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 2014 new medical service and
technology add-on payment applications before the publication of the FY
2014 proposed rule.
Approximately 60 individuals registered to attend the town hall
meeting in person, while additional individuals listened over an open
telephone line. We considered each applicant's presentation made at the
town hall meeting, as well as written comments submitted on the
applications that were received by the due date of February 26, 2013,
in our evaluation of the new technology add-on payment applications for
FY 2014 in the proposed rule. In response to the published notice and
the new technology town hall meeting, commenters submitted and
presented public comments that were unrelated to the substantial
clinical improvement criterion in regard to the new technology
applications for FY 2014. We also received public comments in response
to the proposed rule relating to topics such as marginal cost factors
for new technology add-on payments, and the use of external data in
determining the cost threshold and mapping new technologies to the
appropriate MS-DRG. Because we did not request public comments nor
propose to make any changes to any of the issues above, we are not
summarizing these public comments nor responding to them in this final
rule.
We also live-streamed the town hall meeting over the Internet and
received very positive feedback from the public on use of this option.
In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that we are
considering no longer holding an in-person town hall meeting in
Baltimore, MD, and instead holding a virtual town hall meeting that
would be live-streamed on the Internet. We invited public comments on
the possibility of holding a virtual town hall meeting instead of an
in-person town hall meeting in Baltimore, MD.
Comment: Some commenters expressed concern that limiting the town
hall meeting to a virtual town hall meeting may give less of a voice to
applicants. The commenters supported the option to observe the town
hall meeting via live stream on line but recommended that we maintain
the in-person option as well.
Response: In the proposed rule, we noted that we received positive
comments concerning the virtual town hall meeting. We expect that
applicants would still be an integral part of the virtual town hall
meeting as it is typical for applicants to make presentations at the
annual town hall meeting about their technologies and why their
technologies represent a substantial clinical improvement over existing
technologies. However, we note that some applicants have either chosen
not to make a presentation at the town hall meeting and/or to make all
or part of their presentation by phone. Therefore, we do not believe a
virtual town hall would offer less of a voice to applicants. The
purpose of a virtual town hall meeting would be to continue to provide
the information to the public in advance of the proposed rule while
reducing the burden and providing greater access for all applicants and
interested parties by eliminating the need to make special travel
arrangements or by mitigating any other issue that would limit the
public from attending the meeting in person. For example, in 2010, we
postponed the town hall meeting due to inclement weather. We will
consider the issues raised by these commenters as we consider whether
to transition to a virtual town hall meeting. Further information
regarding the mechanism we use to engage the public for future town
hall meetings will be provided via public notice.
3. FY 2014 Status of Technologies Approved for FY 2013 Add-On Payments
a. Auto Laser Interstitial Thermal Therapy (AutoLITT\TM\) System
Monteris Medical submitted an application for new technology add-on
payments for FY 2011 for the AutoLITT\TM\. AutoLITT\TM\ is a minimally
invasive, MRI-guided laser tipped catheter designed to destroy
malignant brain tumors with interstitial thermal energy causing
immediate coagulation and necrosis of diseased tissue. The technology
can be identified by ICD-9-CM procedure codes 17.61 (Laser interstitial
thermal therapy [LITT] of lesion or tissue of brain under guidance),
and 17.62 (Laser interstitial thermal therapy [LITT] of lesion or
tissue of head and neck under guidance), which became effective on
October 1, 2009.
The AutoLITT\TM\ received a 510(k) FDA clearance in May 2009. The
AutoLITT\TM\ is indicated for use to necrotize or coagulate soft tissue
through interstitial irradiation or thermal therapy in medicine and
surgery in the discipline of neurosurgery with 1064 nm lasers. The
AutoLITT\TM\ may be used in patients with glioblastoma multiforme brain
tumors. The applicant stated in its application and through
supplemental information that, due to required updates, the technology
was actually introduced to the market in December 2009. After
evaluation of the newness, costs, and substantial clinical improvement
criteria for new technology add-on payments for the AutoLITT\TM\ and
consideration of the public comments we received in response to the FY
2011 IPPS/LTCH PPS proposed rule, including the additional analysis of
clinical data and supporting information submitted by the applicant, we
approved the AutoLITT\TM\ for new technology add-on payments for FY
2011. In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27935 through
27936), based on the original information provided by the applicant, we
believed that the newness date for the AutoLITT\TM\ began in December
2009. However, as summarized in the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53345 through 53346), the applicant submitted a public
[[Page 50573]]
comment (in response to the FY 2013 proposed rule) demonstrating that
the AutoLITT\TM\ was first available on May 11, 2010. The manufacturer
explained that some of the sterile disposable products were not
released from quarantine until May 11, 2010, which prevented the
AutoLITT\TM\ from being used prior to May 11, 2010. Therefore, the
manufacturer asserted that the first time the AutoLITT\TM\ was
available on the market was May 11, 2010. As a result of this
information, we continued to make new technology add-on payments for
the AutoLITT\TM\ in FY 2013. (We refer readers to the FY 2013 IPPS/LTCH
PPS final rule for a complete discussion on this issue).
Consistent with the applicant's clinical trial, the add-on payment
is intended only for use of the device in cases of glioblastoma
multiforme. Therefore, we limited the new technology add-on payment to
cases involving the AutoLITT\TM\ in MS-DRGs 025 (Craniotomy and
Endovascular Intracranial Procedures with Major Complications or
Comorbidities (MCC)), 026 (Craniotomy and Endovascular Intracranial
Procedures with Complications or Comorbidities (CC)), and 027
(Craniotomy and Endovascular Intracranial Procedures without CC or
MCC). Cases involving the AutoLITT\TM\ that are eligible for the new
technology add-on payment are identified by assignment to MS-DRGs 025,
026, and 027 with a procedure code of 17.61 (Laser interstitial
thermotherapy of lesion or tissue of brain under guidance) in
combination with a principal diagnosis code that begins with a prefix
of 191 (Malignant neoplasm of brain). We note that using the procedure
and diagnosis codes above and restricting the add-on payment to cases
that map to MS-DRGs 025, 026, and 027 is consistent with information
provided by the applicant, which demonstrated that cases of the
AutoLITT\TM\ would only map to MS-DRGs 025, 026, and 027. Procedure
code 17.62 (Laser interstitial thermotherapy of lesion or tissue of
head and neck under guidance) does not map to MS-DRGs 025, 026, or 027
under the GROUPER software and, therefore, is ineligible for new
technology add-on payment.
The average cost of the AutoLITT\TM\ is reported as $10,600 per
case. Under Sec. 412.88(a)(2) of the regulations, new technology add-
on payments are limited to the lesser of 50 percent of the average cost
of the device or 50 percent of the costs in excess of the MS-DRG
payment for the case. As a result, the maximum add-on payment for a
case involving the AutoLITT\TM\ is $5,300.
The new technology add-on payment regulations provide that ``a
medical service or technology may be considered new within 2 or 3 years
after the point at which data begin to become available reflecting the
ICD-9-CM code assigned to the new service or technology'' (Sec.
412.87(b)(2)). Our practice has been to begin and end new technology
add-on payments on the basis of a fiscal year, and we have generally
followed a guideline that uses a 6-month window before and after the
start of the fiscal year to determine whether to extend the new
technology add-on payment for an additional fiscal year. In general, we
extend add-on payments for an additional year only if the 3-year
anniversary date of the product's entry on the market occurs in the
latter half of the fiscal year (70 FR 47362). With regard to the
newness criterion for the AutoLITT\TM\, as stated above, we consider
the beginning of the newness period for the device to commence when the
AutoLITT\TM\ was first available on May 11, 2010. Because the 3-year
anniversary date of the AutoLITT\TM\'s entry onto the market will occur
on May 11, 2013, which is prior to the beginning of FY 2014, we
proposed to discontinue new technology add-on payments for the
AutoLITT\TM\ for FY 2014.
We invited public comments on this proposal. However, we did not
receive any public comments in response to our invitation. Therefore,
we are finalizing our proposal to discontinue new technology add-on
payments for the AutoLITT\TM\ for FY 2014.
b. Glucarpidase (Trade Brand Voraxaze[supreg])
BTG International, Inc. submitted an application for new technology
add-on payments for Glucarpidase (trade brand Voraxaze[supreg]) for FY
2013. Glucarpidase is used in the treatment of patients who have been
diagnosed with toxic methotrexate (MTX) concentrations as of result of
renal impairment. The administration of Glucarpidase causes a rapid and
sustained reduction of toxic MTX concentrations.
Voraxaze[supreg] was approved by the FDA on January 17, 2012.
Beginning in 1993, certain patients could obtain expanded access for
treatment use to Voraxaze[supreg] as an investigational drug. Since
2007, the applicant has been authorized to recover the costs of making
Voraxaze[supreg] available through its expanded access program. We
describe expanded access for treatment use of investigational drugs and
authorization to recover certain costs of investigational drugs in the
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350).
Voraxaze[supreg] was available on the market in the United States as a
commercial product to the larger population as of April 30, 2012. In
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we
expressed concerns about whether Voraxaze[supreg] could be considered
new for FY 2013. After consideration of all of the public comments
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which
is the date of market availability.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology payments for Voraxaze[supreg]
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg]
are identified with ICD-9-CM procedure code 00.95 (Injection or
infusion of glucarpidase). The cost of Voraxaze[supreg] is $22,500 per
vial. The applicant stated that an average of four vials is used per
Medicare beneficiary. Therefore, the average cost per case for
Voraxaze[supreg] is $90,000 ($22,500 x 4). Under Sec. 412.88(a)(2),
new technology add-on payments are limited to the lesser of 50 percent
of the average cost of the technology or 50 percent of the costs in
excess of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for Voraxaze[supreg] is $45,000 per case.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for Voraxaze[supreg], as stated above, we consider the beginning of the
newness period to commence when Voraxaze[supreg] was first available on
the market on April 30, 2012. Because Voraxaze[supreg] is still within
the 3-year newness period, we proposed to continue new technology add-
on payments for this technology for FY 2014. We invited public comments
on this proposal.
Comment: Several commenters supported the continuation of making
new technology add-on payments for Voraxaze[supreg] in FY 2014.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to continue to make new technology add-on
payments for Voraxaze[supreg] in FY 2014.
[[Page 50574]]
c. DIFICID\TM\ (Fidaxomicin) Tablets
Optimer Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for FY 2013 for the use of DIFICID\TM\
tablets. As indicated on the labeling submitted to the FDA, the
applicant noted that Fidaxomicin is taken twice a day as a daily dosage
(200 mg tablet twice daily = 400 mg per day) as an oral antibiotic. The
applicant asserted that Fidaxomicin provides potent bactericidal
activity against C. Diff., and moderate bactericidal activity against
certain other gram-positive organisms, such as enterococcus and
staphylococcus. Unlike other antibiotics used to treat CDAD, the
applicant noted that the effects of Fidaxomicin preserve bacteroides
organisms in the fecal flora. These are markers of normal anaerobic
microflora. The applicant asserted that this helps prevent pathogen
introduction or persistence, which potentially inhibits the re-
emergence of C. Diff., and reduces the likelihood of overgrowths as a
result of vancomycin-resistant Enterococcus (VRE). Because of this
narrow spectrum of activity, the applicant asserted that Fidaxomicin
does not alter this native intestinal microflora.
In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27939 through
27941), we expressed concern that DIFICID\TM\ may not be eligible for
new technology add-on payments because eligibility is limited to new
technologies associated with procedures described by ICD-9-CM codes. We
further stated that drugs that are only taken orally (such as
DIFICID\TM\) may not be eligible for consideration for new technology
add-on payments because there is no procedure associated with these
drugs and, therefore, no ICD-9-CM code(s). In the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53350 through 53358), after consideration of the
public comments received, we revised our policy to allow the use of
National Drug Codes (NDCs) to identify oral medications that have no
inpatient procedure for the purposes of new technology add-on payments.
The revised policy is effective for payments for discharges occurring
on or after October 1, 2012. We refer readers to the FY 2013 IPPS/LTCH
PPS final rule for a complete discussion on this issue.
With regard to the newness criterion, Fidaxomicin was approved by
the FDA on May 27, 2011, for the treatment of CDAD in adult patients,
18 years of age and older. In the FY 2013 IPPS/LTCH PPS final rule, we
established that the beginning of the newness period for this
technology is its FDA approval date of May 27, 2011.
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for DIFICID\TM\
and consideration of the public comments we received in response to the
FY 2013 IPPS/LTCH PPS proposed rule, we approved DIFICID\TM\ for new
technology add-on payments for FY 2013. Cases of DIFICID\TM\ are
identified with ICD-9-CM diagnosis code 008.45 (Intestinal infection
due to Clostridium difficile) in combination with NDC code 52015-0080-
01. Providers must report the NDC on the 837i Health Care Claim
Institutional form (in combination with ICD-9-CM diagnosis code 008.45)
in order to receive the new technology add-on payment. According to the
applicant, the cost of DIFICID\TM\ is $2,800 for a 10-day dosage. The
average cost per day for DIFICID\TM\ is $280 ($2,800/10). Cases of
DIFICID\TM\ within the inpatient setting typically incur an average
dosage of 6.2 days, which results in an average cost per case for
DIFICID\TM\ of $1,736 ($280 x 6.2). Under Sec. 412.88(a)(2), new
technology add-on payments are limited to the lesser of 50 percent of
the average cost of the technology or 50 percent of the costs in excess
of the MS-DRG payment for the case. As a result, the maximum new
technology add-on payment for FY 2013 for DIFICID\TM\ is $868.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). Our practice has been to begin and
end new technology add-on payments on the basis of a fiscal year, and
we have generally followed a guideline that uses a 6-month window
before and after the start of the fiscal year to determine whether to
extend the new technology add-on payment for an additional fiscal year.
In general, we extend add-on payments for an additional year only if
the 3-year anniversary date of the product's entry on the market occurs
in the latter half of the fiscal year (70 FR 47362). With regard to the
newness criterion for DIFICID\TM\, as stated above, we consider the
beginning of the newness period to commence when DIFICID\TM\ was first
approved by the FDA on May 27, 2011. Because the 3-year anniversary
date of DIFICID\TM\ will occur in the second half of the fiscal year
(after April 1, 2014), we proposed to continue new technology add-on
payments for DIFICID\TM\ for FY 2014. We invited public comments on
this proposal.
Comment: Several commenters supported the continuation of making
new technology add-on payments for DIFICID\TM\ in FY 2014. In addition,
the applicant submitted a comment stating that the new technology add-
on payment for DIFICID\TM\ has expanded Medicare beneficiary access for
DIFICID\TM\ in the acute care setting. The manufacturer also provided
supplemental data demonstrating that cases of DIFICID\TM\ within the
inpatient setting continue to incur an average dosage of 6.2 days.
Based on this supplemental data, the manufacturer recommended that we
continue to consider 6.2 days of inpatient administration of
DIFICID\TM\ in its calculations for the cost criterion and the add-on
payment.
Response: We appreciate the commenters' support. We agree that the
supplemental data submitted by the manufacturer continues to support
the use of 6.2 days for the cost criterion and the add-on payment.
After consideration of the public comments we received, we are
finalizing our proposal to continue to make new technology add-on
payments for DIFICID\TM\ in FY 2014.
d. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA)
Endovascular Graft
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY
2013. The applicant stated that the current treatment for patients who
have had an AAA is an endovascular graft. The applicant explained that
the Zenith[supreg] F. Graft is an implantable device designed to treat
patients who have an AAA and who are anatomically unsuitable for
treatment with currently approved AAA endovascular grafts because of
the length of the infrarenal aortic neck. The applicant noted that,
currently, an AAA is treated through an open surgical repair or medical
management for those patients not eligible for currently approved AAA
endovascular grafts.
With respect to newness, the applicant stated that FDA approval for
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we
stated that because the Zenith[supreg] F. Graft was approved by the FDA
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the
newness criterion as of that date.
[[Page 50575]]
After evaluation of the newness, costs, and substantial clinical
improvement criteria for new technology add-on payments for the
Zenith[supreg] F. Graft and consideration of the public comments we
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we
approved the Zenith[supreg] F. Graft for new technology add-on payments
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are
eligible for new technology add-on payments are identified by ICD-9-CM
procedure code 39.78 (Endovascular implantation of branching or
fenestrated graft(s) in aorta). In the application, the applicant
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal)
alignment stents was $17,264. Of the $17,264 in costs for the
Zenith[supreg] F. Graft, $921 are for components that are used in a
standard Zenith AAA Endovascular Graft procedure. Because the costs for
these components are already reflected within the MS-DRGs (and are no
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated
that we do not believe it is appropriate to include these costs in our
calculation of the maximum cost to determine the maximum add-on payment
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for
the Zenith[supreg] F. Graft is $16,343 ($17,264-$921). Under Sec.
412.88(a)(2), new technology add-on payments are limited to the lesser
of 50 percent of the average cost of the device or 50 percent of the
costs in excess of the MS-DRG payment for the case. As a result, the
maximum add-on payment for a case involving the Zenith[supreg] F. Graft
is $8,171.50.
As stated above, the new technology add-on payment regulations
provide that ``a medical service or technology may be considered new
within 2 or 3 years after the point at which data begin to become
available reflecting the ICD-9-CM code assigned to the new service or
technology'' (Sec. 412.87(b)(2)). With regard to the newness criterion
for the Zenith[supreg] F. Graft, as stated above, we consider the
beginning of the newness period to commence when the Zenith[supreg] F.
Graft was approved by the FDA on April 4, 2012. Because the
Zenith[supreg] F. Graft is still within the 3-year newness period, we
proposed to continue new technology add-on payments for this technology
for FY 2014. We invited public comments on this proposal.
Comment: Several commenters supported the continuation of new
technology add-on payments for the Zenith[supreg] F. Graft in FY 2014.
Response: We appreciate the commenters' support.
After consideration of the public comments we received, we are
finalizing our proposal to continue to make new technology add-on
payments for the Zenith[supreg] F. Graft in FY 2014.
4. FY 2014 Applications for New Technology Add-On Payments
We received five applications for new technology add-on payments
for FY 2014. In accordance with the regulations under Sec. 412.87(c),
applicants for new technology add-on payments must have FDA approval by
July 1 of each year prior to the beginning of the fiscal year that the
application is being considered. Two of the five technologies for which
we received applications for new technology add-on payments, the
NeuroPace Responsive Neurostimulator System (RNS) System and the Abbott
Vascular MitraClip[supreg] System, did not receive FDA approval by the
July 1 deadline. Therefore, these applications are not eligible for
consideration for new technology add-on payments for FY 2014. In
addition, the applicant for the NeuroPace RNS System withdrew its
application prior to publication of this final rule. We note that we
did receive public comments concerning these two applications. However,
as stated above, because these two technologies did not receive FDA
approval by the July 1 deadline and, therefore, cannot be considered
for new technology add-on payments for FY 2014, we are not summarizing
or responding to these comments in this final rule. We refer readers to
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27543 through 27545 and
27547 through 27552) for summaries of these two applications. A
discussion of the remaining three applications is presented below.
a. Kcentra\TM\
CSL Behring submitted an application for new technology add-on
payments for Kcentra\TM\ for FY 2014. Kcentra\TM\ is a replacement
therapy for fresh frozen plasma (FFP) for patients with an acquired
coagulation factor deficiency due to warfarin and who are experiencing
a severe bleed. Kcentra\TM\ contains the Vitamin K dependent
coagulation factors II, VII, IX and X, together known as the
prothrombin complex, and antithrombotic proteins C and S. Factor IX is
the lead factor for the potency of the preparation. The product is a
heat-treated, non-activated, virus filtered and lyophilized plasma
protein concentrate made from pooled human plasma. Kcentra\TM\ is
available as a lyophilized powder that needs to be reconstituted with
sterile water prior to administration via intravenous infusion. The
product is dosed based on Factor IX units. Concurrent Vitamin K
treatment is recommended to maintain blood clotting factor levels once
the effects of Kcentra\TM\ have diminished.
Kcentra\TM\ was approved by the FDA on April 29, 2013. The
applicant applied for a new ICD-9-CM procedure code for consideration
at the March 5, 2013 ICD-9-CM Coordination and Maintenance Committee
Meeting. In this final rule, we have approved new ICD-9-CM procedure
code 00.96 (Infusion of 4-Factor Prothrombrin Complex Concentrate)
which uniquely identifies Kcentra\TM\. More information on this request
and approval can be found on the CMS Web site at: http://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html and http://cms.hhs.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum.html.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we were
concerned that Kcentra\TM\ may be substantially similar to FFP and/or
Vitamin K therapy. If so, Kcentra\TM\ would not meet the newness
criterion because costs associated with FFP and/or Vitamin K therapy
are already reflected within the MS-DRGs. In the FY 2010 IPPS/RY 2010
LTCH PPS final rule (74 FR 43813 through 43814), we established
criteria for evaluating whether a new technology is substantial similar
to an existing technology, specifically: (1) Whether a product uses the
same or a similar mechanism of action to achieve a therapeutic outcome;
(2) whether a product is assigned to the same or a different MS-DRG;
and (3) whether the new use of the technology involves the treatment of
the same or similar type of disease and the same or similar patient
population. If a technology meets all three of the criteria above, it
would be considered substantially similar to an existing technology and
would not be considered ``new'' for purposes of new technology add-on
payments.
In evaluating the first criterion, we stated in the FY 2014 IPPS/
LTCH PPS proposed rule that we believe that both FFP and Kcentra\TM\
use the same mechanism of action of Vitamin K dependent coagulation to
reverse the anti-coagulation effects of warfarin. With respect to the
second criterion, we believe that cases involving both FFP and
Kcentra\TM\ would be assigned to the same MS-DRGs. Finally, with
respect to the third criterion, we stated that we believe that both
technologies treat the same condition and patient population.
Specifically, the patient population for both Kcentra\TM\ and FFP are
patients
[[Page 50576]]
with an iatrogenically acquired coagulation factor deficiency due to
warfarin and who are experiencing severe bleeding. Delay of treatment
of these patients can lead to an increase in complications as well as
an increase of the severity of the blood loss. Although FFP needs to
thaw before it can be administered and can delay treatment compared to
Kcentra\TM\, which can be used in a more timely manner, we stated that
we believe that both Kcentra\TM\ and FFP treat the same patient
population. Based on evaluation of the similarity criteria, we stated
that it appears that Kcentra\TM\ is substantially similar to FFP with
regard to being able to reverse the Warfarin effect of blood
coagulation. Therefore, we stated in the proposed rule that Kcentra\TM\
may not be considered ``new'' for purposes of new technology add-on
payments. We invited public comments regarding whether Kcentra\TM\ is
substantially similar to existing technologies and whether Kcentra\TM\
meets the newness criterion.
Comment: One commenter, the applicant and manufacturer, submitted a
public comment stating that Kcentra\TM\ meets the newness criterion
because it was approved by the FDA and no data on the product will be
available in the DRG payment system until FY 2014. In addition, the
applicant asserted that because a new ICD-9-CM procedure code for
Kcentra\TM\ was created that will be effective October 1, 2013,
Kcentra\TM\ fulfills the regulatory requirements.
Response: As discussed in the proposed rule, because Kcentra\TM\
may be substantially similar to FFP, it is possible that the costs
associated with Kcentra\TM\ may already be reflected in the MS-DRGs.
Below we summarize the applicant's comments and our response concerning
substantial similarity.
With regard to considering the technology ``new'' due to the
issuance of a new ICD-9-CM procedure code, in the FY 2005 IPPS final
rule (69 FR 49002), we discussed how, generally, we use the FDA
approval as the indicator of the time when a technology begins to
become available on the market and data reflecting the costs of the
technology begin to become available for recalibration of the DRGs. In
some specific circumstances, we have recognized a date later than the
FDA approval as the appropriate starting point for the 2-year to 3-year
period. Using the ICD-9-CM code alone is not an appropriate test of
newness because technologies that are new to the market are
automatically placed into the closest ICD-9-CM category when they first
become available on the market, unless the manufacturer requests the
assignment of a new ICD-9-CM code because existing codes do not
adequately reflect or describe the medical service or device. We refer
readers to the FY 2005 IPPS final rule for a complete discussion
concerning the issuance of an ICD-9-CM code and the newness criterion.
Comment: The manufacturer submitted a public comment stating that
Kcentra\TM\ has a different mechanism of action than FFP in the same
way that we determined that the AutoLITT\TM\ had a different mechanism
of action than the Visual-ase in the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50144).
Response: The commenter did not provide any details regarding the
perceived similarities between the AutoLITT\TM\ and the Kcentra\TM\
applications in correlation with the comparison presented in its
comment. For example, in the FY 2011 IPPS/LTCH PPS final rule, we
determined that the AutoLITT\TM\ was different than the Visual-ase due
to its side-firing laser versus elliptical-firing. In addition, the
AutoLITT\TM\ contained a proprietary probe cooling system that removes
heat from tissue not directly in the path of the laser beam, while the
Visual-ase did not contain this cooling system. Therefore, without more
information detailing the comparable differences in mechanism of action
and/or the perceived similarities between these two applications, we
are unable to provide further response to the comment.
Comment: The manufacturer submitted a public comment asserting that
Kcentra\TM\ has a different mechanism of action than FFP. The commenter
explained that Kcentra\TM\'s mechanism of action for Vitamin K
antagonist (VKA) reversal is different from FFP. Kcentra\TM\ is
purified, heat treated, nanofiltered, non-activated four factor
prothorbin complex concentrate. It contains coagulation factors (II,
VII, IX, X) and anti-coagulation proteins (C and S) that are 25 times
more concentrated than plasma. Kcentra\TM\ provides a simple and rapid
repletion within 30 minutes. Unlike FPP, it does not require ABO typing
as it does not contain ABO antibodies, thereby reducing the risk of a
transfusion reaction. The absence of additional proteins removes the
risk of transfusion related acute lung injury or TRALI.
Conversely, the manufacturer stated that FFP is isolated from the
whole blood by the removal of cellular components (erythrocytes,
granulocytes, lymphocytes and platelets), therefore it contains all the
protein components in blood including coagulation proteins among others
at a physiologic level of 1 IO/ml. In addition, FFP is a non-specific
therapy which does not achieve the goal of repleting all coagulation
factors to therapeutic levels. The manufacturer explained that factors
II and X and Protein C remain below 50 percent at 3 hours. The
manufacturer maintained that the reason for lack of correction of these
factors is unclear and suggests that plasma cannot provide simple
repletion or that there is another mechanism resulting in a plateau of
some of the factors at a sub-therapeutic level. In contrast, the
manufacturer noted that Kcentra\TM\ increases all coagulation factors
(II, VII, IX, X) and anti-coagulation proteins (C and S). The
manufacturer added that modest reversal of VKA is also reflected in the
slow return to normal of the International Normalized Ratio (INR). The
manufacturer compared FFP to Kcentra\TM\ and noted that early INR
reduction was achieved in 62 percent of Kcentra\TM\ patients versus
less than 10 percent of FFP patients. The manufacturer also contended
that the different method of production of Kcentra\TM\ contributes to
its distinct mechanism of action by providing a highly specific, highly
concentrated product available on an urgent basis. The manufacturer
explained that Kcentra\TM\'s blood factor constituents are 25 more
times concentrated than those contained in a standard unit of FFP
allowing for markedly decrease of infusion time and infusion of smaller
volumes compared to equivalent doses of FFP; Kcentra\TM\ provides
standardized and known concentrations of factors compared to variable
concentrations for FFP; Kcentra\TM\ is a targeted therapy replacing
only what is deficient in vitamin K antagonists reversal resulting in
rapid reversal without impact of nonspecific protein content;
Kcentra\TM\ does not require ABO typing compared to FFP; and
Kcentra\TM\ is lyophilized powder for reconstitution and is stable for
up to 36 months at room temperature making it ideal for emergency use
compared to FFP.
Response: We appreciate the details provided in the manufacturer's
comment that reference the different reasons why Kcentra\TM\ uses a
different mechanism of action than FFP. We appreciate the issues that
the manufacturer raises that Kcentra\TM\ provides a simple and rapid
repletion relative to FFP and reduces the risk of a transfusion
reaction relative to FFP because it does not contain ABO or RH
antibodies, which require blood typing prior to administration.
However,
[[Page 50577]]
despite the arguments presented in the public comment, we remain
concerned that Kcentra\TM\ still uses the same mechanism of action as
FFP because they both use coagulation factors and proteins to improve
blood coagulation, in the context of an acquired coagulation
deficiency.
Comment: The manufacturer also submitted a public comment asserting
that Kcentra\TM\ provides a therapeutic option for new patient
populations and patient populations not recommended for FFP. The
manufacturer listed the following patient populations that would be
eligible to use Kcentra\TM\ but not FFP:
``Jehovah's Witnesses: Certain religious groups' beliefs
prevent patients from accepting transfusion of whole blood or its
primary components which includes plasma. Fractionated factor
concentrates are considered `secondary components', and thus they may
be acceptable to some followers'' (with these beliefs who would
otherwise not be eligible for FFP).
Immunoglobulin A (IgA) deficient patients can have severe
anaphylactoid reactions due to the formation of anti-IgA antibodies.
Plasma contains immunoglobulins and plasma in amounts as small as 10
ml, which can result in severe reaction. Kcentra\TM\ provides a
treatment option for these patients who were not eligible for FFP.
Rapid reversal of bleeding is important for patients with
intracranial hemorrhaging (ICH) in order to restrict hematoma
enlargement and allow timely neurosurgical intervention. The
manufacturer believed that Kcentra\TM\ provides a therapy for this
population because plasma is not ideal because Warfarin increases the
risk of ICH, which could lead to stroke. The manufacturer cited a study
noting that intervention for ICH within the first hour may improve
outcomes and protocol driven treatment can facilitate timely and
efficient care. The manufacturer also noted that for patients receiving
VKA therapy with an INR less than 1.4, protocol recommends
administering agents to normalize the INR within minutes; Kcentra\TM\
provides a readily available treatment compared to FFP which takes time
to thaw, type the patient and then infuse.
The manufacturer also noted that the most significant
limitations of plasma are the volume and time required to increase
factor levels. Because Kcentra\TM\ is concentrated, schemes can be
designed to achieve targeted factor level for patients, especially
those with cardiac impairment, rather than a maximum tolerated volume.
The manufacturer further explained that plasma volume, rate of
infusion, left ventricular dysfunction and VKA reversal have been
identified as risk factors for the development of Transfusion
Associated Circulatory Overload (TACO). The manufacturer cited data
from its clinical trial that demonstrated that plasma should not be
administered to patients with cardiac impairment or risk of cardiac
overload. The manufacturer asserted that Kcentra\TM\ provides a therapy
for patients with cardiac impairment for whom plasma would not be
ideal.
The manufacturer explained that given the logistical
issues of managing, typing and storing supplies of plasma (fresh/
thawed) as well as the limited supply of AB universal blood plasma,
Kcentra\TM\ provides a new treatment option for hospitals, regardless
of size (small, rural, community) or trauma level, to handle urgent
warfarin reversals. Plasma requires blood-type matching, thawing and is
often located away from the point of care. The applicant cited a study
conducted at a large, urban, tertiary care facility, where the median
time from time of diagnosis to plasma infusion was 90 minutes
(Goldstein STROKE 2006). This did not include time to infuse the
plasma, which can take hours. The manufacturer further explained that
even at leading hospitals, the logistics around obtaining units of
plasma for urgent transfusions is difficult, making good outcomes
difficult to obtain (Goldstein STROKE 2006). Smaller hospitals without
the resources of a Level 1 trauma center find plasma even more
difficult to manage resulting in under-treatment and slow treatment
(Menzin Thromb and Hemostasis 2012). Particularly for smaller,
community, rural, and hospitals less than Level One Trauma Centers,
Kcentra\TM\ represents the best opportunity for providing quality care
to patients with Warfarin-related bleeding.
Response: We agree that Kcentra\TM\ may be used in a patient
population that is experiencing an acquired coagulation factor
deficiency due to Warfarin and who are experiencing a severe bleed
currently but are ineligible for FFP, particularly for use by IgA
deficient patients and other patient populations that have no other
treatment option to resolve severe bleeding in the context of an
acquired Vitamin K deficiency. In addition, as mentioned above, FFP is
limited because it requires special storage conditions while
Kcentra\TM\ is stable for up to 36 months at room temperature thus
allowing hospitals that otherwise would not have access to FFP (for
example, small rural hospitals as discussed by the applicant in its
comments) to keep a supply of Kcentra\TM\ and treat patients who would
possibly have no access to FFP. We note that, FFP is considered
perishable and can be scarce by nature (due to production and other
market limitations) thus making some hospitals unable to store FFP,
which limits access to certain patient populations in certain
locations. Therefore, we believe that Kcentra\TM\ provides a
therapeutic option for a new patient population and is not
substantially similar to FFP. Also, as stated above, we give credence
to the information presented by the manufacturer in its comment that
Kcentra\TM\ provides a simple and rapid repletion relative to FFP and
reduces the risk of a transfusion reaction relative to FFP because it
does not contain ABO antibodies and does not require ABO typing.
Because Kcentra\TM\ is not substantially similar to FFP, we believe
that Kcentra\TM\ meets the newness criterion.
Comment: One commenter recommended that CMS eliminate the
substantial similarity criterion. The commenter believed that there are
several benefits to this proposal including eliminating the risk that
patients would be denied access to new therapies that provide
substantial clinical improvement, improving clarity and predictability
of the add-on rules and conforming to the statutory and regulatory
provisions governing add-on payments, which do not mention substantial
similarity and allowing technologies that enter the market subsequent
to similar products receiving the add-on payment to be eligible for the
add-on payment as well and not giving an advantage to the first product
on the market representing a specific technology.
Response: We appreciate the commenter's suggestion. However, we
note that we did not propose to eliminate the substantial similarity
criterion in the proposed rule. In regard to the commenter's assessment
of the benefits of eliminating the substantial similarity criterion, we
refer readers to the FY 2006 IPPS final rule (70 FR 47351) and the FY
2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 and 43814), where we
explain our policy and reasoning regarding substantial similarity in
detail.
According to the applicant, the technology is eligible to be used
across all MS-DRGs. To demonstrate that it meets the cost criterion,
the applicant searched the FY 2011 MedPAR file (across all MS DRGs) for
cases reporting a primary or secondary diagnosis of E934.2 (Adverse
events due to anticoagulants), V58.61 (Long term
[[Page 50578]]
(current) use of anticoagulants), or 964.2 (Poisoning by
anticoagulants) in combination with procedure code 99.07 (Transfusion
of the serum). The applicant believed that this combination identified
cases that suggest the use of a Vitamin K antagonist therapy as well as
a major bleed.
The applicant found 66,749 cases across all MS-DRGs and noted that
18 percent of all cases would map to MS-DRGs 377 (Gastrointestinal
Hemorrhage with MCC), 378 (Gastrointestinal Hemorrhage with CC), and
379 (Gastrointestinal Hemorrhage without CC/MCC), while the top 20 MS-
DRGs would account for 41 percent of all cases. The applicant
standardized charges (for all 66,749 cases) and removed charges for FFP
therapy, which equated to a case-weighted average standardized charge
per case of $49,748. The applicant calculated a case-weighted threshold
of $46,068 across all MS-DRGs. The applicant asserted that the average
case-weighted standardized charge per case without including charges
for Kcentra\TM\ exceeded the case-weighted threshold of $46,068.
Therefore, the applicant maintained that it meets the cost criterion.
We invited public comments regarding whether Kcentra\TM\ meets the cost
criterion, particularly with regard to the assumptions and methodology
used in the applicant's analysis. However, we did not receive any
public comments concerning the cost criterion and, therefore, we
believe that Kcentra\TM\ meets the cost criterion.
With regard to substantial clinical improvement, according to the
applicant, Kcentra\TM\ is the first prothrombin complex concentrate
(PCC) that will be FDA-approved for rapid Warfarin reversal in patients
experiencing an acute major bleed. The applicant maintained that
Kcentra\TM\ represents a substantial clinical improvement in the
treatment of patients with acute severe bleeding who require immediate
reversal of their VKA therapy by (1) providing a rapid, beneficial
resolution of the patient's blood clotting factor deficiency, (2)
decreasing the risk of exposure to blood borne pathogens, and (3)
reducing the rate of transfusion-associated complications.
The applicant cited its pivotal study (a randomized clinical trial)
\3\ and noted that Kcentra\TM\ was noninferior in its ability to
reverse the effects of Warfarin to a target INR of less than or equal
to 1.3 within 30 minutes in 62 percent of patients compared to less
than 10 percent success for plasma. Also, serum levels of the key
coagulant and anti-thrombotic proteins were normalized in less than an
hour with Kcentra\TM\, but these levels remained depressed with plasma
for hours after dosing with FFP.
---------------------------------------------------------------------------
\3\ Sarode R, et al., Efficacy and Safety of a Four Factor
Prothrombin Complex Concentrate in Patients on Vitamin K Antagonists
Presenting with Major Bleeding: A Randomized, Plasma Controlled,
Phase IIIb Study. Circulation. Submitted October 31, 2012. Copy to
be provided upon acceptance.
---------------------------------------------------------------------------
The applicant also explained that Kcentra\TM\ undergoes a dedicated
pathogen detection and removal process as well as purification steps to
produce its specific components and plasma does not. The applicant
asserted that this drastically reduces the risk of transmitting both
known and unknown blood borne pathogens. The applicant cited a
retrospective analysis of scientific publications \4\ on the use of
Kcentra\TM\ in the European Union (EU), including the pharmacovigilance
database from 1996 through 2008. The applicant noted that an estimated
350,000 patients have been treated with Kcentra\TM\ (known as Beriplex
in the EU) with no documented cases of viral transmission.
---------------------------------------------------------------------------
\4\ Hanke A, et al., Efficacy and Long-Term Safety of a
Pasteurized Nanofiltrated Prothrombin Complex Concentrate
(BERIPLEX[supreg] P/N), 2009, J Thromb Haemost, Vol. 7 (Suppl.2) PP-
WE-697.
---------------------------------------------------------------------------
The applicant also stated that, in the United States, blood
suppliers follow a strict set of regulations for screening and testing
the blood supply, but these tests and donor questionnaires do not
account for emerging pathogens that could contaminate the blood supply.
The applicant explained that parasitic infections and bacterial
diseases (such as babesiosis and Chaga's disease) have already been
documented in U.S. patients as a result of FFP transfusion. However,
there is no screening test to date for some of these parasitic
infections and diseases. The applicant believed that the multi-step
manufacturing process for Kcentra\TM\, including heat treatment and
nanofiltration, reduces the risk of transmitting such infections and
diseases.
The applicant also noted that another benefit of Kcentra\TM\ is the
ability to rapidly prepare and administer the product in an emergency
situation. In addition to the benefit of room temperature storage,
Kcentra\TM\ can be rapidly reconstituted and administered. In the
clinical study, the applicant found that the average administration
time for Kcentra\TM\ was less than 30 minutes. However, the applicant
stated, other treatments such as FFP and intravenous Vitamin K
therapies act more slowly, and FFP can be difficult to use. The
applicant explained that FFP therapy requires blood-type matching,
usually requires thawing, and is often located away from the point of
care. The applicant also cited a study \5\ that demonstrated the median
time from time of diagnosis to plasma infusion was 90 minutes, which
did not include the time to infuse the FFP which can take hours.
---------------------------------------------------------------------------
\5\ Goldstein, Joshua N., et al., Timing of Fresh Frozen Plasma
Administration and Rapid Correction of Coagulopathy in Warfarin-
Related Intracerebral Hemorrhage, Stroke 37.1 (2006):151-155.
---------------------------------------------------------------------------
The applicant further noted that essential blood coagulation
factors in one vial of Kcentra\TM\ are approximately 25 times more
concentrated than those in the equivalent plasma dose. According to the
applicant, this translated to an infusion volume that was 87 percent
greater in the FFP group of patients as seen in the pivotal study. The
applicant explained that high transfusion volumes of treatments such as
FFP therapy can lead to TACO. According to the applicant, when TACO
occurs, acute left ventricular failure may occur resulting in shortness
of breath, tachypnea (rapid breathing), and result in other harmful
effects.
Finally, the applicant noted that Kcentra\TM\ is recommended as the
standard of care in the new guidelines issued by the American College
of Chest Physicians (ACCP) for patients needing emergent Warfarin
reversal. In addition, the applicant noted that the American
Association of Blood Banks (AABB) stated that plasma should no longer
be used to reverse Warfarin in bleeding patients when specific factor
concentrates are available.
In conclusion, the applicant maintained that Kcentra\TM\ represents
a substantial clinical improvement over existing technologies. We
invited public comments regarding whether Kcentra\TM\ meets the
substantial clinical improvement criterion.
Comment: Several commenters supported making new technology add-on
payments for Kcentra\TM\. One commenter stated that Kcentra\TM\ is a
new, significantly more rapid way to provide substantial improvement
over existing technologies. The commenter noted that compared to FFP,
Kcentra\TM\ is concentrated and includes natural anticoagulants. In
addition, the commenter noted that Kcentra\TM\ is more targeted than
FFP because it does not contain the full range of proteins and other
molecules found in FFP and believed that this targeted therapy provides
high levels of coagulation factors at a faster rate and a more rapid
correction of deficiencies induced by Warfarin. The commenter further
stated
[[Page 50579]]
that Kcentra\TM\ can be infused in minutes compared to the hours needed
to infuse FFP. The commenter expressed the opinion that this saved time
can be critical when treating patients in a trauma or intensive care
setting, including patients requiring urgent surgical intervention. The
commenter also noted that Vitamin K therapy requires new factor
synthesis/modification, which is dependent on optimal organ function,
which in the context of patient injury or disease, may occur only after
substantial delay, while Kcentra\TM\ provides immediate functioning
factors.
The commenter also noted that a common use of FFP and/or Vitamin K
is sometimes a prophylactic measure for Warfarin reversal prior to an
invasive procedure. The commenter believes that once Kcentra\TM\ is
widely available, it will likely be used in a broader subset of
patients than FFP and/or Vitamin K. The commenter finally noted that
another benefit of Kcentra\TM\ is the low transfusion volume compared
to FFP which decreases the risk of exposure to TACO.
Another commenter noted that FFP has not been prospectively studied
in controlled randomized trials for urgent Warfarin reversal while
current guidelines for Vitamin K antagonist reversal recommend the use
of 4-factor PCC over plasma.
Response: We agree that KcentraTM represents a
substantial clinical improvement over existing technologies.
Specifically, KcentraTM provides (1) a rapid, beneficial
resolution of the patient's blood clotting factor deficiency, (2)
decreases the risk of exposure to blood borne pathogens, and (3)
reduces the rate of transfusion-associated complications.
KcentraTM meets all of the new technology add-on payment
policy criteria. Therefore, we are approving KcentraTM for
new technology add-on payments in FY 2014. Cases involving
KcentraTM that are eligible for new technology add-on
payments will be identified by ICD-9-CM procedure code 00.96. In the
application, the applicant estimated that the average Medicare
beneficiary would require an average dosage of 2500 International Units
(IU). Vials contain 500 IU at a cost of $635 per vial. Therefore, cases
of KcentraTM would incur an average cost per case of $3,175
($635 x 5). Under Sec. 412.88(a)(2), new technology add-on payments
are limited to the lesser of 50 percent of the average cost of the
technology or 50 percent of the costs in excess of the MS-DRG payment
for the case. As a result, the maximum add-on payment for a case of
KcentraTM is $1,587.50.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that, if
KcentraTM were to be approved for new technology add-on
payments, we did not believe such payments would be available with
respect to discharges for which the hospital receives an add-on payment
for blood clotting factor administered to a Medicare beneficiary with
hemophilia who is a hospital inpatient. Under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is ``the amount of the payment with respect to the
operating costs of inpatient hospital services (as defined in
subsection (a)(4) of this section)'' for discharges on or after April
1, 1988. Section 1886(a)(4) of the Act excludes from the term
``operating costs of inpatient hospital services'' the costs with
respect to administering blood clotting factors to individuals with
hemophilia. The costs of administering blood clotting factor to
Medicare beneficiaries who have hemophilia and are hospital inpatients
are paid separately from the IPPS. (For information on how the blood
clotting factor add-on payment is made, we refer readers to section
20.7.3 of Chapter Three of the Medicare Claims Processing Manual, which
can be downloaded from the CMS Web site at: http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we
stated that if KcentraTM is approved by the FDA as a blood
clotting factor, we believe that it may be eligible for blood clotting
factor add-on payments when administered to Medicare beneficiaries with
hemophilia. We would make an add-on payment for KcentraTM
for such discharges in accordance with our policy for payment of blood
clotting factor, and it would be excluded from the operating costs of
inpatient hospital services as set forth in section 1886(a)(4) of the
Act.
Section 1886(d)(5)(K)(i) of the Act requires the Secretary to
``establish a mechanism to recognize the costs of new medical services
and technologies under the payment system established under this
subsection'' beginning with discharges on or after October 1, 2001. We
believe that it is reasonable to interpret this requirement to mean
that the payment mechanism established by the Secretary recognizes only
costs for those items that would otherwise be paid based on the
prospective payment system (that is, ``the payment system established
under this subsection''). As noted above, under section
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective
payment rate is the amount of payment for the operating costs of
inpatient hospital services, as defined in section 1886(a)(4) of the
Act, for discharges on or after April 1, 1988. We understand this to
mean that a new medical service or technology must be an operating cost
of inpatient hospital services paid based on the prospective payment
system, and not excluded from such costs, in order to be eligible for
the new technology add-on payment. We point out that new technology
add-on payments are based on the operating costs per case relative to
the prospective payment rate as described in Sec. 412.88. Therefore,
we believe that new technology add-on payments are appropriate only
when the new technology is an operating cost of inpatient hospital
services and are not appropriate when the new technology is excluded
from such costs.
We stated that if KcentraTM were to be approved for new
technology add-on payments, we believe that hospitals may only receive
that add-on payment for discharges where KcentraTM is an
operating cost of inpatient hospital services. In other words, we do
not believe that a hospital could be eligible to receive the new
technology add-on payment when it is administering KcentraTM
in treating a Medicare beneficiary who has hemophilia. In those
instances, KcentraTM is specifically excluded from the
operating costs of inpatient hospital services in accordance with
section 1886(a)(4) of the Act and paid separately from the IPPS.
However, when a hospital administers KcentraTM to a Medicare
beneficiary who does not have hemophilia, the hospital could be
eligible for a new technology add-on payment because
KcentraTM would not be excluded from the operating costs of
inpatient hospital services. Therefore, we do not believe that
discharges where the hospital receives a blood clotting factor add-on
payment are eligible for a new technology add-on payment for the blood
clotting factor.
To summarize, we believe that it would be inappropriate to make an
add-on payment for new technology for a blood clotting factor when a
blood clotting factor add-on payment has been made. We invited public
comments on our proposal to only make new technology add-on payments
for KcentraTM in cases when it is included in the operating
costs of inpatient hospital services (that is, when no add-on payment
is made for blood clotting factor). We did not receive any public
comments concerning this proposal. Because we are approving new
technology add-on payments for KcentraTM, we are finalizing
our
[[Page 50580]]
proposal not to make a new technology add-on payment for cases of
KcentrawTM in treating a Medicare beneficiary who has
hemophilia. We refer readers to Chapter three, section 20.7.3 of the
Medicare Claims Processing Manual for a complete discussion on when a
blood clotting factor add-on payment is made. The manual can be
downloaded from the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
b. Argus[supreg] II Retinal Prosthesis System
Second Sight Medical Products, Inc. submitted an application for
new technology add-on payments for the Argus[supreg] II Retinal
Prosthesis System (Argus[supreg] II System) for FY 2014. The
Argus[supreg] II System is an active implantable medical device that is
intended to provide electrical stimulation of the retina to induce
visual perception in patients who are profoundly blind due to retinitis
pigmentosa (RP). These patients have bare or no light perception in
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally
worn video camera. The Argus[supreg] II implant is intended to be
implanted in a single eye, typically the worse-seeing eye. Currently,
bilateral implants are not intended for this technology. According to
the applicant, the surgical implant procedure takes approximately 4
hours and is performed under general anesthesia.
The Argus[supreg] II System consists of three primary components:
(1) An implant which is an epiretinal prosthesis that is fully
implanted on and in the eye (that is, there are no percutaneous leads);
(2) external components worn by the user; and (3) a ``fitting'' system
for the clinician that is periodically used to perform diagnostic tests
with the system and to custom-program the external unit for use by the
patient. We describe these components more fully below.
Implant: The retinal prosthesis implant is responsible for
receiving information from the external components of the system and
electrically stimulating the retina to induce visual perception. The
retinal implant consists of: (a) A receiving coil for receiving
information and power from the external components of the Argus[supreg]
II System; (b) electronics to drive stimulation of the electrodes; and
(c) an electrode array. The receiving coil and electronics are secured
to the outside of the eye using a standard scleral band and sutures,
while the electrode array is secured to the surface of the retina
inside the eye by a retinal tack. A cable, which passes through the eye
wall, connects the electronics to the electrode array. A pericardial
graft is placed over the extra-ocular portion on the outside of the
eye.
External Components: The implant receives power and data
commands wirelessly from an external unit of components, which include
the Argus II Glasses and Video Processing Unit (VPU). A small
lightweight video camera and transmitting coil are mounted on the
glasses. The telemetry coils and radio-frequency system are mounted on
the temple arm of the glasses for transmitting data from the VPU to the
implant. The glasses are connected to the VPU by a cable. This VPU is
worn by the patient, typically on a belt or a strap, and is used to
process the images from the video camera and convert the images into
electrical stimulation commands, which are transmitted wirelessly to
the implant.
``Fitting System'': To be able to use the Argus[supreg] II
System, a patient's VPU needs to be custom-programmed. This process,
which the applicant called ``fitting'', occurs in the hospital/clinic
shortly after the implant surgery and then periodically thereafter as
needed. The clinician/physician also uses the ``Fitting System'' to run
diagnostic tests (for example, to obtain electrode and impedance
waveform measurements or to check the radio-frequency link between the
implant and external unit). This ``Fitting System'' can also be
connected to a ``Psychophysical Test System'' to evaluate patients'
performance with the Argus[supreg] II System on an ongoing basis.
These three components work together to stimulate the retina and
allow a patient to perceive phosphenes (spots of light), which they
then need to learn to interpret. While using the Argus[supreg] II
System, the video camera on the patient-worn glasses captures a video
image. The video camera signal is sent to the VPU, which processes the
video camera image and transforms it into electrical stimulation
patterns. The electrical stimulation data are then sent to a
transmitter coil mounted on the glasses. The transmitter coil sends
both data and power via radio-frequency (RF) telemetry to the implanted
retinal prosthesis. The implant receives the RF commands and delivers
stimulation to the retina via an array of electrodes that is secured to
the retina with a retinal tack.
In patients with RP, the photoreceptor cells in the retina, which
normally transduce incoming light into an electro-chemical signal, have
lost most of their function. The stimulation pulses delivered to the
retina via the electrode array of the Argus[supreg] II Retinal
Prosthesis System are intended to mimic the function of these
degenerated photoreceptors cells. These pulses induce cellular
responses in the remaining, viable retinal nerve cells that travel
through the optic nerve to the visual cortex where they are perceived
as phosphenes (spots of light). Patients learn to interpret the visual
patterns produced by these phosphenes.
With respect to the newness criterion, according to the applicant,
the FDA designated the Argus[supreg] II System a Humanitarian Use
Device in May 2009 (HUD designation 09-0216). The applicant
submitted a Humanitarian Device Exemption (HDE) application
(H110002) to the FDA in May 2011 to obtain market approval for
the Argus[supreg] II System. The HDE was referred to the Ophthalmic
Devices Panel of the FDA's Medical Devices Advisory Committee for
review and recommendation. At the Panel's meeting held on September 28,
2012, the Panel voted 19 to 0 that the probable benefits of the
Argus[supreg] II System outweigh the risks of the system for the
proposed indication for use. The applicant received the HDE approval
from the FDA on February 14, 2013. Currently there are no other
approved treatments for patients with severe to profound RP. The
Argus[supreg] II System has an IDE number of G050001 and is a Class III
device. The applicant applied for three new ICD-9-CM procedure codes
for consideration at the March 5, 2013 ICD-9-CM Coordination and
Maintenance Committee meeting. For this final rule, we have approved
new ICD-9-CM procedure code 14.81 (Implantation of Epiretinal Visual
Prosthesis) which uniquely identifies the Argus [supreg]II System. The
other two codes approved by CMS are for removal, revision or
replacement of the device. More information on these codes can be found
on the CMS Web site at: http://cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2013-03-05-MeetingMaterials.html. We invited public comments on whether
the Argus[supreg] II System meets the newness criterion.
Comment: Many commenters expressed their opinion that the
Argus[supreg] II System meets the newness criterion. The commenters
noted that this technology is the first available treatment approved by
the FDA for profoundly blind RP patients, pointing out that it
``enables patients to interpret the visual patterns and gain
independence and mobility,'' which has not been possible previously for
these
[[Page 50581]]
patients with any other treatment modality. The commenters also noted
that the Argus[supreg] II System has not been sold in the United States
at this time.
Response: We appreciate the commenters' support. We agree that the
Argus[supreg]II System meets the newness criterion based on its FDA
approval date and due to the fact that we are unaware of any other
existing technologies that are substantially similar to it that would
allow Medicare beneficiaries with severe to profound Retinitis
Pigmentosa (RP) who have no vision to have some functional vision.
With regard to the cost criterion, the applicant identified all
discharges from claims in the FY 2011 MedPAR file for MS-DRGs 116
(Intraocular Procedures with CC/MCC) and 117 (Intraocular Procedures
without CC/MCC) with the presence of ICD-9-CM procedure code 14.73
(Anterior vitrectomy), or 14.74 (Posterior vitrectomy). (We note that
because no procedure code previously existed for this technology, these
cases would include patients that are not eligible for or would not
otherwise receive this technology.) The applicant found 199 cases (47.6
percent of all cases) in MS-DRG 116 and 219 cases (52.3 percent of all
cases) in MS-DRG 117. This resulted in an average charge per case of
$40,957 for MS-DRG 116 and $20,621 for MS-DRG 117, equating to a case-
weighted average charge per case of $24,011.
The applicant then standardized the charges using the FY 2011 final
rule impact file and converted the cost of the device to a charge by
dividing the operating costs by a CCR of 0.50 (which equates to a 100
percent markup). Although the applicant submitted data related to the
estimated cost of the Argus[supreg] II System, the applicant noted that
the cost of the technology was proprietary information. The applicant
then added the charges related to the device to the case-weighted
average standardized charge per case and determined a final case-
weighted average standardized charge per case of $311,180. Using the FY
2014 Table 10 thresholds, the case-weighted threshold for MS-DRGs 116
and 117 was $30,328 (all calculations above were performed using
unrounded numbers). Because the final case-weighted average
standardized charge per case for the applicable MS-DRGs exceed the
case-weighted threshold amount, the applicant maintained that the
Argus[supreg] II System would meet the cost criterion. We invited
public comments on whether the Argus[supreg] II System meets the cost
criterion, particularly based on the assumptions and methodology used
in the applicant's analysis. We did not receive any public comments
concerning the cost criterion and, therefore, we believe that the
Argus[supreg] II System meets the cost criterion.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that, although
we could not disclose the cost of the technology, the device is very
costly. Because of its high costs, the technology would easily exceed
the case-weighted threshold. In addition, because of the high cost of
the device it is likely that claims with the device would receive an
outlier payment. The applicant anticipates that approximately 65
Argus[supreg] II Systems will be sold in FY 2014, of which
approximately 50 systems would be provided to Medicare patients. The
target disease population is extremely limited as required and
supported by the HDE application. Most patients for whom this
technology is indicated may be eligible for Medicare based on their
age, blindness, or a disability that is associated with profound
blindness.
We also noted that these types of procedures are often performed in
the outpatient setting. We expressed concern that if new technology
add-on payments were to be approved, this would serve as a financial
incentive to inappropriately shift utilization from an outpatient to an
inpatient setting, although medical review may result in very few of
these cases being paid as inpatient hospital services if the patient
can be appropriately treated as an outpatient. We emphasized that it is
critical that physicians use their clinical judgment in determining the
medical necessity of an inpatient admission and stress that care should
be provided in the appropriate setting. We invited public comments on
whether the Argus[supreg] II System meets the cost criterion,
particularly based on the assumptions and methodology used in the
applicant's analysis. We also expressed general concerns relating to
the descriptions of the medical necessity of performing this procedure
on an inpatient basis. Therefore, we invited public comments to further
our understanding regarding whether approving new technology add-on
payments for the Argus[supreg] II System would create a financial
incentive that would shift utilization inappropriately from an
outpatient to an inpatient setting.
Comment: Some commenters stated that approving new technology add-
on payments for the Argus[supreg] II System would not create a
financial incentive for inappropriate inpatient utilization because
these patients are treated in both inpatient and outpatient settings.
These commenters stated that the complex clinical judgment of the
physician must be the basis for determining inpatient status and/or the
site of care. The commenters added that ``decisions on the appropriate
site of service must be based on the individual patient's health status
and expected treatment. . . .''
Response: We appreciate the commenters' input, feedback, and
opinions that the appropriate setting and appropriate patients should
be based on a complex clinical judgment of the physician and note that
this would need to be supported by clinical documentation in the
medical record to maintain appropriate use of inpatient and outpatient
care settings.
With regard to the substantial clinical improvement criterion, the
Argus[supreg] II System is intended to provide electrical stimulation
of the retina to induce visual perception in blind patients with the
indication of severe to profound RP with bare or no light perception in
both eyes. According to the applicant, an estimated 1 in 3,037
Americans suffers from RP, and the incidence of people with severe to
profound RP is significantly lower. According to the applicant, the
need for treatments for RP is high, given the impact of loss of vision.
According to the applicant, numerous experimental research programs
are currently underway to slow, stop, or reverse the progress of RP,
including gene therapy, tissue and cell transplants, and some
pharmacologic neuroprotection therapies. However, these approaches so
far have had fairly limited success in treating RP patients, and some
approaches are intended for an extremely small segment of the RP
population. Currently there are no other approved treatments for
patients with severe to profound RP. Therefore, the Argus[supreg] II
device treats a patient population that has no other treatment options.
The applicant submitted the results of a clinical trial to
demonstrate substantial clinical improvement. This clinical trial
enrolled 30 patients. The median age of patients was 57.9 years at the
time of implantation and the range was 28 to 77 years of age. Thirty
percent of the patients were female, and 70 percent were male. All of
the patients had bare or no light perception in both eyes. Fourteen of
the patients were Medicare eligible. As part of the methods for the
study, the applicant stated that while working within the framework of
clinical trials for other ophthalmic devices, the manufacturer and its
team of scientific advisors selected or designed several tests that
would address the main elements of the
[[Page 50582]]
system that should be assessed for these types of devices--visual
function (that is, how the eye as an organ works [for example, visual
acuity]), functional vision (that is, how the patient performs in
vision-related activities of daily living), and quality of life. The
endpoints that were selected provided a mixture of objective and
subjective data. The study design was strengthened by the fact that
controlled observations could be obtained by performing assessments
with the Argus[supreg] II System ``on'' and ``off'' (that is, control
was available at each time point).
According to the applicant, there were no unexpected adverse
events. Non-serious adverse events represented the majority of events.
The safety review concluded that the Argus[supreg] II System has a
reasonable safety profile for an ophthalmic device that requires
vitreoretinal surgery to implant. In addition, the applicant noted that
the device can be extracted and is reversible. The Argus[supreg] II
System provided all 30 patients with benefit as measured by high-
contrast visual function tests. The applicant stated that the degree of
benefit varied from patient to patient and provided the following
results:
All subjects were able to see visual percepts when the
Argus[supreg] II System was electrically activated.
On the Square Localization Test (that is, object
localization), patients (on average) performed better with the system
``on'' rather than ``off'' at all follow-up time points. At 24 months,
on average, patients missed the target by approximately 50 pixels with
the system ``on'' versus approximately 250 pixels with the system
``off.''
On the Direction of Motion Test, which tested the
patients' ability to determine the direction of a moving bar, patients
had higher mean accuracy with the system ``on'' than they did with the
system ``off'' at all follow-up time points, indicating that the
Argus[supreg] II System improved their performance on a spatial vision
task. At 24 months, the mean response error was approximately 60[deg]
with the system ``on'' versus more than 80[deg] with the system
``off.'' According to the applicant, this is nearly the error expected
by chance.
On the Grating Visual Acuity Test, which assessed the
patients' visual acuity using the principles of acuity charts designed
for extremely low vision patients, 27 percent of the patients were able
to score on the scale (between 1.6 and 2.9 log MAR) at least once with
the system ``on,'' while none of the Argus[supreg] II patients were
able to score on the scale with the system ``off.''
A large number of patients were able to recognize large
letters and numbers with the system ``on'' (but not with the system
``off''), and some of the patients were able to read short words. The
median percent correct with the system ``on'' was approximately 50
percent higher than with the system ``off.''
The trial also measured objectively-scored functional
vision tests. The patients performed better with the Argus[supreg] II
System ``on'' versus ``off'' on orientation and mobility tests (finding
a door and following a line) and on functional vision tasks (sorting
white, black, and gray socks, following an outdoor sidewalk, and
determining the direction of a person walking by).
Analysis of the Functional Low-vision Observer Rated
Assessment (FLORA) results showed that three-quarters of the patients
received a positive benefit in terms of well-being and/or functional
vision, while none of the patients experienced a negative effect.
We also noted that we were concerned that the study did not have
pre-specified endpoints and changed measurements mid-trial. In
addition, we expressed concern about the reliability of the measures
used for the tests and the inconsistency of the results across
different patients, which lead us to question the long-term benefits
associated with this device. We received two comments on the
Argus[supreg]II System during the town hall meeting's public comment
period. These comments were summarized and responded to in the FY 2014
IPPS/LTCH PPS proposed rule. We refer readers to the proposed rule for
a summary of these comments and our detailed responses (78 FR 27542
through 27543). In addition, we invited public comments on whether the
Argus[supreg] II System meets the substantial clinical improvement
criterion, specifically in regard to the measures used in the study and
the lack of pre-specified endpoints.
Comment: One commenter, the applicant, submitted a public comment
in response to CMS' concern about the lack of pre-specified end points
and evolving measures in their studies, noting that at the beginning of
its studies, ``it was clear that there was an absence of measures that
were validated for the intended treatment population (e.g., no
functional vision).'' The commenter noted that as the trial progressed,
new measures were introduced to address the applicability of clinical
results to everyday life, and measurements changed to make the testing
more challenging for the subjects (for example, with both the system
``off'' and ``on'') and to reduce the likelihood of success based on
chance. The applicant further stated that the selection and
modification of endpoint measures was done with a ``tremendous amount
of input from independent third party experts (ophthalmologists,
surgeons, optometrists, retinal degeneration specialists, and low
vision experts) and the FDA (and many times at the request of the
FDA).'' The applicant believed that ``the resulting trial design and
execution was the best possible trial for this target population given
the novelty of the Argus II Retinal Prosthesis System.'' The commenter
asserted that, ``Furthermore, the results of this study clearly
indicate a beneficial effect for the Argus[supreg]II.'' Another
commenter noted that because the target population for this technology
had not previously been studied, there were no pre-existing endpoints.
This commenter opined that the new instruments and methods added during
the study strengthened the results because they each added difficulty
to the tests. Another commenter supported the study design and
responded to our concerns that having no fixed endpoints or lack of
validation for some of the clinical trial measures is an inevitable
consequence of applying this new technology to a population that has
had no other options. This commenter expressed its opinion that the
measures needed to be designed, and refined, because very few tests
existed that could assess such limited vision in quantitative terms.
Response: We appreciate the commenters' views and explanation of
the study design, measures, and endpoints in light of the small and
rare population of patients with severe to profound Retinitis
Pigmentosa being studied for this Argus[supreg]II System. We agree with
the commenters that, in view of these difficulties that very few tests
existed that could assess such limited vision in quantitative terms for
this population of blind patients with the indication of severe to
profound RP with bare or no light perception in both eyes, the
applicant presented data that demonstrated that the Argus[supreg]II
System represents a substantial clinical improvement over existing
technologies.
The Argus[supreg]II System meets all of the new technology add-on
payment policy criteria. Therefore, we are approving the
Argus[supreg]II System for new technology add-on payments in FY 2014.
Cases involving the Argus[supreg]II System that are eligible for new
technology add-on payments will be identified by ICD-9-CM procedure
code 14.81. We note that section 1886(d)(5)(K)(i) of the Act requires
that the Secretary establish a
[[Page 50583]]
mechanism to recognize the costs of new medical services or
technologies under the payment system established under that
subsection, which establishes the system for paying for the operating
costs of inpatient hospital services. The system of payment for capital
costs is established under section 1886(g) of the Act, which makes no
mention of any add-on payments for a new medical service or technology.
Therefore, it is not appropriate to include capital costs in the add-on
payments for a new medical service or technology. In the application,
the applicant provided a breakdown of the costs of the Argus[supreg]II
System. The total operating cost of the Argus[supreg]II System is
$144,057.50. Under Sec. 412.88(a)(2), new technology add-on payments
are limited to the lesser of 50 percent of the average cost of the
device or 50 percent of the costs in excess of the MS-DRG payment for
the case. As a result, the maximum add-on payment for a case involving
the Argus[supreg]II System is $72,028.75.
c. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
Cook[supreg] Medical submitted an application for new technology
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The
Zilver[supreg] PTX[supreg] is intended for use in the treatment of
peripheral artery disease (PAD) of the above-the-knee femoropopliteal
arteries (superficial femoral arteries). According to the applicant,
the stent is percutaneously inserted into the artery(s), usually by
accessing the common femoral artery in the groin. The applicant stated
that an introducer catheter is inserted over the wire guide and into
the target vessel where the lesion will first be treated with an
angioplasty balloon to prepare the vessel for stenting. The applicant
indicated that the stent is self-expanding, made of nitinol (nickel
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug
approved for use as an anticancer agent and for use with coronary
stents to reduce the risk of renarrowing of the coronary arteries after
stenting procedures.
The applicant received FDA approval on November 15, 2012, for the
Zilver[supreg] PTX[supreg]. The applicant maintains that the
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for
superficial femoral arteries. The technology is currently described by
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of
the superficial femoral artery). We invited public comments regarding
how the Zilver[supreg] PTX[supreg] meets the newness criterion.
However, we did not receive any public comments concerning the newness
criterion and, therefore, we believe that the Zilver[supreg]
PTX[supreg] meets the newness criterion.
With regard to the cost criterion, the applicant believed that
cases of superficial femoral arteries typically map to MS-DRGs 252
(Other Vascular Procedures with MCC), 253 (Other Vascular Procedures
with CC), and 254 (Other Vascular Procedures without CC/MCC). The
applicant searched the FY 2010 MedPAR file for cases reporting
procedure code 39.90 (Insertion of non-drug-eluting peripheral vessel
stents) in combination with a diagnosis code of 440.20 (Atherosclerosis
of the extremities, unspecified), 440.21 (Atherosclerosis of the
extremities, with intermittent claudication), 440.22 (Atherosclerosis
of the extremities with rest pain), 440.23 (Atherosclerosis of the
extremities with ulceration), or 440.24 (Atherosclerosis of the
extremities with gangrene). The applicant noted that the Zilver[supreg]
PTX[supreg] is available in an 80 mm size and is approved for lesions
in native vascular disease of the above-the-knee femoropopliteal
arteries having reference vessel diameter from 4 mm to 9 mm and total
lesion lengths up to 140 mm per limb. The applicant further noted that
bare metal stents typically are available up to lengths of 200 mm.
Therefore, in order to target cases eligible for the Zilver[supreg]
PTX[supreg], the applicant believed that it was only appropriate to
target those cases with one or two bare metal stents. The applicant was
able to identify the amount of stents used per claim by searching for
ICD-9-CM procedure codes 00.45 (Insertion of one vascular stent) and
00.46 (Insertion of two vascular stents). The applicant submitted two
methodologies: one with cases that received one bare metal stent and
the other with cases that received one or two bare metal stents.
Under the first methodology (one bare metal stent), the applicant
found 2,062 cases (or 19.7 percent of all cases) in MS-DRG 252, 3,385
cases (or 32.3 percent of all cases) in MS-DRG 253, and 5,019 cases (or
48 percent of all cases) in MS-DRG 254. The average charge per case was
$89,194 for MS-DRG 252, $67,965 for MS-DRG 253, and $46,539 for MS-DRG
254, equating to a case-weighted average charge per case of $60,855.
The case-weighted average charge per case above does not include
charges related to the Zilver[supreg] PTX[supreg]. Therefore, it was
first necessary to remove the amount of charges related to the non-
drug-eluting peripheral vessel stent and replace them with charges
related to the Zilver[supreg] PTX[supreg]. The applicant multiplied the
use of the single stent used per case by the average market price for
non-drug-eluting peripheral vessel stents and then converted the cost
of the stents used per case to a charge by dividing the results by the
hospital-specific CCR (from the FY 2010 IPPS impact file). The
applicant removed the appropriate amount of charges per case and then
standardized the charges per case.
Because the applicant used FY 2010 MedPAR data, it was necessary to
inflate the charges from FY 2010 to FY 2013. Using data from the Bureau
of Labor Statistics Consumer Price Index, the applicant inflated the
average standardized charge per case with an inflation factor of 7
percent. To determine the amount of Zilver[supreg] PTX[supreg] stents
per case, instead of using the amount of stents used per case based on
the ICD-9-CM codes above, the applicant used an average of 1.9 stents
per case based on the Zilver[supreg] PTX[supreg] Global Registry
Clinical Study.\6\ The applicant believed that it is appropriate to use
data from the clinical study (to determine the average amount of stents
used per case) rather than the actual data from the claims because the
length of a non-drug-eluting peripheral vessel stent typically ranges
from 80 mm to 120 mm, while the length of the Zilver[supreg]
PTX[supreg] is 80 mm (which could cause a variance in the actual amount
of stents used per case when using the Zilver[supreg] PTX[supreg]). The
applicant then multiplied the average of 1.9 stents used per case by
the future market price for the Zilver[supreg] PTX[supreg] and then
converted the cost of the stents used per claim to a charge by dividing
the results by the hospital-specific CCR (from the FY 2010 IPPS impact
file). The applicant then added the amount of charges related to the
Zilver[supreg] PTX[supreg] to the inflated average standardized charge
per case and determined a final inflated case-weighted average
standardized charge per case of $58,419. Although the applicant
submitted data that related to the estimated cost of the Zilver[supreg]
PTX[supreg], the applicant noted that the cost of the technology was
proprietary information. Using the FY 2014 Table 10 thresholds, the
case-weighted threshold for MS-DRGs 252, 253, and 254 was $54,547 (all
calculations above were performed using unrounded numbers). Because the
final inflated case-weighted average
[[Page 50584]]
standardized charge per case for the applicable MS-DRGs exceeded the
case-weighted threshold amount, the applicant maintained that the
Zilver[supreg] PTX[supreg] would meet the cost criterion.
---------------------------------------------------------------------------
\6\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S., Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S. (2011),
Paclitaxel-eluting stents show superiority to balloon angioplasty
and bare metal stents in femoropopliteal disease: twelve-month
zilver PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------
The applicant used the same methodology above to demonstrate that
it meets the cost criterion with the only difference being that it
included cases that used one or two bare metal stents instead of just
one bare metal stent. Using this methodology, the applicant determined
a final inflated case-weighted average standardized charge per case of
$62,455. Using the FY 2014 Table 10 thresholds, the case-weighted
threshold for MS-DRGs 252, 253, and 254 was $54,474 (all calculations
above were performed using unrounded numbers). Because the final
inflated case-weighted average standardized charge per case for the
applicable MS-DRGs exceeded the case-weighted threshold amount, the
applicant maintained that the Zilver[supreg] PTX[supreg] would meet the
cost criterion.
We invited public comments on whether or not the Zilver[supreg]
PTX[supreg] meets the cost criterion. In addition, we invited public
comments on the methodologies used by the applicant in its analysis,
including its assumptions regarding the types of cases in which this
technology could potentially be used and the number of stents required
for each case. However, we did not receive any public comments
concerning the cost criterion and, therefore, we believe that the
Zilver[supreg] PTX[supreg] meets the cost criterion.
In an effort to demonstrate that the technology meets the
substantial clinical improvement criterion, the applicant shared
several findings from the clinical trial data. The applicant stated
that current treatment options for patients who have been diagnosed
with PAD includes angioplasty, bare metal stenting, bypass graft, and
endarterectomy. The applicant asserted that the Zilver[supreg]
PTX[supreg] meets the substantial clinical improvement criterion
because it decreases the recurrence of symptoms arising from restenotic
SFA lesions, the rate of subsequent diagnostic or therapeutic
interventions required to address restenotic lesions, and the number of
future hospitalizations.
The applicant cited a 479-patient, multicenter, multinational
randomized controlled trial that compared the Zilver[supreg]
PTX[supreg] to balloon angioplasty \7\; an additional component of the
study allowed a direct comparison of the Zilver[supreg] PTX[supreg] to
a bare (uncoated) metal Zilver[supreg] stent. Patients were randomized
to treatment with the Zilver[supreg] PTX[supreg] stent (treatment
group) or with a percutaneous transluminal balloon angioplasty (PTA,
control group). Recognizing that balloon angioplasty may not be
successful acutely, the trial design mandated provisional stent
placement immediately after failure of balloon angioplasty in instances
of acute PTA failure. Therefore, patients with suboptimal (failed) PTA
underwent a secondary randomization to stenting with either
Zilver[supreg] PTX[supreg] or bare Zilver[supreg] stents. This
secondary randomization allows evaluation of the Zilver[supreg]
PTX[supreg] stent compared to a bare metal stent. The primary safety
endpoint of the randomized controlled study was ``Event-Free Survival''
(EFS), defined as ``freedom from the major adverse events of death,
target lesion revascularization, target limb ischemia requiring
surgical intervention or surgical repair of the target vessel, and
freedom of worsening systems as described by the Rutherford
classification by 2 classes or to class 5 or 6.'' The primary
effectiveness endpoint was primary patency (defined as a less than 50
percent re-narrowing). In the FY 2014 IPPS/LTCH PPS proposed rule, we
noted that we were concerned that other endpoints such as walking,
walking speed, and climbing were not considered as primary endpoints to
demonstrate the effectiveness of the Zilver[supreg] PTX[supreg].
---------------------------------------------------------------------------
\7\ Dake, M.D., Ansel, G.M., Jaff, M.R., Ohki, T., Saxon, R.R.,
Smouse, H.B., Zeller, T., Roubin, G.S.,Burket, M.W., Khatib, Y.,
Snyder, S.A., Ragheb, A.O., White, J.K., Machan, L.S.(2011),
Paclitaxeleluting stents show superiority to balloon angioplasty and
bare metal stents in femoropopliteal disease: twelve-month zilver
PTX randomized study results. Circulation Cardiovascular
Interventions, published online September 27, 2011, 495-504.
---------------------------------------------------------------------------
According to the applicant, the Zilver[supreg] PTX[supreg] had an
EFS of 90.4 percent compared to balloon angioplasty, which had an EFS
of 83.9 percent, at 12 months demonstrating that the Zilver[supreg]
PTX[supreg] is as safe or safer than balloon angioplasty. The applicant
further stated that this benefit was maintained at 24 months. In
addition, the applicant noted that the Zilver[supreg] PTX[supreg]
demonstrated a 50-percent reduction in restenosis rates compared to
angioplasty and a 20-percent reduction compared to bare metal stents.
The 12-month patency rate for the Zilver[supreg] PTX[supreg] was 82.7
percent, which compared favorably to the balloon angioplasty patency
rate of 32.7 percent. In the provisional stenting arm of the study,
which allowed a direct comparison of the Zilver[supreg] PTX[supreg] and
a bare metal stent, the Zilver[supreg] PTX[supreg] primary patency
exceeded the bare metal stent patency by nearly 20 percent (87.3
percent versus 72.3 percent at 12 months). The applicant stated that
these differences are significant, as they result in a substantial
clinical improvement compared to angioplasty and bare metal stenting,
with patients being spared a recurrence of their leg pain and the need
to be admitted to the hospital for repeat procedures on these treated
lesions. The applicant also submitted 3 years of follow-up data, which
the applicant maintained support that the Zilver[supreg] PTX[supreg] is
more effective in maintaining primary patency.\8\
---------------------------------------------------------------------------
\8\ Dake, MD., VIVA 2012, October 10, 2012; Las Vegas, Nevada.
---------------------------------------------------------------------------
The applicant also cited a prospective, multicenter, multinational,
787-patient single arm study on the Zilver[supreg] PTX[supreg] that
demonstrated similar safety and effectiveness results consistent with
those from the pivotal randomized controlled study above. The applicant
cited an EFS for the Zilver[supreg] PTX[supreg] of 89.0 percent and an
86.2 percent primary patency rate. According to the applicant, these
results confirm the safety and effectiveness of the Zilver[supreg]
PTX[supreg], and compare favorably to current results for angioplasty
and bare metal stenting. The applicant further stated that these
results also demonstrate a 67 to 81 percent relative reduction in
Target Lesion Revascularization (the need to retreat an already treated
lesion that has restenosed, resulting in a recurrence of symptoms)
rates compared to recently published results of contemporary bare metal
stents.\9\
---------------------------------------------------------------------------
\9\ Dake, M. D., Scheinert, D., Tepe, G., Tessarek, J., Fanelli,
F., Bosiers, M., et al., (2011). Nitinol stents with polymer-free
paclitaxel coating for lesions in the superficial femoral and
popliteal arteries above the knee: Twelve-month safety and
effectiveness results from the Zilver PTX single-arm clinical study.
Journal of Endovascular Therapy, 18(5), 613-623.
---------------------------------------------------------------------------
In the FY 2014 IPPS/LTCH PPS proposed rule, we also expressed
concern that on April 24, 2013, the FDA announced that, based on its
investigation into a small number of complaints that the delivery
system of the device had separated at the tip of the inner catheter,
Cook Medical has initiated a nationwide/global voluntary recall of its
Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent. We refer
readers to http://www.fda.gov/Safety/Recalls/ucm349421.htm?source=govdelivery for more information regarding this
announcement.
We note that we did not receive any public comments on the
Zilver[supreg] PTX[supreg] during the new technology town hall
meeting's public comment period. However, we invited public comments
[[Page 50585]]
regarding whether the Zilver[supreg] PTX[supreg] meets the substantial
clinical improvement criterion.
Comment: One commenter, the manufacturer and applicant, submitted a
public comment responding to our concerns presented in the proposed
rule. With regard to our first concern that other endpoints such as
walking, walking speed, and climbing were not considered as primary
endpoints, the manufacturer noted that in addition to the primary
endpoint of primary patency at 12 months, the study investigators (for
the Zilver[supreg] PTX[supreg] Global Registry Clinical Study)
understood the importance of including other effective endpoints in the
study. Specifically, the commenter noted that the study included
Rutherford classification, walking ability, and quality of life. Also,
a composite clinical endpoint defined as ``freedom from symptoms of
ischemia'' was calculated based on freedom from worsening claudication,
worsening Rutherford class, tissue loss, and other symptoms indicating
the need for reintervention.
The commenter added that similar improvements in the Rutherford
score, and walking and quality of life scores were observed in both the
PTA control and Zilver[supreg] PTX[supreg] treatment groups of the
Zilver[supreg] PTX[supreg] Global Registry Clinical Study. The
commenter noted that the study was designed to allow ongoing,
clinically indicated care to optimize each patient's health status and
quality of life throughout the course of the study, which would result
in improved clinical outcomes. The commenter asserted that while
allowing for ongoing care within the clinical trial, the study design
confounded the comparison of clinical benefit between the PTA control
and Zilver[supreg] PTX[supreg] treatment groups due to the additional
study and/or non-study related procedures that were performed during
the study and subsequent to the index procedure(s). The commenter
concluded that this confounding aspect of the study design, though in
the patient's best interest, argued against using these clinical
effectiveness endpoints as primary endpoints.
The commenter also explained that because these standard clinical
effectiveness outcomes were not ideally suited to discriminate
differences between treatment arms in clinical trial, a secondary
clinical benefit index of freedom from symptoms of ischemia was
calculated (as described above). The commenter believed that measuring
freedom from symptoms of ischemia provides an important measure of
clinical benefit of the Zilver[supreg] PTX[supreg]. The commenter noted
that freedom from symptoms of ischemia was maintained in 88.5 percent
of the Zilver[supreg] PTX[supreg] treatment group at 12 month versus
75.3 percent of PTA control group patients. The commenter also pointed
out that at the time of submission of the application, only 12-month
data had been published in the peer review literature. Since that time,
the 2-year safety and effectiveness outcomes have been published \10\
and can be accessed on the Internet at: http://www.sciencedirect.com/science/article/pii/S0735109713014149.
---------------------------------------------------------------------------
\10\ Dake, M. D., Ansel, G. M., Jaff, M. R., Takao, O., Saxon,
R. R., Smouse, H. B., Snyder, S. A., O'leary, E. E., Tepe, G.,
Scheinert, D., Zeller, T., (June 18, 2013) Sustained Safety and
Effectiveness of Paclitaxel-Eluting Stents for Femoropopliteal
Leasions: 2 Year-Follow-Up from the Zilver PTX Randomized and
Single-Arm Clinical Studies. Journal of American College of
Cardiology, Vol. 61, Issue 24.
---------------------------------------------------------------------------
With regard to our concerns concerning the recall of the device,
the commenter stated that it has ``identified the root cause of the
underlying failure mode to the delivery device and corrective action
has been implemented'' with the anticipated return of the
Zilver[supreg] PTX[supreg] to the market in early August 2013. The
commenter noted that there are no issues with the Zilver[supreg]
PTX[supreg] itself, only the delivery system to implant the
Zilver[supreg] PTX[supreg].
Response: After consideration of the public comments received in
response to our concerns and proposals presented in the proposed rule,
we agree that the Zilver[supreg] PTX[supreg] represents a substantial
clinical improvement over existing technologies because it decreases
the recurrence of symptoms arising from restenotic SFA lesions, the
rate of subsequent diagnostic or therapeutic interventions required to
address restenotic lesions, and the number of future hospitalizations.
We also believe that the commenter has sufficiently responded to our
concerns presented in the proposed rule. However, we will continue to
monitor the long-term clinical trial data concerning the primary and
secondary endpoints as it becomes available.
Comment: Several commenters supported making new technology add-on
payments for the Zilver[supreg] PTX[supreg] in FY 2014.
Response: We appreciate the commenters' support. The Zilver[supreg]
PTX[supreg] meets all of the new technology add-on payment policy
criteria. Therefore, we are approving the Zilver[supreg] PTX[supreg]
for new technology add-on payments in FY 2014. Cases involving the
Zilver[supreg] PTX[supreg] that are eligible for new technology add-on
payments will be identified by ICD-9-CM procedure code 00.60. As stated
above, to determine the amount of Zilver[supreg] PTX[supreg] stents per
case, instead of using the amount of stents used per case based on the
ICD-9-CM codes, the applicant used an average of 1.9 stents per case
based on the Zilver[supreg] PTX[supreg] Global Registry Clinical Study.
The applicant stated in its application that the anticipated cost per
stent is approximately $1,795. Therefore, cases of the Zilver[supreg]
PTX[supreg] would incur an average cost per case of $3,410.50 ($1,795 x
1.9). Under Sec. 412.88(a)(2), new technology add-on payments are
limited to the lesser of 50 percent of the average cost of the device
or 50 percent of the costs in excess of the MS-DRG payment for the
case. As a result, the maximum add-on payment for a case of the
Zilver[supreg] PTX[supreg] is $1,705.25.
III. Changes to the Hospital Wage Index for Acute Care Hospitals
A. Background
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary adjust the standardized amounts ``for area differences in
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level.'' We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the FY 2014 hospital wage index based on the
statistical areas appears under section III.B. of the preamble of this
final rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. This provision
also requires that any updates or adjustments to the wage index be made
in a manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The adjustment for FY 2014 is
discussed in section II.B. of the Addendum to this final rule.
As discussed below in section III.H. 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),
[[Page 50586]]
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The budget neutrality adjustment for FY 2014 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, 2013 (the FY 2014 wage index) appears under
section III.F. of the preamble of this final rule.
B. 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. 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. The current statistical areas are based on
OMB standards published on December 27, 2000 (65 FR 82228) and Census
2000 data and Census Bureau population estimates for 2007 and 2008 (OMB
Bulletin No. 10-02). For a discussion of OMB's delineations of CBSAs
and our implementation of the CBSA definitions, we refer readers to the
preamble of the FY 2005 IPPS final rule (69 FR 49026 through 49032). We
also discussed in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582)
and the FY 2013 IPPS/LTCH PPS final rule (77 FR 53365) that, in 2013,
OMB planned to announce new area delineations based on new standards
adopted in 2010 (75 FR 37246) and the 2010 Census of Population and
Housing data. As stated in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27552), on February 28, 2013, OMB issued OMB Bulletin No. 13-01,
which established revised delineations for Metropolitan Statistical
Areas, Micropolitan Statistical Areas, and Combined Statistical Areas,
and provided guidance on the use of the delineations of these
statistical areas. A copy of this bulletin may be obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf.
According to OMB, ``[t]his bulletin provides the delineations of all
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan
Statistical Areas, Combined Statistical Areas, and New England City and
Town Areas in the United States and Puerto Rico based on the standards
published on June 28, 2010, in the Federal Register (75 FR 37246-37252)
and Census Bureau data.''
In order to implement these changes for the IPPS, it is necessary
to identify the new area designation for each county and hospital in
the country. While the revisions OMB published on February 28, 2013 are
not as sweeping as the changes OMB announced in 2003, the February 28,
2013 bulletin does contain a number of significant changes. For
example, there are new CBSAs, urban counties that become rural, rural
counties that become urban, and existing CBSAs that have been split
apart. In addition, the effect of the new designations on various
hospital reclassifications, the out-migration adjustment (established
by section 505 of Pub. L. 108-173), and treatment of hospitals located
in certain rural counties (that is, ``Lugar'' hospitals) provided for
under section 1886(d)(8)(B) of the Act must be considered. These are
just a few of the many issues that need to be considered regarding the
effects of the new designations prior to proposing and establishing
policies.
However, because the bulletin was not issued until February 28,
2013, with supporting data not available until later, and because the
changes made by the bulletin and their ramifications must be
extensively reviewed and verified, we were unable to undertake such a
lengthy process before publication of the FY 2014 IPPS/LTCH PPS
proposed rule. By the time the bulletin was issued, the FY 2014 IPPS/
LTCH PPS proposed rule was in the advanced stages of development. We
had already developed the FY 2014 proposed wage index based on the
previous OMB definitions. We note that, in June 2003, OMB announced
changes resulting from the 2000 Census, and at that time, CMS proposed
and implemented the changes during the following year's rulemaking
cycle for FY 2005. Although OMB published the data earlier than June
this year, we still are in essentially the same situation as we were in
2003 because the data are not available in time to be incorporated into
this year's rulemaking cycle. To allow for sufficient time to assess
the new changes and their ramifications, we intend to propose changes
to the wage index based on the newest CBSA changes in the FY 2015
proposed rule. We refer readers to the FY 2005 IPPS final rule (69 FR
49026 through 49034) for those interested in learning about the issues
we may need to address next year in proposing to implement the latest
OMB update for FY 2015, and some of the policy decisions that we may
consider making.
Comment: Several commenters recommended that, if CMS were to
implement OMB's MSAs in the FY 2015 final rule, the newly adopted
definitions should not be effective until FY 2016, and even then, CMS
should phase in the new MSAs. Other commenters specifically stated that
CMS should provide a 3-year ``hold harmless'' period for those
hospitals that maintain a specific status under the Medicare program
that is jeopardized by changes to the MSAs. For example, two commenters
suggested that rural hospitals that currently qualify for MDH and SCH
status should be protected from the negative financial consequences of
a change to urban status. Several other commenters urged CMS to hold an
open-door call to review the CMSA changes and outline for hospitals
what may or may not be the next steps for CMS as it plans to proceed,
similar to the 2003 process. One commenter suggested that the Secretary
allow rural teaching hospitals that will be redesignated to urban to
start a new residency training program, and under the GME rules
specific to rural hospitals, allow the hospital to count the FTEs for
an additional time period of 2 years.
Response: We appreciate the comments made by the commenters. As we
indicated in the proposed rule, we intend to assess these new
definitions, which require extensive review and verification to
identify the new area designation for each county and hospital in the
county, before adopting them. Any changes would be made through notice-
and-comment rulemaking. We will address the concerns raised in these
comments and other issues at part of the FY 2015 rulemaking process.
C. Worksheet S-3 Wage Data for the FY 2014 Wage Index
The FY 2014 wage index values are based on the data collected from
the Medicare cost reports submitted by hospitals for cost reporting
periods beginning in FY 2010 (the FY 2013 wage indices were based on
data from cost reporting periods beginning during FY 2009).
1. Included Categories of Costs
The FY 2014 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);
[[Page 50587]]
Home office costs and hours;
Certain contract labor costs and hours (which includes
direct patient care, certain top management, pharmacy, laboratory, and
nonteaching physician Part A services, and certain contract indirect
patient care services (as discussed in the FY 2008 final rule with
comment period (72 FR 47315 through 47318)); and
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
Consistent with the wage index methodology for FY 2013, the wage
index for FY 2014 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
2014 wage index also excludes the salaries, hours, and wage-related
costs of hospital-based rural health clinics (RHCs), and Federally
qualified health centers (FQHCs) because Medicare pays for these costs
outside of the IPPS (68 FR 45395). In addition, salaries, hours, and
wage-related costs of CAHs are excluded from the wage index, for the
reasons explained in the FY 2004 IPPS final rule (68 FR 45397 through
45398).
3. Use of Wage Index Data by Providers Other Than Acute Care Hospitals
under the IPPS
Data collected for the IPPS wage index are also currently used to
calculate wage indices applicable to other providers, such as SNFs,
home health agencies (HHAs), and hospices. In addition, they are used
for prospective payments to IRFs, IPFs, and LTCHs, and for hospital
outpatient services. We note that, in the IPPS rules, we do not address
comments pertaining to the wage indices for non-IPPS providers, other
than for LTCHs. Such comments should be made in response to separate
proposed rules for those providers.
D. Verification of Worksheet S-3 Wage Data
The wage data for the FY 2014 wage index were obtained from
Worksheet S-3 of the Medicare cost report for cost reporting periods
beginning on or after October 1, 2009, and before October 1, 2010. For
wage index purposes, we refer to cost reports during this period as the
``FY 2010 cost report,'' the ``FY 2010 wage data,'' or the ``FY 2010
data.'' Instructions for completing the wage index sections of
Worksheet S-3 are included in the Provider Reimbursement Manual (PRM),
Part 2 (Pub. No. 15-2), Chapter 36, Sections 3605.2 and 3605.3 for Form
CMS-2552-96 and Chapter 40, Sections 4005.2 through 4005.4 for Form
CMS-2552-10. Hospitals with cost reporting periods beginning on or
after October 1, 2009 and before May 1, 2010 reported FY 2010 data on
Form CMS-2552-96. Hospitals with cost reporting periods beginning on or
after May 1, 2010 and before October 1, 2010 reported FY 2010 data on
the new Form CMS-2552-10. The data file used to construct the final FY
2014 wage index includes FY 2010 data submitted to us as of June 26,
2013. As in past years, we performed an extensive review of the wage
data, mostly through the use of edits designed to identify aberrant
data.
We asked our fiscal intermediaries/MACs to revise or verify data
elements that result in specific edit failures. For the proposed FY
2014 wage index, we identified and excluded 43 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 are corrected,
we intended to include some of these providers in the final FY 2014
wage index. (We note that in the FY 2014 IPPS/LTCH PPS proposed rule,
we inadvertently stated that we excluded 44 providers.) We have
received corrected data for 11 providers, and therefore, we are
including the data for these 11 providers in the final FY 2014 wage
index. Therefore, in total, we are excluding the data of 32 providers
from the final FY 2014 wage index.
In constructing the proposed FY 2014 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2010, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages. However, we excluded the wage data for CAHs as discussed in the
FY 2004 IPPS final rule (68 FR 45397 through 45398). For the proposed
rule, we removed 4 hospitals that converted to CAH status on or after
February 14, 2012, the cut-off date for CAH exclusion from the FY 2013
wage index, and through and including February 14, 2013, the cut-off
date for CAH exclusion from the FY 2014 wage index. After removing
hospitals with aberrant data and hospitals that converted to CAH
status, the final FY 2014 wage index is calculated based on 3,440
hospitals.
For the final FY 2014 wage index, we allotted the wages and hours
data for a multicampus hospital among the different labor market areas
where its campuses are located in the same manner that we allotted such
hospitals' data in the FY 2013 wage index (77 FR 53366). Table 2
containing the FY 2014 wage index associated with this final rule
(available on the CMS Web site) includes separate wage data for the
campuses of six multicampus hospitals (two additional multicampus
hospitals have been added to the wage index calculation for FY 2014).
E. Method for Computing the FY 2014 Unadjusted Wage Index
The method used to compute the FY 2014 wage index without an
occupational mix adjustment follows the same methodology that we used
to compute the FY 2012 final wage index without an occupational mix
adjustment (76 FR 51591 through 51593) and which we discussed and used
for the FY 2013 final wage index without an occupational mix adjustment
(77 FR 53366 through 53367).
As discussed in the FY 2012 final rule, in ``Step 5,'' for each
hospital, we adjust the total salaries plus wage-related costs to a
common period to determine total adjusted salaries plus wage-related
costs. To make the wage adjustment, we estimate the percentage change
in the employment cost index (ECI) for compensation for each 30-day
increment from October 14, 2009, through April 15, 2011, for private
industry hospital workers from the BLS' Compensation and Working
Conditions. We have consistently used the ECI as the data source for
our wages and salaries and other price proxies in the IPPS market
basket, and as we proposed, we are not making any changes to the usage
for FY 2014. 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
------------------------------------------------------------------------
10/14/2009.................................... 11/15/2009 1.02682
11/14/2009.................................... 12/15/2009 1.02490
12/14/2009.................................... 01/15/2010 1.02299
[[Page 50588]]
01/14/2010.................................... 02/15/2010 1.02116
02/14/2010.................................... 03/15/2010 1.01941
03/14/2010.................................... 04/15/2010 1.01768
04/14/2010.................................... 05/15/2010 1.01591
05/14/2010.................................... 06/15/2010 1.01412
06/14/2010.................................... 07/15/2010 1.01235
07/14/2010.................................... 08/15/2010 1.01064
08/14/2010.................................... 09/15/2010 1.00898
09/14/2010.................................... 10/15/2010 1.00738
10/14/2010.................................... 11/15/2010 1.00584
11/14/2010.................................... 12/15/2010 1.00434
12/14/2010.................................... 01/15/2011 1.00288
01/14/2011.................................... 02/15/2011 1.00143
02/14/2011.................................... 03/15/2011 1.00000
03/14/2011.................................... 04/15/2011 0.99860
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2010, and ending December 31, 2010, is June 30, 2010. An
adjustment factor of 1.01235 would be applied to the wages of a
hospital with such a cost reporting period.
Using the data as described above and in the FY 2013 IPPS/LTCH PPS
final rule, the FY 2014 national average hourly wage (unadjusted for
occupational mix) is $38.3998. The FY 2014 Puerto Rico overall average
hourly wage (unadjusted for occupational mix) is $16.4890.
F. Occupational Mix Adjustment to the FY 2014 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 2014 Occupational Mix Adjustment
Based on the 2010 Occupational Mix Survey
As provided for under section 1886(d)(3)(E) of the Act, we collect
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
As discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53367
through 53368), the occupational mix adjustment to the FY 2013 wage
index was based on data collected on the 2010 Medicare Wage Index
Occupational Mix Survey (Form CMS-10079 (2010)). For the FY 2014 wage
index, as we proposed, we are again using occupational mix data
collected on the 2010 survey to compute the occupational mix adjustment
for FY 2014. We are including data for 3,201 hospitals that also have
wage data included in the FY 2014 wage index.
2. New 2013 Occupational Mix Survey for the FY 2016 Wage Index
As stated earlier, section 304(c) of Public Law 106-554 amended
section 1886(d)(3)(E) of the Act to require CMS to collect data every 3
years on the occupational mix of employees for each short-term, acute
care hospital participating in the Medicare program. We used
occupational mix data collected on the 2010 survey to compute the
occupational mix adjustment for FY 2013 and the FY 2014 wage index
associated with this final rule. We also plan to use the 2010 survey
data for the FY 2015 wage index. Therefore, a new measurement of
occupational mix will be required for FY 2016.
On December 7, 2012, we published in the Federal Register a notice
soliciting comments on the proposed 2013 Medicare Wage Index
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013
survey, which will be applied to the FY 2016 wage index, includes the
same data elements and definitions as the 2010 survey and provides for
the collection of hospital-specific wages and hours data for nursing
employees for calendar year 2013 (that is, payroll periods ending
between January 1, 2013 and December 31, 2013). The comment period for
the notice ended on February 5, 2013. After considering the public
comments that we received on the December 2012 notice, we made a few
minor editorial changes and published the 2013 survey in the Federal
Register on February 28, 2013 (78 FR 13679). This survey was approved
by OMB on May 14, 2013, and is available on the CMS Web site at: http://www.cms.hhs.gov/PaperworkReductionActof1995 by clicking on ``PRA
Listings.'' (The OMB control number for this collection of information
is 0938-0907.) Hospitals are required to submit their completed 2013
surveys to their fiscal intermediaries/MACs by July 1, 2014. The
preliminary, unaudited 2013 survey data will be released afterward,
along with the FY 2012 Worksheet S-3 wage data, for the FY 2016 wage
index review and correction process. The 2013 Occupational Mix Survey
Hospital Form and Instructions and Definitions are available on the CMS
Web site at: http://cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html.
3. Calculation of the Occupational Mix Adjustment for FY 2014
For FY 2014, we calculated the occupational mix adjustment factor
using the same methodology that we used for the FY 2012 and FY 2013
wage indices (76 FR 51582 through 51586, and 77 FR 53367 through 53368,
respectively). As a result of applying this methodology, the FY 2014
occupational mix adjusted national average hourly wage is $38.3698. The
FY 2014 occupational mix adjusted Puerto Rico-specific average hourly
wage is $16.5319.
Because the occupational mix adjustment is required by statute, all
hospitals that are subject to payments under the IPPS, or any hospital
that would be subject to the IPPS if not granted a waiver, must
complete the occupational mix survey, unless the hospital has no
associated cost report wage data that are included in the FY 2014 wage
index. For the FY 2010 survey, the response rate was 91.7 percent. In
the FY 2014 wage index established in this final rule, we applied proxy
data for noncompliant hospitals, new hospitals, or hospitals that
submitted erroneous or aberrant data in the same manner that we applied
proxy data for such hospitals in the FY 2012 wage index occupational
mix adjustment (76 FR 51586).
In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR
23943 and 75 FR 50167, respectively), we stated that, in order to gain
a better understanding of why some hospitals are not submitting the
occupational mix data, we will require hospitals that do not submit
occupational mix data to provide an explanation for not complying. This
requirement was effective beginning with the 2010 occupational mix
survey. We instructed fiscal intermediaries/MACs to continue gathering
this information as part of the FY 2014 wage index desk review process.
We will review these data for future analysis and consideration of
potential penalties for noncompliant hospitals.
[[Page 50589]]
G. Analysis and Implementation of the Occupational Mix Adjustment and
the FY 2014 Occupational Mix Adjusted Wage Index
1. Analysis of the Occupational Mix Adjustment and the Occupational Mix
Adjusted Wage Index
As discussed in section III.F. of this preamble, for FY 2014, we
apply the occupational mix adjustment to 100 percent of the FY 2014
wage index. We calculated the final occupational mix adjustment using
data from the 2010 occupational mix survey data, using the methodology
described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51582 through
51586).
Using the occupational mix survey data and applying the
occupational mix adjustment to 100 percent of the FY 2014 wage index
results in a national average hourly wage of $38.3698 and a Puerto-Rico
specific average hourly wage of $16.5319. After excluding data of
hospitals that either submitted aberrant data that failed critical
edits, or that do not have FY 2010 Worksheet S-3, Parts II and III,
cost report data for use in calculating the FY 2014 wage index, we
calculated the FY 2014 wage index using the occupational mix survey
data from 3,201 hospitals. Using the Worksheet S-3, Parts II and III,
cost report data of 3,440 hospitals and occupational mix survey data
from 3,201 hospitals represents a 93.1 percent survey response rate.
The FY 2014 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............................................. 37.430602011
National LPN and Surgical Technician.................... 21.771626577
National Nurse Aide, Orderly, and Attendant............. 15.323325633
National Medical Assistant.............................. 17.2056709
National Nurse Category................................. 31.80354668
------------------------------------------------------------------------
The national average hourly wage for the entire nurse category as
computed in Step 5 of the occupational mix calculation is $31.80354668.
Hospitals with a nurse category average hourly wage (as calculated in
Step 4) of greater than the national nurse category average hourly wage
receive an occupational mix adjustment factor (as calculated in Step 6)
of less than 1.0. Hospitals with a nurse category average hourly wage
(as calculated in Step 4) of less than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of greater than 1.0.
Based on the 2010 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) that the national
percentage of hospital employees in the nurse category is 43.45
percent, and the national percentage of hospital employees in the all
other occupations category is 56.55 percent. At the CBSA level, the
percentage of hospital employees in the nurse category ranged from a
low of 21.9 percent in one CBSA, to a high of 62.0 percent in another
CBSA.
We compared the FY 2014 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 (66.7 percent)
rural areas will increase. One hundred and twenty (30.7 percent) urban
areas will increase by 1 percent or more, and 4 (1.02 percent) urban
areas will increase by 5 percent or more. Thirteen (27.1 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 182
(46.5 percent) urban areas and 16 (33.3 percent) rural areas will
decrease. Eighty (20.5 percent) urban areas will decrease by 1 percent
or more, and 1 urban area will decrease by 5 percent or more (0.26
percent). Seven (14.6 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 6.61 percent for an urban area and 2.64
percent for a rural area. The largest negative impacts are 5.28 percent
for an urban area and 3.17 percent for a rural area. Four urban areas'
wage indices, but no rural area wage indices, will remain unchanged by
application of the occupational mix adjustment. These results indicate
that a larger percentage of rural areas (66.7 percent) will benefit
from the occupational mix adjustment than will urban areas (52.4
percent). However, approximately one-third (33.3 percent) of rural
CBSAs will still experience a decrease in their wage indices as a
result of the occupational mix adjustment.
2. Application of the Rural, Imputed, and Frontier Floors
a. Rural Floor
Section 4410(a) of Public Law 105-33 provides that, for discharges
on or after October 1, 1997, the area wage index applicable to any
hospital that is located in an urban area of a State may not be less
than the area wage index applicable to hospitals located in rural areas
in that State. This provision is referred to as the ``rural floor.''
Section 3141 of Public Law 111-148 also requires that a national budget
neutrality adjustment be applied in implementing the rural floor. In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27556), we estimated
that 434 hospitals would receive an increase in their FY 2014 proposed
wage index due to the application of the rural floor. Based on the
final FY 2014 wage indices associated with this final rule and
available on the CMS Web site, 424 hospitals are receiving an increase
in their FY 2014 wage index due to the application of the rural floor.
We received some comments concerning the application of the rural floor
and additional tables. We respond to these public comments in Appendix
A of this final rule.
b. Imputed Floor
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the ``imputed floor'' policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have argued that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. Since its initial
implementation, we have extended the imputed floor policy three times,
the last of which was adopted in the FY 2013 IPPS/LTCH PPS final rule
and is set to expire on September 30, 2013 (we refer readers to the
discussion in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369) and to our regulations at 42 CFR 412.64(h)(4)). There are
currently two all-urban States, New Jersey and Rhode Island, that have
a range of wage indices assigned to hospitals in the State, including
through reclassification or redesignation (we refer readers to
discussions of geographic reclassifications and redesignations in
section III.H. of the preamble of this final rule). However, as we
explain below, the method as of FY 2012 for computing the imputed
floor, which we will refer to as the original methodology, benefitted
only New Jersey, and not Rhode Island.
In computing the imputed floor for an all-urban State under the
original methodology, we calculated the ratio of the lowest-to-highest
CBSA wage index for each all-urban State (that is, New Jersey and Rhode
Island) as well as the average of the ratios of lowest-to-highest CBSA
wage indices of those all-urban States. We compared the State's own
ratio to the average ratio for all-urban States and whichever is higher
was
[[Page 50590]]
multiplied by the highest CBSA wage index value in the State--the
product of which established the imputed floor for the State. Rhode
Island has only one CBSA (Providence-New Bedford-Fall River, RI-MA);
therefore, Rhode Island's own ratio equals 1.0, and its imputed floor
was equal to its original CBSA wage index value. Conversely, New Jersey
has 10 CBSAs. Because the average ratio of New Jersey and Rhode Island
was higher than New Jersey's own ratio, the original methodology
provided a benefit for New Jersey, but not for Rhode Island.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through
53369), for the FY 2013 wage index, the final year of the extension of
the imputed floor policy under Sec. 412.64(h)(4), we did not make any
changes to the original methodology and we finalized a proposed
alternative, temporary methodology for computing the imputed floor wage
index to address the concern that the then-current imputed floor
methodology guaranteed a benefit for one all-urban State with multiple
wage indices but could not benefit the other. The alternative
methodology for calculating the imputed floor was established using
data from the application of the rural floor policy for FY 2013. We
first determined the average percentage difference between the post-
reclassified, pre-floor area wage index and the post-reclassified,
rural floor wage index (without rural floor budget neutrality applied)
for all CBSAs receiving the rural floor. (Table 4D associated with the
FY 2013 final rule, which is available on the CMS Web site, included
the CBSAs receiving a State's rural floor wage index.) The lowest post-
reclassified wage index assigned to a hospital in an all-urban State
having a range of such values would then be increased by this factor,
the result of which established the State's alternative imputed floor.
We refer to this methodology as the alternative methodology. We also
adopted a policy that, for discharges on or after October 1, 2012, and
before October 1, 2013, the minimum wage index value for the State is
the higher of the value determined under the original methodology or
the value computed using the alternative methodology. We amended Sec.
412.64(h)(4) of the regulations to add new paragraph (vi) to
incorporate the finalized alternative methodology policies, and to make
conforming changes.
We stated that we intended to further evaluate the need,
applicability, and methodology for the imputed floor before the
September 30, 2013 expiration of the imputed floor policy and address
these issues in the FY 2014 proposed rule. In the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27556), we proposed to extend the imputed floor
policy (both the original methodology and the alternative methodology)
for one additional year, through September 30, 2014, while we continue
to explore potential wage index reforms. We proposed to revise the
regulations at Sec. 412.64(h)(4) to reflect the proposed 1-year
extension. We invited public comments on this extension.
Comment: Many of the commenters supported the CMS proposal, stating
that it provides a remedy to the financial and competitive
disadvantages suffered by hospitals in all-urban States, and that
preserving the current imputed floor policy is the sound course of
action as CMS continues to explore potential wage index reforms. One
commenter who supported the proposal advised CMS that the American
Hospital Association's (AHA's) Medicare Area Wage Index Task Force has
issued draft recommendations (including the imputed floor policy) and
has requested comments from hospitals prior to finalizing the report.
The commenter suggested that the industry have a chance to provide
input to CMS prior to finalizing any decisions regarding the imputed
floor policy. The commenter also suggested that, if CMS decides to
finalize a policy that would result in the expiration of the imputed
floor, CMS afford hospitals a multiyear phase out in order to offset
their lost revenue.
One commenter objected to the proposal and stated that it did not
support the policy behind the imputed floor. The commenter stated that
it agreed with the rationale that CMS previously provided in the FY
2012 IPPS/LTCH PPS proposed rule (76 FR 25878 and 25879) for not
proposing to extend the imputed floor policy, and urged CMS to let the
policy expire. Another commenter opposed the proposal, stating that it
supported CMS' position in the FY 2008 IPPS proposed rule (72 FR 24786)
that the imputed floor policy should apply only when required by
statute.
Response: We appreciate the commenters' support. For those
commenters who objected to the proposed policy and made further
recommendations, we will further consider these comments while we
continue to explore potential wage index reforms. In response to the
commenter who advised that the AHA's Medicare Area Wage Index Task
Force has requested comments from hospitals prior to finalizing its
report and also suggested that the industry have a change to provide
input to CMS prior to finalizing any decisions regarding the imputed
floor policy, we are unclear on exactly what the commenter is
requesting. We have allowed the industry to comment on the proposals
regarding the imputed floor policy; specifically in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27556), we invited public comment on the
proposed 1-year extension. With regard to the comment that requested
that CMS afford hospitals a multiyear phase-out of the imputed floor
policy, we did not propose to let the imputed floor policy expire for
FY 2014. We will consider the commenter's suggestion in future
rulemaking.
After consideration of the public comments we received, in this
final rule, as we proposed, we are providing an extension of the
imputed floor policy (both the original methodology and the alternative
methodology) for one additional year, through September 30, 2014, while
we continue to explore potential wage index reform. We also are
adopting as final the proposed conforming changes at Sec. 412.64(h)(4)
to reflect the 1-year extension.
The wage index and impact tables associated with this final rule
that are available on the CMS Web site include the application of the
imputed floor policy at Sec. 412.64(h)(4) and a national budget
neutrality adjustment for the rural floor (which includes the imputed
floor). There are 25 hospitals in New Jersey that will receive an
increase in their FY 2014 wage index due to the imputed floor
calculated under the original methodology. The wage index and impact
tables for this final rule also reflect the application of the
alternative methodology for computing the imputed floor, which will
benefit 4 hospitals in Rhode Island.
c. Frontier Floor
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000 (we
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50160 through 50161)). Forty-six hospitals are receiving
the frontier floor value of 1.0000 for their FY 2014 wage index. These
hospitals are located in Montana, North Dakota, South Dakota, and
Wyoming. Although Nevada is also defined as a frontier State, its FY
2014 rural floor value of 1.1454 was greater than 1.0000, and
therefore, no Nevada hospitals will receive a frontier floor value for
their FY 2014 wage index. We
[[Page 50591]]
did not receive any public comments concerning the frontier floor.
The areas affected by the rural, imputed, and frontier floor
policies for the FY 2014 wage index are identified in Table 4D
associated with this final rule, which is available on the CMS Web
site.
3. FY 2014 Wage Index Tables
The wage index values for FY 2014 (except those for hospitals
receiving wage index adjustments under section 1886(d)(13) of the Act),
included in Tables 4A, 4B, 4C, and 4F, available on the CMS Web site,
include the occupational mix adjustment, geographic reclassification or
redesignation as discussed in section III.H. of the preamble of this
final rule, and the application of the rural, imputed, and frontier
State floors as discussed in section III.G.2. of the preamble of this
final rule.
Tables 3A and 3B, available on the CMS Web site, list the 3-year
average hourly wage for each labor market area before the redesignation
or reclassification of hospitals based on FYs 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, which is
available on the CMS Web site, includes the adjusted average hourly
wage for each hospital from the FY 2008 and FY 2009 cost reporting
periods, as well as the FY 2010 period used to calculate the FY 2014
wage index. The 3-year averages are calculated by dividing the sum of
the dollars (adjusted to a common reporting period using the method
described in Step 5 in section III.G. of the preamble of this final
rule) across all 3 years, by the sum of the hours. If a hospital is
missing data for any of the previous years, its average hourly wage for
the 3-year period is calculated based on the data available during that
period. The average hourly wages in Tables 2, 3A, and 3B, which are
available on the CMS Web site, include the occupational mix adjustment.
The wage index values in Tables 4A, 4B, 4C, and 4D also include the
national rural floor budget neutrality adjustment (which includes the
imputed floor). The wage index values in Table 2 also include the out-
migration adjustment for eligible hospitals.
H. Revisions to the Wage Index Based on Hospital Redesignations and
Reclassifications
1. General Policies and Effects of Reclassification and Redesignation
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify not later than 13 months prior to the start of the fiscal
year for which reclassification is sought (generally by September 1).
Generally, hospitals must be proximate to the labor market area to
which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. The MGCRB
issues its decisions by the end of February for reclassifications that
become effective for the following fiscal year (beginning October 1).
The regulations applicable to reclassifications by the MGCRB are
located in 42 CFR 412.230 through 412.280. (We refer readers to a
discussion in the FY 2002 IPPS final rule (66 FR 39874 and 39875)
regarding how the MGCRB defines mileage for purposes of the proximity
requirements.) The general policies for reclassifications and
redesignations that we are adopting for FY 2014, and the policies for
the effects of hospitals' reclassifications and redesignations on the
wage index, are the same as those discussed in the FY 2012 IPPS/LTCH
PPS final rule for the FY 2012 final wage index (76 FR 51595 and
51596). Also, in the FY 2012 IPPS/LTCH PPS final rule, we discussed the
effects on the wage index of urban hospitals reclassifying to rural
areas under 42 CFR 412.103. Hospitals that are geographically located
in States without any rural areas are ineligible to apply for rural
reclassification in accordance with the provisions of 42 CFR 412.103.
Comment: One commenter noted that CMS did not propose any
amendments to Sec. 412.103, but requested that CMS retract the
statement that hospitals that are geographically located in States
without any rural areas are ineligible to apply for rural
reclassification pursuant to 42 CFR 412.103; the commenter believed
that this statement is a change in policy. The commenter believed that
the statute and regulations permit a hospital in an all-urban State to
be treated as if it were located in a rural area, and that no actual
rural area in the State is necessary for such reclassification.
Response: We disagree with commenter's request, and maintain our
position that hospitals that are geographically located in States
without any rural areas are ineligible for Sec. 412.103
reclassification. This is consistent with the statute and CMS'
longstanding policy, and we did not propose any changes to this policy.
Comment: One commenter questioned the reclassification process
concerning urban hospitals that redesignate from urban status to rural
status under Sec. 412.103, then cancel their rural status and
subsequently seek reclassification to another urban area through the
MGCRB. The commenter also had questions concerning the process of MGCRB
reclassification in the case of hospitals that currently have acquired
rural status under Sec. 412.103.
Response: We thank the commenter for the comments. We did not make
any proposals to change any of the reclassification processes or
criteria. The processes for Sec. 412.103 urban to rural redesignation
and MGCRB reclassification are specified in 42 CFR 412.103 and 412.230
et. seq. The regulations in the sections above clearly define the
process and describe the criteria and conditions for these
reclassifications. We refer the commenter to the regulations for
complete details on wage index reclassifications.
2. FY 2014 MGCRB Reclassifications
a. FY 2014 Reclassification Requirements and Approvals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. The specific procedures and rules that apply
to the geographic reclassification process are outlined in regulations
under 42 CFR 412.230 through 412.280.
At the time this final rule was constructed, the MGCRB had
completed its review of FY 2014 reclassification requests. Based on
such reviews, there were 296 hospitals approved for wage index
reclassifications by the MGCRB for FY 2014. Because MGCRB wage index
reclassifications are effective for 3 years, for FY 2014, hospitals
reclassified during FY 2012 or FY 2013 are eligible to continue to be
reclassified to a particular labor market area based on such prior
reclassifications. There were 214 hospitals approved for wage index
reclassifications in FY 2012, and 196 hospitals approved for wage index
reclassifications in FY 2013. Of all the hospitals approved for
reclassification for FY 2012, FY 2013, and FY 2014, based upon the
review at the time of this final rule, 679 hospitals are in a
reclassification status for FY 2014.
Under the regulations at 42 CFR 412.273, hospitals that have been
[[Page 50592]]
reclassified by the MGCRB are permitted to withdraw their applications
within 45 days of the publication of a proposed rule. For information
about withdrawing, terminating, or canceling a previous withdrawal or
termination of a 3-year reclassification for wage index purposes, we
refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule
(66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR
50065 through 50066). Additional discussion on withdrawals and
terminations, and clarifications regarding reinstating
reclassifications and ``fallback'' reclassifications, were included in
the FY 2008 IPPS final rule (72 FR 47333).
Changes to the wage index that result from withdrawals of requests
for reclassification, terminations, wage index corrections, appeals,
and the Administrator's review process for FY 2014 are incorporated
into the wage index values published in this FY 2014 IPPS/LTCH PPS
final rule. These changes affect not only the wage index value for
specific geographic areas, but also the wage index value redesignated/
reclassified hospitals receive; that is, whether they receive the wage
index that includes the data for both the hospitals already in the area
and the redesignated/reclassified hospitals. Further, the wage index
value for the area from which the hospitals are redesignated/
reclassified may be affected.
b. Applications for Reclassifications for FY 2015
Applications for FY 2015 reclassifications are due to the MGCRB by
September 3, 2013 (the first working day of September 2013). We note
that this is also the deadline for canceling a previous wage index
reclassification withdrawal or termination under 42 CFR 412.273(d). As
mentioned in section III.B. of the preamble of this final rule,
although OMB issued revisions on February 28, 2013 to its area
delineations, we did not propose to adopt those revisions for the FY
2014 wage index, and we will not be adopting the revisions before the
September 3, 2013 deadline for applications for the FY 2015 wage index.
Therefore, hospitals must apply for reclassifications based on the
delineations we are using for FY 2014. Applications and other
information about MGCRB reclassifications may be obtained via the
Internet on the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Review-Boards/MGCRB/index.html, or by calling the MGCRB at
(410) 786-1174. The mailing address of the MGCRB is: 2520 Lord
Baltimore Drive, Suite L, Baltimore, MD 21244-2670.
3. 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.
(We note that, as mentioned in section III.B. of the preamble of this
final rule, although OMB issued revisions on February 28, 2013, to its
area delineations based on 2010 census data, we did not propose to
adopt these revisions for the FY 2014 wage index.) Hospitals located in
these counties have been known as ``Lugar'' hospitals and the counties
themselves are often referred to as ``Lugar'' counties. The FY 2014
chart with the listing of the rural counties containing the hospitals
designated as urban under section 1886(d)(8)(B) of the Act is available
via the Internet on the CMS Web site.
4. Hospitals Redesignated under Section 1886(d)(8)(B) of the Act
Seeking Reclassification by the MGCRB
As in the past, hospitals redesignated under section 1886(d)(8)(B)
of the Act are also eligible to be reclassified to a different area by
the MGCRB. Using Table 4C associated with the proposed rule (which is
available via the Internet on the CMS Web site), affected hospitals
were permitted to compare the reclassified wage index for the labor
market area into which they would be reclassified by the MGCRB to the
reclassified wage index for the area to which they are redesignated
under section 1886(d)(8)(B) of the Act. Hospitals could have withdrawn
from an MGCRB reclassification within 45 days of the publication of the
FY 2014 proposed rule. (We refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51598 through 51599) for the procedural rules and
requirements for a hospital that is redesignated under section
1886(d)(8)(B) of the Act and seeking reclassification under the MGCRB,
as well as our policy of measuring the urban area, exclusive of the
Lugar County, for purposes of meeting proximity requirements.) We treat
New England deemed counties in a manner consistent with how we treat
Lugar counties. (We refer readers to the FY 2008 IPPS final rule with
comment period (72 FR 47337 through 47338) for a discussion of this
policy.)
5. Waiving Lugar Redesignation for the Out-Migration Adjustment
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the DSH payment adjustment, effective for the
fiscal year in which the hospital receives the out-migration
adjustment. (We refer readers to a discussion of DSH payment adjustment
under section V.E. of the preamble of this final rule.)
In addition, we adopted a minor procedural change that would allow
a Lugar hospital that qualifies for and accepts the out-migration
adjustment (through written notification to CMS within the requisite
number of days from the publication of the proposed rule \11\) to
automatically waive its urban status for the 3-year period for which
its out-migration adjustment is effective. That is, such a Lugar
hospital would no longer be required during the second and third years
of eligibility for the out-migration adjustment to advise us annually
that it prefers to continue being treated as rural and receive the
adjustment. Thus, under the procedural change, a Lugar hospital that
requests to waive its urban status in order to receive the rural wage
index in addition to the out-migration adjustment would be deemed to
have accepted the out-migration adjustment and agrees to be treated as
rural for the duration of its 3-year eligibility period, unless, prior
to its second or third year of eligibility, the hospital explicitly
notifies CMS in writing, within the required period (generally 45 days
from the publication of the proposed rule), that it instead elects to
return to its deemed urban status and no longer wishes to accept the
out-migration adjustment.
---------------------------------------------------------------------------
\11\ Hospitals generally have 45 days from publication of the
proposed rule to request an out-migration adjustment in lieu of the
section 1886(d)(8) deemed urban status.
---------------------------------------------------------------------------
We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR
51599 through 51600) for a detailed discussion of the policy and
process for waiving Lugar status for the out-migration adjustment.
[[Page 50593]]
I. FY 2014 Wage Index Adjustment Based on Commuting Patterns of
Hospital Employees
In accordance with the broad discretion granted to the Secretary
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. For FY 2014, we are adopting the out-migration
adjustment based on the same policies, procedures, and computation that
were used for the FY 2012 out-migration adjustment. (We refer readers
to a full discussion of the adjustment, including rules on deeming
hospitals reclassified under section 1886(d)(8) or section 1886(d)(10)
of the Act to have waived the out-migration adjustment, in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51601 through 51602).) Table 4J, which
is available via the Internet on the CMS Web site, lists the out-
migration adjustments for the FY 2014 wage index.
We did not receive any public comments with regard to the out-
migration adjustment for FY 2014.
J. Process for Requests for Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data and occupational
mix survey data files for the proposed FY 2014 wage index were made
available on October 3, 2012, through the Internet on the CMS Web site
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional public use
file on our Web site that reflects the actual data that are used in
computing the proposed wage index. The release of this new file does
not alter the current wage index process or schedule. We notify the
hospital community of the availability of these data as we do with the
current public use wage data files through our Hospital Open Door
forum. We encourage hospitals to sign up for automatic notifications of
information about hospital issues and the scheduling of the Hospital
Open Door forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
In a memorandum dated October 19, 2012, 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 3, 2012 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 10, 2012. (We
note that this date was originally December 3, 2012. However, in a
memorandum dated October 25, 2012, we instructed all fiscal
intermediaries/MACs to inform the IPPS hospitals they service that we
extended the deadline to December 10, 2012.) Hospitals were notified of
this deadline and of all other deadlines and requirements, including
the requirement to review and verify their data as posted in the
preliminary wage index data files on the Internet, through the October
19, 2012 memorandum referenced above.
In the October 19, 2012 memorandum, we also specified that a
hospital requesting revisions to its occupational mix survey data was
to copy its record(s) from the CY 2010 occupational mix preliminary
files posted to the CMS Web site in 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 10,
2012.
The fiscal intermediaries/MACs notified the hospitals by mid-
February 2013 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 2013. CMS published the proposed
wage index public use files that included hospitals' revised wage index
data on February 21, 2013. Hospitals had until March 4, 2013, 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' 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 to CMS any additional
revisions resulting from the hospitals' reconsideration requests by
April 10, 2013. The deadline for a hospital to request CMS intervention
in cases where the hospital disagreed with the fiscal intermediary's
(or, if applicable, the MAC's) policy interpretations was April 17,
2013.
Hospitals were given the opportunity to examine Table 2, which was
listed in section VI. of the Addendum to the proposed rule and
available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html. Table 2 contained
each hospital's adjusted average hourly wage used to construct the wage
index values for the past 3 years, including the FY 2010 data used to
construct the proposed FY 2014 wage index. We noted that the hospital
average hourly wages shown in Table 2 only reflected changes made to a
hospital's data that were transmitted to CMS by March 4, 2013.
We released the final wage index data public use files in early May
2013 on the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY_2014_Wage_Index_Home_Page.html. The May 2013 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 10, 2013). If, after reviewing the May
2013 final public use 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
was required to send a letter to both its fiscal intermediary/MAC and
CMS that outlined why the hospital believed an error existed and
provide all supporting information, including relevant dates (for
example, when it first became aware of the error). The hospital was
required to send the letter to CMS and its fiscal
[[Page 50594]]
intermediaries/MACs no later than June 3, 2013.
After the release of the May 2013 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 10, 2013.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the February 21,
2013 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 3, 2013)
were incorporated into the final wage index in this FY 2014 IPPS/LTCH
PPS final rule, which will be effective October 1, 2013.
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 2014 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. We refer readers also to the FY 2000 IPPS
final rule (64 FR 41513) for a discussion of the parameters for appeals
to the PRRB for wage index data corrections.
Again, we believe the wage index data correction process described
above provides hospitals with sufficient opportunity to bring errors in
their wage and occupational mix data to the fiscal intermediary's (or,
if applicable, the MAC's) attention. Moreover, because hospitals have
access to the final wage index data by early May 2013, they have the
opportunity to detect any data entry or tabulation errors made by the
fiscal intermediary or the MAC or CMS before the development and
publication of the final FY 2014 wage index by August 2013, and the
implementation of the FY 2014 wage index on October 1, 2013. If
hospitals avail 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 3, 2013, 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 deadline for making corrections to
the wage data for the following fiscal year's wage index (for example,
June 3, 2013 for the FY 2014 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 MACs notify hospitals directly of any wage index data changes
after completing their desk reviews, we do not expect that midyear
corrections will be necessary. However, under our current policy, if
the correction of a data error changes the wage index value for an
area, the revised wage index value will be effective prospectively from
the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The 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 3,
2013 deadline for the FY 2014 wage index); and (3) CMS agreed before
October 1 that the fiscal intermediary (or, if applicable, the MAC) or
CMS made an error in tabulating the hospital's wage index data and the
wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the June 3, 2013 deadline for the FY 2014 wage index), 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 situations where our policies would allow midyear corrections
other than those specified in 42 CFR 412.64(k)(2)(ii), we continue to
believe that it is appropriate to make prospective-only corrections to
the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.
K. Labor-Related Share for the FY 2014 Wage Index
Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related: ``The Secretary
shall adjust the proportion, (as estimated by the Secretary from time
to time) of hospitals' costs which are attributable to wages and wage-
related costs, of the
[[Page 50595]]
DRG prospective payment rates. . . .'' We refer to the portion of
hospital costs attributable to wages and wage-related costs as the
labor-related share. The labor-related share of the prospective payment
rate is adjusted by an index of relative labor costs, which is referred
to as the wage index.
Section 403 of Public Law 108-173 amended 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 ``would result
in lower payments to a hospital than would otherwise be made.''
However, these provisions of Public Law 108-173 did not change the
legal requirement that the Secretary estimate ``from time to time'' the
proportion of hospitals' costs that are ``attributable to wages and
wage-related costs.'' Thus, hospitals receive payment based on either a
62-percent labor-related share, or the labor-related share estimated
from time to time by the Secretary, depending on which labor-related
share results in a higher payment.
Comment: Several commenters stated that CMS has not kept pace by
adjusting the labor-related share of the standard rate to which the
wage index is applied. The commenters explained that CMS has provided
incentives for hospitals to reduce costs through a declining wage index
while hospitals have responded and made strides in labor efficiency.
The commenters recommended that CMS adjust the labor-related share of
the standard rate to 42 percent from the current 62 percent for
hospitals with a wage index of less than 1.0. The commenters believed
that a 42-percent labor component is more reflective of hospitals
seeking cost efficiencies in wages.
Response: As stated above, 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. Therefore, any changes to the application of the 62 percent
labor-related share would require a change to current law by Congress.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43857), we rebased and revised the IPPS market basket and the
labor-related share, using FY 2006 as the base year. The labor-related
share for FY 2010 through FY 2013 is 68.8 percent.
For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27561 through 27572), and as described in section IV. of the
preamble of this final rule, we are rebasing and revising the IPPS
market basket using FY 2010 as the base year. Using the FY 2010-based
IPPS market basket, we also recalculated the labor-related share and
are finalizing a labor-related share of 69.6 percent for discharges
occurring on or after October 1, 2013, as discussed in section IV.B.4.
of the preamble of this final rule. As discussed in Appendix A of this
final rule, we are implementing this revised and rebased labor-related
share in a budget neutral manner. However, consistent with section
1886(d)(3)(E) of the Act, we are not taking into account the additional
payments that would be made as a result of hospitals with a wage index
less than or equal to 1.0 being paid using a labor-related share lower
than the labor-related share of hospitals with a wage index greater
than 1.0.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. For FY 2014, as proposed in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27561 through 27572) and as described in section IV. of the
preamble of this final rule, 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
facilities support services, and all other labor-related services as
measured in the FY 2010-based IPPS market basket.
Therefore, for FY 2014, as discussed in section IV.B.4. of the
preamble of this final rule, we are finalizing our proposals without
modification and adopting a labor-related share of 69.6 percent for
discharges occurring on or after October 1, 2013. Tables 1A and 1B,
which are published in section VI. of the Addendum to this final rule
and are available via the Internet, reflect this labor-related share.
For FY 2014, for all IPPS hospitals whose wage indices are less than
1.0000, we are applying the wage index to a labor-related share of 62
percent of the national standardized amount. For all IPPS hospitals
whose wage indices are greater than 1.0000, for FY 2014, we are
applying the wage index to a labor-related share of 69.6 percent of the
national standardized amount. We note that, for Puerto Rico hospitals,
the national labor-related share is 62 percent because the national
wage index for all Puerto Rico hospitals is less than 1.0.
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43850
through 43856), we also rebased and revised the labor-related share for
the Puerto Rico-specific standardized amounts using FY 2006 as a base
year. We finalized a labor-related share for the Puerto Rico-specific
standardized amounts for FY 2010 through FY 2013 of 62.1 percent. As
proposed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27566
through 27568) and as described in section IV.B.4. of the preamble of
this final rule, for FY 2014, we also are rebasing and revising the
labor-related share for the Puerto Rico-specific standardized amounts
using FY 2010 as a base year. In the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27566 through 27568), we proposed a labor-related share for
the Puerto Rico-specific standardized amounts of 63.2 percent for
discharges occurring on or after October 1, 2013. For FY 2014, we are
finalizing our proposal and adopting a labor-related share for the
Puerto Rico-specific standardized amounts of 63.2 percent for
discharges occurring on or after October 1, 2013, as discussed in
section IV.B.4. of the preamble of this final rule. Consistent with our
methodology for determining the national labor-related share, we added
the Puerto Rico-specific relative weights for wages and salaries,
employee benefits, and contract labor, with the national proportion of
costs for the labor-related portion of professional fees,
administrative and facilities support services, and all other labor-
related services to determine the labor-related share. Puerto Rico
hospitals are paid based on 75 percent of the national standardized
amounts and 25 percent of the Puerto Rico-specific standardized
amounts. For FY 2014, we are adopting that the labor-related share of a
hospital's Puerto Rico-specific rate will be either the Puerto Rico-
specific labor-related share of 63.2 percent or 62 percent, depending
on which results in higher payments to the hospital. If the hospital
has a Puerto Rico-specific wage index of greater than 1.0 for FY 2014,
we will set the hospital's rates using a labor-related share of 63.2
percent for the 25 percent portion of the hospital's payment determined
by the Puerto Rico standardized amounts because this amount will result
in higher payments. Conversely, a hospital with a Puerto Rico-specific
wage index of less than 1.0 for FY 2014 will be paid using the Puerto
Rico-specific labor-related share of 62 percent of the Puerto Rico-
specific rates because the lower labor-related share will result in
higher payments. The Puerto Rico labor-related share of 63.2 percent
for FY 2014 is reflected in Table 1C, which is published in section VI.
of the Addendum to this final rule and available via the Internet.
Comment: Several commenters supported the proposed increase in the
[[Page 50596]]
labor-related share. We did not receive any public comments on the
proposed Puerto Rico labor-related share.
Response: We appreciate the commenters' support.
As discussed in section IV.B.4. of the preamble of this final rule,
we are finalizing the labor-related share of 69.6 percent as proposed
for all IPPS hospitals whose wage indices are greater than 1.0000. We
also are finalizing the Puerto Rico labor-related share of the labor-
related share of 63.2 percent as proposed. Further discussion of the FY
2014 labor-related share for the national standardized amount and the
Puerto Rico-specific standardized amount can be found in section
IV.B.4. of the preamble of this final rule.
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'' 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 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43843) in which we discussed
the most recent previous rebasing of the hospital input price index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the quantity or mix of goods and services (that
is, intensity) purchased over time are not measured.
The index itself is constructed in three steps. First, a base
period is selected (as we proposed, in this final rule, we are using FY
2010 as the base period) and total base period expenditures are
estimated for a set of mutually exclusive and exhaustive spending
categories, with the proportion of total costs that each category
represents being calculated. These proportions are called ``cost
weights'' or ``expenditure weights.'' Second, each expenditure category
is matched to an appropriate price or wage variable, referred to as a
``price proxy.'' In almost every instance, these price proxies are
derived from publicly available statistical series that are published
on a consistent schedule (preferably at least on a quarterly basis).
Finally, the expenditure weight for each cost category is multiplied by
the level of its respective price proxy. The sum of these products
(that is, the expenditure weights multiplied by their price index
levels) for all cost categories yields the composite index level of the
market basket in a given period. Repeating this step for other periods
produces a series of market basket levels over time. Dividing an index
level for a given period by an index level for an earlier period
produces a rate of growth in the input price index over that timeframe.
As noted above, the market basket is described as a fixed-weight
index because it represents the change in price over time of a constant
mix (quantity and intensity) of goods and services needed to provide
hospital services. The effects on total expenditures resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. For example, a hospital hiring more
nurses to accommodate the needs of patients would increase the volume
of goods and services purchased by the hospital, but would not be
factored into the price change measured by a fixed-weight hospital
market basket. Only when the index is rebased would changes in the
quantity and intensity be captured, with those changes being reflected
in the cost weights. Therefore, we rebase the market basket
periodically so that the cost weights reflect recent changes in the mix
of goods and services that hospitals purchase (hospital inputs) to
furnish inpatient care between base periods.
We last rebased the hospital market basket cost weights effective
for FY 2010 (74 FR 43843), with FY 2006 data used as the base period
for the construction of the market basket cost weights. In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27561 through 27572), we proposed to
rebase the cost structure for the IPPS hospital index from FY 2006 to
FY 2010, as discussed below.
B. Rebasing and Revising the IPPS Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in this final rule, we are shifting the base year
cost structure for the IPPS hospital index from FY 2006 to FY 2010).
``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 2014 IPPS update, as we proposed, we are rebasing and revising
the IPPS market basket from FY 2006 to FY 2010. We invited public
comments on our proposed methodology. A summary of the public comments
we received and our responses are included under the appropriate
subject area.
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 2010 Medicare
cost reports. These FY 2010 Medicare cost reports are for cost
reporting periods beginning on and after October 1, 2009 and before
October 1, 2010. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27562), we proposed to use FY 2010 as the base year because we believe
that the FY 2010 Medicare cost reports represent the most recent,
complete set of Medicare cost report data available for IPPS hospitals.
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
[[Page 50597]]
be paid under the HHA PPS and, therefore, these costs are not IPPS
Medicare-allowable costs.
We proposed to obtain seven major expenditures or cost categories
for the FY 2010 IPPS market basket from the Medicare cost reports--the
same as in the FY 2006-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 proposed cost weights that
were obtained directly from the Medicare cost reports were reported in
Table IV01 of the proposed rule. We proposed to then supplement these
Medicare cost report cost weights with information obtained from other
data sources to derive the proposed IPPS market basket cost weights.
Comment: One commenter supported the proposal to move to an FY
2010-based market basket.
Response: We appreciate the commenter's support. In this final
rule, we are finalizing our calculation of the FY 2010-based IPPS cost
weights using the Medicare cost reports as proposed and describe our
methods in more detail below.
Table IV01 below shows the major cost categories and their
respective cost weights as calculated directly from the Medicare Cost
Reports for this final rule.
Table IV01--Major Cost Categories and Their Respective Cost Weights as
Calculated Directly From the Medicare Cost Reports
------------------------------------------------------------------------
Proposed and
FY 2006-based final FY 2010-
Major cost categories market basket based market
basket
------------------------------------------------------------------------
Wages and salaries...................... 45.156 45.819
Employee benefits....................... 11.873 12.713
Contract labor.......................... 2.598 1.806
Professional Liability Insurance 1.661 1.330
(Malpractice)..........................
Pharmaceuticals......................... 5.380 5.402
Blood and blood products................ 1.078 1.069
All other............................... 32.254 31.861
------------------------------------------------------------------------
From FY 2006 to FY 2010, the wages and salaries and employee
benefits cost weights as calculated directly from the Medicare cost
reports increased by approximately 0.7 and 0.8 percentage point,
respectively, while the contract labor cost weight decreased by 0.8
percentage point. As we did for the FY 2006-based IPPS market basket
(74 FR 43847), we proposed to allocate contract labor costs to the
wages and salaries and employee benefits cost weights based on their
relative proportions for employed labor under the assumption that
contract labor costs are comprised of both wages and salaries and
employee benefits. The contract labor allocation proportion for wages
and salaries is equal to the wages and salaries cost weight as a
percent of the sum of the wages and salaries cost weight and the
employee benefits cost weight. Using the FY 2010 Medicare cost report
data, this percentage is 78.3 percent; therefore, we proposed to
allocate approximately 78.3 percent of the contract labor cost weight
to the wages and salaries cost weight. Table IV02 in the proposed rule
showed the wages and salaries and employee benefit cost weights after
contract labor allocation for both the FY 2006-based IPPS market basket
and the proposed FY 2010-based IPPS market basket.
We did not receive any specific public comment regarding the
allocation of contract labor cost weight to the wages and salaries and
employee benefits cost weights. In this final rule, we are finalizing
our methodology of allocating the contract labor cost weight as we
proposed. Table IV02 below shows the wages and salaries and employee
benefit cost weights after contract labor allocation for the FY 2006-
based IPPS market basket and the proposed and final FY 2010-based IPPS
market basket.
Table IV02--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
Proposed and
FY 2006-based final FY 2010-
Major cost categories market basket based market
basket
------------------------------------------------------------------------
Wages and salaries...................... 47.213 47.233
Employee benefits....................... 12.414 13.105
------------------------------------------------------------------------
After the allocation of contract labor, the final FY 2010-based
wages and salaries cost weight is relatively similar to the FY 2006-
based wages and salaries cost weight while the final FY 2010-based
employee benefits cost weight increased 0.7 percentage point. This is
primarily a result of an increase in benefits costs relative to wages
and salaries costs from the Medicare cost report data for employed
workers; in 2006, the ratio of the employee benefits cost weight to the
wages and salaries cost weight was 26.3 percent, while in 2010 this
ratio increased to 27.8 percent.
b. Other Data Sources
In addition to the data from the Medicare cost reports, the other
data source we proposed to use to develop the FY 2010-based IPPS market
basket cost weights is the 2002 Benchmark Input-Output (I-O) Tables
created by the Bureau of Economic Analysis (BEA), U.S. Department of
Commerce. We proposed to use the 2002 BEA Benchmark I-O data to
disaggregate the ``all other'' (residual) cost category (31.861
percent) into more detailed hospital expenditure category shares. The
BEA Benchmark I-O accounts provide the most detailed information on the
goods and services purchased by an industry, which allows for a more
[[Page 50598]]
detailed disaggregation of expenses in the market basket for which we
can then proxy the appropriate price inflation.
The BEA Benchmark I-O data are generally scheduled for publication
every 5 years. At the time of development of the FY 2014 IPPS/LTCH PPS
proposed rule, the most recent data available were for 2002. BEA also
produces Annual I-O estimates; however, the 2002 Benchmark I-O data
represent a much more comprehensive and detailed set of data that are
derived from the 2002 Economic Census. In the FY 2010 IPPS/RY 2010 LTCH
PPS final rule (74 FR 43845), we used the 2002 Benchmark I-O data (aged
to FY 2006) for the FY 2006-based IPPS market basket, to be effective
for FY 2010. Because BEA had not yet released new Benchmark I-O data at
the time we prepared our analysis for the proposed rule, and we believe
the data to be comprehensive and complete as indicated above, we
proposed to use the 2002 Benchmark I-O data in the FY 2010-based IPPS
market basket for the FY 2014 IPPS/LTCH PPS proposed rule.
Therefore, instead of using the less detailed, less accurate Annual
I-O data, we proposed to age the 2002 Benchmark I-O data forward to FY
2010. The methodology we proposed to use 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. In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27563), we
proposed that, if more recent BEA benchmark I-O data for 2007 was
released between the proposed and final rule with sufficient time to
incorporate such data into the final rule, we would incorporate these
data into the FY 2010-based IPPS market basket for the final rule. The
2007 BEA I-O data was expected to be released in the summer of 2013.
However, at the time we prepared our analysis for this final rule, BEA
had not published the 2007 Benchmark I-O data. Therefore, we were
unable to incorporate any revised I-O data in the final FY 2010-based
IPPS market basket.
The ``all other'' cost category expenditure shares are determined
as being equal to each category's proportion to total ``all other''
expenditures based on the aged 2002 Benchmark I-O data. For instance,
if the cost for telephone services represented 10 percent of the sum of
the ``all other'' Benchmark I-O hospital expenditures, telephone
services would represent 10 percent of the ``all other'' cost category
of the IPPS market basket.
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.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html 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. Cost Category Computation
As stated previously, for the proposed FY 2010-based market basket,
we proposed to use data from the Medicare cost reports to derive seven
major cost categories that were the same detailed cost categories as
used in the FY 2006-based IPPS market basket. Also, we did not propose
to change our definition of the labor-related share. As discussed in
more detail below and similar to the previous rebasings, 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.
Comment: One commenter supported the use of 2002 BEA data if it is
not possible to move to 2007 data in the final rule. We did not receive
any public comments on the specific methodology for calculating the
final cost weights.
Response: Since the 2007 BEA I-O data has not been published, we
are unable to incorporate the data into the FY 2010-based IPPS market
basket. We appreciate the commenter's support to use the 2002 BEA I-O
data, given these data limitations.
In this final rule, we are finalizing the use of the 2002 I-O data
as we proposed in the FY 2014 proposed rule. We also are finalizing our
calculation of the final cost category weights as we proposed.
3. Selection of Price Proxies
After computing the FY 2010 cost weights for the IPPS market
basket, it was necessary to select appropriate wage and price proxies
to reflect the rate of price change for each expenditure category. We
proposed to use the same price proxies that were used in the FY 2006-
based IPPS market basket. A discussion of our rationale for selecting
these price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43845).
With the exception of the proxy for professional liability
insurance (PLI), all the proxies we proposed were based on Bureau of
Labor Statistics (BLS) data and are grouped into one of the following
BLS categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure price changes for goods sold in markets other than the retail
market. PPIs are preferable price proxies for goods and services that
hospitals purchase as inputs because PPIs better reflect the actual
price changes encountered by hospitals. For example, we proposed to use
a PPI for prescription drugs, rather than the Consumer Price Index
(CPI) for prescription drugs, because hospitals generally purchase
drugs directly from a wholesaler. The PPIs that we proposed to use
measure price changes at the final stage of production.
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure change in the prices of final goods and services bought by the
typical consumer. Because they may not represent the price faced by a
producer, we proposed to use CPIs only if an appropriate PPI is not
available, or if the expenditures are more like those faced by retail
consumers in general rather than by purchasers of goods at the
wholesale level. For example, the CPI for food purchased away from home
was proposed to be used as a proxy for contracted food services.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. Appropriately, they are not affected by shifts in
employment mix.
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance. Reliability indicates that the
index is based on valid statistical methods and has low sampling
variability. Timeliness implies that the proxy is published regularly,
preferably at least once a quarter. Availability means that the proxy
is publicly available. Finally, relevance means that the proxy is
applicable and representative of the cost category weight to which it
is applied. We stated in the proposed rule that we believed the
proposed PPIs, CPIs, and ECIs selected meet these criteria.
Table IV03 below sets forth the final FY 2010-based IPPS market
basket, including the cost categories and their respective weights and
price proxies. For comparison purposes, the corresponding FY 2006-based
IPPS market basket cost weights also are listed. A summary outlining
the choice of the various proxies follows the table.
[[Page 50599]]
Table IV03--FY 2010-Based IPPS Hospital Market Basket Cost Categories, Cost Weights, and Price Proxies Compared
to FY 2006-Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
FY 2006-based FY 2010-based
hospital hospital FY 2010-based hospital market
Cost categories market basket market basket basket price proxies
cost weights cost weights
----------------------------------------------------------------------------------------------------------------
1. Compensation............................ 59.627 60.338 ...................................
A. Wages and Salaries \1\.............. 47.213 47.233 ECI for Wages and Salaries,
Civilian Hospital Workers.
B. Employee Benefits \1\............... 12.414 13.105 ECI for Benefits, Civilian Hospital
Workers.
2. Utilities............................... 2.180 2.246 ...................................
A. Fuel, Oil, and Gasoline............. 0.418 0.447 PPI for Petroleum Refineries.
B. Electricity......................... 1.645 1.666 PPI for Commercial Electric Power.
C. Water and Sewage.................... 0.117 0.133 CPI-U for Water and Sewerage
Maintenance.
3. Professional Liability Insurance........ 1.661 1.330 CMS Professional Liability
Insurance Premium Index.
4. All Other............................... 36.533 36.086 ...................................
A. All Other Products.................. 19.473 19.458 ...................................
(1.) Pharmaceuticals................... 5.380 5.402 PPI for Pharmaceuticals for Human
Use, Prescription.
(2.) Food: Direct Purchases............ 3.982 4.206 PPI for Processed Foods & Feeds.
(3.) Food: Contract Services........... 0.575 0.578 CPI-U for Food Away From Home.
(4.) Chemicals \2\..................... 1.538 1.529 Blend of Chemical PPIs.
(5.) Blood and Blood Products.......... 1.078 1.069 PPI for Blood and Organ Banks.
(6.) Medical Instruments............... 2.762 2.577 PPI for Medical, Surgical, and
Personal Aid Devices.
(7.) Rubber and Plastics............... 1.659 1.637 PPI for Rubber & Plastic Products.
(8.) Paper and Printing Products....... 1.492 1.507 PPI for Converted Paper &
Paperboard Products.
(9.) Apparel........................... 0.325 0.299 PPI for Apparel.
(10.) Machinery and Equipment.......... 0.163 0.151 PPI for Machinery and Equipment.
(11.) Miscellaneous Products........... 0.519 0.503 PPI for Finished Goods less Food
and Energy.
B. Labor-related Services.............. 9.175 9.249 ...................................
(1.) Professional Fees: Labor-related.. 5.356 5.500 ECI for Compensation for
Professional and Related
Occupations.
(2.) Administrative and Facilities 0.626 0.619 ECI for Compensation for Office and
Support Services \3\. Administrative Services.
(3.) All Other: Labor-Related Services. 3.193 3.130 ECI for Compensation for Private
Service Occupations.
C. Nonlabor-Related Services........... 7.885 7.379 ...................................
(1.) Professional Fees: Nonlabor- 4.074 3.687 ECI for Compensation for
Related. Professional and Related
Occupations.
(2.) Financial Services................ 1.281 1.239 ECI for Compensation for Financial
Activities.
(3.) Telephone Services................ 0.627 0.597 CPI-U for Telephone Services.
(4.) Postage........................... 0.963 0.956 CPI-U for Postage.
(5.) All Other: Nonlabor-Related 0.940 0.900 CPI-U for All Items less Food and
Services. 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 gas
manufacturing, 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 the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43845).
\3\ We note that this cost category in the FY 2006-based IPPS market basket was ``Administrative and Business
Support Services.'' We changed the name slightly to be more clear what type of costs are included in this cost
category, but we did not change the classification of which costs are included in the category.
As stated above, we proposed to use the same price proxies used in
the FY 2006-based IPPS market basket. A rationale for selecting these
price proxies can be found in the FY 2010 IPPS/RY 2010 LTCH PPS final
rule (74 FR 43845). The price proxies were selected to most closely
match the costs included in each of the cost categories of the FY 2010-
based IPPS market basket. We did not receive any public comments on the
price proxies we proposed to use in the FY 2010-based IPPS market
basket. In this final rule, we are finalizing the use of the price
proxies that we proposed. Below is a list of the price proxies we
proposed, and are finalizing to use, for the FY 2010-based IPPS market
basket.
a. Wages and Salaries
We use the ECI for Wages and Salaries for Hospital Workers (All
Civilian) (BLS series code CIU1026220000000I) to measure the price
growth of this cost category.
b. Employee Benefits
We use the ECI for Employee Benefits for Hospital Workers (All
Civilian) to measure the price growth of this cost category.
c. Fuel, Oil, and Gasoline
We use the PPI for Petroleum Refineries (BLS series code
PCU324110324110) to measure the price growth of this cost category.
d. Electricity
We use the PPI for Commercial Electric Power (BLS series code
WPU0542) to measure the price growth of this cost category.
e. Water and Sewage
We use the CPI for Water and Sewerage Maintenance (All Urban
Consumers) (BLS series code
[[Page 50600]]
CUUR0000SEHG01) to measure the price growth of this cost category.
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 Insurance Premium 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 is also used to proxy PLI
price changes in the Medicare Economic Index (75 FR 73268).
g. Pharmaceuticals
We use the PPI for Pharmaceuticals for Human Use, Prescription (BLS
series code WPUSI07003) to measure the price growth of this cost
category. This is the same proxy that was used in the FY 2006-based
IPPS market basket, although BLS since changed the naming convention
for this series.
h. Food: Direct Purchases
We use the PPI for Processed Foods and Feeds (BLS series code
WPU02) to measure the price growth of this cost category.
i. Food: Contract Services
We use the CPI for Food Away From Home (All Urban Consumers) (BLS
series code CUUR0000SEFV) to measure the price growth of this cost
category.
j. Chemicals
We use a blended PPI composed of the PPI for Industrial Gas
Manufacturing (NAICS 325120) (BLS series code PCU325120325120P), the
PPI for Other Basic Inorganic Chemical Manufacturing (NAICS 325180)
(BLS series code PCU32518-32518-), the PPI for Other Basic Organic
Chemical Manufacturing (NAICS 325190) (BLS series code PCU32519-32519),
and the PPI for Soap and Cleaning Compound Manufacturing (NAICS 325610)
(BLS series code PCU32561-32561-).
k. Blood and Blood Products
We use the PPI for Blood and Organ Banks (BLS series code
PCU621991621991) to measure the price growth of this cost category.
l. Medical Instruments
We use the PPI for Medical, Surgical, and Personal Aid Devices (BLS
series code WPU156) to measure the price growth of this cost category.
m. Rubber and Plastics
We use the PPI for Rubber and Plastic Products (BLS series code
WPU07) to measure price growth of this cost category.
n. Paper and Printing Products
We use the PPI for Converted Paper and Paperboard Products (BLS
series code WPU0915) to measure the price growth of this cost category.
o. Apparel
We use the PPI for Apparel (BLS series code WPU0381) to measure the
price growth of this cost category.
p. Machinery and Equipment
We use the PPI for Machinery and Equipment (BLS series code WPU11)
to measure the price growth of this cost category.
q. Miscellaneous Products
We use the PPI for Finished Goods Less Food and Energy (BLS series
code WPUSOP3500) to measure the price growth of this cost category.
r. Professional Fees: Labor-Related and Professional Fees: Nonlabor-
Related
We use the ECI for Compensation for Professional and Related
Occupations (Private Industry) (BLS series code CIU2010000120000I) to
measure the price growth of these cost categories.
s. Administrative and Facilities Support Services
We use the ECI for Compensation for Office and Administrative
Support Services (Private Industry) (BLS series code CIU2010000220000I)
to measure the price growth of this category.
t. All Other: Labor-Related Services
We use the ECI for Compensation for Service Occupations (Private
Industry) (BLS series code CIU2010000300000I) to measure the price
growth of this cost category.
u. Financial Services
We use the ECI for Compensation for Financial Activities (Private
Industry) (BLS series code CIU201520A000000I) to measure the price
growth of this cost category.
v. Telephone Services
We use the CPI for Telephone Services (BLS series code
CUUR0000SEED) to measure the price growth of this cost category.
w. Postage
We use the CPI for Postage (BLS series code CUUR0000SEEC01) to
measure the price growth of this cost category.
x. All Other: Nonlabor-Related Services
We use the CPI for All Items Less Food and Energy (BLS series code
CUUR0000SA0L1E) to measure the price growth of this cost category.
Table IV04 in the proposed rule compared both the historical and
forecasted percent changes in the FY 2006-based IPPS market basket and
the proposed FY 2010 based IPPS market basket.
Table IV04 below compares both the historical and forecasted
percent changes in the FY 2006-based IPPS market basket and the final
FY 2010-based IPPS market basket. As stated in the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27572), we are incorporating a more recent
forecast of the market basket to determine the FY 2014 market basket
updates and MFP adjustment in the final rule. Therefore, the forecasted
growth rates in Table IV04 are based on IHS Global Insight, Inc.'s
(IGI) most recent second quarter 2013 forecast with historical data
through first quarter 2013. The proposed rule presented IGI's first
quarter 2013 forecast with historical data through fourth quarter of
2012.
Table IV04--FY 2006-Based and FY 2010-Based Prospective Payment Hospital
Operating Index Percent Change, FY 2008 Through FY 2016
------------------------------------------------------------------------
FY 2006- based FY 2010- based
IPPS market IPPS market
basket basket
Fiscal year (FY) operating operating
index percent index percent
change change
------------------------------------------------------------------------
Historical data:
FY 2008............................. 4.0 4.0
FY 2009............................. 2.6 2.6
FY 2010............................. 2.1 2.1
[[Page 50601]]
FY 2011............................. 2.7 2.7
FY 2012............................. 2.2 2.2
-------------------------------
Average FYs 2008-2012........... 2.7 2.7
Forecast:
FY 2013............................. 2.2 2.1
FY 2014............................. 2.5 2.5
FY 2015............................. 2.7 2.7
FY 2016............................. 3.0 3.0
-------------------------------
Average FYs 2013-2016........... 2.6 2.6
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast.
There is no difference between the FY 2006-based and the FY 2010-
based IPPS market basket increases for 2008-2012. For FY 2014, the
increase is 2.5 percent for both the FY 2006-based and FY 2010-based
IPPS market baskets.
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. Because of this
approach, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27566), we
proposed to include 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 facilities support services,
and all other: Labor-related services, as we did in the FY 2010 IPPS/RY
2010 LTCH PPS final rule (74 FR 43850). 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.
Similar to the FY 2006-based IPPS market basket, we proposed that
the professional fees: Labor-related cost category includes expenses
associated with advertising and a proportion of legal services,
accounting and auditing, engineering, management consulting, and
management of companies and enterprises expenses. As was done in the FY
2006-based IPPS market basket rebasing, we proposed to determine the
proportion of legal, accounting and auditing, engineering, and
management consulting services that meet our definition of labor-
related services based on a survey of hospitals conducted by CMS in
2008. We notified the public of our intent to conduct this survey on
December 9, 2005 (70 FR 73250) and received no comments (71 FR 8588).
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. A more
thorough discussion of the composition of the survey and
poststratification can be found in the FY 2010 IPPS/RY 2010 LTCH PPS
final rule (74 FR 43850 through 43856). Based on the weighted results
of the survey, we determined that hospitals purchase, on average, the
following portions of contracted professional services outside of their
local labor market:
34 percent of accounting and auditing services;
30 percent of engineering services;
33 percent of legal services; and
42 percent of management consulting services.
We proposed to apply each of these percentages to its respective
Benchmark I-O cost category underlying the professional fees cost
category. This is the methodology that we used to separate the FY 2006-
based IPPS market basket professional fees category into professional
fees: Labor-related and professional fees: nonlabor-related cost
categories. We proposed to use the same methodology and survey results
to separate the FY 2010-based IPPS market basket professional fees
category into professional fees: Labor-related and professional fees:
nonlabor-related cost categories. We believe these survey results are
appropriate to use for the FY 2010-based IPPS market basket rebasing as
they empirically determine the proportion of contracted professional
services purchased by the industry that is attributable to local firms
and the proportion that is purchased from national firms.
We did not receive any specific public comments on the use of the
professional fees survey. Therefore, we are finalizing our methodology
for allocating contracted professional services for FY 2014 as
proposed. In the FY 2010-based IPPS market basket, nonmedical
professional fees that were subject to allocation based on the survey
results represent 2.059 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 1.301 percentage points of the 2.059 percentage point
figure into the labor-
[[Page 50602]]
related share and designating the remaining 0.758 percentage point as
nonlabor-related.
In addition to the professional services listed above, we also
classify a proportion of the expenses under NAICS 55, Management of
Companies and Enterprises, into the professional fees: Labor-related
cost category as was done in the previous rebasing. The NAICS 55 data
are mostly comprised of corporate, subsidiary, and regional managing
offices, or otherwise referred to as home offices. As was done for the
FY 2006-based IPPS market basket and as we proposed for the FY 2010-
based IPPS market basket, for this final rule, we are including only a
portion of the home office costs in the labor related share as not all
hospitals are located in the same geographic area as their home office.
We did not receive any specific public comments on our proposed
methodology for allocating home office costs to the labor-related
share. Therefore, we are finalizing this methodology as described in
the proposed rule and provided below for FY 2014. Our methodology is
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
and locations. Using the data reported on the Medicare Cost Report as
well as 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 determined
the proportion of costs that should be allocated to the labor-related
share based on the percent of total hospital home office compensation
costs for those hospitals that had home offices located in their
respective local labor markets--defined as being in the same
Metropolitan Statistical Area (MSA). We primarily determined a
hospital's and home office's MSAs using their zip code information from
the Medicare cost report. For any home offices for which we could not
identify a MSA from the Medicare cost report, we used the Medicare
HOMER database to identify the home office's city and State.
As proposed, we determined the proportion of costs that should be
allocated to the labor-related share based on the percent of hospital
home office compensation as reported in Worksheet S-3, Part II. Using
this methodology, we determined that 62 percent of hospitals' home
office compensation costs were for home offices located in their
respective local labor markets. Therefore, we are allocating 62 percent
of NAICS 55 expenses to the labor-related share.
In the FY 2010-based IPPS market basket, NAICS 55 expenses that
were subject to allocation based on the home office allocation
methodology represent 5.650 percent of the total operating costs. Based
on the home office results, we are apportioning 3.503 percentage points
of the 5.650 percentage points figure into the labor-related share and
designating the remaining 2.147 percentage points as nonlabor-related.
In sum, based on the two allocations mentioned above, we apportioned
4.804 percentage points into the labor-related share. This amount is
added to the 0.696 percentage point of professional fees that we
already identified as labor-related, resulting in a professional fees:
Labor-related cost weight of 5.500 percent.
Below is a table comparing the FY 2010-based labor-related share
and the FY 2006-based labor-related share. As discussed in section
IV.B.3. of the preamble of this final rule, the wages and salaries and
employee benefits cost weight reflect contract labor costs.
Table IV05--Comparison of the FY 2010-Based Labor-Related Share and the
FY 2006-Based Labor-Related Share
------------------------------------------------------------------------
FY 2006- based FY 2010- based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 47.213 47.233
Employee Benefits....................... 12.414 13.105
Professional Fees: Labor-Related........ 5.356 5.500
Administrative and Facilities........... 0.626 0.619
Support Services........................
All Other: Labor-Related Services....... 3.193 3.130
-------------------------------
Total Labor-Related Share........... 68.802 69.587
------------------------------------------------------------------------
Using the cost category weights from the FY 2010-based IPPS market
basket, we calculated a labor-related share of 69.587 percent,
approximately 0.8 percentage point higher than the current labor-
related share of 68.802. We continue to believe, as we have stated in
the past, that these operating cost categories are related to,
influenced by, or vary with the local markets. Therefore, our
definition of the labor-related share continues to be consistent with
section 1886(d)(3) of the Act. We note that section 403 of 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 62 percent ``would result in lower payments to a
hospital than would otherwise be made.''
Comment: Several commenters supported the proposed increase in the
labor-related share.
Response: We appreciate the commenters' support.
In this final rule, we are finalizing the labor-related share of
69.6 percent for FY 2014 as proposed.
As we proposed, we also updated the labor-related share for Puerto
Rico. Consistent with our methodology for determining the national
labor-related share, we calculated the Puerto Rico-specific relative
weights for wages and salaries, employee benefits, and contract labor
using FY 2010 Medicare cost report data for IPPS hospitals located in
Puerto Rico. Because there are no Puerto Rico-specific relative weights
for professional fees and labor intensive services, we use the national
weights as shown in Table IV05. This is the same methodology we used to
determine the FY 2006-based Puerto Rico-specific labor-related share
derived during the FY 2006-based IPPS market basket rebasing (74 FR
43856).
Below is a table comparing the FY 2010-based Puerto Rico-specific
labor-
[[Page 50603]]
related share and the FY 2006-based Puerto Rico-specific labor-related
share.
Table IV06--Comparison of the FY 2010-Based Puerto Rico-Specific Labor-
Related Share and FY 2006-Based Puerto Rico-Specific Labor-Related Share
------------------------------------------------------------------------
FY 2006- based FY 2010- based
market basket market basket
cost weights cost weights
------------------------------------------------------------------------
Wages and Salaries...................... 44.221 44.918
Benefits................................ 8.691 8.990
Professional Fees: Labor-Related........ 5.356 5.500
Administrative and Facilities: Support 0.626 0.619
Services...............................
All Other: Labor-Related Services....... 3.193 3.130
-------------------------------
Total Labor-Related Share........... 62.087 63.157
------------------------------------------------------------------------
Using the FY 2010-based Puerto Rico cost category weights, we
calculated a labor-related share of 63.157 percent, approximately 1.1
percentage points higher than the current Puerto-Rico specific labor-
related share of 62.087.
We did not receive any public comments on the proposal to update
the Puerto Rico labor-related share. Therefore, we are finalizing the
Puerto Rico labor-related share of 63.2 percent for FY 2014 as
proposed.
C. Market Basket for Certain Hospitals Presently Excluded From the IPPS
In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43857), we
adopted the use of the FY 2006-based IPPS operating market basket
percentage increase to update the target amounts for children's
hospitals, PPS-excluded cancer hospitals and religious nonmedical
health care institutions (RNHCIs). Children's hospitals and PPS-
excluded cancer hospitals and RNHCIs are still reimbursed solely under
the reasonable cost-based system, subject to the rate-of-increase
limits. Under these limits, an annual target amount (expressed in terms
of the inpatient operating cost per discharge) is set for each hospital
based on the hospital's own historical cost experience trended forward
by the applicable rate-of-increase percentages.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27568), 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 proposed to use the FY 2010-based IPPS operating market
basket percentage increase to update the target amounts for children's
hospitals, 11 PPS-excluded cancer hospitals, and RNHCIs that are paid
on the basis of reasonable cost subject to the rate-of-increase limits
under Sec. 413.40.
We did not receive any public comments on this proposal. In this
final rule, we are finalizing the use of the FY 2010-based IPPS
operating market basket percentage increase to update the target
amounts for children's hospitals, 11 PPS-excluded cancer hospitals, and
RNHCIs that are paid on the basis of reasonable cost as we proposed.
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. Due to the limited cost report
data available, we believe that the FY 2010-based IPPS operating market
basket most closely represents the cost structure of children's
hospitals, PPS-excluded cancer hospitals, and RNHCIs. We believe this
is appropriate as the IPPS operating market basket would reflect the
input price growth for providing inpatient hospital services (similar
to the services provided by the above excluded hospitals) based on the
specific mix of goods and services required. Therefore, we believe that
the percentage change in the FY 2010-based IPPS operating market basket
is the best available measure of the average increase in the prices of
the goods and services purchased by children hospitals, the 11 cancer
hospitals, and RNHCIs in order to provide care.
D. Rebasing and Revising the Capital Input Price Index (CIPI)
The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final payment rules. The FY 2010
IPPS/RY 2010 LTCH PPS final rule (74 FR 43857) discussed the most
recent rebasing and revision of the CIPI to a FY 2006 base year, which
reflected the capital cost structure of the hospital industry in that
year.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27568), for the
FY 2014 IPPS update, we proposed to rebase and revise the CIPI to a FY
2010 base year to reflect the more current structure of capital costs
in hospitals. As with the FY 2006-based index, we developed two sets of
weights in order to calculate the FY 2010-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 were 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 2010 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 and
price movement 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
those costs to the Other
[[Page 50604]]
category accordingly. The remaining lease expenses were distributed
across the three cost categories based on the respective weights of
Depreciation, Interest, and Other 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 2006-based index.
The total Interest cost category is split between government/
nonprofit interest and for-profit interest. The FY 2006-based CIPI
allocated 85 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 15 percent of the interest cost
weight was allocated to for-profit interest and was proxied by the
average yield on Moody's Aaa bonds (74 FR 43857).
For the FY 2010-based CIPI, as we proposed, we derived the split
using the relative FY 2010 Medicare cost report data on interest
expenses for government/nonprofit and for-profit hospitals. Based on
these data, we calculated an 89/11 split between government/nonprofit
and for-profit interest. We believe it is important that this split
reflects the latest relative cost structure of interest expenses.
We did not receive any public comments on our proposed methodology
for calculating the FY 2010-based CIPI cost weights.
In this final rule, we are finalizing the FY 2010-based CIPI cost
weights as proposed. Table IV07 presents a comparison of the FY 2010-
based CIPI cost weights and the FY 2006-based CIPI cost weights.
Table IV07--FY 2010-Based CIPI Cost Categories, Weights, and Price Proxies With FY 2006-Based CIPI Included for
Comparison
----------------------------------------------------------------------------------------------------------------
FY 2006 FY 2010
Cost categories weights weights Price proxy
----------------------------------------------------------------------------------------------------------------
Total...................................... 100.00 100.00 ...................................
Total depreciation......................... 75.154 74.011 ...................................
Building and fixed equipment depreciation.. 35.789 36.153 BEA chained price index for
nonresidential construction for
hospitals and special care
facilities--vintage-weighted (26
years).
Movable equipment depreciation............. 39.365 37.858 PPI for machinery and equipment--
vintage-weighted (12 years).
Total interest............................. 17.651 19.157 ...................................
Government/nonprofit interest.............. 15.076 17.051 Average yield on domestic municipal
bonds (Bond Buyer 20 bonds)--
vintage-weighted (26 years).
For-profit interest........................ 2.575 2.106 Average yield on Moody's Aaa bonds--
vintage-weighted (26 years).
Other...................................... 7.195 6.832 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.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html 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 2010.
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 2010 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,
[[Page 50605]]
assuming straight-line depreciation. From the FY 2010 Medicare cost
reports, the expected life of building and fixed equipment was
determined to be 26 years, and the expected life of movable equipment
was determined to be 12 years. The FY 2006-based CIPI was based on an
expected life of building and fixed equipment of 25 years and 12 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 2010 Medicare cost reports to
separate the depreciation expenses into annual amounts of building and
fixed equipment depreciation and movable equipment depreciation. 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 2010 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 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 26 years, the vintage weights for building and
fixed equipment are deemed to represent the average purchase pattern of
building and fixed equipment over 26-year periods. With real building
and fixed equipment purchase estimates available back to 1963, we
averaged twenty-two 26-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 26-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 26-year period. This calculation
is done for each year in the 26-year period, and for each of the
twenty-two 26-year periods. We used the average of each year across the
twenty-two 26-year periods to determine the average building and fixed
equipment vintage weights for the FY 2010-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-six
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-six 12-year periods. We used the
average of each year across the thirty-six 12-year periods to determine
the average movable equipment vintage weights for the FY 2010-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 26 years, the
vintage weights for interest are deemed to represent the average
purchase pattern of total equipment over 26-year periods. With nominal
total equipment purchase estimates available back to 1963, twenty-two
26-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 26-year period are
calculated by dividing the nominal total capital purchase amount for
any given year by the total amount of purchases in the 26-year period.
This calculation is done for each year in the 26-year period and for
each of the twenty-two 26-year periods. We used the average of each
year across the twenty-two 26-year periods to determine the average
interest vintage weights for the proposed FY 2010-based CIPI.
We did not receive any public comments on our proposed methodology
for calculating the FY 2010-based CIPI vintage weights. In this final
rule, we are finalizing the CIPI vintage weights as proposed. The
vintage weights for the FY 2006-based CIPI and the FY 2010-based CIPI
are presented in Table IV08.
Table IV08--FY 2006 Vintage Weights and FY 2010 Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year \1\ FY 2006 25 FY 2010 26 FY 2006 12 FY 2010 12 FY 2006 25 FY 2010 26
Years Years Years Years Years Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.021 0.023 0.063 0.064 0.010 0.012
2....................................................... 0.023 0.024 0.067 0.068 0.012 0.013
3....................................................... 0.025 0.026 0.071 0.071 0.014 0.015
4....................................................... 0.027 0.028 0.075 0.073 0.016 0.017
5....................................................... 0.029 0.029 0.079 0.076 0.018 0.018
6....................................................... 0.031 0.031 0.082 0.078 0.020 0.021
7....................................................... 0.032 0.032 0.085 0.084 0.023 0.023
8....................................................... 0.033 0.034 0.086 0.088 0.025 0.025
9....................................................... 0.036 0.036 0.090 0.092 0.028 0.028
10...................................................... 0.038 0.038 0.093 0.098 0.031 0.030
11...................................................... 0.040 0.040 0.102 0.103 0.034 0.033
12...................................................... 0.042 0.041 0.106 0.106 0.038 0.036
[[Page 50606]]
13...................................................... 0.044 0.042 .............. .............. 0.041 0.038
14...................................................... 0.045 0.042 .............. .............. 0.044 0.040
15...................................................... 0.046 0.043 .............. .............. 0.047 0.043
16...................................................... 0.047 0.044 .............. .............. 0.050 0.045
17...................................................... 0.048 0.044 .............. .............. 0.053 0.047
18...................................................... 0.050 0.044 .............. .............. 0.057 0.048
19...................................................... 0.050 0.044 .............. .............. 0.059 0.051
20...................................................... 0.050 0.044 .............. .............. 0.060 0.052
21...................................................... 0.048 0.045 .............. .............. 0.060 0.056
22...................................................... 0.048 0.045 .............. .............. 0.062 0.057
23...................................................... 0.047 0.045 .............. .............. 0.063 0.060
24...................................................... 0.049 0.046 .............. .............. 0.068 0.062
25...................................................... 0.048 0.045 .............. .............. 0.069 0.064
26...................................................... .............. 0.045 .............. .............. .............. 0.066
-----------------------------------------------------------------------------------------------
Total................................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
\1\ Year 1 represents the vintage weight applied to the farthest year while the vintage weight for year 26, for example, would apply to the most recent
year.
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 2010-based CIPI that
were used in the FY 2006-based CIPI. The rationale for selecting the
price proxies was explained more fully in the FY 1997 IPPS final rule
(61 FR 46196) and the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43857). These price proxies are presented in Table IV07.
Table IV09 below compares both the historical and forecasted
percent changes in the FY 2006-based CIPI and the FY 2010-based CIPI.
As stated in the FY 2014 IPPS/LTCH proposed rule (78 FR 27572), we are
incorporating a more recent forecast of the market baskets in the final
rule. Therefore, the forecasted growth rates in Table IV09 are based on
IHS Global Insight Inc.'s (IGI) most recent second quarter 2013
forecast with historical data through first quarter 2013. The proposed
rule presented IGI's first quarter 2013 forecast with historical data
through fourth quarter of 2012.
Table IV09--Comparison of FY 2006-Based and FY 2010-Based Capital Input
Price Index, Percent Change, FY 2008 through FY 2016
------------------------------------------------------------------------
CIPI, FY 2006- CIPI, FY 2010-
Fiscal year Based Based
------------------------------------------------------------------------
FY 2008................................. 1.5 1.1
FY 2009................................. 1.5 1.2
FY 2010................................. 1.0 0.7
FY 2011................................. 1.2 0.9
FY 2012................................. 1.2 1.0
Forecast:............................... .............. ..............
FY 2013................................. 1.3 1.1
FY 2014................................. 1.4 1.2
FY 2015................................. 1.5 1.4
FY 2016................................. 1.7 1.6
Average: .............. ..............
FYs 2008-2012....................... 1.3 1.0
FYs 2013-2016....................... 1.5 1.3
------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast.
IHS Global Insight, Inc. forecasts a 1.2 percent increase in the FY
2010-based CIPI for FY 2014, as shown in Table IV09. 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 Table IV10.
[[Page 50607]]
Table IV10--CMS Capital Input Price Index Percent Changes, Total and Depreciation and Interest Components-- FYs
2008 Through 2016
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
FY 2008......................................................... 1.1 2.0 -3.1
FY 2009......................................................... 1.2 2.0 -2.0
FY 2010......................................................... 0.7 1.7 -2.8
FY 2011......................................................... 0.9 1.7 -2.3
FY 2012......................................................... 1.0 1.7 -2.7
Forecast:....................................................... .............. .............. ..............
FY 2013......................................................... 1.1 1.8 -2.7
FY 2014......................................................... 1.2 1.9 -2.3
FY 2015......................................................... 1.4 2.0 -1.8
FY 2016......................................................... 1.6 2.0 -0.8
----------------------------------------------------------------------------------------------------------------
Source: IHS Global Insight, Inc., 2nd Quarter 2013 forecast.
Rebasing the CIPI from FY 2006 to FY 2010 decreased the percent
change in the forecasted update for FY 2014 by 0.2 percentage point,
from 1.4 percent to 1.2 percent, as shown in Table IV09. The difference
in the forecasted market basket update for FY 2014 is primarily due to
the rebasing of the index to FY 2010 and revising the base year cost
weights to incorporate the FY 2010 Medicare cost report data.
V. Other Decisions and Changes to the IPPS for Operating Costs and GME
Costs
A. Changes in the Inpatient Hospital Update for FY 2014 (Sec. Sec.
412.64(d) and 412.211(c))
1. FY 2014 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient operating
costs by a factor called the ``applicable percentage increase.''
Section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act, sets the applicable percentage
increase under the IPPS for FY 2014 as equal to the rate-of-increase in
the hospital market basket for IPPS hospitals in all areas, subject to
a reduction of 2.0 percentage points if the hospital fails to submit
quality information under rules established by the Secretary in
accordance with section 1886(b)(3)(B)(viii) of the Act, and then
subject to an adjustment based on changes in economy-wide productivity
(the multifactor productivity (MFP) adjustment), and an additional
reduction of 0.3 percentage point. Sections 1886(b)(3)(B)(xi) and
(b)(3)(B)(xii) of the Act, as added by section 3401(a) of the
Affordable Care Act, state that application of the MFP adjustment and
the additional FY 2014 adjustment of 0.3 percentage point may result in
the applicable percentage increase being less than zero.
We note, in compliance with section 404 of the MMA, in this final
rule, as we proposed, we are replacing the FY 2006-based IPPS operating
and capital market baskets with the revised and rebased FY 2010-based
IPPS operating and capital market baskets for FY 2014. We also are
rebasing the labor-related share to reflect the more recent base year.
For FY 2014, we are adopting a labor-related share of 69.6 percent,
which is based on the rebased and revised FY 2010-based IPPS market
basket (as compared to the FY 2013 labor-related share of 68.8 percent,
which is based on the FY 2006-based IPPS market basket). For a complete
discussion on the rebasing of the market basket and labor-related
share, we refer readers to section IV. of the preamble of this final
rule.
Based on the most recent data available for the FY 2014 proposed
rule, in accordance with section 1886(b)(3)(B) of the Act, we proposed
to base the proposed FY 2014 market basket update used to determine the
applicable percentage increase for the IPPS on the IHS Global Insight,
Inc. (IGI's) first quarter 2013 forecast of the FY 2010-based IPPS
market basket rate-of-increase with historical data through fourth
quarter 2012, which was estimated to be 2.5 percent. We also proposed
that if more recent data become subsequently available (for example, a
more recent estimate of the market basket and the MFP adjustment), we
would use such data, if appropriate, to determine the FY 2014 market
basket update and the MFP adjustment in the final rule. We did not
receive any public comments on our proposal. Therefore, for this final
rule, we based the final FY 2014 market basket update used to determine
the applicable percentage increase for the IPPS on more recently
available data, the IGI's second quarter 2013 forecast of the FY 2010-
based IPPS market basket rate-of-increase, which is estimated to be 2.5
percent.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
MFP adjustment. We also stated in the FY 2014 IPPS/LTCH PPS proposed
rule that, for FY 2014, we were not proposing to make any change in our
methodology for calculating and applying the MFP adjustment. In the
proposed rule, we proposed a MFP adjustment of 0.4 percent. Similar to
the market basket adjustment, for this final rule, we are using the
most recent data available to compute the MFP adjustment. We did not
receive any public comments on our proposal. Therefore, for this final
rule, using the most recent data available, we computed a MFP
adjustment of 0.5 percent for FY 2014.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572-27573),
consistent with current law, and based on IGI's first quarter 2013
forecast of the FY 2014 market basket increase, we proposed an
applicable percentage increase to the FY 2014 operating standardized
amount of 1.8 percent (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.4
percentage point for economy-wide productivity (that is, the MFP
adjustment) and less 0.3 percentage point) for hospitals in all areas,
provided the hospital submits quality data under rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals
that do not submit these quality data, we proposed an applicable
percentage increase to the operating standardized amount of -0.2
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent, less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.4 percentage point for the
MFP adjustment, and less an additional adjustment of 0.3 percentage
point). Lastly, as noted above, in the
[[Page 50608]]
proposed rule, we stated that if more recent data become subsequently
available (for example, a more recent estimate of the market basket and
the MFP adjustment), we would use such data, if appropriate, to
determine the FY 2014 market basket update and MFP adjustment in the
final rule. We did not receive any public comments on our proposal.
For this final rule, using the most recent data available,
consistent with current law, and based on IGI's second quarter 2013
forecast of the FY 2014 market basket increase, we are finalizing an
applicable percentage increase to the FY 2014 operating standardized
amount of 1.7 percent (that is, the FY 2014 estimate of the market
basket rate-of-increase of 2.5 percent less an adjustment of 0.5
percentage point for economy-wide productivity (that is, the MFP
adjustment) and less 0.3 percentage point) for hospitals in all areas,
provided the hospital submits quality data under rules established in
accordance with section 1886(b)(3)(B)(viii) of the Act. For hospitals
that do not submit these quality data, we are finalizing an applicable
percentage increase to the operating standardized amount of -0.3
percent (that is, the FY 2014 estimate of the market basket rate-of-
increase of 2.5 percent, less 2.0 percentage points for failure to
submit quality data, less an adjustment of 0.5 percentage point for the
MFP adjustment, and less an additional adjustment of 0.3 percentage
point).
In the proposed rule, we proposed to revise the existing
regulations at 42 CFR 412.64(d) to reflect the current law for the FY
2014 update. Specifically, in accordance with section 1886(b)(3)(B) of
the Act, we proposed to add a new paragraph (v) to Sec. 412.64(d)(1)
to reflect the applicable percentage increase to the FY 2014 operating
standardized amount as the percentage increase in the market basket
index less an MFP adjustment and less an additional reduction of 0.3
percentage point. We did not receive any public comments on this
proposal. Therefore, in this final rule, we are adopting as final,
without modification, the proposed changes to Sec. 412.64(d)(1)(v) to
reflect the current law.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs equals the
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of
the Act (that is, the same update factor as for all other hospitals
subject to the IPPS). Therefore, the update to the hospital-specific
rates for SCHs is also subject to section 1886(b)(3)(B)(i) of the Act,
as amended by sections 3401(a) and 10319(a) of the Affordable Care Act.
Accordingly, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27572-
27573), we proposed an update to the hospital-specific rates applicable
to SCHs of 1.8 percent for hospitals that submit quality data or -0.2
percent for hospitals that fail to submit quality data. For FY 2014,
the existing regulations in Sec. Sec. 412.73(c)(16), 412.75(d),
412.77(e) and 412.78(e) contain provisions that set the update factor
for SCHs equal to the update factor applied to the national
standardized amount for all IPPS hospitals. Therefore, we did not
propose to make any further changes to these four regulatory provisions
to reflect the FY 2014 update factor for the hospital-specific rates of
SCHs. We did not receive any public comments on this proposal.
Therefore, for this final rule, we are finalizing an update to the
hospital-specific rates applicable to SCHs of 1.7 percent for hospitals
that submit quality data or -0.3 percent for hospitals that fail to
submit quality data. As we noted above, for the proposed rule, we used
the first quarter 2013 forecast of the FY 2010-based IPPS market basket
with historical data through fourth quarter 2012. For this final rule,
we used the most recent data available, which was the second quarter
2013 forecast of the FY 2010-based IPPS market basket with historical
data through first quarter 2013. Similarly, for the proposed rule, we
used IGI's first quarter 2013 forecast of MFP. For this final rule, we
used the most recent data available, which was IGI's second quarter
2013 forecast of MFP.
We note that, as discussed in section V.F. of this preamble,
section 606 of the American Taxpayer Relief Act of 2012 extended the
MDH program from the end of FY 2012 (that is, for discharges occurring
before October 1, 2012) to the end of FY 2013 (that is, for discharges
occurring before October 1, 2013). Under prior law, the MDH program was
to be in effect through the end of FY 2012 only. Absent congressional
action further extending the MDH program, the MDH program will expire
for discharges beginning in FY 2014. Accordingly, we are not including
MDHs in our update of the hospital-specific rates for FY 2014.
2. FY 2014 Puerto Rico Hospital Update
Puerto Rico hospitals are paid a blended rate for their inpatient
operating costs based on 75 percent of the national standardized amount
and 25 percent of the Puerto Rico-specific standardized amount. Section
1886(d)(9)(C)(i) of the Act is the basis for determining the applicable
percentage increase applied to the Puerto Rico-specific standardized
amount. Section 401(c) of Public Law 108-173 amended section
1886(d)(9)(C)(i) of the Act, which states that, for discharges
occurring in a fiscal year (beginning with FY 2004), the Secretary
shall compute an average standardized amount for hospitals located in
any area of Puerto Rico that is equal to the average standardized
amount computed under subclause (I) for fiscal year 2003 for hospitals
in a large urban area (or, beginning with FY 2005, for all hospitals in
the previous fiscal year) increased by the applicable percentage
increase under subsection (b)(3)(B) for the fiscal year involved.
Therefore, the update to the Puerto Rico-specific operating
standardized amount equals the applicable percentage increase set forth
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a)
and 10319(a) of the Affordable Care Act (that is, the same update
factor as for all other hospitals subject to the IPPS). Accordingly, in
the FY 2014 IPS/LTCH PPS proposed rule (78 FR 27572 through 27573), we
proposed an applicable percentage increase to the Puerto Rico-specific
operating standardized amount of 1.8 percent for FY 2014. The
regulations at Sec. 412.211(c) currently set the update factor for the
Puerto Rico-specific operating standardized amount equal to the update
factor applied to the national standardized amount for all IPPS
hospitals. Therefore, it is not necessary to make any changes to the
existing regulatory text.
We did not receive any public comments on this proposal. Therefore,
for this final rule, we are finalizing an applicable percentage
increase to the Puerto Rico-specific operating standardized amount of
1.7 percent for FY 2014. As we noted above, for the proposed rule, we
used the first quarter 2013 forecast of the FY 2010-based IPPS market
basket with historical data through fourth quarter 2012. For this final
rule, we used the most recent data available, which was the second
quarter 2013 forecast of the FY 2010-based IPPS market basket with
historical data through first quarter 2013. Similarly, for the proposed
rule, we used IGI's first quarter 2013 forecast of MFP. For this final
rule, we used the most recent data available, which was IGI's second
quarter 2013 forecast of MFP.
B. Rural Referral Centers (RRCs): Annual Updates to Case-Mix Index and
Discharge Criteria (Sec. 412.96)
Under the authority of section 1886(d)(5)(C)(i) of the Act, the
[[Page 50609]]
regulations at Sec. 412.96 set forth the criteria that a hospital must
meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive some special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of Public Law 108-173 raised the DSH payment adjustment
for RRCs such that they are not subject to the 12-percent cap on DSH
payments that is applicable to other rural hospitals. RRCs are also not
subject to the proximity criteria when applying for geographic
reclassification. In addition, they do not have to meet the requirement
that a hospital's average hourly wage must exceed, by a certain
percentage, the average hourly wage of the labor market area where the
hospital is located.
Section 4202(b) of Public Law 105-33 states, in part, ``[a]ny
hospital classified as an RRC by the Secretary . . . for fiscal year
1991 shall be classified as such an RRC for fiscal year 1998 and each
subsequent year.'' In the August 29, 1997 IPPS final rule with comment
period (62 FR 45999), CMS reinstated RRC status for all hospitals that
lost the status due to triennial review or MGCRB reclassification.
However, CMS did not reinstate the status of hospitals that lost RRC
status because they were now urban for all purposes because of the OMB
designation of their geographic area as urban. Subsequently, in the
August 1, 2000 IPPS final rule (65 FR 47089), we indicated that we were
revisiting that decision. Specifically, we stated that we would permit
hospitals that previously qualified as an RRC and lost their status due
to OMB redesignation of the county in which they are located from rural
to urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC
status must satisfy all of the other applicable criteria. We use the
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR
Part 412. One of the criteria under which a hospital may qualify as an
RRC is to have 275 or more beds available for use (Sec.
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size
requirement can qualify as an RRC if the hospital meets two mandatory
prerequisites (a minimum CMI and a minimum number of discharges), and
at least one of three optional criteria (relating to specialty
composition of medical staff, source of inpatients, or referral
volume). (We refer readers to Sec. 412.96(c)(1) through (c)(5) and the
September 30, 1988 Federal Register (53 FR 38513).) With respect to the
two mandatory prerequisites, a hospital may be classified as an RRC
if--
The hospital's CMI is at least equal to the lower of the
median CMI for urban hospitals in its census region, excluding
hospitals with approved teaching programs, or the median CMI for all
urban hospitals nationally; and
The hospital's number of discharges is at least 5,000 per
year, or, if fewer, the median number of discharges for urban hospitals
in the census region in which the hospital is located. (The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.)
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment rates for purposes of determining RRC status. The methodology
we used to determine the national and regional CMI values is set forth
in the regulations at Sec. 412.96(c)(1)(ii). The national median CMI
value for FY 2014 includes data from all urban hospitals nationwide,
and the regional values for FY 2014 are the median CMI values of urban
hospitals within each census region, excluding those hospitals with
approved teaching programs (that is, those hospitals that train
residents in an approved GME program as provided in Sec. 413.75).
These values are based on discharges occurring during FY 2012 (October
1, 2011 through September 30, 2012), and include bills posted to CMS'
records through March 2013.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27573), we
proposed that, in addition to meeting other criteria, if rural
hospitals with fewer than 275 beds are to qualify for initial RRC
status for cost reporting periods beginning on or after October 1,
2013, they must have a CMI value for FY 2012 that is at least--
1.5526; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located. (We refer readers to the table set forth
in the FY 2014 IPPS/LTCH PPS proposed rule at 78 FR 27574.)
The final CMI values for FY 2014 are based on the latest available
data (FY 2012 bills received through March 2013). In addition to
meeting other criteria, if rural hospitals with fewer than 275 beds are
to qualify for initial RRC status for cost reporting periods beginning
on or after October 1, 2013, they must have a CMI value for FY 2012
that is at least--
1.5560; or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in Sec. 413.75) calculated by CMS for the census region in
which the hospital is located.
The final median CMI values by region are set forth in the
following table:
------------------------------------------------------------------------
Case-mix index
Region value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 1.3319
2. Middle Atlantic (PA, NJ, NY)......................... 1.4015
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 1.4808
4. East North Central (IL, IN, MI, OH, WI).............. 1.4618
5. East South Central (AL, KY, MS, TN).................. 1.4281
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 1.5355
7. West South Central (AR, LA, OK, TX).................. 1.5814
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 1.6438
9. Pacific (AK, CA, HI, OR, WA)......................... 1.5605
------------------------------------------------------------------------
A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its fiscal intermediary
or MAC. Data are available on the Provider Statistical and
Reimbursement (PS&R) System. In keeping with our policy on discharges,
the CMI values are computed based on all Medicare patient discharges
subject to the IPPS MS-DRG-based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges in each year's annual notice of
prospective payment rates for purposes of determining RRC status. As
specified in section 1886(d)(5)(C)(ii) of the Act, the national
standard is set at 5,000 discharges. We would normally propose to
update the regional standards based on discharges for urban hospitals'
cost reporting periods that began during FY 2011 (that is, October 1,
2010 through September 30, 2011), which would normally be the latest
cost report data available at the time of the development of the
proposed rule. However, in the FY 2014 IPPS/LTCH PPS proposed rule (78
FR 27574), due to a transition in our data system, in lieu of a full
year of FY 2011 cost report data, we proposed to use a combination of
FY 2010 and FY 2011 cost report data in order to create a full fiscal
year of cost report data for this
[[Page 50610]]
analysis. Due to CMS' transition to a new cost reporting form effective
for cost reporting periods beginning on or after May 1, 2010, some FY
2011 cost reports were not yet in our system for analysis at the time
of the development of the proposed rule. Therefore, in order to have a
complete fiscal year of cost report data, we utilized FY 2011 cost
report data if available, and for those providers whose FY 2011 cost
report data were not yet in our system, we utilized their FY 2010 cost
report data. This is similar to the process we used to establish the
median number of discharges for urban hospitals in the census region
for FY 2013, where we utilized FY 2009 and 2010 cost report data (77 FR
53406).
At the time of the development of this final rule, a full year of
FY 2011 cost report data became available in our system for analysis.
Therefore, the final FY 2014 discharges criteria is based on only FY
2011 cost reports, that is, data from cost reporting periods that began
in FY 2011.
In the FY 2014 PPS/LTCH PPS proposed rule, we proposed that, in
addition to meeting other criteria, a hospital, if it is to qualify for
initial RRC status for cost reporting periods beginning on or after
October 1, 2013, must have, as the number of discharges for its cost
reporting period that began during FY 2011 (based on a combination of
FY 2010 and FY 2011 cost report data as explained in the preceding
paragraph), at least--
5,000 (3,000 for an osteopathic hospital); or
The median number of discharges for urban hospitals in the
census region in which the hospital is located. (We refer readers to
the table set forth in the FY 2014 IPPS/LTCH PPS proposed rule at 78 FR
27574.)
Based on the latest discharge data available at this time (that is,
based on FY 2011 cost report data as explained earlier in this
section), the final median number of discharges for urban hospitals by
census region are set forth in the following table:
------------------------------------------------------------------------
Number of
Region discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)................. 7,830
2. Middle Atlantic (PA, NJ, NY)......................... 10,968
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV).. 11,535
4. East North Central (IL, IN, MI, OH, WI).............. 8,507
5. East South Central (AL, KY, MS, TN).................. 7,397
6. West North Central (IA, KS, MN, MO, NE, ND, SD)...... 7,792
7. West South Central (AR, LA, OK, TX).................. 5,374
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............ 9,024
9. Pacific (AK, CA, HI, OR, WA)......................... 8.857
------------------------------------------------------------------------
We note that the median number of discharges for hospitals in each
census region is greater than the national standard of 5,000
discharges. Therefore, 5,000 discharges is the minimum criterion for
all hospitals under this final rule.
We reiterate that, if an osteopathic hospital is to qualify for RRC
status for cost reporting periods beginning on or after October 1,
2013, the hospital would be required to have at least 3,000 discharges
for its cost reporting period that began during FY 2011 (based on FY
2011 cost report data as explained earlier in this section).
C. Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital under the IPPS beginning in FY
2005. Section 1886(d)(12) of the Act sets forth the qualifying criteria
for a qualifying low-volume hospital and the methodology for
determining the low-volume hospital payment adjustment.
Sections 3125 and 10314 of the Affordable Care Act provided for a
temporary change in the low-volume hospital payment policy for FYs 2011
and 2012 by expanding the definition of a low-volume hospital and
modifying the methodology for determining the payment adjustment for
hospitals meeting the definition. Therefore, prior to the enactment of
the American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240) on
January 2, 2013, beginning with FY 2013, the low-volume hospital
qualifying criteria and payment adjustment requirements would have
reverted to the statutory requirements under section 1886(d)(12) of the
Act that were in effect prior to FY 2011. Section 605 of the ATRA
extended for an additional year, through FY 2013, the temporary changes
in the low-volume hospital definition and methodology for determining
the payment adjustment made by the Affordable Care Act for FYs 2011 and
2012. Beginning with FY 2014, the low-volume hospital qualifying
criteria and payment adjustment will revert to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act and the ATRA. In section V.D.3. of this preamble,
we discuss the low-volume hospital payment adjustment policies for FY
2014.
a. Original Implementation of the Low-Volume Hospital Payment
Adjustment
Section 1886(d)(12) of the Act, as added by section 406(a) of
Public Law 108-173, provides for a payment adjustment to account for
the higher costs per discharge for low-volume hospitals under the IPPS,
effective beginning FY 2005. The additional payment adjustment to a
low-volume hospital provided for under section 1886(d)(12) of the Act
is ``[i]n addition to any payment calculated under this section.''
Therefore, the additional payment adjustment is based on the per
discharge amount paid to the qualifying hospital under section 1886 of
the Act. In other words, the low-volume hospital payment adjustment is
based on total per discharge payments made under section 1886 of the
Act, including capital, DSH, IME, and outlier payments. For SCHs and
MDHs, the low-volume hospital payment adjustment is based in part on
either the Federal rate or the hospital-specific rate, whichever
results in a greater operating IPPS payment.
Section 1886(d)(12)(C)(i) of the Act defined a low-volume hospital
as ``a subsection (d) hospital (as defined in paragraph (1)(B)) that
the Secretary determines is located more than 25 road miles from
another subsection (d) hospital and has less than 800 discharges during
the fiscal year.'' Section 1886(d)(12)(C)(ii) of the Act further
stipulates that the term ``discharge'' means ``an inpatient acute care
discharge of an individual regardless of whether the individual is
entitled to benefits under Part A.'' Therefore, the term ``discharge''
refers to total discharges, regardless of payer (that is, not only
Medicare discharges). Furthermore, under section 406(a) of Public Law
108-173, which initially added subparagraph (12) to section 1886(d) of
the Act, the provision requires the Secretary to determine an
applicable percentage increase for these low-volume hospitals based on
the ``empirical relationship'' between ``the standardized cost-per-case
for such hospitals and the total number of discharges of such hospitals
and the amount of the additional incremental costs (if any) that are
associated with such number of discharges.'' The statute thus mandates
that the Secretary develop an empirically justifiable
[[Page 50611]]
adjustment based on the relationship between costs and discharges for
these low-volume hospitals. Section 1886(d)(12)(B)(iii) of the Act
limits the applicable percentage increase adjustment to no more than 25
percent.
Based on an analysis we conducted for the FY 2005 IPPS final rule
(69 FR 49099 through 49102), a 25-percent low-volume hospital payment
adjustment to all qualifying hospitals with less than 200 discharges
was found to be most consistent with the statutory requirement to
provide relief to low-volume hospitals where there is empirical
evidence that higher incremental costs are associated with low numbers
of total discharges. In the FY 2006 IPPS final rule (70 FR 47432
through 47434), we stated that multivariate analyses supported the
existing low-volume hospital payment adjustment implemented in FY 2005.
Therefore, the low-volume hospital payment adjustment of an additional
25 percent continued to be provided for qualifying hospitals with less
than 200 discharges.
b. Affordable Care Act Provisions for FYs 2011 and 2012
For FYs 2011 and 2012, sections 3125 and 10314 of the Affordable
Care Act expanded the definition of low-volume hospital and modified
the methodology for determining the payment adjustment for hospitals
meeting that definition. Specifically, those provisions of the
Affordable Care Act amended the qualifying criteria for low-volume
hospitals under section 1886(d)(12)(C)(i) of the Act to specify that,
for FYs 2011 and 2012, a subsection (d) hospital qualifies as a low-
volume hospital if it is more than 15 road miles from another
subsection (d) hospital and has less than 1,600 discharges of
individuals entitled to, or enrolled for, benefits under Part A during
the fiscal year. In addition, section 1886(d)(12)(D) of the Act, as
added by the Affordable Care Act, provides that the low-volume hospital
payment adjustment (that is, the percentage increase) is to be
determined ``using a continuous linear sliding scale ranging from 25
percent for low-volume hospitals with 200 or fewer discharges of
individuals entitled to, or enrolled for, benefits under Part A in the
fiscal year to zero percent for low-volume hospitals with greater than
1,600 discharges of such individuals in the fiscal year.''
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we revised the regulations at 42 CFR 412.101 to reflect the
changes to the qualifying criteria and the payment adjustment for low-
volume hospitals made by sections 3125 and 10314 of the Affordable Care
Act. In addition, we defined, at Sec. 412.101(a), the term ``road
miles''' to mean ``miles'' as defined at Sec. 412.92(c)(1), and
clarified the existing regulations to indicate that a hospital must
continue to qualify as a low-volume hospital in order to receive the
payment adjustment in that year (that is, it is not based on a one-time
qualification). Furthermore, in that same final rule, we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment for FY 2011 (75 FR 50240). For the second year of the
changes to the low-volume hospital payment adjustment provided for by
section 3125 and 10314 of the Affordable Care Act (that is, FY 2012),
consistent with the regulations at Sec. 412.101(b)(2)(ii), in the FY
2012 IPPS/LTCH PPS final rule (76 FR 51677 through 51680), we updated
the discharge data source used to identify qualifying low-volume
hospitals and calculate the payment adjustment (percentage increase).
Under Sec. 412.101(b)(2)(ii), for FYs 2011 and 2012, a hospital's
Medicare discharges from the most recently available MedPAR data, as
determined by CMS, are used to determine if the hospital meets the
discharge criteria to receive the low-volume hospital payment
adjustment in the current year. In that same final rule, we established
that, for FY 2012, qualifying low-volume hospitals and their payment
adjustment are determined using Medicare discharge data from the March
2011 update of the FY 2010 MedPAR file, as these data were the most
recent data available at that time. In addition, we noted that
eligibility for the low-volume hospital payment adjustment for FY 2012
was also dependent upon meeting (if the hospital was qualifying for the
low-volume hospital payment adjustment for the first time in FY 2012),
or continuing to meet (if the hospital qualified in FY 2011), the
mileage criterion specified at Sec. 412.101(b)(2)(ii). Furthermore, we
established a procedure for a hospital to request low-volume hospital
status for FY 2012 (which was consistent with the process we employed
for the low-volume hospital payment adjustment for FY 2011).
2. Provisions of the ATRA for FY 2013
a. Background
Section 605 of the ATRA amended sections 1886(d)(12)(B), (C)(i),
and (D) of the Act to extend, for FY 2013, the temporary changes in the
low-volume hospital payment adjustment policy provided for in FYs 2011
and 2012 by the Affordable Care Act. As we have noted previously, prior
to the enactment of section 605 of the ATRA, beginning with FY 2013,
the low-volume hospital definition and payment adjustment methodology
would have reverted to the policy established under statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act.
Prior to the enactment of the ATRA, in the FY 2013 IPPS/LTCH PPS
final rule (77 FR 53406 through 53409), we discussed the low-volume
hospital payment adjustment for FY 2013 and subsequent fiscal years.
Specifically, we discussed that, in accordance with section 1886(d)(12)
of the Act, beginning with FY 2013, the low-volume hospital definition
and payment adjustment methodology would revert back to the statutory
requirements that were in effect prior to the amendments made by the
Affordable Care Act. Therefore, we explained, as specified under the
existing regulations at Sec. 412.101, effective for FY 2013 and
subsequent years, that in order to qualify as a low-volume hospital, a
subsection (d) hospital must be more than 25 road miles from another
subsection (d) hospital and have less than 200 discharges (that is,
less than 200 total discharges, including both Medicare and non-
Medicare discharges) during the fiscal year. We also established a
procedure for hospitals to request low-volume hospital status for FY
2013 (which was consistent with our previously established procedures
for FYs 2011 and 2012).
In a Federal Register notice published on March 7, 2013 (78 FR
14689) (hereinafter referred to as the FY 2013 IPPS notice), we
announced the extension of the Affordable Care Act amendments to the
low-volume hospital payment adjustment requirements under section
1886(d)(12) of the Act for FY 2013 pursuant to section 605 of the ATRA.
The applicable low-volume hospital percentage increase provided for by
the provisions of the Affordable Care Act and the ATRA is determined
using a continuous linear sliding scale equation that results in a low-
volume hospital payment adjustment ranging from an additional 25
percent for hospitals with 200 or fewer Medicare discharges to a zero
percent additional payment adjustment for hospitals with 1,600 or more
Medicare discharges.
In the FY 2013 IPPS notice (78 FR 14689 through 14694), to
implement the extension of the temporary change in the low-volume
hospital payment adjustment policy for FY 2013 provided for by the
ATRA, we updated the discharge data source used to identify
[[Page 50612]]
qualifying low-volume hospitals and calculate the payment adjustment
(percentage increase). Consistent with our implementation of the low-
volume hospital payment adjustment policy for FYs 2011 and 2012 as set
forth at existing Sec. 412.101(b)(2)(ii), we established that, for FY
2013, qualifying low-volume hospitals and their payment adjustments are
determined using Medicare discharge data from the March 2012 update of
the FY 2011 MedPAR file, as these data were the most recent data
available at the time of the development of the FY 2013 payment rates
and factors established in the FY 2013 IPPS/LTCH PPS final rule. In
addition, we noted that eligibility for the low-volume hospital payment
adjustment for FY 2013 is also dependent upon meeting (in the case of a
hospital that did not qualify for the low-volume hospital payment
adjustment in FY 2012), or continuing to meet (in the case of a
hospital that did qualify for the low-volume hospital payment
adjustment in FY 2012), the mileage criterion specified at existing
Sec. 412.101(b)(2)(ii). We also established a procedure for a hospital
to request low-volume hospital status for FY 2013 (which is consistent
with the process for the low-volume hospital payment adjustment for FYs
2011 and 2012). Furthermore, we noted our intent to make conforming
changes to the regulations text at Sec. 412.101 to reflect the changes
to the qualifying criteria and the payment adjustment for low-volume
hospitals in accordance with the amendments made by section 605 of the
ATRA in future rulemaking. (We refer readers to the FY 2013 IPPS notice
(78 FR 14689 through 14694) for additional information on the extension
of the Affordable Care Act amendments to the low-volume hospital
payment adjustment requirements under section 1886(d)(12) of the Act
through FY 2013 in accordance with section 605 of the ATRA.)
b. Conforming Regulatory Changes
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414), we amended the regulations at Sec. 412.101 to specify
that, beginning with FY 2013, the low-volume hospital definition and
payment adjustment methodology reverted to the policy established under
statutory requirements that were in effect prior to the amendments made
by the Affordable Care Act. In the FY 2014 IPPS/LTCH PPS proposed rule
(78 FR 27576), we proposed to make conforming changes to the existing
regulations text at Sec. 412.101 to reflect the extension of the
changes to the qualifying criteria and the payment adjustment
methodology for low-volume hospitals through FY 2013 in accordance with
section 605 of the ATRA, as announced in the FY 2013 IPPS notice (as
discussed above). Specifically, we proposed to revise paragraphs
(b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d). Under these proposed
changes to Sec. 412.101, beginning with FY 2014, consistent with
section 1886(d)(12) of the Act, as amended, the low-volume hospital
qualifying criteria and payment adjustment methodology would revert to
that which was in effect prior to the amendments made by the Affordable
Care Act and the ATRA (that is, the low-volume hospital payment
adjustment policy in effect for FYs 2005 through 2010).
We did not receive any public comments on the proposed conforming
changes to the existing regulations text at Sec. 412.101 to reflect
the extension of the changes to the qualifying criteria and the payment
adjustment methodology for low-volume hospitals through FY 2013 in
accordance with section 605 of the ATRA. Therefore, in this final rule,
we are adopting as final the proposed revisions to paragraphs
(b)(2)(i), (b)(2)(ii), (c)(1), (c)(2), and (d) of Sec. 412.101 without
modification.
3. Low-Volume Hospital Definition and Payment Adjustment for FY 2014
and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, as amended,
beginning with FY 2014, the low-volume hospital definition and payment
adjustment methodology will revert back to the statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA. Therefore, as discussed in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27576 through 27577), consistent with section
1886(d)(12) of the Act, as amended, under the proposed conforming
changes to Sec. 412.101(b)(2), effective for FY 2014 and subsequent
years, in order to qualify as a low-volume hospital, a subsection (d)
hospital must be more than 25 road miles from another subsection (d)
hospital and have less than 200 discharges (that is, less than 200
discharges total, including both Medicare and non-Medicare discharges)
during the fiscal year. Under our existing policy, effective for FY
2014 and subsequent years, qualifying hospitals would receive the low-
volume hospital payment adjustment of an additional 25 percent for
discharges occurring during the fiscal year.
Comment: A few commenters expressed concern about the financial
impact of the expiration of the temporary expansion of the low-volume
hospital payment adjustment provided for by the provisions of
Affordable Care Act and the ATRA, which were similar to the comments we
received on the FY 2013 IPPS/LTCH PPS proposed rule, prior to the 1-
year expansion of the low-volume hospital payment adjustment for FY
2013 provided for by the ATRA. Some commenters supported legislative
action that would continue the temporary expansion of the low-volume
hospital payment adjustment. Other commenters requested that CMS use
the existing statutory authority to make the low-volume adjustment to
qualifying hospitals that have less than 800 total discharges rather
than only to qualifying hospitals that have less than 200 total
discharges. The commenters did not provide any data analysis in support
of their comments to expand the low-volume hospital adjustment to
qualifying hospitals that have less than 800 total discharges.
Response: As noted previously in section V.I.C.a. of the preamble
of this final rule and as discussed in response to public comments in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408 through 53409), to
implement the original low-volume hospital payment adjustment
provision, and as mandated by statute, we developed an empirically
justified adjustment based on the relationship between costs and total
discharges of hospitals with less than 800 total (Medicare and non-
Medicare) discharges. Specifically, we performed several regression
analyses to evaluate the relationship between hospitals' costs per case
and discharges, and found that an adjustment for hospitals with less
than 200 total discharges is most consistent with the statutory
requirement to provide for additional payments to low-volume hospitals
where there is empirical evidence that higher incremental costs are
associated with lower numbers of discharges (69 FR 49101 through
49102). Based on these analyses, we established a low-volume hospital
policy where qualifying hospitals with less than 200 total discharges
receive a payment adjustment of an additional 25 percent. (Section
1886(d)(12)(B)(iii) of the Act limits the applicable percentage
increase adjustment to no more than 25 percent.) In the future, we may
reevaluate the low-volume hospital adjustment policy; that is, the
definition of a low-volume hospital and the payment adjustment.
However, because we are not aware of any analysis or empirical evidence
that would support expanding the originally established a low-volume
hospital adjustment policy
[[Page 50613]]
and we did not make any proposals regarding the low-volume hospital
payment adjustment for FY 2014, we are not making any changes to the
low-volume hospital payment adjustment policy in this final rule. Thus,
the low-volume hospital definition and payment adjustment methodology
will revert back to the policy established under statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA.
As described above, for FYs 2005 through 2010 and FY 2014 and
subsequent fiscal years, the discharge determination will be made based
on the hospital's number of total discharges, that is, Medicare and
non-Medicare discharges. The hospital's most recently submitted cost
report is used to determine if the hospital meets the discharge
criterion to receive the low-volume hospital payment adjustment in the
current year (Sec. 412.101(b)(2)(i)). We use cost report data to
determine if a hospital meets the discharge criterion because this is
the best available data source that includes information on both
Medicare and non-Medicare discharges. As we noted in the proposed rule,
for FYs 2011, 2012, and 2013, we used the most recently available
MedPAR data to determine the hospital's Medicare discharges because
only Medicare discharges were used to determine if a hospital met the
discharge criterion for those years. In addition to a discharge
criterion, the eligibility for the low-volume hospital payment
adjustment also will be dependent upon the hospital meeting the mileage
criterion specified at Sec. 412.101(b)(2)(i). Specifically, to meet
the mileage criterion to qualify for the low-volume hospital payment
adjustment for FY 2014 and subsequent fiscal years, a hospital must be
located more than 25 road miles from the nearest subsection (d)
hospital.
For FY 2014, as we stated in the proposed rule, we will continue to
use the established process for requesting and obtaining the low-volume
hospital payment adjustment. That is, in order to receive a low-volume
hospital payment adjustment under Sec. 412.101, a hospital must notify
and provide documentation to its fiscal intermediary or MAC that it
meets the discharge and distance requirements. The fiscal intermediary
or MAC will determine, based on the most recent data available, if the
hospital qualifies as a low-volume hospital, so that the hospital will
know in advance whether or not it will receive a payment adjustment.
The fiscal intermediary or MAC and CMS may review available data, in
addition to the data the hospital submits with its request for low-
volume hospital status, in order to determine whether or not the
hospital meets the qualifying criteria. (For additional details on our
established process for the low-volume hospital payment adjustment, we
refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53408).)
Consistent with our previously established procedure, for FY 2014,
a hospital must make its request for low-volume hospital status in
writing to its fiscal intermediary or MAC by September 1, 2013, in
order for the 25-percent low-volume hospital payment adjustment to be
applied to payments for its discharges beginning on or after October 1,
2013 (through September 30, 2014). If a hospital's request for low-
volume hospital status for FY 2014 is received after September 1, 2013,
and if the fiscal intermediary or MAC determines the hospital meets the
criteria to qualify as a low-volume hospital, the fiscal intermediary
or MAC will apply the 25-percent low-volume hospital payment adjustment
to determine the payment for the hospital's FY 2014 discharges,
effective prospectively within 30 days of the date of the fiscal
intermediary's or MAC's low-volume hospital status determination.
As we discussed previously in section V.C.2.b. of the preamble of
this final rule, we are adopting as final our proposed conforming
changes to the regulatory text at Sec. 412.101 to reflect the
extension of the changes to the qualifying criteria and the payment
adjustment methodology for low-volume hospitals through FY 2013 made by
section 605 of the ATRA (78 FR 27576). Specifically, we are revising
Sec. 412.101 to conform the regulations to the statutory requirements
that, beginning with FY 2014, the low-volume hospital qualifying
criteria and payment adjustment methodology revert to that which was in
effect prior to the amendments made by the Affordable Care Act and the
ATRA (that is, the low-volume hospital payment adjustment policy in
effect for FYs 2005 through 2010). Under this revision, the low-volume
hospital payment adjustment policy in effect prior for FYs 2005 through
2010 will apply for FY 2014 and subsequent years. Thus, as noted above,
the low-volume hospital definition and payment adjustment methodology
will revert back to the policy established under statutory requirements
that were in effect prior to the amendments made by the Affordable Care
Act and the ATRA.
D. Indirect Medical Education (IME) Payment Adjustment (Sec. 412.105)
1. IME Adjustment Factor for FY 2014
Under the IPPS, an additional payment amount is made to hospitals
with residents in an approved graduate medical education (GME) program
in order to reflect the higher indirect patient care costs of teaching
hospitals relative to nonteaching hospitals. The payment amount is
determined by use of a statutorily specified adjustment factor. The
regulations regarding the calculation of this additional payment, known
as the IME adjustment, are located at Sec. 412.105. We refer readers
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full
discussion of the IME adjustment and IME adjustment factor. Section
1886(d)(5)(B) of the Act states that, for discharges occurring during
FY 2008 and fiscal years thereafter, the IME formula multiplier is
1.35. Accordingly, for discharges occurring during FY 2014, the formula
multiplier is 1.35. We estimate that application of this formula
multiplier for the FY 2014 IME adjustment will result in an increase in
IPPS payment of 5.5 percent for every approximately 10 percent increase
in the hospital's resident to bed ratio.
Comment: Two commenters supported the continuation of the IME
adjustment factor. Both commenters stated that IME payments are vital
to guaranteeing a strong surgery workforce in which there is currently
a growing shortage. One commenter noted that this shortage is
especially prevalent within the cardiothoracic surgery workforce.
Response: We appreciate the commenters' support. We note that the
IME formula multiplier is set by Congress. We are specifying in this
final rule that the IME formula multiplier for FY 2014 is set at 1.35,
which we estimate will result in an increase in IPPS payments of 5.5
percent for every approximately 10-percent increase in the hospital's
resident-to-bed ratio.
2. Other Policy Changes Affecting GME
In section V.J. of the preamble of this final rule, we present
other proposed and final policy changes relating to GME payment. We
refer readers to that section of the preamble of this final rule where
we present the proposed and final policies.
E. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) (Sec. 412.106)
1. Background
Section 1886(d)(5)(F) of the Act provides for additional Medicare
[[Page 50614]]
payments to subsection (d) hospitals that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the most common, is based on a complex statutory formula under which
the DSH payment adjustment is based on the hospital's geographic
designation, the number of beds in the hospital, and the level of the
hospital's disproportionate patient percentage (DPP). A hospital's DPP
is the sum of two fractions: the ``Medicare fraction'' and the
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI
fraction'' or ``SSI ratio'') is computed by dividing the number of the
hospital's inpatient days that are furnished to patients who were
entitled to both Medicare Part A and Supplemental Security Income (SSI)
benefits by the hospital's total number of patient days furnished to
patients entitled to benefits under Medicare Part A. The Medicaid
fraction is computed by dividing the hospital's number of inpatient
days furnished to patients who, for such days, were eligible for
Medicaid, but were not entitled to benefits under Medicare Part A, by
the hospital's total number of inpatient days in the same period.
Because the DSH payment adjustment is part of the IPPS, the DSH
statutory references (under section 1886(d)(5)(F) of the Act) to
``days'' apply only to hospital acute care inpatient days. Regulations
located at Sec. 412.106 govern the Medicare DSH payment adjustment and
specify how the DPP is calculated as well as how beds and patient days
are counted in determining the Medicare DSH payment adjustment. Under
Sec. 412.106(a)(1)(i), the number of beds for the Medicare DSH payment
adjustment is determined in accordance with bed counting rules for the
IME adjustment under Sec. 412.105(b).
2. Counting of Patient Days Associated With Patients Enrolled in
Medicare Advantage Plans in the Medicare and Medicaid Fractions of the
Disproportionate Patient Percentage (DPP) Calculation
The regulation at 42 CFR 422.2 defines Medicare Advantage (MA) plan
to mean ``health benefits coverage offered under a policy or contract
by an MA organization that includes a specific set of health benefits
offered at a uniform premium and uniform level of cost-sharing to all
Medicare beneficiaries residing in the service area of the MA plan. . .
.'' Generally, each MA plan must at least provide coverage of all
services that are covered by Medicare Part A and Part B, but also may
provide for Medicare Part D benefits and/or additional supplemental
benefits. However, certain items and services, such as hospice
benefits, continue to be covered under Medicare fee-for-service (FFS).
Under Sec. 422.50 of the regulations, an individual is eligible to
elect an MA plan if he or she is entitled to Medicare Part A and
enrolled in Medicare Part B. Dual eligible beneficiaries (individuals
entitled to Medicare and eligible for Medicaid) also may choose to
enroll in a MA plan, and, as an additional supplemental benefit, the MA
plan may pay for Medicare cost-sharing not covered by Medicaid.
In the FY 2004 IPPS proposed rule (68 FR 27208), in response to
questions about whether the patient days associated with patients
enrolled in an MA plan (then called a Medicare + Choice (M+C) plan)
should be counted in the Medicare fraction or the Medicaid fraction of
the disproportionate patient percentage (DPP) calculation, we proposed
that once a beneficiary enrolls in an MA plan, those patient days
attributable to the beneficiary would not be included in the Medicare
fraction of the DPP. Instead, those patient days would be included in
the numerator of the Medicaid fraction, if the patient also were
eligible for Medicaid. In the FY 2004 IPPS final rule (68 FR 45422), we
did not respond to public comments on this proposal, due to the volume
and nature of the public comments we received, and we indicated that we
would address those comments later in a separate document. In the FY
2005 IPPS proposed rule (69 FR 28286), we stated that we planned to
address the FY 2004 comments regarding MA days in the IPPS final rule
for FY 2005. In the FY 2005 IPPS final rule (69 FR 49099), we
determined that, under Sec. 412.106(b)(2)(i) of the regulations, MA
patient days should be counted in the Medicare fraction of the DPP
calculation. We explained that, even where Medicare beneficiaries elect
Medicare Part C coverage, they are still entitled to benefits under
Medicare Part A. Therefore, we noted that if a MA beneficiary is also
an SSI recipient, the patient days for that beneficiary will be
included in the numerator of the Medicare fraction (as well as in the
denominator) and not in the numerator of the Medicaid fraction. We note
that, despite our explicit statement in the final rule that the
regulations also would be revised, due to a clerical error, the
corresponding regulation at Sec. 412.106(b)(2)(i) was not amended to
explicitly reflect this policy until 2007 (72 FR 47384).
On November 15, 2012, in a ruling in the case of Allina Health
Services v. Sebelius (Allina), the Federal District Court for the
District of Columbia (the court) held that the final policy of putting
MA patient days in the Medicare fraction adopted in the FY 2005 IPPS
final rule was not a logical outgrowth of the FY 2004 IPPS proposed
rule (904 F. Supp. 2d 75 (D.D.C. 2012), appeal docketed, No. 13-5011
(D.C. Cir. Jan. 11, 2013). The court held that interested parties had
not been put on notice that the Secretary might adopt a final policy of
counting the days in the Medicare fraction and were not provided an
adequate further opportunity for public comment.
We continue to believe that individuals enrolled in MA plans are
``entitled to benefits under part A'' as the phrase is used in the DSH
provisions at section 1886(d)(5)(F)(vi)(I) of the Act. Section 226(a)
of the Act provides that an individual is automatically ``entitled'' to
Medicare Part A when the person reaches age 65 or becomes disabled,
provided that the individual is entitled to Social Security benefits
under section 202 of the Act. Beneficiaries who are enrolled in MA
plans provided under Medicare Part C continue to meet all of the
statutory criteria for entitlement to Medicare Part A benefits under
section 226 of the Act. Moreover, in order to enroll in Medicare Part
C, or to change from one MA plan to another MA plan offered under Part
C, a beneficiary must be ``entitled to benefits under Part A and
enrolled under Part B'' (section 1852(a)(1)(B)(i) of the Act). Thus, by
definition, a beneficiary must be entitled to Part A to be enrolled in
Part C. There is nothing in the Act that suggests that beneficiaries
who enroll in a Medicare Part C plan forfeit their entitlement to
Medicare Part A benefits. To the contrary, a beneficiary who enrolls in
Medicare Part C is entitled to receive benefits under Medicare Part A
through
[[Page 50615]]
the MA plan in which he or she is enrolled, and the MA organization's
costs in providing such Part A benefits are paid for by CMS with money
from the Medicare Part A Trust Fund. In addition, under certain
circumstances, Medicare Part A pays directly for care furnished to
patients enrolled in Medicare Part C plans, rather than indirectly
through Medicare Part A Trust Fund payments to MA organizations. For
example, if, during the course of the year, the scope of benefits
provided under Medicare Part A expands beyond a certain cost threshold
due to Congressional action or a national coverage determination,
Medicare Part A will pay the provider directly for the cost of those
services (section 1852(a)(5) of the Act). Similarly, Medicare Part A
also pays directly for federally qualified health center services and
hospice care furnished to MA patients (section 1853(a)(4) and section
1853(h)(2) of the Act, respectively). Thus, we continue to believe that
a patient enrolled in an MA plan remains entitled to benefits under
Medicare Part A, and should be counted in the Medicare fraction of the
DPP, and not the Medicaid fraction.
We also believe that our policy of counting patients enrolled in MA
plans in the Medicare fraction was a logical outgrowth of the FY 2004
IPPS proposed rule, and, accordingly, have appealed the decision in
Allina. However, in an abundance of caution and for the reasons
discussed above, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27578), we proposed to readopt the policy of counting the days of
patients enrolled in MA plans in the Medicare fraction of the DPP. We
sought public comments from interested parties that may support or
oppose the proposal to include the MA patient days in the Medicare
fraction of the DPP calculation for FY 2014 and subsequent years. We
indicated in the proposed rule that we would evaluate these public
comments and consider whether a further change in policy is warranted,
and would include our final determination in the FY 2014 IPPS/LTCH PPS
final rule. We did not propose any change to the regulation text
because the current text reflects the policy being proposed.
Comment: A few commenters supported CMS' proposal to readopt the
policy of including MA patient days in the numerator and denominator of
the Medicare fraction of the DPP calculation. One commenter
recommended, for consistency purposes, that MA days continue to be
included in the Medicare fraction. Another commenter stated that the
proposal makes logical sense because these patients remain entitled to,
and receive, Medicare Part A benefits, and have simply chosen to
receive them through an MA plan offered under Medicare Part C. The
commenter also opined that the effect on the Medicare fraction would
likely be minimal because the commenter believed that the majority of
patients who enroll in Medicare Part C would not be likely to meet the
income eligibility requirement for SSI benefits. Other commenters
supported CMS' proposal to readopt the policy, stating that CMS will
have provided all interested parties with adequate time and information
to meaningfully participate in the rulemaking process.
Response: We appreciate the commenters' support. We agree with
commenters that a patient enrolled in a MA plan remains entitled to
benefits under Part A and should be included in the Medicare fraction
of the DPP and not the Medicaid fraction. We also agree with commenters
that we have provided adequate notice and opportunity for the public to
comment on our proposal to readopt our policy of counting the days of
patients enrolled in MA plans in the Medicare fraction for FY 2014 and
subsequent years. Furthermore, as discussed in more detail below, we
continue to believe that we also provided adequate notice and
opportunity for review and comment prior to the original adoption of
the policy in the FY 2005 IPPS rule; and, therefore, we have appealed
the court's decision in Allina which concluded that we did not. In
addition, with regard to the commenter's assertion that the majority of
patients who enroll in Medicare Part C would not be likely to meet the
income eligibility requirement for SSI benefits, we disagree and note
that research, such as the findings from the Medicare Current
Beneficiary Survey as listed in the table below, has shown that Part C
enrollees tend to have lower incomes at similar rates as Medicare
beneficiaries who are not enrolled in Part C.
Percentage of Medicare Beneficiaries by Income Level, Fee for Service and Risk
HMO: 2009-2011 \12\
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 Fee- 2010 Fee- 2009 Fee-
Beneficiaries (%) 2011 for- 2011 Risk 2010 for- 2010 Risk 2009 for- 2009 Risk
Total service HMO Total service HMO Total service HMO
--------------------------------------------------------------------------------------------------------------------------------------------------------
Less than $5,000..................................... 3.47 3.69 2.84 4.17 4.29 3.82 3.86 4.07 3.19
$5,000-$9,999........................................ 10.92 11.03 10.61 10.94 11.00 10.78 11.75 12.01 10.92
$10,000-$14,999...................................... 13.76 13.50 14.50 13.94 13.63 14.86 14.00 13.35 16.03
$15,000-$19,999...................................... 9.51 8.48 12.34 10.13 9.01 13.46 9.97 9.20 12.38
$20,000-$24,999...................................... 9.17 8.52 10.97 8.67 8.15 10.21 9.00 8.33 11.11
$25,000-$29,999...................................... 7.88 7.65 8.53 8.02 7.85 8.53 8.80 8.40 10.03
$30,000-$39,999...................................... 13.18 12.88 14.00 13.44 13.17 14.23 13.30 13.19 13.63
$40,000-$49,999...................................... 9.92 9.96 9.82 9.83 10.21 8.70 9.65 10.02 8.49
$50,000 or more...................................... 22.18 24.28 16.39 20.87 22.71 15.41 19.67 21.43 14.21
--------------------------------------------------------------------------------------------------------------------------------------------------------
\12\ Sources: Medicare Current Beneficiary Survey. 2011 Characteristics and Perceptions of the Medicare Population. 2010 Characteristics and Perceptions
of the Medicare Population. 2009 Characteristics and Perceptions of the Medicare Population. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Research/MCBS/Data-Tables.html.
Note: As described in the sources, income estimates are derived from imputed income data. Standard errors of income estimates may be underestimated as
they have not been adjusted to reflect the imputation of missing data.
Comment: A few commenters stated that the policy proposal promotes
the integrity of the 340B program. The commenters stated that the size
of the 340B program has far exceeded Congress' intent to help safety-
net providers cover the costs of uncompensated pharmaceutical care; and
including MA patient days in the Medicare fraction helps to ensure that
a hospital's DPP is not artificially inflated, thereby helping to curb
some of the recent abuse and promote the program's original goals. In
addition, the commenters stated that, given that section 3133 of the
Affordable Care Act reduces aggregate DSH funding beginning in FY 2014,
providing oversight of the 340B program will be critical. The
commenters stated that, with less DSH funds available, ensuring
[[Page 50616]]
that entities with inflated DPPs do not divert funds from truly DSH
eligible providers is critical to maintain that the support is provided
where it will be the most beneficial, as intended by Congress. In
addition, one commenter stated that CMS has an opportunity to provide
protection for DPP values for hospitals located in States where
Medicaid was not expanded under the intent of the Affordable Care Act.
The commenter recommended that CMS issue rules that grandfather current
providers who qualify for 340B prescription drug discounting until
further impacts of the Affordable Care Act can be reviewed and a new
standard be determined for hospitals located in States that are not
expanding the Medicaid program to levels prescribed under the
Affordable Care Act.
Response: Although we appreciate receiving the commenters' views on
the 340B program, we note that this program is administered by HRSA and
is not within the scope of this rulemaking. Additionally, we note that
we believe the commenter that made the recommendation about issuing
rules that would grandfather current providers who qualify for 340B
prescription drug discounting until further impacts of the Affordable
Care Act can be assessed for hospitals located in States that are not
expanding the Medicaid program, may be confused about how the statute,
specifically the Affordable Care Act, ``protects'' DPP values.
Comment: Many commenters opposed CMS' proposal and urged CMS to
exclude MA patient days from the Medicare fraction of the DPP
calculation. These commenters disagreed that individuals enrolled in
Medicare Advantage are ``entitled'' to benefits under Part A, and
asserted that the policy proposal is not dictated by the statute and is
inconsistent with their view of the intent of Congress. The commenters
argued that, in examining the statute and CMS' regulations, it is clear
to them that MA enrollees are not entitled to benefits under Part A
and, therefore, should be excluded from the Medicare fraction. These
commenters cited three provisions of the statute in support of this
argument:
Section 226(c)(1) of the Act, which states ``entitlement
of an individual to hospital insurance benefits for a month [under Part
A] shall consist of entitlement to have payment made under, and subject
to the limitations in, [P]art A . . . .''
Section 1851(a)(1) of the Act, which states that the
persons eligible for Medicare Advantage are ``entitled to elect to
receive benefits'' either ``through the original [M]edicare fee-for-
service program under [P]arts A and B, or through enrollment in a
[Medicare Advantage] plan under [Part C].''
Section 1851(i)(1) of the Act, which states that
``payments under a contract with a [Medicare Advantage] organization .
. . with respect to an individual electing a [Medicare Advantage] plan
. . . shall be instead of the amounts which (in the absence of the
contract) would otherwise be payable under [P]arts A and B . . . .''
The commenters contended that because individuals who enroll in an
MA plan receive benefits under Part C and not Part A, they cannot be
``entitled'' to benefits under Part A because, in the commenters' view,
they no longer receive benefits under Part A. They argued that
beneficiaries are not ``entitled'' to benefits that the commenters
believe the law denies them, and therefore, CMS' interpretation is
unreasonable.
Response: We disagree that Medicare beneficiaries enrolled in Part
C no longer receive benefits under Part A and that, because the payment
structure of Part C applies (that is, CMS pays the MA plans so that the
plans may make payment to hospitals for the care of the beneficiaries),
those beneficiaries are not entitled to Part A benefits. As we stated
above, section 226(A) of the Act provides that an individual is
automatically ``entitled'' to Medicare Part A when the person reaches
age 65 or becomes disabled, provided that the individual is entitled to
Social Security benefits under section 202 of the Act.
This interpretation is consistent with our conclusion that Congress
uses the phrase ``entitled to benefits under part A'' to consistently
refer to an individual's status as a Medicare beneficiary. We agree
with the United States Court of Appeals for the Sixth Circuit when it
recently explained, ``the phrase `entitled to benefits under [Medicare]
part A' appears in more than 30 other sections of the Medicare statute,
indicating that the phrase has a specific, consistent meaning
throughout the statutory scheme, rather than a varying, context-
specific meaning in each section and subsection. (We refer readers to
Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 222 (2008) (noting that
statutory construction ``must, to the extent possible, ensure that the
statutory scheme is coherent and consistent'') and Metro. Hosp. v. U.S.
Dep't of Health & Human Servs., 712 F.3d 248, 260 (6th Cir. 2013)
(holding that including patients who have exhausted inpatient benefits
in the Medicare fraction is consistent with how ``entitled to benefits
under part A'' is used throughout the Medicare statute).) Enrolling in
Part C does not change an enrollee's status as a Medicare beneficiary
and does not remove or reduce any benefits the beneficiary would
otherwise have received; indeed, the MA plan must provide the benefits
to which the beneficiary is entitled under Part A and may provide
additional benefits as described by section 1852(a)(1)(A) of the Act.
We agree with the Court of Appeals for the District of Columbia Circuit
that ``Congress has not clearly foreclosed the Secretary's
interpretation that [Part C] enrollees are entitled to benefits under
Part A. Rather, it has left a statutory gap, and it is for the
Secretary . . . to fill that gap'' (Northeast Hosp. Corp. v. Sebelius;
657 F.3d 1, 13 (D.C. Cir. 2011)). We further note that the D.C. Circuit
has already rejected many of the commenters' view that the agency's
interpretation is inconsistent with the plain language of the statute
(Id. at 6-13).
Thus, for purposes of section 226(c)(1) of the Act, beneficiaries
enrolled in Part C are having payment made under Part A for the month
in question, via the Part A component of the monthly payment made to
the MA organization, and are receiving Part A benefits subject to the
limitations on such benefits provided for in Part A.
For purposes of section 1851(a)(1) of the Act, the ``benefits''
referenced in the phrase quoted by the commenters (``entitled to elect
to receive benefits'') are the benefits provided for in Part A and Part
B. Thus, this language confirms that beneficiaries enrolled in Part C
remain ``entitled to'' benefits under Part A, and thus supports our
interpretation of the statute. It is only the vehicle ``through'' which
such Part A benefits are received that changes, from the ``fee-for-
service'' method spelled out under Part A, to the capitation payment
method spelled out in Part C.
Section 1851(i)(1) of the Act similarly refers only to whether Part
A benefits are provided via payments to, and by, the MA organization,
or direct payments made under the ``fee-for-service'' payment
procedures provided for in Part A and Part B. It is only the process
for furnishing these benefits that is at issue, not entitlement to such
benefits.
Comment: Another commenter objecting to our proposal noted that
section 1886(d)(5)(F) of the Act, which defines the Medicare and
Medicaid fractions of the DPP calculation, has not undergone any
significant amendments since its enactment, and was never amended to
explicitly address the creation of Medicare Part C. As such, the
commenter asserted that Part C days
[[Page 50617]]
should clearly be excluded from the Medicare fraction because the
commenter believed that services paid for under Part C cannot also
result in a patient being entitled to benefits for those services under
Part A. However, the commenter asserted that Part C days are clearly
not excluded from the Medicaid fraction because ``the numerator of the
Medicaid fraction includes all hospital patient days (regardless of
under which `Part' of Medicare) for which the patient was `eligible'
for Medicaid as well as Medicare, but for which the patient was not
entitled to receive benefits under Part A of Medicare . . . .''
Response: The enactment of the current provisions in Medicare Part
C authorizing an alternative way of receiving Part A benefits did not
alter the criteria for entitlement to such benefits, any more than did
earlier, similar provisions in section 1876 of the Act that were
enacted in 1982. Indeed, language in section 1876 made clear that a
beneficiary was still ``entitled to benefits under Part A'' while
receiving Part A benefits through a private health plan paid by CMS to
provide them because section 1876 provided for two classes of
enrollees, one only enrolled in Part B, and another ``entitled to
benefits under Part A'' and enrolled in Part B, and provided for Part A
Trust Fund payments in the latter case, and only Part B payments in the
former. There is no indication that Part C enrollees are not similarly
``entitled to benefits under Part A'' on an ongoing basis.
With regard to the Medicaid fraction, as stated in section
1886(d)(5)(F) of the Act, the number of patient days for patients who,
for those days, were eligible for medical assistance under a State plan
approved under Title XIX (Medicaid) but who were not entitled to
benefits under Medicare Part A is divided by the total number of
patient days for that same period. MA enrollees are entitled to
benefits under Medicare Part A, and therefore, these patient days
should not be included in the Medicaid portion of the calculation. It
is CMS' interpretation that the statute provides support to include MA
days in the Medicare fraction. The statute requires that the inpatient
days be attributable to inpatients entitled to benefits under Part A.
Section 1851(a)(3) of the Act defines an individual that is eligible to
enroll in an MA plan as an individual who is entitled to benefits under
Part A and enrolled under Part B. We have concluded that, based on
section 1886(d)(5)(F) of the Act, MA enrollee patient days should be
included in calculating the DSH adjustment by finding that such
enrollees are otherwise entitled to benefits under Part A. In other
words, MA patients are entitled to Medicare Part A prior to and after
selecting Part C, and because they do not lose that entitlement when
they choose to enroll in a Part C plan, our position is that the
Medicare Part C days should be included in the Medicare fraction,
regardless of whether the beneficiary opts for Part C coverage.
Comment: Another commenter argued that, while it is true that a
patient must at some point be entitled to benefits under Part A in
order to be eligible to enroll in Part C, once an enrollee has chosen
Part C, he or she is no longer entitled to Part A benefits and instead,
the payment structure in Part C applies, and CMS pays MA organizations
for those beneficiaries, while the MA organizations pay the providers.
The commenter also asserted that this was evidence that Congress did
not intend to include Part C days in the Medicare fraction because if
it had, Congress could have easily revised the DSH statute to indicate
as such.
Response: Again, this commenter confuses the method for covering
Part A benefits with whether an individual is entitled to receive such
benefits. We refer readers to the previous response for a fuller
discussion.
Comment: One commenter stated that the proposed policy would be
inconsistent with prior practice and CMS' longstanding operational
treatment of Part C days in Medicare Part A calculations because
services furnished to Part C enrollees historically were recorded as
non-Medicare days. The commenter further stated that, similarly, CMS
has historically interpreted entitled to benefits under Part A to mean
entitlement to payment for inpatient hospital care under the IPPS. The
commenter also asserted that the proposed policy is inconsistent with
CMS' interpretation of entitled to SSI benefits in the DSH statute
because CMS construes this to mean including only those days for
patients who were entitled to have SSI benefits actually paid to them
on such days. Therefore, the commenter argued, even when an individual
is entitled to payment of SSI benefits, CMS does not count the day as
an SSI patient day if there is some other reason why the Social
Security Administration does not make the payment owed to the
individual.
Response: While we acknowledge that in the past CMS has not always
captured MA patient days as Medicare days, this was an operational
issue, not the result of an authoritative agency legal interpretation
or Medicare payment policy decision not to include MA days in the
Medicare fraction. We note that these operational issues persisted for
a time after we expressly concluded that MA days should be counted in
the Medicare fraction in the FY 2005 IPPS rule. Contrary to the
commenter's assertion, we have not, as a matter of either legal
interpretation or policy, considered the days of patients enrolled in
MA plans to be non-Medicare days. Patients enrolled in Medicare Part C
must be entitled to Medicare Part A and enrolled in Part B. Moreover,
the days of patients enrolled in Medicare HMOs are considered to be
paid or covered days even though the payment may be made indirectly
through a section 1876 HMO or through an MA plan. We note that the
original Medicare DSH regulations indicated that patients receiving
their Part A benefits under section 1876 of the Act were to count as
Medicare patient days.
We further disagree with the commenter that CMS' interpretation is
unreasonable and inconsistently interprets the term ``entitled to
benefits.'' To the contrary, we adopted this interpretation of
``entitled to benefits under part A'' in large part in order to be
consistent with how that phrase is used elsewhere in the Act. Section
1886(d)(5)(F)(vi)(I) of the Act specifically notes that the numerator
of the Medicare fraction must reflect patient days for patients
``entitled to benefits under part A'' who are also ``entitled to
supplementary security income benefits (excluding any State
supplementation) under title XVI of this Act.'' Regarding entitlement
to SSI benefits, we note that section 1602 of the Act states that
``Every aged, blind, or disabled individual who is determined under
part A to be eligible on the basis of his income and resources shall,
in accordance with and subject to the provisions of this title, be paid
benefits by the Commissioner of Social Security.'' Therefore, because
SSI is a cash benefit, only a person who is actually paid these
benefits can be considered entitled to these benefits. This differs
from entitlement to Medicare benefits under Part A, which are a
distinct set of health insurance benefits described under section 1812
of the Act, including coverage of inpatient hospital, inpatient
critical access hospital, and post-acute care services as well as post-
institutional home health and hospice services under certain
conditions. We note that the agency has undertaken extensive effort and
notice-and-comment rulemaking to establish a process to identify
appropriately Medicare patient days for which a beneficiary was
simultaneously eligible for SSI benefits in the FY 2011 IPPS/
[[Page 50618]]
LTCH PPS final rule (75 FR 50275 through 50286).
Comment: One commenter noted that the Medicare fraction does not
include patient days for Medicare beneficiaries enrolled in Medicare
Part B only. The commenter further argued that, similarly, the Medicare
fraction does not include all patient days for some individuals who are
eligible for and enrolled in Part A because Part A patient days in
hospital units excluded from the IPPS are not included in the Medicare
fraction, even if actually paid under Part A. The commenter asserted
that as the DPP calculation is limited to patient days in areas of the
hospital that provide services that are paid for under the IPPS, in the
same way, the Medicare fraction should exclude patient days for
Medicare beneficiaries who have elected to receive benefits under Part
C--because these days are not paid under the IPPS, they should not be
included in the Medicare fraction.
Response: In the case of a Medicare beneficiary enrolled only in
Part B, we agree that such an individual is not ``entitled to benefits
under Part A,'' and thus is clearly distinguishable from a beneficiary
who is entitled to benefits under Part A, but has elected to enroll in
a Part C plan.
We note that commenters may be misunderstanding our policy when
they asserted that the days of patients enrolled in Part C should not
be included in the Medicare/SSI fraction because the DSH calculation
does not include patient days in hospital units excluded from the IPPS
but paid under Part A. The regulation at 42 CFR 412.106(a)(1)(ii)
limits the patient days used in determining a hospital's DPPs to
patient days ``attributable to units or wards of the hospital providing
acute care services generally payable under the [inpatient] prospective
payment system.'' Patient days associated with beds in excluded
distinct part hospital units are explicitly excluded from the DPP
calculation in accordance with 42 CFR 412.105(a)(1)(ii)(A). In
contrast, the days for MA beneficiaries that are counted in the
Medicare/SSI fraction are days on which those beneficiaries received
care that would be (and in some cases actually was) payable under IPPS.
Accordingly, CMS' policies regarding patient days in excluded distinct
part units provide no reason to treat Part C enrollees differently than
other patients also entitled to benefits under Part A.
Comment: One commenter argued that the instances where a Part C
beneficiary can have services paid under Part A are extremely limited,
both in scope and duration, and asserted that CMS' descriptions of the
exceptions overstate the extent to which Part A payments actually can
be obtained by Part C beneficiaries. The commenter also contended that
this illustrates that when Congress has wanted to explain how Part C
and Part A benefits relate to one another, Congress has done so
explicitly, and without ambiguity. Another commenter added that when
Congress added Part C to the Medicare statute, it did not amend the DSH
statute to require CMS to treat Part C days differently for DSH payment
purposes, and that intent should be given effect by continuing to
exclude Part C days from the Medicare fraction and including Medicaid
eligible Part C days in the numerator of the Medicaid fraction.
Response: While we appreciate the comments noting that instances
where a Part C beneficiary can have services paid under Part A are
limited, we disagree that our description of these exceptions
overstates the extent to which Part A payments can be obtained by Part
C beneficiaries. Under the commenters' view of the statute,
beneficiaries enrolled in MA plans are not ``entitled to benefits under
Part A,'' which would suggest that Medicare Part A should not make any
payments on their behalf. However, as discussed above, there are
instances where Part A is required to do just that. The hospice
benefit, for instance, is a significant part of the benefits available
under Part A that is always paid for on a fee-for-service basis, even
if the beneficiary is enrolled in an MA plan. We find these
circumstances impossible to reconcile with the commenter's assertion
that beneficiaries enrolled in MA plans are not ``entitled to benefits
under Part A.'' Rather, these payments make clear that beneficiaries
enrolled in MA plans are ``entitled to benefits under Part A,''
regardless of the frequency or magnitude of these claims for payment.
Comment: Commenters stated that CMS still does not discuss that
including MA days in the Medicare fraction would be a reversal of its
prior position and, therefore, is both substantively and procedurally
flawed. Some commenters argued that CMS did not include a reasoned
explanation for what they characterize as a reversal of policy.
Some commenters contended that CMS, in both the FY 2004 proposed
rule and the FY 2005 final rule, acknowledged that the statute is
susceptible to multiple interpretations, including the agency's own
previous position that individuals enrolled in the MA plans should not
be included in the Medicare fraction, and that the FY 2014 proposed
rule only slightly elaborates on the assertion in the FY 2005 final
rule that individuals enrolled in MA plans ``are still, in some sense
entitled to benefits under Medicare Part A.'' Commenters stated that,
in Allina, the court found the FY 2005 final rule was flawed because
CMS did not acknowledge that the policy was a reversal of the agency's
prior interpretation, and did not give a sufficient explanation for
that reversal in interpretation, and that the FY 2014 proposed rule
does not correct those deficiencies, but instead just states that CMS
``continues'' to believe that MA patient days should be included in the
Medicare fraction.
Response: We disagree that including the MA days in the Medicare
fraction is a reversal of prior policy. No final regulation,
administrative decision, or subregulatory guidance issued by the
Secretary has ever taken the position that MA days were to be excluded
from the Medicare fraction. Similarly, no final regulation,
administrative decision, or subregulatory guidance issued by the
Secretary has ever taken the position that MA days should be included
in the numerator of the Medicaid fraction. Accordingly, commenters are
incorrect insofar as they suggest that including MA days in the
Medicare fraction represents a reversal of a prior policy. However, we
acknowledge that, although the DC Circuit held in Northeast that the
agency had a practice of excluding MA days from the Medicare fraction
prior to the FY 2005 rule (657 F.3d at 17), the court did not hold that
the Secretary had adopted a legal interpretation of the phrase
``entitled to benefits under part A'' or an authoritative agency
Medicare payment policy that would require excluding MA days from the
Medicare fraction (Id. at 14-17).
In fact, in the FY 1990 IPPS final rule (55 FR 35994), CMS made
clear that its policy was to include the days of patients enrolled in
managed care plans in the Medicare fraction:
``Based on the language of section 1886(d)(5)(F)(vi) of the Act,
which states that the disproportionate share adjustment computations
should include `patients who were entitled benefits under Part A', we
believe it is appropriate to include the days associated with Medicare
patients who receive care at a qualified [health maintenance
organization (HMO)]. Prior to December 1, 1987, we were not able to
isolate the days of care associated with Medicare patients in HMOs and,
therefore, were unable to fold this number into the calculation.
However, as of December 1, 1987, a field was
[[Page 50619]]
included on the Medicare Provider Analysis and Review (MedPAR) file
that allows us to isolate those HMO days that are associated with
Medicare patients. Therefore, since that time, we have been including
HMO days in SSI/Medicare percentage.''
We note that a recent review of our records from the years
immediately before the implementation of Part C demonstrates that the
MedPAR data used to calculate Medicare fractions for those years
includes the days of patients enrolled in section 1876 HMOs.
Prior to the FY 2004 proposed rule, this was the only authoritative
agency interpretation relating to the treatment of patient days of
individuals enrolled in managed care plans. When Congress created Part
C in the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33, 111 Stat.
251 (Aug. 5, 1997)), section 1876 HMO days were being counted in the
Medicare fraction, and were correspondingly being excluded from the
Medicaid fraction. On January 1, 1999, patients enrolled in risk HMOs
under section 1876 of the Act were automatically enrolled in M+C plans.
We issued no guidance discussing how the change in the type of HMO,
from section 1876 to M+C, would have affected the DSH calculation. We
see no reason why the reorganization in the managed care structure,
from section 1876 HMOs into Part C, should have any bearing on how a
day counts in the DSH calculation. The BBA does not specifically
address DSH, and we thus believe it was appropriate that MA patients
should have continued to be counted in the Medicare fraction after its
enactment. Indeed, the BBA provided that to enroll in an MA plan, an
individual must be ``entitled to benefits under part A''--the same
language used in the DSH provision. Individuals enrolled in MA plans
continue to meet the age and disability requirements for entitlement to
benefits under Medicare Part A, and thus should be included in the
Medicare fraction.
Our contractors, having received no instructions to the contrary,
continued to exclude the days of patients enrolled in Medicare HMOs
(now mostly M+C) from the numerator of the Medicaid fraction. However,
at this same time, and for reasons that are not clear to us now, the
agency generally stopped collecting no-pay bills from hospitals and
therefore lacked the data necessary to include Part C days in the
Medicare fraction. We are aware of nothing to suggest that the failure
to include Part C days in the Medicare fraction was the result of any
reasoned decision making or even, in fact, that the relevant policy
makers were aware the Part C days were not being counted in the
Medicare fraction. Consequently, Medicare Part C days were largely not
included in the DSH calculation at all, except for the denominator of
the Medicaid fraction which includes all patient days.
We further note that even when the agency promulgated the FY 2005
IPPS final rule, which expressly stated that MA days should be included
in Medicare fraction, the agency did not begin collecting the data that
would have allowed for their inclusion. We believe that this suggests
that relevant policymakers thought that MA days were being included in
the Medicare fraction. However, as discussed in detail above, CMS has
since taken action to ensure that we are collecting the data necessary
to include these days in the Medicare fraction.
In short, we disagree that the decision in the FY 2005 IPPS rule to
include MA days in the Medicare fraction, and to exclude them from the
numerator of the Medicaid fraction, was a reversal of prior policy. We
had not (in rulemaking or through subregulatory guidance) specifically
addressed the treatment of MA days prior to the FY 2004 proposed rule,
although we acknowledge that, as a matter of practice, MA days
generally had not been counted in either fraction. Accordingly,
commenters are incorrect insofar as they suggested that including MA
days in the Medicare fraction, and excluding them from the Medicaid
fraction, represents a reversal of prior policy.
In the FY 2005 IPPS final rule, CMS determined that M+C days should
be included in the Medicare fraction because M+C beneficiaries ``. . .
are still, in some sense, entitled to benefits under Medicare Part A''
(69 FR 49099). CMS acknowledged that, in the FY 2004 proposed rule, it
had noted that although a beneficiary must be entitled to Medicare Part
A to enroll in an M+C plan, when an individual enrolls in an M+C plan,
his or her benefits are ``no longer administered under Part A,'' and
had proposed to exclude M+C days from the Medicare fraction and to
include them in the Medicaid fraction numerator if the M+C days
enrollee was also eligible for Medicaid (69 FR 49099.) CMS further
noted that the proposed rule recognized that whether MA days should be
included in the Medicare or the Medicaid fraction ``stems from whether
M+C plan enrollees are entitled to benefits under Medicare Part A'' (69
FR 49099). CMS thus made clear its view that MA days should be counted
in one fraction or the other. CMS explained that after considering
comments received to its proposal--including the comment that M+C
enrollees ``are just as much Medicare beneficiaries as those
beneficiaries in the traditional fee-for-service program''--it
ultimately agreed with those that opposed its proposal on the ground
that M+C enrollees remain ``entitled to benefits under part A'' in the
relevant sense for determining whether they should be included in the
Medicare or Medicaid fraction.
CMS thus responded to the comments that were most relevant to the
question before the agency: how to interpret the phrase ``entitled to
benefits under part A'' in the DSH provision and provided a reasoned
explanation for including MA days in the Medicare fraction. As set
forth above, CMS continues to believe that its interpretation reflects
the statutory language and congressional intent. Indeed, when it
enacted the DSH provision, Congress intended that the Medicare fraction
serve as a proxy for the percentage of low-income Medicare patients and
the Medicaid fraction serve as a proxy for the percentage of low-income
non-Medicare patients. When Congress subsequently created Part C, it
provided that to enroll in part C, an individual must be ``entitled to
benefits under part A''--the same language that it used in the DSH
provision. Thus, Part C enrollees are a subset of individuals
``entitled to benefits under part A,'' and therefore should be included
in the Medicare fraction.
Comment: Some commenters added that it is unclear what CMS is
actually proposing because the proposal to readopt the policy of
counting MA patient days in the Medicare fraction is for FY 2014 and
subsequent years, but CMS also stated that it believes the policy
adopted in the FY 2005 final rule was a logical outgrowth of the FY
2004 proposed rule. The commenters asserted that CMS' statements
suggest that CMS is also planning to apply the policy to correct
retroactively invalid past rulemaking. Some commenters stated that CMS
cannot retroactively validate invalid rulemakings by restating the
positions it adopted in FY 2005, through notice-and-comment rulemaking
for FY 2014, and in the absence of a Congressional grant of retroactive
rulemaking authority, an attempt to cure prior deficient proceedings is
similarly invalid.
Response: We disagree that the FY 2014 IPPS/LTCH PPS proposed rule
seeks to validate retroactively an invalid rulemaking as the commenter
asserted. We proposed to readopt the policy of counting the days of
patients enrolled in MA plans in the Medicare fraction of the DPP for
FY 2014 and subsequent years in an abundance of caution and have
considered the public comments
[[Page 50620]]
received in support of and in opposition to our proposal in making our
final determination.
Comment: Commenters stated that CMS cannot finalize its new
proposed policy for FY 2014 because CMS has not corrected the
deficiencies cited by the court in Allina, and by doing so, CMS would
be acting in an arbitrary and capricious manner in violation of the
Administrative Procedure Act. The commenters added that, while they
urge CMS not to finalize its proposal, if it does choose to move
forward, the agency must provide a thorough discussion and allow
stakeholder comment on it before deciding whether to finalize its
proposal. Some commenters also stated that the ambiguity in CMS'
proposal does not provide affected parties adequate notice to properly
comment on the proposal. Commenters stated that a complete and thorough
discussion is critical because, citing the decision in FCC v. Fox
Television Stations (556 U.S. 502 (2009), when stakeholders come to
rely on a certain policy, an agency must give a more detailed
explanation for changing its policy than would be necessary for a
policy created on a blank slate.
Response: Our proposed rule did not propose a change in policy, but
rather to readopt a policy that we finalized in the FY 2005 IPPS final
rule. We believe that commenters favoring our proposal and those
opposed have had a fair opportunity to comment both in response to the
FY 2004 proposed rule and the present proposed rule. We also believe
that we have fully explained why our proposal is an appropriate and
consistent interpretation of the DSH statute.
Comment: Commenters stated that the court in Northeast Hospital v.
Sebelius (657 F.3d at 5) opined that the fiscal impact of this policy
change was a number in the hundreds of millions of dollars, and they
requested that CMS release data as to whether this estimate is correct
and, if not, provide the dollar impact so that hospitals can
meaningfully assess this policy change in advance of issuing the final
rule.
Response: We note that we proposed to readopt this policy for FY
2014 and subsequent years. Because this proposal is consistent with our
longstanding policy, it is not considered a change in our policy.
Accordingly, we do not believe that there will be additional savings or
costs to the Medicare program, and by inference, to hospitals, as a
result of this policy.
Comment: One commenter stated that the issue is further confused by
the fact that, as discussed in the proposed budget presented by the
President on April 10, 2013, the agency intends to ask Congress to
``clarify that individuals who have exhausted inpatient benefits under
Part A or who have elected to enroll in part C plans should be included
in the calculation of the Medicare fraction of hospitals' [DPP
calculation].'' The commenter stated that the agency's position
regarding where such days should be counted has been rejected by the
courts in several cases such as Northeast v. Sebelius and Allina v.
Sebelius. The commenter asserted that asking Congress to clarify how
these days should be treated in the DSH calculation is an attempt to
reverse unfavorable court decisions. The commenter also asserted that
from the beginning of the DSH program until the FY 2005 final rule, CMS
administered the program exactly as the commenter asserted that it
should have been administered then and today stating that: ``1. CMS did
not count Medicare managed care days in the SSI fraction; 2. From the
outset of the Medicare + Choice program CMS instructed hospitals not
receiving IME/GME reimbursement to not shadow bill M+C claims, which is
the very data CMS needed to include the days in the SSI fraction; 3.
CMS' practice from the beginning of the program was to count all
Medicaid paid days in the Medicaid fraction, which included Part A
exhausted days.''
Response: Although we appreciate receiving the commenter's views,
proposals in the President's budget and/or pending legislation are
outside the scope of this rulemaking. As we have previously stated, it
has never been CMS policy that MA days were to be included in the
Medicaid fraction. We remind commenters that CMS issued Change Request
6329 on March 6, 2009, and Change Request 5647 on July 20, 2007, to
instruct hospitals to submit informational claims for MA patients for
FY 2006 and FY 2007 and subsequent periods when it was brought to our
attention that hospitals were not submitting these claims, and contrary
to our regulations, we were administratively unable to include these MA
days in the Medicare fraction. Furthermore, we note that CMS issued
Change Request 5647 to provide hospitals additional time to submit FY
2007 claims when it was brought to our attention that compliance with
our policy was uneven, partly due to the fact that teaching hospitals
have a financial incentive to submit these claims because they receive
IME payments for MA discharges while nonteaching hospitals receive no
additional IME payment.
Comment: One commenter stated that if CMS maintains its view that
MA days properly belong in the Medicare fraction, then IPPS hospitals
should receive a DSH add-on payment for every MA beneficiary discharge
in the same manner that IPPS hospitals receive an IME payment add-on
for every MA beneficiary discharge.
Response: We appreciate receiving the commenters' views. However,
we note that while section 1886(d)(11) of the Act explicitly provides
for an IME payment add-on for each MA beneficiary discharge, section
1886(d)(5)(F) of the Act does not provide for a similar DSH payment
add-on for each MA beneficiary discharge. A legislative change would be
necessary to authorize such DSH payments to IPPS hospitals that treat
MA beneficiaries.
After consideration of the public comments we received, we are
finalizing our proposal to readopt the policy of counting the days of
patients enrolled in MA plans in the Medicare fraction of the DPP for
FY 2014 and subsequent years. We continue to believe this policy is
most consistent with the language of the statute, congressional intent,
and the structure of the DSH calculation.
3. New Payment Adjustment Methodology for Medicare Disproportionate
Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
(Sec. 412.106)
a. General Discussion and Legislative Change
Section 3133 of the Patient Protection and Affordable Care Act
(PPACA), as amended by section 10316 of PPACA and section 1104 of the
Health Care and Education Reconciliation Act (Pub. L. 111-152), added a
new section 1886(r) to the Act that modifies the methodology for
computing the Medicare DSH payment adjustment beginning in FY 2014. For
purposes of this rule, we refer to these provisions collectively as
section 3133 of the Affordable Care Act.
Currently, Medicare DSH adjustment payments are calculated under a
statutory formula that considers the hospital's Medicare utilization
attributable to beneficiaries who also receive Supplemental Security
Income (SSI) benefits and the hospital's Medicaid utilization.
Beginning for discharges in FY 2014, hospitals that qualify for
Medicare DSH payments under section 1886(d)(5)(F) will receive 25
percent of the amount they previously would have received under the
current statutory formula for Medicare DSH payments. This provision
[[Page 50621]]
applies equally to all hospitals that qualify for DSH payments under
section 1886(d)(5)(F)(i)(II) of the Act. Section 1886(d)(5)(F)(i)(II)
of the Act provides for a method known as the ``Pickle'' adjustment
under which a hospital that is located in an urban area and has 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to needy patients with low
incomes. Pursuant to new section 1886(r) of the Act, hospitals that
qualify for the Pickle method of the DSH payment adjustment would
receive 25 percent of the 35-percent add-on adjustment for which they
would otherwise qualify under section 1886(d)(5)(F)(i)(II) of the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals under age 65 who are
uninsured, will become available to make additional payments to each
hospital that qualifies for Medicare DSH payments and that has
uncompensated care. The payments to each hospital for a fiscal year
will be based on the hospital's amount of uncompensated care for a
given time period relative to the total amount of uncompensated care
for that same time period reported by all hospitals that receive
Medicare DSH payments for that fiscal year.
As provided by section 3133 of the Affordable Care Act, section
1886(r) of the Act requires that, for ``fiscal year 2014 and each
subsequent fiscal year,'' a ``subsection (d) hospital'' that would
otherwise receive a ``disproportionate share hospital payment . . .
made under subsection (d)(5)(F)'' will receive two separately
calculated payments. Specifically, section 1886(r)(1) of the Act
provides that the Secretary shall pay to such a subsection (d) hospital
(including a Pickle hospital) 25 percent of the amount the hospital
would have received under section 1886(d)(5)(F) of the Act for
disproportionate share payments, which represents ``the empirically
justified amount for such payment, as determined by the Medicare
Payment Advisory Commission in its March 2007 Report to the Congress.''
We refer to this payment as the ``empirically justified Medicare DSH
payment.''
In addition to this payment, section 1886(r)(2) of the Act provides
that, for fiscal year 2014 and each subsequent fiscal year, the
Secretary shall pay to ``such subsection (d) hospital an additional
amount equal to the product of'' three factors. The first factor is the
difference between ``the aggregate amount of payments that would be
made to subsection (d) hospitals under subsection (d)(5)(F) if this
subsection did not apply'' and ``the aggregate amount of payments that
are made to subsection (d) hospitals under paragraph (1)'' for each
fiscal year. Therefore, this factor amounts to 75 percent of the
payments that would otherwise be made under section 1886(d)(5)(F) of
the Act.
The second factor is, for FYs 2014 through 2017, 1 minus the
percent change in the percent of individuals under the age of 65 who
are uninsured, determined by comparing the percent of such individuals
who are uninsured in 2013, the last year before coverage expansion
under the Affordable Care Act (as calculated by the Secretary based on
the most recent estimates available from the Director of the
Congressional Budget Office before a vote in either House on the Health
Care and Education Reconciliation Act of 2010 that, if determined in
the affirmative, would clear such Act for enrollment), minus 0.1
percentage point for FY 2014, and minus 0.2 percentage point for FYs
2015 through 2017. For FYs 2014 through 2017, the baseline for the
estimate of the change in uninsurance is fixed by the most recent
estimate of the Congressional Budget Office before the final vote on
the Health Care and Education Reconciliation Act of 2010, which is
contained in a March 20, 2010 letter from the then Director of the
Congressional Budget Office to the Speaker of the House. A link to this
letter is included in section V.E.3.d.2. of the preamble of the
proposed rule (and this final rule).
For FY 2018 and subsequent years, the second factor is 1 minus the
percent change in the percent of individuals who are uninsured, as
determined by comparing the percent of individuals ``who are uninsured
in 2013 (as estimated by the Secretary, based on data from the Census
Bureau or other sources the Secretary determines appropriate, and
certified by the Chief Actuary'' of CMS, and ``who are uninsured in the
most recent period for which data is available (as so estimated and
certified) minus 0.2 percentage points for FYs 2018 and 2019.'' Thus,
for FY 2018 and subsequent years, the statute provides some greater
flexibility in the choice of the data sources to be used in the
estimate of the change in the percent of uninsured individuals.
The third factor is a percent that, for each subsection (d)
hospital, ``represents the quotient of . . . the amount of
uncompensated care for such hospital for a period selected by the
Secretary (as estimated by the Secretary, based on appropriate data . .
.),'' including the use of alternative data ``where the Secretary
determines that alternative data is available which is a better proxy
for the costs of subsection (d) hospitals for . . . treating the
uninsured,'' and ``the aggregate amount of uncompensated care for all
subsection (d) hospitals that receive a payment under this
subsection.'' Therefore, this third factor represents a hospital's
uncompensated care amount for a given time period relative to the
uncompensated care amount for that same time period for all hospitals
that receive Medicare DSH payments in that fiscal year, expressed as a
percent. For each hospital, the product of these three factors
represents its additional payment for uncompensated care for the
applicable fiscal year. We refer to the additional payment determined
by these factors as the ``uncompensated care payment.''
Section 1886(r) of the Act states that this provision is effective
for ``fiscal year 2014 and each subsequent fiscal year.'' In the FY
2014 IPPS/LTCH PPS proposed rule (78 FR 27578 through 27592), we set
forth our proposals for implementing the required changes to the DSH
payment methodology. We noted that, because section 1886(r) modifies
the payment required under section 1886(d)(5)(F) of the Act, it affects
only the DSH payment under the operating IPPS. It does not revise or
replace the capital IPPS DSH payment provided under the regulations at
42 CFR Part 412, Subpart M, which were established through the exercise
of the Secretary's discretion in implementing the capital IPPS under
section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
``no administrative or judicial review under section 1869, section
1878, or otherwise'' of ``any estimate of the Secretary for purposes of
determining the factors described in paragraph (2),'' or of ``any
period selected by the Secretary'' for the purpose of determining those
factors. Therefore, there can be no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or the periods selected
in order to develop such estimates.
Comment: Several commenters expressed concerns about the change in
the payment methodology used to calculate Medicare DSH payments as a
[[Page 50622]]
result of the implementation of section 3133 of the Affordable Care
Act, which limits the Medicare DSH payment to 25 percent of what would
have otherwise been paid prior to the enactment of section 3133 and
establishes an uncompensated care payment calculated under a different
payment methodology. The commenters were concerned about large
redistributions in payments and hospitals experiencing large increases
or decreases in payment with little notice. Some commenters requested
that CMS implement a stop-loss and stop-gain policy that would limit
the amount by which a hospital's Medicare DSH payments could change in
a single year in order to minimize the effects of annual Medicare DSH
payment adjustment changes. Some of these commenters suggested a stop-
loss and stop-gain policy that would limit the amount by which a
hospital's Medicare DSH payments could change in a single year by no
more than 2 percent. Other commenters suggested that CMS institute a
cap on the annual payment adjustments, or phase in the transition from
Medicare DSH payments calculated prior to the enactment of section 3133
of the Affordable Care Act and Medicare DSH payments calculated under
the new payment methodology mandated by section 3133 of the Affordable
Care Act to mitigate drastic decreases in payments to eligible
hospitals. The commenters noted that CMS has historically implemented
transitions for policies that may cause significant changes in
payments. The commenters recognized CMS' policy position regarding data
finality, but expressed concern that significant increases or decreases
in payments may suggest that the data are inaccurate. The commenters
further stated that a stop-loss and stop-gain policy would protect
against such problems. The commenters believed that the authority to
implement a stop-loss and stop-gain policy is a logical extension of
CMS' proxy authority granted under section 1886(r)(2)(C) of the Act to
ensure data integrity.
Response: We appreciate the commenters' input. We do not believe
that we have the statutory authority to phase in the transition from
Medicare DSH payments calculated prior to the enactment of section 3133
of the Affordable Care Act to Medicare DSH payments calculated under
the new payment methodology established by section 3133 of the
Affordable Care Act, or to apply a cap on the change in Medicare DSH
payments to eligible hospitals. Rather, we believe that we are required
to reduce Medicare DSH payments to 25 percent of the amount that would
otherwise be paid under section 1886(d)(5)(F) of the Act, effective for
discharges occurring on or after October 1, 2013. In addition, we
believe that we are required to make the additional payment for
uncompensated care under the new payment methodology prescribed in
section 1886(r)(2) of the Act effective for FY 2014. The change to the
payment methodology for Medicare DSH payments for FY 2014 was designed
to have redistributive effects in order to provide payments to eligible
hospitals based upon their amount of uncompensated care relative to the
total amount of uncompensated care furnished by all eligible hospitals.
We also do not believe that the statute provides authority for adopting
a stop-loss and stop-gain policy, or any other transitional
methodology. Rather, the statute designates an effective date of
October 1, 2013, for implementing both empirically justified Medicare
DSH payments and uncompensated care payments.
Comment: Some commenters requested that CMS delay the
implementation of this provision. These commenters cited factors such
as uncertainties over the rate of reduction in uninsurance due to the
decisions of some States not to adopt Medicaid expansion as reasons for
recommending a delay. Some of these commenters indicated that a delay
until FY 2016 would allow time to assess the effect of health care
reform on the rates of insured and uninsured Americans and, therefore,
would allow implementation of this provision in a manner that would be
least disruptive to hospitals, especially those vulnerable hospitals
that provide large amounts of uncompensated care.
Response: The statute provides that this provision will be
effective ``for fiscal year 2014 and each subsequent fiscal year'' and,
therefore, does not provide us with the flexibility to delay
implementation.
b. Eligibility
As indicated above, the new payment methodology applies to
``subsection (d) hospitals'' that would otherwise receive a
``disproportionate share payment . . . made under subsection
(d)(5)(F).'' Therefore, eligibility for empirically justified Medicare
DSH payments is unchanged under this new provision. Consistent with the
law, hospitals must receive empirically justified Medicare DSH payments
in FY 2014 or a subsequent year to receive an additional Medicare
uncompensated care payment for that year. Specifically, section
1886(r)(2) of the Act states that, ``[i]n addition to the payment made
to a subsection (d) hospital under paragraph (1) . . . the Secretary
shall pay to such subsection (d) hospital an additional amount . . .''
(Emphasis supplied.) Because paragraph (1) refers to empirically
justified Medicare DSH payments, the additional payment under section
1886(r)(2) of the Act is, therefore, limited to hospitals that receive
empirically justified Medicare DSH payments pursuant to section
1886(r)(1) of the Act for FY 2014 and subsequent years.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we
proposed that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in FY 2014 and subsequent years would
not receive uncompensated care payments for those respective years. We
also proposed to make a determination concerning eligibility for
interim uncompensated care payments based on each hospital's estimated
DSH status for FY 2014 or the applicable year (using the most recent
data that are available). We indicated that our final determination on
the hospital's eligibility for uncompensated care payments would be
based on the hospital's actual DSH status on the cost report for that
payment year. (We discuss these proposals and our final policies in
more detail below.)
In the course of developing the proposed policies for implementing
section 1886(r) of the Act, we considered whether several specific
classes of hospitals are included within the scope of the statutory
provision. In particular, we considered whether the provision applies
to (1) hospitals in the Commonwealth of Puerto Rico, (2) hospitals in
the State of Maryland paid under a waiver as provided in section
1814(b) of the Act, (3) sole community hospitals (SCHs), (4) hospitals
participating in the Bundled Payments for Care Improvement Initiative
developed by the Center for Medicare and Medicaid Innovation
(Innovation Center), and (5) hospitals participating in the Rural
Community Hospital demonstration. We discuss each of these specific
classes of hospitals below.
(1) Puerto Rico Hospitals
Under section 1886(d)(9)(A) of the Act, Puerto Rico hospitals
subject to the IPPS are not ``subsection (d) hospitals,'' but rather
constitute a distinct class of ``subsection (d) Puerto Rico
hospitals.'' However, section 1886(d)(9)(D)(iii) of the Act specifies
that subparagraph (d)(5)(F) (the provision governing the current DSH
payment methodology) ``shall apply to subsection (d) Puerto
[[Page 50623]]
Rico hospitals . . . in the same manner and to the extent as [it
applies] to subsection (d) hospitals.'' While the new section 1886(r)
of the Act does not specifically address whether the methodology
established there applies to ``subsection (d) Puerto Rico hospitals,''
section 3133 of the Affordable Care Act does make a revision to section
1886(d)(5)(F)(i) of the Act that is crucial for determining the
eligibility of Puerto Rico hospitals for empirically justified Medicare
DSH payments and uncompensated care payments under the new provision.
Specifically, section 3133 of the Affordable Care Act amended section
1886(d)(5)(F)(i) of the Act to provide that this section is ``[s]ubject
to subsection (r).'' One effect of this amendment is to provide that
all hospitals subject to section 1886(d)(5)(F)(i) of the Act, including
``subsection (d) Puerto Rico hospitals,'' also are subject to the new
payment methodology established in section 1886(r) of the Act.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we
proposed that subsection (d) Puerto Rico hospitals that are eligible
for DSH payments also would be eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the new payment methodology. We invited public comments on this
proposal.
Comment: Several commenters supported the proposal to include
subsection (d) Puerto Rico hospitals that are eligible for Medicare DSH
payments as hospitals eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under the new
payment methodology. However, some commenters, including hospitals from
Puerto Rico and associations representing Puerto Rico hospitals,
maintained that Puerto Rico hospitals have been unfairly deprived of
''DSH money'' due to Puerto Rico's exclusion from the national SSI
program. These commenters noted that because of the proposed
methodologies for determining the empirically justified DSH payments
and Factor 3 of the uncompensated care payment, Puerto Rico will
continue to be unfairly deprived of DSH dollars despite having
significant uncompensated care expenses.
Response: We are finalizing our proposal to include subsection (d)
Puerto Rico hospitals that are eligible for Medicare DSH payments as
hospitals eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments under the new payment
methodology. With respect to the comment that Puerto Rico hospitals
will continue to be unfairly deprived of Medicare DSH payments because
the new methodology continues to rely on SSI days, we acknowledge the
commenters' concerns and note that it is our view that section
1886(r)(1) of the Act requires us to use Medicare SSI days to determine
the empirically justified Medicare DSH payments. We further note that,
for the reasons discussed below, low-income insured days (which include
Medicare SSI days) are currently the best data available that CMS can
use as a proxy for the treatment costs of the uninsured and CMS intends
to continue to develop an appropriate data source from which to
determine the amount of uncompensated care provided by hospitals.
However, we note that for FY 2014 the 51 hospitals in Puerto Rico are
expected to experience a 41.3 percent increase in Medicare DSH payments
(from approximately $8 million to $82 million, or a $74 million
increase) due to the implementation of the changes to the DSH payment
methodology under section 3133 of the Affordable Care Act, which
represents a 41.8 percent increase in overall payments to these
hospitals. Generally, Puerto Rico hospitals had a relatively low, less
than 10 percent, Medicare utilization (as measured by a percentage of
Medicare patient days to total patient days), therefore the changes in
section 1886(r)(2) of the Act result in the significant increase for
Puerto Rico. We refer readers to the appendix of this rule for a more
detailed impact analysis.
(2) Hospitals Paid Under a Waiver Under Section 1814(b) of the Act
Under section 1814(b) of the Act, hospitals in the State of
Maryland are subject to a waiver from the Medicare payment
methodologies under which they would otherwise be paid. We have taken
the position in other contexts, for example, for purposes of EHR
incentive payments (75 FR 44448), that Maryland acute care hospitals
remain subsection (d) hospitals. This is because these hospitals are
``located in one of the fifty States or the District of Columbia'' (as
provided in the definition of subsection (d) hospitals) and do not meet
the definitions of the hospitals that are specifically excluded from
that category, such as cancer hospitals and psychiatric hospitals.
However, section 1886(r) of the Act applies to hospitals that are both
subsection (d) hospitals and hospitals that would otherwise receive a
disproportionate share payment made under the previous DSH payment
methodology. Because Maryland waiver hospitals are paid under section
1814(b)(3) of the Act and not under section 1886(d)(5)(F) of the Act,
they are not eligible to receive empirically justified Medicare DSH
payments and uncompensated care payments under the new payment
methodology of section 1886(r) of the Act.
Comment: Several commenters supported the proposal to exclude
Maryland hospitals, which are paid under section 1814(b)(3) of the Act
and not under section 1886(d)(5)(F) of the Act, from hospitals eligible
to receive empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology
established under section 1886(r) of the Act.
Response: We appreciate the commenters' support and are finalizing
this policy, as proposed.
(3) Sole Community Hospitals (SCHs)
SCHs are paid based on their hospital-specific rate from certain
specified base years or the IPPS Federal rate, whichever yields the
greatest aggregate payment for the hospital's cost reporting period.
Payments based on the Federal rate are based on the IPPS standardized
amount and include all applicable IPPS add-on payments, such as
outliers, DSH, and IME, while payments based on the hospital-specific
rate have no add-on payments. For each cost reporting period, the
fiscal intermediary/MAC determines which of the payment options will
yield the highest aggregate payment. Interim payments are automatically
made on a claim-by-claim basis at the highest rate using the best data
available at the time the fiscal intermediary/MAC makes the payment
determination for each discharge. However, it may not be possible for
the fiscal intermediary/MAC to determine in advance precisely which of
the rates will yield the highest aggregate payment by year's end. In
many instances, it is not possible to forecast outlier payments or the
final amount of the DSH payment adjustment or the IME adjustment until
cost report settlement. As noted above, these adjustment amounts are
applicable only to payments based on the Federal rate and not to
payments based on the hospital-specific rate. The fiscal intermediary/
MAC makes a final adjustment at cost report settlement after it
determines precisely which of the payment rates would yield the highest
aggregate payment to the hospital for its cost reporting period. This
payment methodology makes SCHs unique as they can change on a yearly
basis from receiving hospital-specific rate payments to receiving
Federal rate payments, or vice versa.
[[Page 50624]]
In order to implement the provisions of section 1886(r) of the Act,
in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27580), we proposed
to continue to determine interim payments for SCHs based on what we
estimate and project their DSH status to be prior to the beginning of
the Federal fiscal year (based on the best available data at that
time), subject to settlement through the cost report. We also proposed
that SCHs that receive interim empirically justified Medicare DSH
payments in a fiscal year would receive interim uncompensated care
payments that fiscal year, subject as well to settlement through the
cost report. Final eligibility determinations would be made at the end
of the cost reporting period at settlement, and both interim
empirically justified Medicare DSH payments and uncompensated care
payments would be adjusted accordingly. Therefore, we proposed to
follow the same processes of interim and final payments for SCHs that
we proposed to follow for eligible IPPS DSH hospitals generally. (We
discuss these processes in more detail below.)
Comment: Many commenters supported the proposal to allow SCHs that
receive interim empirically justified Medicare DSH payments in a fiscal
year to receive interim uncompensated care payments that fiscal year,
subject to settlement through the cost report. However, one commenter
stated that even an SCH paid under the hospital-specific rate during a
fiscal year that, therefore, would not receive empirically justified
Medicare DSH payments in that year should still receive uncompensated
care payments, provided that the SCH otherwise qualifies for
empirically justified Medicare DSH payments under Sec. 412.106(c). The
commenter stated that, ``Since such payments are not discharge-related
payments, uncompensated care payments should be paid in addition to any
discharge-related payments for an SCH, whether such discharge-related
payments are calculated on the basis of the federal standardized
amount, plus DSH payments, or on the basis of the HSP, without DSH
payments. In other words, if an SCH has aggregate HSP payments that
exceed the sum of federal standardized amount and DSH payments, the SCH
should still receive uncompensated care payments under 42 CFR
412.106(g)-(h), as long as it is DSH-eligible under 42 CFR
412.106(c).''
Response: We do not agree with the commenter who stated that SCHs
paid under the hospital-specific rate during a fiscal year should still
receive uncompensated care payments provided that the SCH otherwise
qualifies for empirically justified Medicare DSH payments under Sec.
412.106(c). As we have noted above, section 1886(r)(2) of the Act
specifically states that, ``[i]n addition to the payment made to a
subsection (d) hospital under paragraph (1) . . . the Secretary shall
pay to such subsection (d) hospital an additional amount . . .''
(Emphases supplied.) Because paragraph (2) provides that the
uncompensated care payment is to be made ``in addition to'' the
empirically justified Medicare DSH payments made under paragraph (1), a
hospital must receive empirically justified Medicare DSH payments under
section 1886(r)(1) in order to receive the additional payment under
section 1886(r)(2) of the Act for FY 2014 and subsequent years.
As previously noted, under the SCH payment methodology, SCHs are
paid the higher of the Federal rate or a hospital-specific payment
rate. This payment methodology is defined under sections
1886(d)(5)(D)(i) and 1886(d)(1)(A)(iii) of the Act. Section 1886(d)(3)
of the Act specifically provides that SCH payments are to be made on a
per-discharge basis. Accordingly, as we also note below, in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27581), we proposed that the
uncompensated care payments would not be accounted for in determining
whether an SCH is paid the higher of the Federal rate or the hospital-
specific rate. This is because we proposed that the uncompensated care
payments would not be discharge-driven payments, but rather payments
made on the basis of a hospital's overall share of uncompensated care
during a payment year. The amount of a hospital's uncompensated care
payments for a year is not directly affected by the number of the
hospital's discharges for the year. Therefore, we did not believe that
uncompensated care payments should be taken into account in a
comparison based on discharge driven hospital-specific and Federal rate
payments. Furthermore, as we proposed later in the proposed rule, we
intended to make interim uncompensated care payments on a periodic
basis rather than a per discharge basis in order to create more
predictability for hospitals and to increase administrative efficiency.
To the extent the payments are intended to reflect the relative amount
of uncompensated care furnished by the hospital, we considered it both
reasonable and appropriate to view this payment as an amount for the
year, which in the interests of predictability and consistency is made
periodically through interim payments.
We invited public comments on all of these proposals affecting
SCHs.
Comment: Several commenters objected to the proposal not to take
uncompensated care payments into account in the comparison of payments
under the hospital-specific rate and the Federal rate that occurs on a
discharge basis and at cost report settlement for SCHs. These
commenters contended that the proposed policy amounted to imposing a
payment cut on many SCHs. This is because the proposed policy would
have the result that more SCHs would be paid under their hospital-
specific rate rather than the higher Federal rate because the
equivalent of 75 percent of the former DSH payment amounts would no
longer be included in the Federal rate side of the comparison. The
commenters maintained that it was not the intention of the new payment
adjustment methodology for disproportionate share hospitals to impose
reductions in payments indirectly on hospitals paid under different
provisions of the statute.
Response: We agree with these commenters that it is not the
intention of the new payment adjustment methodology for
disproportionate share hospitals to impose reductions in payments
indirectly on hospitals paid under different provisions of the statute.
We continue to believe that the periodic biweekly payments approach
would be consistent with the statute, and that it would be, in
isolation, the most administratively efficient means to distribute the
fixed amount of a hospital's uncompensated care payment in a manner
that would avoid the potential for large over- and/or under- payments
during the year and, therefore, limit the need for reconciliation at
cost report settlement. However, after a thorough review of the above
policy considerations reflected in the numerous public comments we
received, we believe that distributing these payments on a per-
discharge basis would allow these payments to be considered in the
comparison of payments under the Federal rate and the hospital-specific
rate for SCHs. We believe that this is an appropriate policy because
this approach provides all SCHs an opportunity to be eligible for
uncompensated care payments. To the extent that their payments under
their hospital-specific rate are higher, we believe that it is
appropriate that they do not receive uncompensated care payments
because they are no longer eligible for DSH payments, as we describe
above. However, after consideration of the public comments we received,
we believe that it is appropriate for the uncompensated care payment to
be considered as part of an
[[Page 50625]]
SCH's payment under the Federal rate. For this and other reasons which
we discuss later in this preamble, we have decided not to finalize our
proposed policy to make interim uncompensated care payments on a
periodic basis rather than a per-discharge basis for FY 2014. We
discuss the operational details of including the uncompensated care
amount in the payment for each IPPS hospital discharge in greater
detail below in section V.E.3.f. of the preamble of this final rule.
However, one result of including the uncompensated care payments in the
payment for each hospital discharge is that such payments can now also
be included in the comparison of the hospital-specific and Federal rate
payments for SCHs. That is, we will now be able to employ the claims
processing system to compare each SCH's payment under the hospital-
specific rate to its Federal rate, including uncompensated care
payments.
(4) Hospitals Participating in the Bundled Payments for Care
Improvement Initiative
IPPS hospitals that have elected to participate in the Bundled
Payments for Care Improvement initiative receive a payment that links
multiple services furnished to a patient during an episode of care. We
have stated in previous rulemaking that those hospitals continue to be
paid under the IPPS (77 FR 53342). Hospitals that elect to participate
in the initiative can still receive DSH payments while participating in
the initiative, if they otherwise meet the requirements for receiving
such payments.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27581), we
proposed to apply the new DSH payment methodology to the hospitals in
this initiative, so that eligible hospitals would receive empirically
justified Medicare DSH payments and uncompensated care payments. We
invited public comments on this proposal.
Comment: Several commenters supported the proposal to apply the new
Medicare DSH payment adjustment methodology to the hospitals in the
Bundled Payments for Care Improvement initiative so that eligible
hospitals would receive empirically justified Medicare DSH payments and
uncompensated care payments.
Response: We appreciate the commenters' support and are finalizing
this policy, as proposed.
(5) Hospitals Participating in the Rural Community Hospital
Demonstration
Section 410A of the Medicare Modernization Act established the
Rural Community Hospital Demonstration Program. After the initial 5-
year period, the demonstration was extended for an additional 5-year
period by sections 3123 and 10313 of the Affordable Care Act. There are
23 hospitals currently participating in the demonstration. Under the
payment methodology provided in section 410A, participating hospitals
receive payment for Medicare inpatient services on the basis of a cost
methodology. Specifically, for discharges occurring in the hospitals'
first cost reporting period of the initial 5-year demonstration or the
first cost reporting period of the 5-year extension, they receive
payments for the reasonable cost of providing such services. For
discharges occurring in subsequent cost reporting periods during the
applicable 5-year demonstration period, hospitals receive the lesser of
the current year's reasonable cost amount, or the previous year's
amount updated by the percentage increase in the IPPS market basket
(the target amount). (We refer readers to section V.K. of the preamble
of this final rule for further information on the demonstration.) The
instructions (CR 5020 (April 14, 2006) and CR 7505 (July 22, 2011)) for
the demonstration require that the fiscal intermediary/MAC not pay
Medicare DSH payments in addition to the amount received under the
cost-based payment methodology. Although the amounts that would
otherwise be paid for Medicare DSH payments (absent the demonstration)
are calculated and identified on the hospital cost report for
statistical and research purposes, as in the case of Maryland waiver
hospitals, hospitals in this demonstration do not receive a separate or
identifiable DSH payment.
Because hospitals participating in the Rural Community Hospital
Demonstration do not receive DSH payments, these hospitals also are
excluded from receiving empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology.
Comment: Several commenters supported the proposal to exclude
hospitals participating in the Rural Community Hospital Demonstration
program from receiving empirically justified Medicare DSH payments and
uncompensated care payments under the new payment methodology.
Response: We appreciate the commenters' support and are finalizing
this policy, as proposed.
c. Empirically Justified Medicare DSH Payments
As we have discussed above, section 1886(r)(1) of the Act requires
CMS to pay 25 percent of the ``amount of disproportionate share
hospital payment that would otherwise be made under subsection
(d)(5)(F) to a subsection (d) hospital.'' Currently, we have a system
for interim payment and final settlement of DSH payments made under
section 1886(d)(5)(F). Specifically, interim payments are made for each
claim based on the best available data concerning each hospital's
eligibility for DSH payments and the appropriate level of such
payments. Final eligibility for Medicare DSH payments and the final
amount of such payments for eligible hospitals are determined at the
time of cost report settlement. Because section 1886(r)(1) of the Act
merely requires the program to pay a designated percentage of these
payments, without revising the criteria governing eligibility for DSH
payments or the underlying payment methodology, we stated in the
proposed rule that we did not believe that it is necessary to develop
and propose any new operational mechanisms for making such payments.
Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27581), we proposed to implement this provision simply by revising the
claims payment methodologies to adjust the interim claim payments to
the requisite 25 percent of what would have otherwise been paid. We
also indicated that we would make corresponding changes to the hospital
cost report so that these empirically justified Medicare DSH payments
can be settled at the appropriate level at the time of cost report
settlement. We stated that we would provide more detailed operational
instructions and cost report instructions following display of the
final rule in the Federal Register.
We proposed to implement this provision by adding a new paragraph
(f) under the regulations at Sec. 412.106. This proposed new paragraph
provides for reducing Medicare DSH payments by 75 percent beginning in
FY 2014.
We invited public comments on this proposal.
Comment: Several commenters supported the proposal to implement
this provision by revising the claims payment methodologies to adjust
the interim claim payments to the requisite 25 percent of what would
have otherwise been paid. The commenters also supported the proposal to
make
[[Page 50626]]
corresponding changes to the hospital cost report so that these
empirically justified Medicare DSH payment adjustments can be settled
at the appropriate level at the time of cost report settlement.
Response: We appreciate the commenters' support and are finalizing
these policies, as proposed, by adding a new paragraph (f) under Sec.
412.106 to reflect the policies.
Comment: Several commenters requested that CMS undertake additional
audits to verify the data used to compute the 25-percent empirically
justified Medicare DSH payment adjustments. Other commenters requested
that CMS grant additional time for hospitals to verify the data and
adjust their cost reports to ensure that the data used to compute the
adjustment are accurate and up to date. Some commenters requested that
CMS establish procedures to allow a hospital initially determined not
to be eligible for Medicare DSH payments to begin receiving empirically
justified Medicare DSH payments if data become available that indicate
that the hospital would be eligible.
Response: As we have emphasized, we are maintaining the well-
established methodology and payment processes used under the current
Medicare DSH payment adjustment methodology for purposes of making the
empirically justified Medicare DSH payment adjustments. Hospitals are
quite familiar with the cost reporting requirements and auditing
procedures employed under the current Medicare DSH payment adjustment
methodology. Hospitals are also familiar with the current process of
determining interim eligibility for Medicare DSH payments with final
determination at cost report settlement. Therefore, we do not believe
that it would be warranted to add additional complexity to these
procedures by adopting any of these recommendations.
Comment: Several commenters noted that, under the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, a 12-
percent cap was placed on DSH payment adjustment percentages for
certain rural hospitals, including those with SCH status. These
commenters also noted that CMS' proposal was silent about how this cap
provision will apply to calculations under the revised Medicare DSH
payment adjustment methodology. The commenters agreed that the cap
should apply to the calculation of the empirically justified Medicare
DSH payment adjustment amounts and the Factor 1 computation in the
uncompensated care payment determination. However, the commenters
expressed concern that the cap could be applied again when formulating
the overall Medicare DSH payment adjustment amount that a hospital
receives. If the cap were to apply to the overall Medicare DSH payment
adjustment amount, the commenters asserted that hospitals would in
effect be penalized twice, once when calculating the empirically
justified Medicare DSH payment adjustment amount and the amount of
Factor 1, which is equal to 75 percent of the DSH payments that would
otherwise have been made under section 1886(d)(5)(F), and again when
formulating the overall Medicare DSH payment adjustment amount that the
hospital receives. Therefore, the commenters asked CMS to clarify and
confirm that the cap provision will not be applied to the overall
Medicare DSH payment adjustment amount that each hospital receives.
Response: Under the Medicare DSH statute, certain hospitals are
subject to a 12-percent cap on their DSH payment adjustment percentage.
For these hospitals, the maximum DSH payment adjustment factor has
historically been 12 percent, regardless of how high the DPP for these
hospitals was. We note that the 12-percent cap only applies to the
following hospital types: hospitals located in urban areas with less
than 100 beds, and hospitals located in rural areas with less than 500
beds (however, we note that the 12-percent cap does not apply to Rural
Referral Centers or to Medicare Dependent Hospitals, regardless of bed
size). We agree with the commenters that the cap should not be applied
to payments under section 1886(r)(2) of the Act. Although we did not
state so specifically, the commenters were correct to infer, from our
proposal to continue employing the current Medicare DSH payment
adjustment methodology in determining the empirically justified
Medicare DSH payment amount, that the cap should and would be applied
when calculating payments under section 1886(r)(1) of the Act (which is
25 percent of the amount otherwise payable under section 1886(d)(5)(F).
This is because the cap under section 1886(d)(5)(F)(xiv)(II) limits the
amount of the payment adjustment under section 1886(d)(5)(F), and
payments under section 1886(r)(1) are 25 percent of the payments that
would otherwise be made under section 1886(d)(5)(F), we believe the cap
necessarily applies to payments under section 1886(r)(1) as well.
Similarly, the commenters were correct to infer that the application of
the cap on Medicare DSH payment adjustments to those hospitals would be
taken into account in determining Factor 1 of the uncompensated care
payment determination, which is equal to 75 percent of the aggregate
amount of payments that would otherwise be made under section
1886(d)(5)(F). However, there is nothing in the statute that requires
an application of this cap to the final amount of uncompensated care
payments hospitals receive, beyond taking it into consideration in the
estimate of Factor 1. Therefore, we are taking this opportunity to
confirm that our proposal did not imply that the cap would be applied
to payments to hospitals under section 1886(r)(2) of the Act.
Comment: One commenter asked CMS to clarify how it will apply the
cap to the empirically justified Medicare DSH payments. The commenter
offered the following example:
``If a hospital subject to the twelve-percent cap has a
disproportionate share patient percentage sufficient to generate a
disproportionate share adjustment percentage of 16 percent pursuant to
[section] 1886(d)(5)(F)(vii) [of the Act], under the proposed formula,
CMS could use either 16 percent or 12 [percent] as the empirically
justified amount. If the Agency uses 16 percent, then the empirically
justified amount portion of the formula would be 4 percent (16 * 0.25);
if the agency uses 12 percent, then the empirically justified amount
portion of the formula would be 3 percent (12 * 0.25).''
Response: Section 1886(r)(1) of the Act clearly provides that
Medicare shall pay 25 percent of the amount that would otherwise be
paid ``under subsection (d)(5)(F) to a subsection (d) hospital.'' The
cap provision is stipulated under section 1886(d)(5)(F)(xiv)(II) of the
Act. Therefore, for purposes of the empirically justified Medicare DSH
payment adjustment amount under section 1886(r)(1) of the act, Medicare
is only authorized to pay 25 percent of the amount otherwise payable
under section 1886(d)(5)(F), subject to the 12-percent cap. We note
that the 12-percent cap only applies to the following hospital types:
hospitals located in urban areas with less than 100 beds, and hospitals
located in rural areas with less than 500 beds (however, we note that
the 12-percent cap does not apply to Rural Referral Centers or to
Medicare Dependent Hospitals, regardless of bed size). In the
commenter's example, the empirically justified Medicare DSH payment
adjustment amount paid under section 1886(r)(1) of the Act would be 25
percent of the maximum 12-percent
[[Page 50627]]
DSH adjustment factor under section 1886(d)(5)(F) of the Act, or 3
percent (12 * 0.25). That is, the empirically justified Medicare DSH
payment adjustment amount paid under section 1886(r)(1) of the Act
could not exceed 25 percent of the maximum 12-percent DSH adjustment
factor under section 1886(d)(5)(F) of the Act and, therefore, could not
exceed 3 percent.
d. Uncompensated Care Payments
As we have discussed above, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
new uncompensated care payment is the product of three factors. These
three factors represent our estimate of 75 percent of the amount of
Medicare DSH payments that would otherwise have been paid, an
adjustment to this amount for the percent change in the national rate
of uninsurance compared to a base of 2013, and each eligible hospital's
estimated uncompensated care amount relative to the estimated
uncompensated care amount for all eligible hospitals. Below we discuss
the proposed data sources and methodologies for computing each of these
factors and our final policies.
Before we begin to discuss these data sources and methodologies, it
is necessary to discuss the timing and manner for determining the
eligibility of hospitals for uncompensated care payments. The statute
provides that subsection (d) hospitals that receive a payment under
section 1886(d)(5)(F) of the Act are eligible to receive a payment
under section 1886(r)(2) of the Act. Specifically, section 1886(r)(2)
of the Act states that, ``[i]n addition to the payment made to a
subsection (d) hospital under paragraph (1) . . . the Secretary shall
pay to such subsection (d) hospitals an additional amount. . . .''
Therefore, because paragraph (1) refers to empirically justified
Medicare DSH payments, the additional payment for FY 2014 and
subsequent years is limited to hospitals that receive empirically
justified Medicare DSH payments for the respective year. However, as we
have discussed above, we currently have a system for interim payment
and final settlement of DSH payments. Specifically, interim payments
are made for each claim based on the best available data concerning
each hospital's eligibility for DSH payments and the appropriate level
of such payments. Final determination of eligibility for Medicare DSH
payments and the final amount of such payments for eligible hospitals
are determined at the time of cost report settlement.
As we describe above, because section 1886(r)(1) of the Act does
not revise the criteria governing eligibility for DSH payments or the
underlying payment methodology, we do not believe that it is necessary
to develop any new operational mechanisms for making such payments and,
therefore, will continue using the existing system of interim
eligibility and payment determination with final cost report settlement
for the empirically justified Medicare DSH payments. In the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27582), we proposed to adopt a
similar system of interim eligibility and payment determination with
final cost report settlement for purposes of uncompensated care
payments. We discussed our proposals regarding the specific operational
details of this system in section V.E.3.f. of the preamble of the
proposed rule.
We invited public comments on these proposals.
Comment: Some commenters requested that if CMS has initially
projected that a hospital is ineligible for uncompensated care
payments, but data later become available to indicate that the hospital
is eligible, the hospital be able to receive the uncompensated care
payments prior to cost report settlement.
Response: For the reasons discussed above regarding the empirically
justified Medicare DSH payments, we do not believe that it is necessary
or advisable to depart from our longstanding process of making interim
eligibility determinations for Medicare DSH payments with final
determination at cost report settlement. As we discuss in greater
detail in section V.E.3.f. of the preamble to this final rule, we will
make interim eligibility determinations based on data from the most
recently available SSI ratios and Medicaid fractions prior to the
beginning of the payment year. We will then make final determinations
of eligibility at the time of settlement of each hospital's cost
report. Therefore, if a hospital is initially determined to be
ineligible for payments under sections 1886(r)(1) and 1886(r)(2) of the
Act, but is later determined to indeed be eligible, we are adopting as
final our proposal to make those payments at cost report settlement. We
also note that, consistent with our decision, as discussed in the next
section, to determine Factor 1 prospectively, we will not revise Factor
1 retrospectively to account for the effects of these final
determinations of eligibility for payments under sections 1886(r)(1)
and 1886(r)(2) of the Act at cost report settlement.
(1) Methodology To Calculate Factor 1
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of
the Act states that it is a factor ``equal to the difference between
(i) the aggregate amount of payments that would be made to subsection
(d) hospitals under subsection (d)(5)(F) if this subsection did not
apply for such fiscal year (as estimated by the Secretary); and (ii)
the aggregate amount of payments that are made to subsection (d)
hospitals under paragraph (1) for such a fiscal year (as so
estimated).'' Therefore, section 1886(r)(2)(A)(i) of the Act represents
the estimated Medicare DSH payment that would have been made under
section 1886(d)(5)(F) if section 1886(r) of the Act did not apply for
such fiscal year. Section 1886(r)(2)(A)(i) of the Act specifies that,
for each fiscal year to which the provision applies, such amount is to
be ``estimated by the Secretary.'' Under a prospective payment system,
we would not know the precise aggregate Medicare DSH payment amount
that would be paid for a Federal fiscal year until cost report
settlement for all IPPS hospitals is completed, which occurs several
years after the end of the Federal fiscal year. Therefore, the statute
gives CMS authority to estimate this amount, by specifying that, for
each fiscal year to which the provision applies, such amount is to be
``estimated by the Secretary.'' Similarly, section 1886(r)(2)(A)(ii) of
the Act represents the estimated empirically justified Medicare DSH
payments to be made in FY 2014 and subsequent years, as prescribed
under section 1886(r)(1) of the Act. Again, section 1886(r)(2)(A)(ii)
of the Act gives CMS authority to estimate this amount.
Therefore, Factor 1 is the difference between our estimates of: (1)
The amount that would have been paid in Medicare DSH payments for FY
2014 and subsequent years, in the absence of the new payment provision;
and (2) the amount of empirically justified Medicare DSH payments that
are made for FY 2014 and subsequent years, which takes into account the
requirement to pay 25 percent of what would have otherwise been paid
under section 1886(d)(5)(F) of the Act. In other words, this factor
represents our estimate of 75 percent (100 percent minus 25 percent) of
our estimate of Medicare DSH payments that would otherwise be made, in
the absence of section 1886(r) of the Act, for FY 2014 and subsequent
years.
[[Page 50628]]
In order to determine Factor 1 in the uncompensated care payment
formula, we proposed to develop final estimates of both the aggregate
amount of Medicare DSH payments that would be made in the absence of
section 1886(r)(1) and the aggregate amount of empirically justified
Medicare DSH payments to hospitals under section 1886(r)(1) of the Act
prior to each fiscal year to which the new provision applies. We
believe this will create some level of predictability and finality for
hospitals eligible for these payments, in addition to being
administratively efficient. Specifically, in order to determine the two
elements of Factor 1 (Medicare DSH payments prior to the application of
section 1886(r)(1) of the Act, and empirically justified Medicare DSH
payments after application of section 1886(r)(1)), we proposed to use
the most recently available projections of Medicare DSH payments for FY
2014 and each subsequent year, as calculated by CMS' Office of the
Actuary. The Office of the Actuary projects Medicare DSH payments on a
biannual basis, typically in February of each year (based on data from
December of the previous year) as part of the President's Budget, and
in July (based on data from June) as part of the Midsession Review. The
estimates are based on the most recently filed Medicare hospital cost
report with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File.
Therefore, for the Office of the Actuary's February 2013 estimate,
the data are based on the December 2012 update of the Medicare Hospital
Cost Report Information System (HCRIS) and the FY 2013 IPPS/LTCH PPS
final rule IPPS Impact file, published in conjunction with the
publication of the FY 2013 IPPS/LTCH PPS final rule. For the July 2013
estimate, we anticipated that the data would be based on the March 2013
update of the Medicare Hospital Cost Report data and the proposed
rule's IPPS Impact file, published in conjunction with the proposed
rule. For purposes of the proposed rule, we used the February 2013
Medicare DSH estimates to calculate Factor 1 and to model the proposed
impact of this provision. We stated that if our proposal to use the
Office of the Actuary's projections for Factor 1 is finalized, we would
use the July 2013 Medicare DSH estimates to determine Factor 1 for this
FY 2014 IPPS/LTCH PPS final rule.
In addition, because we proposed to exclude SCHs paid under their
hospital-specific payment rate from the application of section 1886(r)
of the Act, we also proposed to exclude these hospitals from our
Medicare DSH estimate. Similarly, because Maryland hospitals and
hospitals participating in the Rural Community Hospital Demonstration
do not receive DSH payments, we also proposed to exclude these
hospitals from our Medicare DSH estimate.
Using the data sources discussed above, the Office of the Actuary
uses the most recently submitted Medicare cost report data to identify
current Medicare DSH payments and the most recent DSH payment
adjustments provided in the IPPS Impact File, and applies inflation
updates and assumptions for future changes in utilization and case-mix
to estimate Medicare DSH payments for the upcoming fiscal year. The
February 2013 Office of the Actuary estimate for Medicare DSH payments
for FY 2014, without regard to the application of section 1886(r)(1) of
the Act, was $12.338 billion. This estimate excludes Maryland
hospitals, SCHs paid under their hospital-specific payment rate and
hospitals participating in the Rural Community Hospital Demonstration
as discussed above. Therefore, based on this estimate, the estimate for
empirically justified Medicare DSH payments for FY 2014, with the
application of section 1886(r)(1) of the Act, was $3.084 billion (25
percent of the total amount estimated). Under our proposal, Factor 1 is
the difference of these two estimates of the Office of the Actuary.
Therefore, for the purpose of modeling Factor 1, we calculated Factor 1
to be $9.2535 billion.
We also proposed to develop and use the estimates necessary for
Factor 1 on a purely prospective basis. We proposed to use the
Actuary's most recent February Medicare DSH estimates each year to
calculate Factor 1 and to model the impact of this provision for the
IPPS/LTCH PPS proposed rule. Similarly, we proposed to use the
Actuary's most recent July Medicare DSH estimates to determine Factor 1
for the IPPS/LTCH PPS final rule each year. In other words, we would
not revise or update our estimates after we know the final Medicare DSH
payments for FY 2014 and subsequent years. As we discussed earlier, we
do not know the aggregate Medicare DSH payment amount that would be
paid for each federal fiscal year until the time of cost report
settlements, which occur several years after the end of the fiscal
year. Because the statute provides that CMS use estimates in order to
determine Factor 1 each year, we stated that we believe that applying
our best estimates prospectively would be most conducive to
administrative efficiency, finality, and predictability in payments. We
proposed to add a new paragraph (g)(1)(i) under Sec. 412.106 of our
regulations to define the methodology for calculating Factor 1.
We invited public comments on all the elements of this proposed
methodology to calculate Factor 1.
Comment: Some commenters pointed out that the summary analysis that
CMS provided of the uncompensated care Factor 1 estimate indicates that
the 2009 Medicare DSH payments were used as the starting point to
project expected empirically justified Medicare DSH payment adjustments
for FY 2014. The commenters noted that the current 2009 Medicare DSH
payments do not reflect several key issues that have yet to be settled
by the courts, such as dual eligible days and MA days, or issues that
have already been settled such as labor and delivery room days. In
addition, the commenters noted that the majority of the 2009 cost
reports remain unaudited. Therefore, commenters maintained that we
should not use 2009 as a base year for empirically justified Medicare
DSH payment adjustment eligibility without finalizing all 2009 cost
reports and appeals.
Response: In this final rule, our Office of the Actuary has based
its projections on cost reports for fiscal year 2010 as a starting
point. This is the most recent year for which cost report data has been
submitted by almost all the hospitals, which is very important for
purposes of estimating the full amount of empirically justified
Medicare DSH payments. We do not believe that we should employ a cost
reporting period for which cost report data have all been audited
because doing so would require using much earlier data as the basis for
the projection. This would create the potential for much larger
projection errors and would, therefore, not tend to increase the
accuracy of the projection.
Comment: Some commenters noted that CMS proposed to use 2009 cost
report data as the base year for Factor 1, but to use 2010-2012 cost
report data for purposes of the Factor 3 calculations. The commenters
asked why the baseline information cannot be derived from the same
period as the data used in the Factor 3 calculation and urged CMS to
reconcile this discrepancy.
Response: In order to determine the total amount of Medicare DSH
spending for Factor 1, it is important to use the latest available data
year for which almost all hospitals have submitted their cost reports,
which for purposes of this final rule is 2010 cost report data. This is
because we are computing a total
[[Page 50629]]
number that must include all hospitals and, therefore, to avoid
discrepancies, we believe that it is important to use data from the
same time period for all hospitals. Therefore, we believe that it is
appropriate to use a data year that does not include some hospitals.
However, for purposes of determining hospital-specific factors used to
compute Factor 3, it is important to use the most recent data for each
hospital. In this way, the projections for each hospital will be as
accurate as possible because we use the most recent available data. It
is more important in this case to provide for the most accurate
projection for each hospital than to employ data from the same cost
reporting period for each hospital. Therefore, using different years in
making these two determinations actually enhances, rather than detracts
from, the accuracy of these projections.
Comment: One commenter maintained that we underestimated the 2009
Medicare DSH amount by not including adjustments required by the recent
decision in Allina v. Sebelius. The commenter estimated that the
projected 2014 Medicare DSH payments, which are based on 2009 DSH
payments, are understated by $1.1 billion as a result of the incorrect
treatment of MA days. Therefore, the commenter argued that CMS must use
proper 2009 Medicare DSH data, including corrections required as a
result of court cases, before it can appropriately extrapolate the data
for current year calculations.
Response: The commenter is correct that we did not include the
effects of any court cases that are not already reflected in the cost
reports in developing our estimate for Factor 1. We continue to believe
that Allina was wrongly decided and have appealed the decision.
Therefore, a final decision has not yet been rendered in the case. We
note that elsewhere in this final rule, we are finalizing our proposal
to readopt our policy to include Medicare Advantage days in the
Medicare SSI ratio, which we believe further makes it unnecessary to
revise our Factor 1 estimate. A secondary reason for not including such
an adjustment in our estimate is that we are not aware of a methodology
that could accurately estimate the impact of any court cases and so
introducing another estimate would likely reduce, not improve, the
accuracy of our calculations. We appreciate that the commenter has
offered an estimate but we are unable to verify the methodology and
computations used to develop it.
Comment: One commenter noted that the summary analysis of the
uncompensated care Factor 1 estimate that we provided after the
publication of the proposed rule includes a column for ``other''
adjustment factors used in developing the estimate. However, the
commenter stated that CMS did not provide the detail explaining and
supporting this factor. The commenter further noted that the footnote
to the ``other'' column states: ``Other column includes impact of only
IPPS discharges and impact of DSH payments increasing or decreasing at
a different rate than other IPPS payments.'' The commenter requested
that CMS provide the details behind this factor.
Response: The ``other'' ``adjustment factors as mentioned in the
data file supporting our estimate of Factor 1 reflect two identifiable
factors: The impacts of (1) only including IPPS discharges in the
calculation, and (2) of Medicare DSH payments increasing or decreasing
at a different rate than other IPPS payments. In relation to the first
factor, an adjustment is made to reflect the fact that IPPS discharges
increase at a different rate than total inpatient hospital discharges
(which are reflected in the discharge column of the data file). The
second factor comes into play if the Medicare DSH payments under IPPS
are increasing faster or slower than all payments to IPPS hospitals,
which is determined by looking at prior year's impact files. We note
that the application of these ``other'' adjustment factors has caused
the total Medicare DSH estimate to increase. If we were to ignore these
factors, the final Medicare DSH payment estimate used for purposes of
estimating Factor 1 would be much lower.
Comment: Some commenters stated that the same summary analysis of
the Medicare DSH payments estimate includes an adjustment factor for
discharges. However, the commenters noted that CMS had not provided the
detail supporting the discharge factor it used. In addition, the
commenters stated that the footnote to the discharge column states that
all inpatient hospitals were included, not just IPPS hospitals. The
commenters suggested that because the purpose of the projection is to
estimate the amount of Medicare DSH payments that will go to a subset
of all inpatient hospitals, CMS should use only the hospitals'
projected share in the payments when determining the factors that drive
the estimate.
Response: We agree that the Medicare DSH payment projections
ideally should reflect only the number of discharges for IPPS
hospitals. However, the Office of the Actuary only has projections of
total inpatient hospital discharges. As a result, in this calculation
we have included an adjustment to reflect the impact of IPPS hospitals'
discharges as part of the ``other'' adjustment factors that we have
just discussed.
Comment: Several commenters asserted that CMS' assumption that
actual Medicare DSH payments made for FY 2012 amounted to only $11.59
billion is illogical and unsupported by any substantial evidence. The
commenters stated that, first, this assumption conflicts with other
recent estimates by the same Actuary concerning total Medicare DSH
payments for the same year, 2012. The commenters noted that within 1
month of the release of the proposed rule, CMS released data, which it
attributed to the Office of the Actuary indicating that aggregate
Medicare DSH payments for FY 2012 totaled $11.93 billion. The
commenters pointed out that this number is nearly $400 million greater
than the 2012 estimate (extrapolated from 2009 data) used to calculate
Factor 1 in the proposed rule.
Response: The estimate of $11.93 billion in Medicare DSH payments
for FY 2012 was based on all reported Medicare DSH payments, which are
shown on the cost reports. We note that Maryland hospitals, SCHs, and
hospitals participating in the Rural Community Hospital Demonstration
program report DSH payments on their cost reports even if ultimately
they are not paid a DSH payment adjustment. Therefore, this estimate
included payments for three categories of hospitals that will not
receive uncompensated care payments: Maryland hospitals; SCHs paid on a
hospital-specific basis; and hospitals that are part of the Rural
Community Hospital Demonstration program. Therefore, we removed the
estimated DSH payments for these three categories of hospitals for
purposes of determining Factor 1 in the proposed rule. The removal of
these hospitals reduced the Factor 1 estimate to $11.59 billion
compared to the $11.93 billion estimate of all reported Medicare DSH
payments.
Comment: Several commenters stated that the summary analysis of the
Medicare DSH payment estimate includes an adjustment factor for case-
mix. However, the commenters noted that CMS had not provided the detail
supporting the case-mix factor used. The commenters suggested that CMS
provide the details behind this factor to allow for comprehensive
comments. In addition, these commenters requested that CMS clarify how
the case-mix change from year to year was derived as it relates to the
documentation and coding adjustment. The commenters
[[Page 50630]]
pointed out that the trend in the change in case-mix from year to year
does not seem to support the need for a documentation and coding
adjustment and, in fact, the year-to-year change in two cases is a
decrease. The commenters urged CMS to ensure that the case-mix being
used does not already reflect the documentation and coding adjustment
so providers can be certain the adjustment is not being made twice.
Response: The case-mix increase is calculated using the weighted
average of the relative weights for each year. These relative weights
are weighted by the number of discharges in the first year. The case-
mix numbers used in the estimate of Medicare DSH payments do not
include the documentation and coding adjustments. The years which have
been adjusted for documentation and coding (as required by law)
occurred before the years shown in this data file.
Comment: Several commenters noted that, based on projections made
by CBO, the number of uninsured people is projected to drop 11.2
percentage points in 2014 compared to 2013. The commenters expressed
the view that the projected decline in the uninsured rate is due in
part to the potential addition of 9 million new Medicaid recipients,
according to the May 2013 CBO projections to be used by CMS. However,
the commenters stated that it does not appear that the projected 2014
Medicare DSH amount includes expected additional Medicare DSH payments
due to Medicaid expansion and requested that CMS provide additional
information.
Response: We agree with the commenters that the number of Medicaid
days will likely increase as a result of Medicaid expansion, therefore
likely increasing the aggregate amount of payments that would have been
made to subsection (d) hospitals under section 1886(d)(5)(F) of the Act
if section 1886(r) of the Act did not apply. Medicaid days are included
as part of a hospital's disproportionate patient percentage as
described at Sec. 412.106(b)(4) of the regulations. Accordingly, we
have included an estimate of the impact of the Medicaid expansion in
our projection of Factor 1 for this final rule.
Comment: Several commenters objected to the proposal to apply our
best estimates of Factor 1 on a prospective basis only. These
commenters maintained that the administrative efficiency, finality, and
predictability in payments that CMS cited in favor of the proposal were
less important than accuracy in payments. The commenters noted that
there were a number of questions and uncertainties about the Actuary's
proposed projection for FY 2014, and that it would therefore be most
appropriate to establish a final value for Factor 1 only at the time of
final cost report settlements, using actual data or at a later time,
when more informed projections will be available. Other commenters
supported the proposal to employ prospective estimates from the Office
of the Actuary and not to update these estimates once final data become
available. However, some of these commenters urged CMS to publish final
amounts of Factor 1 so that any consistent errors can be addressed to
improve the accuracy of future projections.
Response: As we noted in the proposed rule (78 FR 27583), we would
not know the precise aggregate Medicare DSH payment amount that would
be paid for a Federal fiscal year until cost report settlement for all
IPPS hospitals is completed, which occurs several years after the end
of the Federal fiscal year. The statute gives us authority to estimate
this amount by specifying that, for each fiscal year to which the
provision applies, such amount is to be ``estimated by the Secretary.''
We believe that it is, therefore, most consistent with the statute to
employ estimates for purposes of determining Factor 1. Otherwise, final
settlement of these payments could be delayed as much as 6 years or
more after the payment year. As in the case of other payment factors
that we determine on the basis of prospective estimates (for example,
the aggregate amount of annual payments for outliers), we will
continually examine our estimates compared to actual data for each year
in order to improve our future projections.
Comment: Several commenters pointed out that CMS assumed a 2-
percent documentation and coding adjustment for FY 2014 in estimating
Factor 1 for the proposed rule, but that CMS actually proposed a
documentation and coding adjustment of 0.8 percent. These commenters
urged CMS to correct this assumption in the final rule.
Response: We agree with these commenters. Accordingly, for this
final rule, the Office of the Actuary has employed a documentation and
coding adjustment of 0.8 percent for FY 2014 in developing our estimate
of Factor 1 for FY 2014.
After consideration of the public comments we received, we are
finalizing our proposal to add a new paragraph (g)(1)(i) under Sec.
412.106 of our regulations to define the methodology for calculating
Factor 1. As we noted in the proposed rule (78 FR 27582 through 27583),
the Office of the Actuary projects Medicare DSH payments on a biannual
basis, typically in February of each year (based on data from December
of the previous year) as part of the President's Budget, and in July
(based on data from June) as part of the Midsession Review. The
estimates are based on the most recently filed Medicare hospital cost
report with Medicare DSH payment information and the most recent
Medicare DSH patient percentages and Medicare DSH payment adjustments
provided in the IPPS Impact File.
Therefore, for the Office of the Actuary's February 2013 estimate,
the data are based on the December 2012 update of the Medicare Hospital
Cost Report Information System (HCRIS) and the FY 2013 IPPS/LTCH PPS
final rule IPPS Impact file, published in conjunction with the
publication of the FY 2013 IPPS/LTCH PPS final rule. For the July 2013
estimate, we anticipated that the data would be based on the March 2013
update of the Medicare Hospital Cost Report data and the IPPS Impact
file published in conjunction with the proposed rule. For purposes of
the proposed rule, we used the February 2013 Medicare DSH estimates to
calculate Factor 1 and to model the proposed impact of this provision.
We stated that if our proposal to use the Office of the Actuary's
projections for Factor 1 is finalized, we would use the July 2013
Medicare DSH estimates to determine Factor 1 for this FY 2014 IPPS/LTCH
PPS final rule.
For this final rule, the Office of the Actuary has used the July
2013 Medicare DSH estimates, based on the March 2013 update of the
Medicare Hospital Cost Report data and the proposed rule's IPPS Impact
file, to determine Factor 1. The July 2013 Office of the Actuary
estimate for Medicare DSH payments for FY 2014, without regard to the
application of section 1886(r)(1) of the Act, is approximately $12.772
billion (for purposes of the proposed rule, we estimated this amount to
be approximately $12.338 billion). As in the proposed rule, this
estimate excludes Maryland hospitals, SCHs paid under their hospital-
specific payment rate, and hospitals participating in the Rural
Community Hospital Demonstration program. Therefore, based on this
estimate, the estimate for empirically justified Medicare DSH payments
for FY 2014, with the application of section 1886(r)(1) of the Act, is
approximately $3.193 billion (25 percent of the total amount
estimated). Under our proposal, Factor 1 is the difference of these two
estimates of the Office of the Actuary.
[[Page 50631]]
Therefore, for the purpose of this final rule, we calculate Factor 1 to
be approximately $9.579 billion (for purposes of the proposed rule,
Factor 1 was estimated to be approximately $9.2535).
(2) Methodology To Calculate Factor 2
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Specifically, section
1886(r)(2)(B)(i) of the Act provides: ``For each of fiscal years 2014,
2015, 2016, and 2017, a factor equal to 1 minus the percent change in
the percent of individuals under the age of 65 who are uninsured, as
determined by comparing the percent of such individuals (I) who are
uninsured in 2013, the last year before coverage expansion under the
Patient Protection and Affordable Care Act (as calculated by the
Secretary based on the most recent estimates available from the
Director of the Congressional Budget Office before a vote in either
House on the Health Care and Education Reconciliation Act of 2010 that,
if determined in the affirmative, would clear such Act for enrollment);
and (II) who are uninsured in the most recent period for which data is
available (as so calculated), minus 0.1 percentage points for fiscal
year 2014 and minus 0.2 percentage points for each of fiscal years
2015, 2016, and 2017.''
Section 1886(r)(2)(B) of the Act establishes, as Factor 2 in the
uncompensated care payment formula, the percent change in uninsurance,
based on a comparison of the percent of individuals under 65 without
insurance in 2013 to the percent of such individuals without insurance
in the most recent period for which we have data, minus 0.1 percentage
points for FY 2014 and 0.2 percentage points for each of FYs 2015,
2016, and 2017.
Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the
percent of individuals under 65 without insurance in 2013 must be the
percent of such individuals ``who are uninsured in 2013, the last year
before coverage expansion under the Patient Protection and Affordable
Care Act (as calculated by the Secretary based on the most recent
estimates available from the Director of the Congressional Budget
Office before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 that, if determined in the affirmative,
would clear such Act for enrollment).'' The Health Care and Education
Reconciliation Act (Pub. L. 111-152) was enacted on March 30, 2010. It
was passed in the House of Representatives on March 21, 2010, and by
the Senate on March 25, 2010. Because the House of Representatives was
the first House to vote on the Health Care and Education Reconciliation
Act of 2010 on March 21, 2010, we have determined that the most recent
estimate available from the Director of the Congressional Budget Office
``before a vote in either House on the Health Care and Education
Reconciliation Act of 2010 . . .'' appeared in a March 20, 2010 letter
from the director of the CBO to the Speaker of the House. (Emphasis
supplied.) Therefore, we believe that only the estimates in this March
20, 2010 letter meet the statutory requirement under section
1886(r)(2)(B)(i)(I) of the Act. (To view the March 20, 2010 letter, we
refer readers to the Web site at: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.
In its March 20, 2010 CBO letter to the Speaker of the House of
Representatives, the CBO provided two estimates of the ``post-policy
uninsured population.'' The first estimate is of the ``Insured Share of
the Nonelderly Population Including All Residents'' (which is 82
percent) and the second estimate is of the ``Insured Share of the
Nonelderly Population Excluding Unauthorized Immigrants'' (83 percent).
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27583), we proposed
to use the first estimate that includes all residents, including
unauthorized immigrants. We stated that we believe this estimate is
most consistent with the statute which requires us to measure ``the
percent of individuals under the age of 65 who are uninsured,'' and
provides no exclusions except for individuals over the age 65. In
addition, we stated that we believe that this estimate would more fully
reflect the levels of uninsurance in the United States that influence
uncompensated care for hospitals than the estimate that reflects only
legal residents. Therefore, using this estimate would seem more
consistent with the statutory requirement of establishing a payment for
uncompensated care. For these reasons, we proposed to use the estimate
of the ``Insured Share of the Nonelderly Population Including All
Residents'' for 2013 to calculate the baseline percentage of
individuals under age 65 without insurance.
We invited public comments on this proposal.
Comment: Several commenters supported the proposal to use the CBO
estimate of the ``Insured Share of the Nonelderly Population Including
All Residents'' for purposes of determining Factor 2. The commenters
agreed that this estimate more fully reflects the levels of uninsurance
in the United States that influence uncompensated care for hospitals
than the estimate that excludes unauthorized immigrants and is,
therefore, more consistent with the statutory requirement of
establishing a payment for uncompensated care.
Response: We appreciate the commenters' support for this proposal,
and we are finalizing our proposal to employ the CBO estimate of the
``Insured Share of the Nonelderly Population Including All Residents''
contained in its March 20, 2010 letter to the Speaker of the House of
Representatives to determine the percentage of individuals under age 65
without insurance for purposes of Factor 2.
The March 20, 2010 CBO letter reports these figures as the
estimated percentage of individuals with insurance. However, because
section 1886(r)(2)(B)(i) of the Act requires that we compare the
percent of individuals ``who are uninsured in 2013,'' in the FY 2014
IPPS/LTCH PPS proposed rule (78 FR 27584), we proposed to use the CBO
insurance rate figure and subtract that amount from 100 percent (that
is, the total population, without regard to insurance status) to
estimate the 2013 baseline percentage of individuals without insurance.
In its March 20, 2010 letter, the CBO reported its estimate of the
``Insured Share of the Nonelderly Population Including All Residents''
as 82 percent. Therefore, we proposed that, for FYs 2014 through 2017,
our estimate of the uninsurance percentage for 2013 would be 18
percent. As provided for in the CBO March 20, 2010 letter, the CBO
estimate for insurance for the nonelderly (under age of 65) population
only includes residents of the 50 States and the District of Columbia,
and the count of uninsured people includes unauthorized immigrants, as
well as individuals who are eligible for, but not enrolled in,
Medicaid. We note that, although we proposed that acute care hospitals
located in Puerto Rico that receive DSH payments would be eligible to
receive payments under section 1886(r) of the Act, this estimate for
insurance does not account for residents in Puerto Rico. We believe
that the impact of the exclusion of Puerto Rico from the insurance
estimate is negligible.
We invited public comments on this proposal.
We did not receive any public comments on our proposal to employ an
estimate for insurance among the nonelderly that includes only
residents of the 50 States and the District of Columbia and, therefore,
does not account for residents in Puerto Rico.
[[Page 50632]]
Therefore, we are finalizing the policy, as proposed.
Section 1886(r)(2)(B)(i) of the Act requires that we compare the
baseline uninsurance rate to the percent of such individuals ``who are
uninsured in the most recent period for which data is available (as so
calculated).'' In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27584), we proposed to use the same data source, CBO estimates, to
calculate this percent of individuals without insurance. Section
1886(r)(2)(B)(i)(I) of the Act refers to the percent of uninsured in
2013 ``as calculated by the Secretary based on'' the CBO data.
Similarly, section 1886(r)(2)(B)(i)(II) of the Act immediately
afterwards refers to the percent of uninsured for 2014 ``as so
calculated.'' (Emphasis supplied.) The phrase ``as so calculated'' in
the latter section can be reasonably interpreted to require the
calculation to similarly be based on CBO estimates. In addition, we
believe that it is preferable from a statistical point of view to
calculate a percent change in insurance over time using a consistent
data source. Furthermore, rather than using the estimates included in
the March 20, 2010 CBO letter, we believe it is appropriate to use more
recent CBO estimates of the percent of individuals with insurance. The
more recent CBO projections take into account changes in the
environment that can impact insurance rates, such as more recent
economic conditions and the Supreme Court's decision in National
Federation of Independent Business. v. Sebelius--U.S.--, 132 S. Ct.
2566 (2012), regarding Medicaid expansions authorized by the Affordable
Care Act. Because the statute requires that we use ``the most recent
period for which data is available'' to calculate the comparison
percentage of individuals without insurance, we proposed to use the
most recent update (that is, the most recent update available at the
time of rulemaking with respect to a particular fiscal year) to the
percent of individuals with insurance provided by the CBO to calculate
this comparison figure.
In addition, for FY 2014, we proposed to use CBO's most recent
estimate for the percent of individuals with insurance in 2014 for
purposes of section 1886(r)(2)(B)(i)(II) of the Act because this is the
year in which this provision is effective. This figure is used for
Factor 2 and later applied to Factor 1, which is also based on an
estimate for FY 2014. On February 5, 2013, the CBO released its annual
Budget and Economic Outlook. The report included updated economic and
budget projections that incorporated the effects of the legislation
enacted prior to the start of the year, a revised economic forecast
consistent with the budget projections, and other changes to CBO's
estimates. (To view the report, we referred readers to the Web site at:
http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900_ACAInsuranceCoverageEffects.pdf.)
In the proposed rule (78 FR 27584), we used the February 5, 2013,
CBO health insurance estimates in order to calculate the percentage of
individuals without insurance for 2014. As we did for the uninsurance
percentage estimate for 2013 (based on the March 20, 2010 CBO letter
discussed above), we proposed to use the ``Insured Share of the
Nonelderly Population Including All Residents'' to calculate the
comparison of the percentage of people without insurance for 2014.
Consistent with the CBO estimate used to calculate the baseline
uninsurance estimate, this estimate for insurance only includes
residents of the 50 States and the District of Columbia, and the count
of uninsured people includes unauthorized immigrants, as well as
individuals who are eligible for, but not enrolled in, Medicaid. The
CBO report projects that the ``Insured Share of the Nonelderly
Population Including All Residents'' for 2014 will be 84 percent.
Therefore, in the same manner that we calculated the uninsurance
percentage for the baseline, we proposed that the uninsurance
percentage for 2014 would be 16 percent (that is, 100 percent minus 84
percent) for the purpose of this proposed rule. We indicated that if
our proposal was finalized, and there is a more recent estimate of the
percentage of individuals with insurance in 2014 by the CBO available
for the FY 2014 IPPS/LTCH PPS final rule, we would use that estimate to
calculate Factor 2. However, we would not adjust Factor 2 retroactively
to account for estimates that become available after publication of the
final rule.
Comment: Some commenters agreed with the proposal to use CBO
estimates of rates of insurance coverage in 2014 and subsequent years
as a basis for calculating Factor 2. One commenter stated that the CBO
estimates were both sufficient and accurate for the purpose of
determining Factor 2. However, other commenters expressed concern about
the accuracy of CBO projections of insurance coverage in 2014 and
subsequent years. These commenters mentioned uncertainties in the wake
of the Supreme Court decision about Medicaid expansion. These
commenters also noted that the statewide exchanges that are to be
established under the Affordable Care Act will not be in operation
until January 2014, so that the CBO projections of an increase in the
rate of insurance coverage may be overstated. Other commenters stated
that the CBO projections are unsupported by substantial data and
requested that Factor 2 be reconciled on the basis of actual data for
2014.
Response: We continue to believe that the CBO projections of
insurance coverage in 2014 and subsequent years are the most reliable
and consistent basis on which to calculate Factor 2. As we noted in the
proposed rule, section 1886(r)(2)(B)(i)(I) of the Act refers to the
percent of uninsured in 2013 ``as calculated by the Secretary based
on'' the CBO data. Similarly, section 1886(r)(2)(B)(i)(II) of the Act
immediately afterwards refers to the percent of uninsured for 2014 ``as
so calculated.'' (Emphasis supplied.) The phrase ``as so calculated''
in the latter section can be reasonably interpreted to require the
calculation to similarly be based on CBO estimates. In addition, we
continue to believe that it is preferable from a statistical point of
view to calculate a percent change in insurance over time using a
consistent data source. The more recent CBO projections take into
account changes in the environment that can impact insurance rates,
such as more recent economic conditions and the Supreme Court's
decision in National Federation of Independent Business. v. Sebelius--
U.S.--, 132 S. Ct. 2566 (2012), regarding Medicaid expansions
authorized by the Affordable Care Act. As is the case with regard to
reconciling the estimates used to determine Factor 1, we believe that
employing actual data as the basis for reconciling the projections
employed to determine Factor 2 would impose an unacceptable delay in
the final determination of uncompensated care payments. Actual data on
the rates of insurance and uninsurance would not become available until
several years after the payment year, and the initial data for the year
would continue to be adjusted for several years after that as further
data become available. Furthermore, by stating that the Secretary's
calculations should be based on ``estimates'' provided by the CBO, the
statute clearly contemplates the use of such estimates on a prospective
basis without reconciliation. Therefore, we are finalizing our proposal
to use the most recently available CBO estimates of insurance rates for
each payment year, and not to adjust Factor 2 retroactively to account
for estimates that become available after publication of the final
rule.
Section 1886(r)(2)(B)(i) of the Act states that Factor 2 for FY
2014 is equal
[[Page 50633]]
to 1 minus the percent change in the percent of individuals under the
age of 65 who are uninsured, as determined by comparing the percent of
such individuals without insurance in the baseline and in the most
recent period for which we have data (minus 0.1 percentage points for
FY 2014). Therefore, in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27584), we proposed that Factor 2 is 1 minus the percent change between
the baseline percentage of individuals without insurance in 2013 (which
was, for the proposed rule, 18 percent) and the most recent percentage
of individuals without insurance for 2014 (which was, for this proposed
rule, 16 percent) minus 0.1 percentage points.
Using the March 20, 2010 CBO projection for 2013 and the February
5, 2013 CBO projection of uninsurance for all residents for 2014, we
proposed to use the following computation for Factor 2 for FY 2014:
Percent of individuals without insurance for CY 2013 (March 2010 CBO
estimate): 18 percent
Percent of individuals without insurance for CY 2014 (February 2013
CBO estimate): 16 percent
1-[verbar][(0.16-0.18)/0.18][verbar] = 1-0.111 = 0.889 (88.9
percent)
0.889 (88.9 percent)-0.001 (0.1 percentage points) = 0.888 (88.8
percent)
0.888 = Factor 2.
Accordingly, we proposed Factor 2 to be 88.8 percent for FY 2014.
In conjunction with this proposal, we proposed that the amount
available for uncompensated care payments for FY 2014 would be $8.217
billion (0.888 times our proposed Factor 1 estimate of $9.2535
billion). As we noted previously, in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27585), we stated that our proposal for Factor 2 may be
subject to change if more recent CBO estimates of the insurance rate
for 2014 become available prior to the preparation of the final rule.
In the proposed rule, we proposed to add a new paragraph (g)(1)(ii)
under Sec. 412.106 of our regulations to define the methodology for
calculating Factor 2.
We invited public comment on our proposed methodology to calculate
Factor 2.
Comment: Many commenters noted that the CBO estimates of the effect
of the Affordable Care Act on the level of insurance coverage are made
on a calendar year basis (for example, calendar year 2014). However,
the commenters stated, the new payment methodology for uncompensated
care payments will go into effect for FY 2014 (that is, on October 1,
2013). The commenters stated that, therefore, the CBO estimate for
calendar year 2014 represents the first full year during which the
exchanges and Medicaid expansion under the Affordable Care Act will be
in effect. However, the commenters further stated, the new payment
methodology will be in effect for 3 months of the previous calendar
year before these Affordable Care Act provisions that should lower the
uninsurance rate go into effect. Therefore, these commenters urged CMS
to normalize the CBO estimate to reflect FY 2014 more accurately,
specifically by calculating a weighted average of the CBO estimate for
October-December 2013 and the estimate for January-September 2014.
Several commenters illustrated the effect of calculating a weighted
average using the February 5, 2013 CBO projections that CMS employed in
the proposed rule as follows:
CY 2013 rate of insurance coverage (February 2013 CBO estimate): 80
percent
CY 2014 rate of insurance coverage (February 2013 CBO estimate): 84
percent
FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent
* .75) = 83 percent.
Percent of individuals without insurance for CY 2013 (March 2010 CBO
estimate): 18 percent
Percent of individuals without insurance for FY 2014 (weighted
average): 17 percent
1-[verbar][(0.17-0.18)/0.18][verbar] = 1-0.056 = 0.944 (94.4
percent)
0.944 (94.4 percent)-0.001 (0.1 percentage points) = 0.943 (94.3
percent)
0.943 = Factor 2
Response: We are finalizing our proposal to employ the most recent
CBO estimates of the rates of insurance for FY 2014 and subsequent
payment years. We agree with the recommendation of the commenters that
we should normalize the estimate of uninsurance for FY 2014 by
calculating a weighted average of the CBO estimates for CY 2013 and CY
2014, respectively. We agree that normalizing the estimate to cover FY
2014 rather than CY 2014 will more accurately reflect the actual rate
of uninsurance that hospitals will experience during the FY 2014
payment year. We also believe that we have sufficient discretion under
the statute to employ a normalized estimate for FY 2014 in place of the
CBO estimate for CY 2014 because section 1886(r)(2)(B)(i) of the Act
merely requires us to develop such estimates ``based on the most recent
estimates available from'' the CBO. (We note that the base year
estimate for 2013 remains the same whether it is normalized to FY 2013
or not. This is because the CBO estimates that the statute requires us
to use for the base year indicate a rate of uninsurance of 18 percent
for both CY 2012 and CY 2013, the calendar years which we would employ
to normalize the estimate for FY 2013.)
In this final rule, we are employing the most recent available
estimate, specifically CBO's May 2013 estimates of the effects of the
Affordable Care Act on health insurance coverage, which are available
at http://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf, as amended by
CBO's July 2013 estimates of changes in estimates of the effects of
insurance coverage provisions in the Affordable Care Act issued in
conjunction with a memo regarding ``Analysis of the Administration's
Announced Delay of Certain Requirements Under the Affordable Care
Act,'' which are available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/44465-ACA.pdf. The CBO's May 2013 estimate of the
rate of insurance for CY 2013 is 80 percent, and for CY 2014 is 84
percent. (These estimates are unchanged from the February 5, 2013 CBO
projections that we employed in the proposed rule.) The CBO's May 2013
estimate includes an estimate of the change in the number of uninsured
non-elderly people (including unauthorized immigrants) of -14 million
in CY 2014. Based on this estimate of the change in the number of
uninsured non-elderly people, in May 2013, the CBO estimated that in CY
2014 there will be 44 million uninsured non-elderly people. In
addition, the CBO's May 2013 estimate stated that there will be a total
of 274 million non-elderly people in CY 2014. Accordingly, we concluded
that in the May 2013 CBO estimates that there will be 230 million
insured non-elderly people (that is, 274 million total non-elderly
people minus 44 million uninsured non-elderly people), which supports
their estimate that the insured share of the non-elderly population is
84 percent (that is, 230 million insured non-elderly people divided by
274 million total non-elderly people). The CBO's July 2013 estimates do
not include a revised estimate of the insured share of the non-elderly
population in CY 2014, and instead include estimates of the changes in
the number of non-elderly people by type of insurance coverage. In
other words, the CBO's July 2013 estimate includes an estimate of the
change in the number of uninsured non-elderly people (including
unauthorized immigrants). The CBO's July 2013 estimate includes a
revised estimate of the change in the number of uninsured non-elderly
people (including unauthorized immigrants) of -13 million in CY 2014.
[[Page 50634]]
Based on this July 2013 revised estimate of the change in the number of
uninsured non-elderly people and the May 2013 estimate of uninsured
non-elderly people, we conclude that it is appropriate to infer that in
CY 2014 there will be 45 million uninsured non-elderly people. We also
believe that is appropriate to conclude that the CBO made no change to
its estimates of total non-elderly people in July 2013, so that it
remains the same as in their May 2013 estimates of 274 million.
Accordingly, we believe that the number of insured non-elderly people
based on the July 2013 CBO estimates for CY 2014 is 229 million (that
is, 274 million total non-elderly people minus 45 million uninsured
non-elderly people), which results in the insured share of the non-
elderly population of 84 percent (that is, 229 million insured non-
elderly people divided by 274 million total non-elderly people).
Therefore, the calculation of Factor 2 for FY 2014, employing a
weighted average of the CBO projections for CY 2013 and CY 2014, is as
follows:
CY 2013 rate of insurance coverage (May 2013 CBO estimate): 80
percent
CY 2014 rate of insurance coverage (May 2013 CBO estimate, updated
with July 2013 CBO estimate): 84 percent
FY 2014 rate of insurance coverage: (80 percent * .25) + (84 percent
* .75) = 83 percent.
Percent of individuals without insurance for 2013 (March 2010 CBO
estimate): 18 percent
Percent of individuals without insurance for FY 2014 (weighted
average): 17 percent
1-[verbar][(0.17-0.18)/0.18][verbar] = 1-0.056 = 0.944 (94.4
percent)
0.944 (94.4 percent)-0.001 (0.1 percentage points) = 0.943 (94.3
percent)
0.943 = Factor 2
We note that, as a result of this change, we will reduce the total
amount of uncompensated care payments by a smaller amount than the
reductions that would have resulted from our proposed methodology for
Factor 2.
Therefore, in this final rule, we are adopting 0.943 as the final
determination of Factor 2 for FY 2014. In conjunction with this
determination, we have also determined, for the purpose of this final
rule, that the amount available for uncompensated care payments for FY
2014 will be approximately $9.033 billion (0.943 times our Factor 1
estimate of $9.579 billion).
Comment: One commenter opined that the new Medicare DSH payment
adjustment policy will hurt Massachusetts hospitals, which will see no
reduction in uninsured rates because the State has already expanded
health insurance coverage under its own health care reform. The
commenter requested that CMS exempt Massachusetts and any other State
which expands health care coverage from any cuts driven by the
reduction in uninsurance at the national level under the Affordable
Care Act. At minimum, the commenter requested that CMS adjust Factor 2
to account for changes in uninsurance at the State level so that
hospitals in States that are not expected to see reductions in their
uninsured rates--because they have already expanded access in alignment
with the Affordable Care Act--will not see large reductions in their
Medicare DSH payments.
Response: We appreciate receiving the commenter's concerns.
However, the statute provides no authority to exempt some States from
the provision or to adjust the calculation of Factor 2 to reflect
uninsurance rates at a State level. Therefore, we are unable to accept
the commenter's recommendations.
(3) Methodology to Calculate Factor 3
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
above, section 1886(r)(2)(C) of the Act states that Factor 3 is ``equal
to the percent, for each subsection (d) hospital, that represents the
quotient of (i) the amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data is available which is a better proxy for
the costs of subsection (d) hospitals for treating the uninsured, the
use of such alternative data)); and (ii) the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under this subsection for such period (as so estimated, based
on such data).''
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and subsection (d) Puerto Rico hospital with
the potential to receive DSH payments relative to the estimated
uncompensated care amount for all hospitals estimated to receive DSH
payments in the fiscal year for which the uncompensated care payment is
to be made. Factor 3 is applied to the product of Factor 1 and Factor 2
to determine the amount of the uncompensated care payment that each
eligible hospital will receive for FY 2014 and subsequent years. In
order to implement the statutory requirements for this factor of the
uncompensated care payment formula, we must determine the following:
(1) The definition of uncompensated care, or in other words, the
specific items that are to be included in the numerator (that is, the
estimated uncompensated care amount for an individual hospital) and
denominator (that is, the estimated uncompensated care amount for all
hospitals estimated to receive DSH payments in the applicable FY); (2)
the data source(s) for the estimated uncompensated care amount; and (3)
the timing and manner of computing the quotient for each hospital
estimated to receive DSH payments. The statute instructs the Secretary
to estimate the amounts of uncompensated care for a period ``based on
appropriate data.'' In addition, we note that the statute permits the
Secretary to use alternative data ``in the case where the Secretary
determines that alternative data is available,'' which is a better
proxy for the costs of subsection (d) hospitals for treating uninsured
individuals.
In the course of considering how to determine Factor 3, we
considered proposing to define the amount uncompensated care for a
hospital as the uncompensated care costs of that hospital and
considered potential data sources for those costs. In doing so, we
first considered which costs should be included in the definition of
``uncompensated care costs.'' We examined the broad literature on
uncompensated care and the concepts of uncompensated care used in
various public and private programs. We also considered input from
stakeholders and public comments in various forums, including the
national provider call that we held in January 2013. Our review of the
information from these sources indicated that there is some variation
in how different States, provider organizations, and Federal programs
define ``uncompensated care.'' However, a common theme of almost all
these definitions is that they include both ``charity care'' and ``bad
debt'' as constituents of ``uncompensated care.'' After considering the
various factors that are included in different definitions of
``uncompensated care,'' we considered proposing to adopt a definition
which incorporated those factors that are most commonly included within
the term. Thus, we considered proposing to define ``uncompensated
care'' as the cost of charity care plus bad debt which includes the
cost of non-Medicare bad debt and non-reimbursed Medicare bad debt. In
turn, we also considered proposing to define ``charity care costs'' as
the cost of care for patients that meet hospitals' individual criteria
for charity care net of any partial payment received by the hospital
from patients for that
[[Page 50635]]
care, and to define ``non-Medicare bad debt costs'' as the cost of
hospital care for non-Medicare patients that have the financial
capacity to pay, but are unwilling to settle the claim. In addition, we
considered proposing to define ``non-reimbursed Medicare bad debt
costs'' as the amount of allowable coinsurance and deductible for
Medicare patients from whom the hospital has sought to collect payment
through reasonable collection efforts as described in Sec. 413.89(e)
of the Medicare regulations and not reimbursed by Medicare. We
discussed these possible elements of uncompensated care in more detail
in the proposed rule (78 FR 27585)
For purposes of selecting an appropriate data source for this
possible definition of uncompensated care costs, we reviewed the
literature and available data sources and determined that the Medicare
cost report Worksheet S-10 could potentially provide the most complete
data for Medicare hospitals. (We refer readers to the report
``Improvements to Medicare Disproportionate Share (DSH) Payments'' for
a full discussion and evaluation of the available data sources. The
report can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.)
However, we noted that Worksheet S-10 is a relatively new data source
that has been used for specific payment purposes only in relatively
restricted ways (for example, to provide a source of charity care
charges in the computation of EHR incentive payments; 75 FR 44456.). We
also noted that some stakeholders have expressed concern that hospitals
have not had enough time to learn how to submit accurate and consistent
data through this reporting mechanism. Other stakeholders have
maintained that some instructions for Worksheet S-10 still require
clarification in order to ensure standardized and consistent reporting
by hospitals. We understand and appreciate the concerns of these
stakeholders. At the same time, Worksheet S-10 is the only national
data source that includes data for all Medicare hospitals and is
designed to elicit data that are both accurate and consistent with the
definition of uncompensated care costs that we considered proposing to
use. We discussed the possible use of data reported on Worksheet S-10
to determine uncompensated care costs in more detail in the proposed
rule (78 FR 27586).
In order to apply a definition of uncompensated care costs based
upon information reported on the Worksheet S-10, it would be necessary
to use the 2010/2011 cost reports, which were submitted on or after May
1, 2010, when the new Worksheet S-10 went into effect. These are the
most recently available full year of cost reports and the first cost
reports with detailed uncompensated care data on the Worksheet S-10
that would be available for use in implementing the new methodology for
uncompensated care payments for FY 2014. Concerns about the
standardization and completeness of the Worksheet S-10 data could be
more acute for data collected in the first year of the Worksheet's use.
Because of these concerns, we did not propose to define uncompensated
care in a way that would require use of the Worksheet S-10 data.
However, we stated our belief that Worksheet S-10 of the Medicare Cost
Report would otherwise be an appropriate data source to determine
uncompensated care costs. In particular, we noted that Worksheet S-10
was developed specifically to collect information on uncompensated care
costs in response to interest by MedPAC and other stakeholders
regarding the topic (for example, MedPAC's March 2007 Report to
Congress) and that it is not unreasonable to expect information on the
cost report to be used for payment purposes. Furthermore, hospitals
attest to the accuracy and completeness of the information reported in
the cost report at the time of submission. While we realize that
hospitals may wish to have a more specific understanding of how these
data will be used, we believe that the discussion in the proposed rule
will help to increase their understanding and also inform our efforts
to refine the cost report and cost report instructions so that
hospitals may continue to gain experience in reporting accurate
information. We also expect reporting on Worksheet S-10 to improve over
time, particularly in the area of charity care which is already being
used and audited for payment determinations related to the electronic
health record incentive program, and will continue to monitor these
data. Accordingly, we stated in the proposed rule that we may proceed
with a proposal to use data on the Worksheet S-10 to determine
uncompensated care costs in the future, once hospitals are submitting
accurate and consistent data through this reporting mechanism.
As we describe above, in the FY 2014 IPPS/LTCH PPS proposed rule,
we indicated that we were concerned about stakeholder input that the
variations in the data reported on Worksheet S-10 of the Medicare cost
report regarding uncompensated care may be due to hospitals' relative
lack of experience reporting all of the data elements on that
worksheet. A large number of stakeholders noted that there is
considerable variation and numerous inconsistencies in how
uncompensated care is calculated and reported in Worksheet S-10 and
they point out that these inconsistencies can produce divergent
results. Some stakeholders went as far as noting that data from
Worksheet S-10 is ``flawed'' and many suggested more precision in
reporting instructions to help hospitals report data in a more
consistent manner. We noted that most of the data elements reported on
Worksheet S-10 have been previously unused for payment purposes, with
only some data elements recently being used for determining a
hospital's electronic health record incentive payments, and these data
elements have not been subject to audit prior to this time. We stated
that we believe it is important that data used to determine Factor 3
are data that have been historically publicly available, subject to
audit, and used for payment purposes (or that the public understands
will be used for payment purposes). We indicated that it is our belief
that hospitals expend more resources to ensure data accuracy when data
are publicly available and used for payments. For example, the National
Quality Forum (NQF) first endorsed quality measures for readmissions
for heart failure (HF) in May 2008 and acute myocardial infarction
(AMI) and pneumonia (PN) in October 2008. HF was subsequently adopted
in the Hospital Inpatient Quality Reporting (IQR) Program in the FY
2009 IPPS rule and AMI and PN in the CY 2009 OPPS rule. All three were
adopted for the FY 2010 Hospital IQR program and publicly reported in
Hospital Compare in 2009. More recently, starting in FY 2013, all three
were used to determine a payment adjustment under section 1886(q) of
the Act. As the measures became linked with payment, CMS has received
an increasing number of questions regarding and requests to refine
these measures, leading us to believe that hospitals are increasingly
focused on ensuring that their data are correct. Furthermore, it is
also our belief that auditing plays an important role in ensuring data
accuracy by identifying and remediating problem areas and/or hospitals
as well as by having a sentinel effect in others. For example, each
year, CMS and its intermediaries work with hospitals to review salary
and wage data reported on Worksheet S-3 of the
[[Page 50636]]
Medicare cost report for use in determining the wage index. This
extensive process identifies errors and ensures that anomalous data are
reviewed, corrected as needed, and documented. Due to stakeholder
concerns and our belief in the importance of using data that have been
historically publicly available, subject to audit, and used for payment
purposes (or that the public understands will be used for payment
purposes), for FY 2014, we stated in the proposed rule that we had
serious concerns about proposing to use Worksheet S-10 to determine the
amount of uncompensated care.
While the statute instructs the Secretary to estimate the amounts
of uncompensated care for a period ``based on appropriate data,''
section 1886(r)(2)(C)(i) of the Act permits the Secretary to use
alternative data ``in the case where the Secretary determines that
alternative data is available which is a better proxy for the costs of
subsection (d) hospitals for treating the uninsured'' for the numerator
of Factor 3. For the denominator of that quotient, section
1886(r)(2)(C)(ii) of the Act requires the Secretary to use ``the
aggregate amount of uncompensated care for all subsection (d) hospitals
that receive a payment under this subsection for such period (as so
estimated, based on such data). (Emphasis added.) The phrase ``as so
estimated, based on such data'' in the latter section can be reasonably
interpreted to require the calculation to similarly be based on the
same data as is used to estimate the numerator of the quotient in
Factor 3, including any alternative data which is determined to be a
better proxy for the costs of treating the uninsured.
As a result of our concerns regarding variations in the data
reported on the Worksheet S-10, we stated in the proposed rule that we
believe it is appropriate to consider the use of alternative data, at
least in FY 2014, the first year that this provision is effective, and
possibly additional years until hospitals have adequate experience
reporting all of the data elements on Worksheet S-10. We noted that
this is consistent with input we received from some stakeholders in
response to the CMS National Provider Call in January 2013, who stated
their belief that existing FY 2010 and FY 2011 data from the Worksheet
S-10 cannot be used for implementation of section 1886(r) and who
requested the opportunity to re-submit the data once more specific
instructions were issued by CMS. Accordingly, we examined alternative
data sources that could be used to allow time for hospitals to gain
experience with and to improve the accuracy of their S-10 reporting.
In order to implement the statutory requirements for Factor 3 using
alternative data, we must: (1) Determine whether alternative data would
be a better proxy for the treatment costs of the uninsured than the
information available on the Worksheet S-10; (2) identify a source for
this alternative data; and (3) determine the timing and manner of
computing the quotient for each hospital.
We stated in the FY 2014 IPPS/LTCH PPS proposed rule that we
believe that data on utilization for insured low-income patients can be
a reasonable proxy for the treatment costs of uninsured patients.
Moreover, due to the concerns regarding the accuracy and consistency of
the data reported on the Worksheet S-10, we believe that this
alternative data, which is currently reported on the Medicare cost
report, would be a better proxy for the amount of uncompensated care
provided by hospitals. Accordingly, in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27587 through 27588), we proposed to use the
utilization of insured low-income patients defined as inpatient days of
Medicaid patients plus inpatient days of Medicare SSI patients as
defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively to
determine Factor 3. We describe our proposal and rationale, on which we
sought public comment, more fully below.
As a preliminary matter, we noted that precise data on health care
costs are difficult to obtain. For Medicare payment purposes, we
estimate those costs using reported charges and cost-to-charge ratios.
This approach to estimating costs is what is used on Worksheet S-10 to
determine costs for charity care and bad debt. We do believe that the
Medicare cost report is the most comprehensive data source regarding
hospital costs reported to Medicare, and note that alternative data on
uninsured patients are difficult to find in a comprehensive manner on a
hospital-specific basis. In a September 2002 report, Analysis of the
Joint Distribution of Disproportionate Share Hospital Payments, RAND
and Urban Institute researchers describe this difficulty, citing as an
example how detailed inpatient utilization data on self-pay patients
were available only for the sample of hospitals (20 percent sample)
from the 24 States included in AHRQ's HCUP database.\13\
---------------------------------------------------------------------------
\13\ Wynn, B. et al. Analysis of the Joint Distribution of
Disproportionate Share Hospital Payments. PM-1387-ASPE. September
20, 2002. Available at: http://www.urban.org/UploadedPDF/410975_ASPEDSH_final.pdf.
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While Worksheet S-10 does contain some information regarding the
treatment costs of the uninsured, most notably of those uninsured
patients who qualify for charity care at an individual hospital, for
the reasons described above, we stated that we were concerned about the
use of information reported on the Worksheet S-10 as appropriate data
for FY 2014 and possibly additional years. As a result of these
concerns, in identifying alternative data that could serve as a proxy
for the treatment costs of the uninsured, we acknowledged that we must
consider methods other than costs to approximate the resources expended
by hospitals to treat uninsured patients. One such method is
utilization. A hospital's costs for treating uninsured patients are a
function of its input costs and utilization of services. In accordance
with the statute, in order to determine Factor 3, a hospital-level
estimate of uncompensated care is required. Such an estimate can be
constructed using detailed data regarding specific items or services.
However, such data are not available to us. In contrast, hospital-level
data measuring utilization as inpatient days or discharges are
available. While we noted that inpatient days or discharges would be
more precise if they took into account the relative resource
utilization of individual patients, such as case-mix, no such data are
available to us. In the September 2002 report discussed above, RAND and
Urban Institute researchers asserted that without specific case-mix
data for low-income populations, inpatient days are preferable to
discharges as a way to measure utilization. Therefore, we stated our
belief that utilization based upon inpatient days is an appropriate
method to approximate costs for the treatment costs of the uninsured.
We further stated that we believe that utilization by insured low-
income patients, such as Medicaid patients or Medicare patients that
receive SSI benefits (Medicare SSI), can be a reasonable proxy for
utilization by uninsured patients. In its 2000 report on American's
Health Care Safety Net, the Institute of Medicine considers uninsured
individuals, low-income underinsured individuals, Medicaid
beneficiaries, and patients with special health care needs all as
vulnerable populations.\14\ We note that when
[[Page 50637]]
studying access to care, researchers may study Medicaid and/or low-
income populations (for example, health outcomes, utilization, etc.) in
order to understand more broadly the impact of similar policy
interventions for other vulnerable populations.\15\ For example,
recently, researchers have studied the effects of Medicaid expansions
to gauge the effects of these expansions on health status and other
indicators to inform policymakers as these expansion efforts
continue.\16\ Researchers have also studied the ability of Medicaid
patients to gain access to outpatient care in an effort to highlight
the ramifications of various policy interventions, such as mandatory
co-payments and utilization restrictions.\17\ We noted that we believe
that this type research is often used by state and other policy makers
to evaluate how Medicaid and other public health insurance can expand
access to care to uninsured populations.
---------------------------------------------------------------------------
\14\ Marion Ein Lewin and Stuart Altman, Editors; Committee on
the Changing Market, Managed Care, and the Future Viability of
Safety Net Providers, Institute of Medicine. America's Health Care
Safety Net: Intact but Endangered. 2000. Available at: http://www.nap.edu/catalog/9612.html.
\15\ John K. Iglehart. Medicaid. N Engl J Med 1993; 328:896-900.
March 25, 1993.
\16\ Benjamin D. Sommers, M.D., Ph.D., Katherine Baicker, Ph.D.,
and Arnold M. Epstein, M.D. Mortality and Access to Care among
Adults after State Medicaid Expansions. N Engl J Med 2012; 367:1025-
1034. September 13, 2012.
\17\ The Medicaid Access Study Group. Access of Medicaid
Recipients to Outpatient Care. N Engl J Med 1994; 330:1426-1430. May
19, 1994.
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While the report by RAND and the Urban Institute cited above found
shortcomings in how well both Medicaid and Medicare DSH target funds
towards safety net hospitals, another key finding of the report was
that the allocation methods used by these programs target funds to
safety net hospitals at least as well as the alternative allocation
methods they examined. The allocation method used by Medicare for
Medicare DSH is the sum of two computations. The first computation,
defined at 42 CFR 412.106(b)(2), known as the SSI ratio or Medicare
fraction, is the proportion of a hospital's Medicare SSI days relative
to Medicare days. The second computation, defined at 42 CFR
412.106(b)(4), known as the Medicaid fraction, is the proportion of a
hospital's Medicaid days relative to total days. The RAND and the Urban
Institute study also found that the choice of patient populations used
to evaluate how well Medicare and Medicaid DSH funds are allocated is
important. The study notes that including Medicare SSI beneficiaries
along with all other low-income patients generally performed better,
resulting in a better targeting of these payments towards safety net
hospitals. Therefore, we indicated that we believe the utilization of
insured low-income patients defined as insured low-income days, or
inpatient days of Medicaid patients plus inpatient days of Medicare-SSI
patients could be a proxy for the treatment costs of uninsured
patients. Currently, for the Medicare DSH adjustment, hospitals report
utilization for Medicaid and Medicare SSI patients in accordance with
the regulations at 42 CFR 412.106(b)(4) and 412.106(b)(2)(i),
respectively. Specifically, we would define inpatient days for Medicaid
patients as they are defined in Sec. 412.106(b)(4) and inpatient days
for Medicare-SSI patients as they are defined at Sec.
412.106(b)(2)(i). A hospital's individual insured low-income insured
days based on this calculation would represent that hospital's
numerator for Factor 3. The sum of the low-income insured days under
this calculation for all the hospitals that we estimate would receive
DSH payments (and thus the uncompensated care payment) for FY 2014
would represent the denominator of Factor 3.
It is important to point out that when these insured low-income
utilization data are used to determine Medicare DSH payments, they are
subject to additional computations as described in 42 CFR 412.106(b)
and 412.106(d). Therefore, using these data to determine Factor 3 will
lead to a different set of results than using these data to determine
hospitals' Medicare DSH payments.
In the FY 2014 IPPS/LTCH PPS proposed rule, we stated that we
believe the data in the Medicare cost report (and the data that are
used to update the SSI ratios in the cost report) are acceptable for
use as a source for this alternative data because they include data for
all Medicare hospitals. For the reasons described above, we considered
data elements from the Medicare cost report that have been historically
publicly available, subject to audit, and used for payment purposes, as
alternative data for the costs of subsection (d) hospitals for treating
the uninsured. Worksheet S-3, Part I of the CMS-2552-96 version of the
Medicare cost report and Worksheet S-2, Part I of the CMS 2552-10
version of the Medicare cost report contain information on the
utilization of Medicaid patients. Specifically, they contain
information regarding Medicaid days (that is, the numerator of the
Medicaid fraction). The SSI ratios can be found in Worksheet E, Part A
and hospitals' SSI ratios are reported by CMS on the Medicare DSH Web
site, by Federal fiscal year, and include a hospital's Medicare SSI
days. We pointed out that CMS calculates the SSI ratios using the
MedPAR claims data and updates them annually in accordance with the
process and timing set forth in the FY 2011 IPPS/LTCH PPS final rule
(75 FR 50282), generally issuing them in the Spring of each year for
the Federal fiscal year 2 years prior. For instance, we would expect
that the SSI ratios for FY 2011 would be made available in the Spring
of 2013. SSI ratios can be downloaded from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. The SSI
ratios for a Federal fiscal year are the data that would ultimately be
used in Worksheet E, Part A to determine a hospital's Medicare DSH
adjustment for that fiscal year. While a hospital may choose to have
its DSH payments settled using an SSI ratio based on the hospital's
cost reporting period, this choice will vary by hospital and the timing
of this choice will vary. As a result, a hospital's decision whether to
have its SSI ratio calculated on the basis of its cost reporting period
may not be available at the time we determine Factor 3 for a specific
federal fiscal year. Therefore, in an effort to balance consistency and
administrative efficiency with precision, we stated our belief that it
is appropriate to use the SSI ratios based on the Federal fiscal year.
Except for the data on Worksheet S-10, the Medicare cost report
does not currently include information that would allow calculation of
the treatment costs of uninsured patients. For the reasons described
previously, for FY 2014 and possibly additional years, we have concerns
with using these data. Accordingly, in the FY 2014 IPPS/LTCH PPS
proposed rule (78 FR 27589), we proposed to use Worksheet S-3 Part I of
the CMS-2552-96 version of the Medicare cost report and Worksheet S-2,
Part I of the CMS 2552-10 version of the Medicare cost report and data
that are used to update the SSI ratios on that Worksheet E, Part A as
the source of the alternative data to determine Factor 3 for FY 2014.
In the proposed rule, we stated that we may propose to use data from
Worksheet S-10 to determine uncompensated care costs in the future,
once hospitals are submitting accurate and consistent data through this
reporting mechanism.
The statute also allows the Secretary the discretion to determine
the time periods from which we will derive the data to estimate the
numerator and the denominator of the Factor 3 quotient. Specifically,
the statute defines the numerator of the quotient as ``the amount of
uncompensated care for such hospital for a period selected by the
Secretary * * *'' (Emphasis added.) The
[[Page 50638]]
statute defines the denominator as ``the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under this subsection for such period.'' (Emphasis added.) As
we have discussed above, we proposed a process of making interim
payments with final cost report settlement for both the empirically
justified Medicare DSH payments and the uncompensated care payments
required by section 3133 of the Affordable Care Act. Consistent with
that proposed process, we also proposed to determine the time period
from which to estimate the numerator and denominator of the Factor 3
quotient in a way that will be consistent with making interim and final
payments. Specifically, we must have Factor 3 values available for
hospitals that we estimate will qualify for Medicare DSH payments using
most recently available historical data and for those hospitals that we
do not estimate will qualify for Medicare DSH payments but that may
ultimately qualify for Medicare DSH payments at the time of cost report
settlement.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27589), we
proposed to estimate the numerator and the denominator of Factor 3 for
hospitals based on the most recently available full year of Medicare
cost report data (including the most recently available data that may
be used to update the SSI ratios) with respect to a Federal fiscal
year. In other words, we proposed to use data from the most recently
available cost report for the Medicaid days and the most recently
available SSI ratios (that is, latest available SSI ratios before the
beginning of the Federal fiscal year) for the Medicare-SSI days. We
noted that these data are publicly available, subject to audit, and
used for payment purposes. While we recognized that older data also
meet these criteria, we often use the most recently available data for
payment determinations. Therefore, for FY 2014, we proposed to use data
from the 2010/2011 cost reports for the Medicaid days and the FY 2011
SSI ratios for the Medicare-SSI days (or, if the FY 2011 SSIs are
unavailable, the FY 2010 SSI ratios) to estimate Factor 3 for FY 2014.
To summarize, for FY 2014, in response to stakeholder concerns
regarding data variability and lack of reporting experience with
Worksheet S-10, we proposed to determine Factor 3 using insured low-
income patient days from the 2010/2011 cost reports (including the
FY2011 or FY 2010 SSI ratios, whichever represents the most recently
available inputs prior to October 1, 2013) as alternative data which
are a better proxy for the treatment costs of uninsured patients. We
further proposed to define insured low-income patient days as inpatient
days of Medicaid patients plus inpatient days of Medicare SSI patients
as defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively.
We proposed to add a new paragraph (g)(1)(iii) under Sec. 412.106
of our regulations to define the methodology for calculating Factor 3.
We invited public comments on this proposal. Notwithstanding our
concerns regarding Worksheet S-10, we stated that we were interested in
hearing commenters' views on the quality of the data reported on the
Worksheet S-10, and whether it would be sufficient for use in
determining uncompensated care amounts for fiscal year 2014, either by
itself or in combination with other data. We also sought public comment
on how fast we could transition to the use of Worksheet S-10 data based
upon increased reliability over time, including whether the data could
be used to determine uncompensated care in FY 2014 either alone or in
combination with other data.
Comment: Most commenters supported the proposal not to employ the
Worksheet S-10 data to determine uncompensated care costs. These
commenters agreed with CMS' assessment that, at the least, hospitals
need more time to learn how to accurately and consistently report the
Worksheet S-10 data before CMS employs the data to determine Factor 3
in the uncompensated care cost calculation. Some commenters discouraged
CMS from considering the use of these data at any point in the future,
and asked CMS to provide sufficient notice that we may propose use of
the Worksheet S-10 data so that stakeholders will have sufficient time
to express remaining concerns about employing such data. Other
commenters encouraged CMS to clarify and revise the reporting
instructions as appropriate to ensure consistent and accurate reporting
of Worksheet S-10 data so that it can eventually be employed in the
determination of Factor 3.
Response: We appreciate the comments in support of our proposal not
to employ Worksheet S-10 data at this time for purposes of determining
Factor 3. However, we remain convinced that the Worksheet S-10 could
ultimately serve as an appropriate source of more direct data regarding
uncompensated care costs. Therefore, we will review Worksheet S-10 in
order to determine what revisions or clarifications may be necessary so
that it can yield accurate and consistent data. We will consider the
commenters' specific recommendations for such revisions and
clarifications as we do so. It is our intention to propose introducing
use of the Worksheet S-10 to determine Factor 3 within a reasonable
amount of time.
Comment: Some commenters objected to our proposal not to employ the
Worksheet S-10 data to determine uncompensated care costs. These
commenters noted that Worksheet S-10 was developed specifically to
collect information on uncompensated care costs. In addition, MedPAC
expressed reservations about CMS' proposal to employ insured low-income
days as a proxy for uncompensated care costs, and recommended
consideration of charity care and/or a blend of the insured low-income
days and uncompensated care data over a transition of several years to
sole use of the Worksheet S-10 uncompensated care data in determining
Factor 3.
Response: We agree with the commenters that the Worksheet S-10 was
developed specifically to collect information on uncompensated care
costs. However, we also agree with the many commenters who stated that
the data reported on the Worksheet S-10 are not yet reported accurately
and consistently enough to be adopted for purposes of determining
Factor 3. Specifically, we agree that because this is the first year
these data are being reported, confusion could exist about how to
report information on Worksheet S-10. This confusion could affect the
accuracy and completeness of the information reported on Worksheet S-
10. In addition, for the reasons described in the FY 2014 IPPS/LTCH PPS
proposed rule and above, we believe that it would be most appropriate
to use data elements that have been historically publicly available,
subject to audit, and used for payment purposes (or that the public
understands will be used for payment purposes) to determine the amount
of uncompensated care. For FY 2014, we do not believe that data
regarding uncompensated care from Worksheet S-10 meet these criteria
and, therefore, are not reliable enough to use for determining FY 2014
uncompensated care payments. We do not think they meet these criteria
because it is the first year they are available and while we recognize
that a limited portion of these data will be used for payment purposes
(for example, for EHR payments) and, therefore, subject to audit for
those purposes they are still not generally used for payment purposes
and subject to audit. Accordingly, we continue to believe that
alternative data will provide a better proxy for the amount of
[[Page 50639]]
uncompensated care during first year or years of implementation.
As we discuss below, we will work on reviewing the instructions for
Worksheet S-10 to determine whether any revisions or clarifications may
be necessary to ensure that the data reported on this Worksheet can
eventually be employed to determine Factor 3. We also appreciate
MedPAC's recommendation that we consider alternative proxies and also a
transition period of several years to sole use of the Worksheet S-10
uncompensated care data in determining Factor 3, possibly with use of a
blend of the insured low-income days and uncompensated care data. While
we acknowledge the appeal of a transition to the sole use of the
uncompensated care data, we believe that we would need to further
analyze the appropriateness of blending Worksheet S-10 uncompensated
care data with other data for use in determining Factor 3. We note that
it is possible that we would consider a more refined proxy or other
proxies for the treatment costs of the uninsured until such a time that
we can propose a methodology to calculate Factor 3 based directly on
reported amounts of uncompensated care. Regardless, we believe that
hospitals should have a full opportunity to comment on any such
proposals before their adoption. Therefore, we may consider including
this recommendation among our proposals in future rulemaking.
Comment: Most commenters supported CMS' proposal to employ each
Medicare disproportionate share hospital's insured low-income inpatient
days relative to the total insured low-income inpatient days provided
by Medicare disproportionate share hospitals as a better proxy for the
costs of the uninsured. These commenters agreed with CMS' assessment
that the data reported on the Worksheet S-10 are not yet reported
accurately and consistently enough to be adopted for purposes of
determining Factor 3. Most commenters endorsed the adoption of the
proxy approach as an interim measure as CMS proceeds to refine the
definition of uncompensated care costs and the instructions for
reporting data on the Worksheet S-10. An association representing
hospitals in a major metropolitan area requested that CMS use the wage
index to adjust insured low-income days to account for the differences
in ``purchasing power'' in different regions of the country. The
association, along with several other commenters, requested that CMS
include insured low-income days from exempt units (for example,
inpatient rehabilitation units paid under the IRF PPS or inpatient
psychiatric units paid under the IPF PPS) of the hospital in order to
better capture the treatment costs of the uninsured by the hospital.
Some commenters, including a beneficiary advocacy organization and a
hospital system, objected to CMS' proposal to use insured low-income
inpatient days as the proxy for distributing uncompensated care
payments. These commenters believed that the proposed method unfairly
rewards States that expand Medicaid to the detriment of States that do
not, despite their belief that the latter group of States should have
larger relative uncompensated care costs. The commenters also believed
that this approach was not an appropriate proxy for uncompensated care
because, by definition, insured low-income days are not uncompensated.
Response: We agree with the commenters who supported our proposal
to employ insured low-income days as a proxy for uncompensated care
costs. For the reasons we detailed in the proposed rule, we believe
that this proxy provides a reasonable basis on which to determine
Factor 3 during an interim period while we work with the hospital
community to review and make any necessary revisions and clarifications
to the instructions to ensure that the data on Worksheet S-10 is
reported accurately and consistently enough to employ in the
determination of this factor. As is noted above, it remains our
intention to propose introducing use of the Worksheet S-10 to determine
Factor 3 within a reasonable amount of time. We do not agree with the
commenters who stated that our proposal inappropriately rewards States
that expand Medicaid coverage to the detriment of States that do not.
Using some of the uncompensated care data discussed in the proposed
rule, we recognize it would be possible for hospitals in States that
choose to expand Medicaid to receive lower uncompensated care payments
because they are less likely to have uninsured patients than hospitals
in a State that does not choose to expand Medicaid. Nevertheless, for
the reasons discussed above, we believe that data on insured low-income
days remains the best proxy for uncompensated care costs currently
available to determine Factor 3.
With respect to the comments requesting that we use the wage index
to adjust low-income days, we agree that there may be regional
variation in uncompensated care costs due to regional variations in the
costs of care generally. However, we do not believe that there is
sufficient basis for believing that the wage index reflects the
variations in uncompensated care costs well enough to adopt it as the
basis for adjusting Factor 3. The wage index reflects the relative
hospital wage level in the geographic area of the hospital compared to
the national average hospital wage level. In computing the wage index,
we derive an average hourly wage for each labor market area (total wage
costs divided by total hours for all hospitals in the geographic area)
and a national average hourly wage (total wage costs divided by total
hours for all hospitals surveyed in the nation). A labor market area's
wage index value is the ratio of the area's average hourly wage to the
national average hourly wage. We note that, for FY 2014, 69.6 percent
of the standardized amount is considered to be the labor-related share
and, therefore, adjusted by the wage index. However, in addition to the
labor-related share of the standardized amount being adjusted by the
wage index, the entire standardized amount is also adjusted for the
relative weight of the MS-DRG for each individual patient. In other
words, the wage index only adjusts for a portion of the variation in
costs, and does not address variations in resource use and patient
severity. Therefore, we think that there is insufficient basis for
believing that adjusting low-income patient days by the wage index
would better reflect variations in uncompensated care costs.
Furthermore, as we discuss above, we are aware of no other data that
may adequately capture these variations, such as case-mix.
Finally, we believe that there may be some merit to the comments
recommending inclusion of insured low-income days from exempt units of
the hospital in order to better capture the full costs of the treatment
of the uninsured by the hospital insofar as those data may be publicly
available, subject to audit, and used for payment purposes. We believe
that it would be prudent to more carefully consider the degree to which
these data meet these conditions before adopting this recommendation.
Therefore, we will consider including this recommendation among our
proposals in future rulemaking.
In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed to estimate
which hospitals would receive an empirically justified Medicare DSH
payment in a given Federal fiscal year using the most recent data
available. As we described previously, only hospitals that receive
empirically justified Medicare DSH payments in a fiscal year may
receive an uncompensated care payment. However, because whether or
[[Page 50640]]
not a hospital will actually receive an empirically justified Medicare
DSH payment is not known until cost report settlement and cost report
settlement occurs several years after end of the federal fiscal year,
we stated that we believe it is necessary to estimate which hospitals
will receive Medicare DSH payments for a given fiscal year. Because the
uncompensated care amounts for these hospitals are used to determine
the denominator of Factor 3, this allows for the calculation of Factor
3 in advance of or during the federal fiscal year so that interim
payments can begin during the fiscal year. We indicated in the proposed
rule that we believe this will create some level of predictability and
finality for hospitals eligible for these payments, in addition to
being administratively efficient.
Therefore, for FY 2014, we proposed that the denominator for Factor
3 would reflect the estimated Medicaid and Medicare SSI patient days
based on data from the 2010/2011 Medicare cost report (including the
most recently available data that may be used to update the SSI ratios)
for all hospitals that we estimate would receive an empirically
justified Medicare DSH payment in FY 2014. The numerator of Factor 3
would be the estimated Medicaid and Medicare SSI patient days for the
individual hospital based on its most recent 2010/2011 Medicare cost
report data (including the most recently available data that may be
used to update the SSI ratios). We proposed to calculate a numerator
for all subsection (d) hospitals and subsection (d) Puerto Rico
hospitals that have the potential of receiving a DSH payment regardless
of whether we estimate that the hospital would receive DSH payments in
the respective Federal fiscal year. In that way, if a hospital becomes
eligible to receive the empirically justified Medicare DSH payment and
also an uncompensated care payment, we will be able to finalize its
uncompensated care payment efficiently and without affecting the
uncompensated care payments of other hospitals.
We noted that we believe this proposed approach strikes an
appropriate balance between administrative efficiency, finality, and
predictability in payments. Therefore, we also proposed to publish a
table or tables listing Factor 3 for all hospitals that we estimate
would receive empirically justified Medicare DSH payments in a fiscal
year (that is, hospitals that would receive interim uncompensated care
payments during the fiscal year), and for the remaining subsection (d)
and subsection (d) Puerto Rico hospitals that have the potential of
receiving a DSH payment in the event that they receive an empirically
justified Medicare DSH payment for the fiscal year as determined at
cost report settlement. We also proposed that hospitals would have 60
days from the date of display of the IPPS/LTCH PPS proposed rule to
review these tables and notify CMS in writing of a change in a
hospital's subsection (d) hospital status, such as if a hospital has
closed or converted to a CAH. We stated that we would notify hospitals
concerning the specifics of this process in program instructions after
the final rule. For FY 2014, we stated that we would allow hospitals 60
days from the date of display of the IPPS/LTCH PPS proposed rule to
review these tables and notify CMS in writing of a change in a
hospital's subsection (d) hospital status, and we indicated that we may
allow an additional (perhaps shorter) such period after the publication
of the final rule.
For hospitals that were not estimated to receive an empirically
justified Medicare DSH payment for a fiscal year, but ultimately
qualify for such a payment at cost report settlement, we proposed to
make the full uncompensated care payment at that time. In the case of
hospitals that we estimated would receive an empirically justified
Medicare DSH payment for a fiscal year and that received interim
empirically justified Medicare DSH payments and uncompensated care
payments, but are found to be ineligible for DSH payments at cost
report settlement, we would recover the overpayment. However, we
proposed only to calculate the denominator (that is, the estimated
Medicaid and Medicare SSI patient days based on data from the 2010/2011
Medicare cost report (including the most recently available data that
may be used to update the SSI ratios) for all hospitals that we
estimate would receive an empirically justified Medicare DSH payment in
FY 2014) once, at the time of the IPPS/LTCH PPS final rule each year.
We did not propose to recalculate the denominator at the time when cost
reports are settled and final eligibility determinations for
uncompensated care (and empirically justified Medicare DSH) payments
are made. We discuss our proposals and final polices for interim
payments and reconciliation processes below in section V.E.3.f. of the
preamble of this final rule.
For the purpose of the proposed rule, we posted proposed tables
listing Factor 3 for the hospitals that we estimated would receive
Medicare DSH payments for FY 2014 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. We requested that hospitals review these
tables. In order to ensure that we would have sufficient time to
incorporate any updated information in the tables for the final rule,
we indicated that hospitals should notify CMS in writing within 60 days
from the date of display of the proposed rule of any change in a
hospital's subsection (d) hospital status. For FY 2014, we stated that
we may allow an additional (perhaps shorter) such period after the
publication of the final rule for hospitals to notify CMS of such
changes.
Comment: Several commenters questioned their hospitals' Medicare
DSH eligibility because many of these hospitals, particularly SCHs,
were projected not to receive empirically justified Medicare DSH
payment adjustments in the FY 2014 IPPS/LTCH PPS proposed rule and,
therefore, to be ineligible to receive uncompensated care payments.
Many of the commenters submitted documentation that they had received
Medicare DSH payments in the past, so the hospitals reasoned that they
should be considered eligible for empirically justified Medicare DSH
payment adjustments and uncompensated care payments.
Response: For the FY 2014 IPPS/LTCH PPS proposed rule, we
identified hospitals as being eligible for empirically justified
Medicare DSH payment adjustments and, therefore, eligible to receive
uncompensated care payments, based on our projections of whether a
hospital would receive Medicare DSH payments for FY 2014. Many SCHs
were determined to be ineligible for empirically justified Medicare DSH
payment adjustments and uncompensated care payments because SCHs are
paid the higher of the hospital-specific rate (which, by definition,
excludes Medicare DSH payments), or the Federal rate (which includes
Medicare DSH payments). With the 75-percent reduction to Medicare DSH
payments in FY 2014 pursuant to section 1886(r)(1) of the Act, and
because we did not propose to include the uncompensated care payment as
part of the Federal payment rate in the proposed rule, more SCHs were
projected to receive payments under their hospital-specific rate. As a
result, these SCHs were determined to be ineligible for empirically
justified Medicare DSH payment adjustments and, therefore, were also
ineligible for uncompensated care payments.
In the FY 2014 IPPS/LTCH PPS proposed rule, we noted that we would
calculate a Factor 3 for hospitals found to be ineligible for
empirically justified Medicare DSH payment adjustments in
[[Page 50641]]
our projections, in the event that they become eligible for empirically
justified Medicare DSH payment adjustments at cost report settlement
and, therefore, able to receive uncompensated care payments. However,
unlike the hospitals projected to receive empirically justified
Medicare DSH payment adjustments for FY 2014, those non-DSH hospitals
would not receive uncompensated care payments on an interim basis.
For the final rule, we are finalizing our methodology to identify
hospitals eligible for empirically justified Medicare DSH payment
adjustments and, therefore, eligible to receive interim uncompensated
care payments based on our projections of whether the hospital would
receive Medicare DSH payments for FY 2014. We will identify those
subsection (d) and Puerto Rico subsection (d) hospitals that we project
to have a disproportionate patient percentage (DPP) of at least 15
percent, which is the minimum required DPP to be eligible for Medicare
DSH payments under section 1886(d)(5)(F) of the Act and, by extension,
under 1886(r)(1) of the Act (that is, empirically justified Medicare
DSH payments). The DPP is the sum of a hospital's SSI fraction and
Medicaid fraction. We are using the most recent data available to us at
the time of this rulemaking to calculate the DPP for all subsection (d)
hospitals and Puerto Rico subsection (d) hospitals and to identify
those hospitals projected to be eligible for empirically justified
Medicare DSH payment adjustments for FY 2014. For purposes of this
final rule, the most recent SSI fraction is the FY 2011 SSI fraction.
We posted the FY 2011 SSI fractions for each subsection (d) hospital on
the CMS DSH Web site (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html) on June 27, 2013. The most
recently available Medicaid fraction is that reported on the March 2013
update of the Provider Specific File.
However, we are modifying our methodology so that an estimated
uncompensated care payment amount will be included as part of the
Federal rate when comparing payments under the hospital-specific rate
versus the Federal rate for SCHs. Once we identify which SCHs we
project will be paid on their hospital-specific rate, we will consider
these hospitals to be ineligible to receive interim uncompensated care
payments because we do not project them to be eligible for the
empirically justified Medicare DSH payment adjustments.
We will calculate Factor 3 for all hospitals that are eligible for
empirically justified Medicare DSH payment adjustments under our
revised methodology based on their proportion of low-income insured
days relative to the low-income insured days for all hospitals
projected to receive DSH payments, and the hospital will receive
uncompensated care payments on an interim basis. As we describe more
fully below, hospitals that receive uncompensated care payments on an
interim basis but are not eligible for Medicare DSH payments at the
time of cost report settlement would no longer be eligible to receive
an uncompensated care payment and would need to repay those interim
payments.
However, we are adopting a policy to calculate Factor 3 for all
subsection (d) hospitals, including hospitals that are projected to be
ineligible to receive Medicare DSH payments (that is, those hospitals
with a DPP less than 15 percent or SCHs that are projected to be paid
based on their hospital-specific rate). If these hospitals are later
determined to be eligible to receive Medicare DSH payments, those
payments (under both sections 1886(r)(1) and 1886(r)(2) of the Act)
would be made at the time of cost report settlement. We note that in
calculating Factor 3, we include in the denominator data only for those
hospitals that we estimate will be eligible to receive empirically
justified Medicare DSH payments for FY 2014. As part of our estimation
of the hospitals eligible for Medicare DSH payments, we consider
whether a SCH is projected to receive Medicare DSH payments in FY 2014
and exclude those SCHs we project to be paid on their hospital-specific
rate. The remaining hospitals with an estimated DPP of 15 percent of
higher are considered to be eligible for Medicare DSH payments and
their SSI days and Medicaid days are included in the calculation of the
denominator for Factor 3.
Comment: Two hospitals submitted public comments regarding their
subsection (d) status. One hospital, Missouri Baptist Sullivan (CCN:
260115), commented that it converted to a CAH and is no longer a
subsection (d) hospital and, therefore, not eligible for uncompensated
care payments. Davie County Hospital submitted a public comment that
stated it was converting from CAH status to become a subsection (d)
hospital as of August 1, 2013, and the hospital requested to have a
Factor 3 calculated so it could be determined eligible for
uncompensated care payments.
Response: As discussed earlier, a hospital is eligible for
uncompensated care payments if the hospital is eligible for the
empirically justified Medicare DSH payment adjustment. Only subsection
(d) hospitals are eligible for these payments. We have removed Missouri
Baptist Hospital as a subsection (d) hospital as we have documentation
that it has converted to a CAH, and we have adjusted our calculation of
Factor 3 to ensure that its data are excluded from the denominator of
this calculation. We do not have documentation to confirm that Davie
County Hospital has been approved to convert from a CAH to an IPPS
hospital. Therefore, we are not calculating a Factor 3 amount for that
provider. If the CAH has converted to an IPPS hospital with the
appropriate supporting documentation, the new IPPS hospital would
receive a new CCN and would be treated as a new hospital. We discuss
how we will calculate uncompensated care payments for new hospitals
later in this final rule.
In the FY 2014 IPPS/LTCH PPS proposed rule our estimates of
eligibility to receive FY 2014 Medicare DSH payments were based on the
Medicaid fraction listed in the December 2012 update of the Provider
Specific File and the FY 2010 SSI ratios. We stated in the proposed
rule that we intended to update in the final rule the list of hospitals
that we estimate will be eligible for Medicare DSH payments for FY 2014
and our estimate of Factor 3 using more recent data and verified
hospital notifications regarding hospital status for example,
closures).
Accordingly, we have updated our data, and, for this final rule,
our estimates of eligibility to receive FY 2014 Medicare DSH payments
are now based on the Medicaid fraction listed in the March 2013 update
of the Provider Specific File and the FY 2011 SSI ratios published on
June 27, 2013 on the CMS Web site. This is the most recently available
data on the DPP for hospitals that are qualified to receive Medicare
DSH payments. We identified 2,695 hospitals with a DPP greater than or
equal to 15 percent and, therefore, eligible to receive Medicare DSH
payments. However, we project that only 2,437 of these DSH-eligible
hospitals would receive a Medicare DSH payment in FY 2014, as the
remaining 257 hospitals are SCHs that we project would be paid under
the hospital-specific rate and, therefore, ineligible for Medicare DSH
and the uncompensated care payments. (As discussed above, in
determining whether a SCH is projected to receive Medicare DSH payments
in FY 2014, we included an estimated uncompensated care payment amount
in the Federal rate when comparing payments under the hospital-specific
[[Page 50642]]
rate versus the Federal rate.) We estimate that 2,437 hospitals, or 72
percent of all subsection (d) hospitals and subsection (d) Puerto Rico
hospitals, would be eligible for Medicare DSH payments in FY 2014. The
data from these 2,437 hospitals was used to determine the denominator
for Factor 3. However, we will estimate a Factor 3 numerator for each
subsection (d) and subsection (d) Puerto Rico hospital that has the
potential of receiving Medicare DSH payments for FY 2014 and,
therefore, qualifying for the uncompensated care payment in FY 2014.
Comment: Several hospitals submitted public comments regarding the
accuracy of the data used in the calculation of the hospital's Factor 3
amount provided in the FY 2014 IPPS/LTCH PPS proposed rule. These
hospitals either indicated that their Medicaid days were understated
and had not been updated in the HCRIS database used to calculate the
Medicaid days for Factor 3, or they indicated that the Medicaid days
reported on Worksheet S-2 of the Medicare Hospital Cost Report version
2552-10 did not match the Medicaid days reported on Worksheet S-3 of
the Medicare Hospital Cost Report version 2552-10. Many hospitals
submitted supporting documentation of the additional Medicaid days. The
hospitals requested that their Medicaid days used in the calculation of
Factor 3 be corrected for the final rule.
Response: We appreciate the information submitted by commenters
regarding the accuracy of the number of Medicaid days used in the
calculation of Factor 3. For this final rule, we are using the March
2013 update of HCRIS and we are identifying a hospital's Medicaid days
based on the Medicaid days reported on the 2011, or if not available,
the 2010 Medicare Hospital Cost Report. In addition, for hospitals that
we project to be eligible to receive empirically justified Medicare DSH
payment adjustments for FY 2014, we are using Medicaid days reported on
Worksheet S-2 of the Medicare Hospital Cost Report version 2552-10 to
determine Factor 3 and not Medicaid days reported on Worksheet S-3 of
the Medicare Hospital Cost Report version 2552-10. The Medicaid days
reported on Worksheet S-2 are used in the computation of the Medicaid
fraction for Medicare DSH payments. Therefore, because they are used
for the payment of Medicare DSH, we believe that these data are more
reliable than data not used for payment purposes. We understand that
there are inconsistencies between the reporting of the days on
Worksheet S-2 and Worksheet S-3. We also understand that hospitals were
not able to report their Medicaid days on Worksheet S-2 if they were
not eligible to receive Medicare DSH payments on that cost report. A
Transmittal has since been released allowing these hospitals to report
their Medicaid days on Worksheet S-2 and to ensure that the Medicaid
days reported on Worksheet S-3 align with the Medicaid days reported on
Worksheet S-2, but those changes may not be reflected in the March 2013
update of HCRIS. Accordingly, for hospitals that did not claim Medicare
DSH payments on their CMS Form 2552-10 Medicare Hospital Cost Report
for FY 2011 or FY 2010, we are calculating Medicaid days from Worksheet
S-3 of the Medicare Hospital Cost Report from the most recently
available cost report from 2011 or 2010. For disproportionate share
hospitals, we are calculating Medicaid days from Worksheet S-2 of the
Medicare Hospital Cost Report from the most recently available cost
report from 2011 or 2010. By using this more updated data, we believe
that we will address many of the issues and questions raised by
commenters. We also remind hospitals that the data we are using are
data that they submit and attest are accurate on the Medicare cost
report.
Comment: Two hospitals merged in 2011 with one surviving provider
number. These hospitals had two cost reports and two SSI ratios in
2011. However, in the proposed rule, CMS calculated Factor 3 using only
the surviving hospital's cost report data and SSI ratio data. The
hospital submitted a public comment requesting that we account for the
merger and include both hospitals' data in the calculation of the
Factor 3 amount.
Response: A hospital's Factor 3 is calculated based on the data
tied to its CCN. This is consistent with the treatment of other IPPS
payment factors, where data used to calculate a hospital's Medicare DSH
payment adjustment, CCRs for outlier payments, and wage index values is
tied to a hospital's CCN. Data associated with a CCN that is no longer
in use are not used to determine those IPPS hospital payments under the
surviving CCN. Furthermore, data reported on the Medicare hospital cost
report under the CCN associated with the old provider agreement would
not necessarily be used to determine hospital payments for the CCN
associated with the surviving provider agreement. Accordingly, in the
case of a merger between two hospitals, Factor 3 will be calculated
based on the low-income insured patient days (that is, Medicaid days
and SSI days) under the surviving CCN, based on the most recent
available data for that CCN from the cost report for 2011 or 2010.
Comment: Several commenters asked how new providers will be treated
in the calculation of Factor 3, specifically what data will be used for
the Factor 3 calculation and how this approach will impact existing
providers. In addition, the commenters questioned how providers
``terminated'' from participation in the Medicare program as a
subsection (d) hospital prior to 2014 would be treated and whether they
would be removed from the Factor 3 calculation and how that would have
an impact on the remaining providers.
Response: In the FY 2014 IPPS/LTCH PPS proposed rule, we requested
that the public verify the accuracy of the list of hospitals that we
identified to be subsection (d) hospitals. As discussed above, one
hospital submitted a public comment stating that it had converted to a
CAH and was no longer a subsection (d) hospital. We have removed that
hospital from our list and calculation of Factor 3. We are using this
process of allowing the public to review the accuracy of our list of
hospitals eligible to receive empirically justified Medicare DSH
payment adjustments and uncompensated care payments as a mechanism of
identifying and removing terminating providers, and adjusting the
calculation of Factor 3 for the remaining providers accordingly. For
the final rule, we have published an updated list of the hospitals we
have identified to be subsection (d) hospitals and subsection (d)
Puerto Rico hospitals eligible to receive empirically justified
Medicare DSH payment adjustments and uncompensated care payments for FY
2014. For FY 2014, we will allow the public an additional period after
the issuance of this final rule to contact us with comments on whether
any of these hospitals should be removed from the list or if any
hospitals should be added to the list, based on their subsection (d)
status. The public can submit input on these two topics via the
Internet on the CMS Web site at: [email protected]. All
information, including relevant documentation, must be received by
August 31, 2013. If we identify changes to the list of hospitals, we
will publish a revised list of hospitals and updated Factor 3 values on
the CMS Medicare DSH Web site after August 31, 2013.
For new providers, meaning hospitals with a CCN established after
2011, we do not have data currently available to calculate a Factor 3
amount and we do not have data to determine if the new hospital is
eligible for empirically
[[Page 50643]]
justified Medicare DSH payment adjustments and, therefore, eligible for
uncompensated care payments for FY 2014. Accordingly, we will treat new
hospitals in the same manner as hospitals that are not found to be
eligible to receive empirically justified Medicare DSH payment
adjustments based upon the most recently available cost report from
2011 or 2010, such that the hospital may not receive either interim
empirically justified Medicare DSH payment adjustments or interim
uncompensated care payments. However, should a hospital later be
determined to be eligible to receive an empirically justified Medicare
DSH payment adjustment based on its FY 2014 cost report, the hospital
will also be eligible to receive uncompensated care payments.
Consistent with our policy to calculate the Factor 3 for all subsection
(d) hospitals regardless of whether or not they are projected to
qualify for Medicare DSH payments, we will also calculate a Factor 3
for new hospitals, although we note that new hospitals would only
require a Factor 3 calculation to receive their uncompensated care
payment if they are ultimately determined to be eligible for the
empirically justified Medicare DSH payment at cost report settlement.
The denominator of every hospital's Factor 3, including new hospitals,
is set to be the sum of the low-income insured days for all hospitals
projected to receive empirically justified Medicare DSH payment
adjustments for FY 2014 as calculated in this final rule using the FY
2011 SSI ratios and the 2011 cost reports. We do not have Medicaid days
or SSI days for new hospitals at the time of this final rule and we do
not know when we will have Medicaid days or SSI days for new hospitals.
Accordingly, we will use the Medicaid days and SSI days for FY 2014 for
new hospitals to serve as the numerator in their Factor 3 calculations
for their FY 2014 uncompensated care payments because we believe that
at minimum, all new hospitals will have data on Medicaid and SSI
patient days for FY 2014.
e. Limitations on Review
Section 1886(r)(3) of the Act provides that there will be no
administrative or judicial review under section 1869 of the Act, 1878
of the Act, or otherwise for any of the following:
Any estimate of the Secretary for purposes of determining
the factors described in paragraph (2) of section 1886(r) of the Act.
Any period selected by the Secretary for such purposes.
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27590), we
proposed to codify this policy in new Sec. 412.106(g)(2) of our
regulations. We invited public comment on this proposal.
We did not receive any public comments on our proposal to implement
the statutory limitations on administrative or judicial review.
We are finalizing the proposed new provisions at Sec. 412.106(f)
and (g) to codify these policies. We note, however, that we have made a
minor change to the provision at Sec. 412.106(g)(1)(i) to clarify that
we intend to revisit the issue of the data that should be used to
determine hospitals' uncompensated care amounts for FY 2015. In
addition, we have also made a minor technical correction to the
provision at Sec. 412.106(g)(2)(iii).
f. Operational Considerations
As discussed in section V.F.3.d. of the preamble of the proposed
rule and this final rule, and in accordance with section 1886(r)(2) of
the Act, only subsection (d) hospitals that receive empirically
justified Medicare DSH payments in a given Federal fiscal year will
also receive the uncompensated care payment (that is, Factor 1 times
Factor 2 times Factor 3) for that given Federal fiscal year. In
addition, as discussed above in this section, in the FY 2014 IPPS/LTCH
PPS proposed rule (78 FR 27580), we proposed that subsection (d) Puerto
Rico hospitals that receive empirically justified Medicare DSH payments
in a given Federal fiscal year would also receive the uncompensated
care payment (that is, Factor 1 times Factor 2 times Factor 3) for that
given Federal fiscal year. As we discussed above, we proposed to
estimate Factor 3 for each subsection (d) and subsection (d) Puerto
Rico hospital with the potential to receive a DSH payment prior to the
beginning of the Federal fiscal year and intend to make that
information available via our Web site. http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.
Specifically, we proposed to make interim uncompensated care
payments on the basis of our best available estimates concerning the
eligibility of each hospital for empirically justified Medicare DSH
payments and our best available calculations concerning the amount of
the uncompensated care payments that the hospital is eligible to
receive. We stated that we intended to make these interim uncompensated
care payments on a periodic basis and not on a per discharge basis as
Medicare DSH payments are currently made and as empirically justified
Medicare DSH payments will be made. As discussed above, we made this
proposal because we believed that this approach was more consistent
with the language in the statute describing the additional payment,
from which we inferred that the payment should not be made on a per-
discharge basis. We also believed that this would be the most
administratively efficient means to distribute a set dollar amount to
individual hospitals and would also create predictability for
hospitals. In the proposed rule, we acknowledged that if we were to
make these interim uncompensated care payments on a per-discharge basis
as Medicare DSH payments are currently made, unless a hospital's
Medicare utilization is identical to the period used to determine the
per-discharge payment level, it is certain that Medicare would overpay
or underpay. We stated further in the proposed rule that by making
interim payments periodically, we could virtually eliminate the
possibility that Medicare would pay a higher or lower amount than
intended and limit the need for reconciliation to whether a hospital is
eligible for Medicare DSH payments and, therefore, the entire
uncompensated care payment at cost report settlement. In response to
the comments on this suggested approach discussed below, in this final
rule, we are instead adopting a policy to make the uncompensated care
payment on a per-discharge basis, which will require reconciliation of
the interim payments made during the year to the total uncompensated
care payment derived as the product of Factors 1, 2, and 3.
Comment: Many commenters, including national hospital associations,
disagreed with CMS' proposal to make interim uncompensated care
payments, and to distribute them on a periodic basis rather than a per-
discharge basis. The commenters expressed concern about the impact this
proposal would have on certain providers, and stated that providers'
cash flow would be adversely affected if payments are distributed on a
periodic bi-weekly basis, as we proposed. Many commenters were
specifically concerned about the potential effects of this proposal on
hospitals treating MA enrollees. One of the commenters, a national
hospital association stated that, ``[t]he contracts between the MA
Plans and hospitals typically provide for payment based upon Medicare
rates and reimbursements. Though the specific contract terms may vary,
they often refer to Medicare DSH payments as one component of the
Medicare reimbursement on which the MA Plan payments are based.'' The
commenters
[[Page 50644]]
further noted that under such contracts MA organizations typically use
vendor software that utilizes the CMS Medicare Inpatient PPS PC PRICER,
as a claim adjudication tool for paying acute care hospital claims. The
commenters also pointed out that MA organizations are required by
statute to pay non-contracted hospitals a floor amount based on what
the provider would have received under original Medicare (what a
hospital would be paid if the beneficiary were not enrolled in an MA
plan), and they understand that MA organizations use the CMS Medicare
Inpatient PPS PC PRICER to determine what that floor amount is. The
commenters expressed concern that if the uncompensated care payment is
not distributed on a per-discharge basis, it would not be incorporated
into the CMS Medicare Inpatient PPS PC PRICER and that because they
believe MA plans employ tools that rely on this software, MA plans
would not be able to calculate an appropriate payment amount, which the
commenters believed should include an amount representing a given
Medicare patient's share of the hospital's uncompensated care payment.
Another commenter added that the proposal would lead to confusion and
underpayment from MA plans to providers. Several commenters requested
that CMS also add a line in the CMS Medicare Inpatient PPS PC PRICER
software for additional DSH ``A-DSH'' that would represent the per-
discharge payment for Medicare Part A and the per-discharge payments
for MA claims paid by MA plans when the MA-paid claim option is
selected, and these commenters requested that the per-discharge
payments be reconciled at cost report settlement. One commenter
recommended that CMS calculate the interim payment by dividing each
hospital's uncompensated care payment amount by the number of its
transfer-adjusted cases.
In addition, these commenters expressed concerns about the impact
to SCHs under the proposal to make interim uncompensated care payments
on a periodic basis because only the empirically justified Medicare DSH
payment adjustments would be included in the comparison that determines
whether an SCH is paid the Federal rate or the hospital-specific rate.
Some commenters asserted under this approach that the comparison
between payments under the Federal rate and under the hospital-specific
rate would be inaccurate, causing several hospitals that were
previously eligible for Medicare DSH payments to instead receive the
hospital-specific rate. These commenters asserted that this would
impose unwarranted payment cuts for SCHs because uncompensated care
payments were not accounted for in determining whether SCHs are paid
the Federal rate or hospital-specific rate. Therefore, the commenters
reasoned that such SCHs would be unfairly penalized. One commenter
expressed concern that a hospital-specific rate based on costs creates
incentives for SCHs to have higher costs of operation. Several
commenters discussed how the uncompensated care payment should be
considered when determining outlier payments and the fixed-loss
threshold, and expressed their concerns about the impact of excluding
uncompensated care payments from these determinations. These comments
will be summarized and addressed fully in section II.A.4.g. of Appendix
A to this final rule under the discussion of outlier payments, where we
finalize our policy decision that uncompensated care payments also
should be included in the determination of outlier payments.
Response: We appreciate the commenters' input with regard to fact
that under our proposed approach, the new uncompensated care payments
would not be accounted for in the CMS PC PRICER tool. While we
acknowledge that many MA plans use this tool to estimate fee-for-
service payments, we note that there is no official CMS requirement
that MA plans use this specific tool. For those MA plans that may elect
to use the CMS PC PRICER, we acknowledge that our proposed interim
payment approach would make it a more complex task for MA organizations
to determine the amount of the uncompensated care payment that would be
attributable to a given discharge. We agree with the commenters that
the uncompensated care payment must be treated as part of a hospital's
Medicare payment for purposes of section 1866(a)(1)(O) of the Act. We
note that under section 1866(a)(1)(O) of the Act, hospitals treating MA
enrollees are entitled to receive payment from an MA organization with
which they have no contract governing payment of an amount representing
the amount the hospital would have received from Medicare if the
beneficiary were not enrolled in an MA plan. We understand the
commenters' reasoning that because the new uncompensated care payments
are intended to replace a portion of the DSH payments previously made
by CMS, and MA organizations have always included the amount of
applicable DSH payment in their payments to non-contracting hospitals
under section 1866(a)(1)(O) of the Act and to contracting hospitals
that contract to be paid at the section 1866(a)(1)(O) rate, MA
organizations should similarly be required to include amounts
representing these uncompensated care payments in their payments for
inpatient services furnished to their MA plan enrollees. It was not our
intention to suggest otherwise in the proposed rule. We also note that
while some commenters expressed concern regarding the payment
arrangements between MA organizations and contracted providers, section
1854(a)(6)(B)(iii) of the Act prohibits CMS from interfering in the
payment arrangements between MA organizations and contract providers
and these arrangements are not within the scope of this rulemaking. We
are only addressing an MA organization's obligations under section
1866(a)(1)(O) of the Act with respect to payments to non-contracting
hospitals. Of course, insofar as both parties to a contract agree that
the contract provides for payment of the rate the MA organization is
required under section 1866(a)(1)(O) to pay to non-contracting
providers, that contract would be indirectly affected. However, this
does not constitute an interference in the terms of the contracts, only
on the indirect effects of our interpretation of section 1866(a)(1)(O)
of the Act on those terms.
We also recognize the potential impact on SCHs if the interim
uncompensated care payments were to be paid on a periodic biweekly
basis rather than a per-discharge basis. As we discuss previously in
the preamble, after a thorough review of the above policy
considerations reflected in the numerous public comments we received,
we believe that distributing these payments on a per-discharge basis
would allow these payments to be considered in the comparison of
payments under the Federal rate and the hospital-specific rate for SCHs
and that this would be an appropriate policy. We also note that we
disagree with the commenter who stated that this could create an
incentive for higher costs of operation for SCHs because hospital-
specific payment rates are based on costs in past years and would not
be affected by higher costs of operation in the current or future
years.
Similarly, after a thorough review of the above policy
considerations reflected in the numerous public comments we received,
we believe that distributing these payments on a per-discharge basis
would make it easier for MA organizations to take these payments into
account when making payments to non-contracting hospitals
[[Page 50645]]
under section 1866(a)(1)(O) of the Act. We have always intended that
this occur as current payments by MA organizations under this provision
include 100 percent of DSH payments and the uncompensated care payment
is intended to replace 75 percent of those payments, after adjusting
for the uninsured percentage. The inclusion of amounts representing
uncompensated care payments in MA organization payments to non-
contracting hospitals does not change the amount of CMS' uncompensated
care payments nor overall IPPS payment, but ensures that payments by MA
organizations under section 1866(a)(1)(O) of the Act reflect the full
amount that would otherwise have been paid by CMS in the case of a
given discharge. We also note that our decision to make uncompensated
care payments on a per-discharge basis will make more SCHs eligible for
uncompensated care payments and, therefore, also change the
distribution of the uncompensated care payments.
Accordingly, for FY 2014 we are finalizing a process to distribute
interim uncompensated care payments under the IPPS on a per-discharge
basis through our claims processing system, with a reconciliation of
the hospital's payments at cost report settlement to ensure that
hospitals receive no more than the estimated amount included in this
final rule. We do not intend to reconcile Factor 3 using data from the
FY 2014 cost reports because we believe that the statute provides the
authority to make these payments on the basis of estimates for Factors
1, 2, and 3, and that it is preferable to do so. If we were to use data
from the FY2014 cost reports to recompute Factor 3, we would need to
wait until such a time that all of these data were submitted by
hospitals and then available to CMS, likely 2 years. Furthermore, it
would be administratively difficult to recompute Factor 3 values for
all hospitals. Under the methodology we are finalizing, because the
per-discharge payment amounts are based on a hospital's historic
Medicare utilization, we would expect the amount of over- or under-
payments to reflect the year to year changes in a hospital's
utilization patterns. We intend to calculate an estimated per-discharge
amount (or per claim amount) for each hospital eligible to receive
interim uncompensated care payments and we will pay that estimated
amount on a per-discharge basis by adding it to the payment otherwise
made on that claim. The estimated per-discharge amount is based on the
amount of the uncompensated care payment that we have calculated for
the hospital for a fiscal year divided by the average number of
discharges, or claims, in the most recently available three fiscal
years of the Medicare claims dataset. For FY 2014 payments, we will use
the average number of claims from the most recent 3 years of MedPAR
claims data, FY 2010, FY 2011 and FY 2012, as this is the most recently
available data on hospital utilization. We believe that it is
appropriate to use a 3-year average to reduce the degree to which we
would over- or under-pay the uncompensated care payment on an interim
basis. In any given year, a hospital could have low or high Medicare
utilization that differs from other years. For example, if a hospital
had two Medicare discharges in its most recent cost report but
experienced four discharges in FY2014, during the fiscal year, we would
pay two times the amount the hospital should receive and need to adjust
for that at cost report settlement. Similarly, if a hospital had four
Medicare discharges on its most recent cost report, but experienced two
discharges in FY2014, during the fiscal year, we would only pay half
the amount the hospital should receive and need to adjust for that at
cost report settlement. We note that because this fee-for-service per-
claim payment will be reconciled against actual hospital utilization at
the end of a hospital's cost year, it may be necessary to make
actuarial adjustments so that the MA organizations can more accurately
and appropriately take these payments into account when making payment
to non-contracting hospitals under section 1866(a)(1)(O) of the Act.
Furthermore, because we do not intend to reduce the uncompensated
care payment based on any claim-specific factors, such as DRG weight or
transfer status, for discharges that are transfers, we do not believe
that it is appropriate to determine the per-discharge interim payment
using the number of transfer-adjusted discharges. In other words, we
will not be using transfer-adjusted discharges to determine per-claim
payments. In order to determine per-claim payments, we will use the 3-
year average of the most recent periods to determine discharges. At
cost report settlement, we will reconcile the total amounts paid on a
per-discharge basis during the Federal fiscal year with the amount of
the uncompensated care payment that we have calculated for the hospital
for the fiscal year and issue further instructions as needed.
Comment: MedPAC submitted a comment supporting the proposal to make
interim uncompensated care payments on a periodic basis, and further
stated that this payment approach was appropriate and would prevent
unnecessary cash flow problems for the hospitals. Other commenters also
supported the proposal. One commenter urged CMS to make direct lump sum
uncompensated care payments to hospitals on a biweekly basis to avoid
the need for hospital-specific reconciliations.
Response: Although we appreciate the commenters' support for our
proposal, for the reasons stated above, we are not adopting our
proposed policy to make interim uncompensated care payments on a
periodic basis. After consideration of the public comments we received,
in this final rule, for FY2014, we are adopting a process to distribute
interim uncompensated care payments on a per-discharge basis through
the claims processing system. We believe that the inclusion of the
uncompensated care per-claim amount on each claim paid will address
MedPAC's concerns about cash flow problems for the hospitals. Because
the per-discharge uncompensated care payments will be made on a claim-
by-claim basis in the claims processing system, we anticipate that the
FY 2014 CMS Medicare Inpatient PPS PC PRICER software tool will also
display the uncompensated care per-claim amount in the pricing
information it calculates. This should assist those MA plans that opt
to use the CMS Medicare Inpatient PPS PC PRICER tool to estimate fee-
for-service like payments.
Comment: Some commenters urged CMS to clarify in the final rule
that MA plans must include payment for uncompensated care in their
payments to hospitals, and requested that CMS take steps to ensure MA
plans have access to the information they need to make payments for
uncompensated care costs as of October 1, 2013.
Response: We appreciate receiving the commenters' feedback. As
stated above, we agree with the commenters that MA organizations have
the obligation to include these payment amounts for purposes of
payments under section 1866(a)(1)(O) of the Act, and, as noted above,
are taking steps to ensure that these amounts are included in the
software used by MA organizations.
After consideration of the public comments we received, in this
final rule we are not adopting our proposed policy to make interim
uncompensated care payments on a periodic basis, and instead for FY
2014 are adopting a process to distribute interim uncompensated care
payments on a per-discharge basis through the claims processing system,
and also such tools
[[Page 50646]]
that we make available to the public, including MA organizations.
In the FY 2014 IPPS/LTCH PPS proposed rule, we also proposed to
make a final determination concerning eligibility for uncompensated
care payments at the time of cost report settlement. As a result of
this proposal, our operational system must be able to handle the
various situations that may arise between interim and final eligibility
determinations. For example, a hospital may receive empirically
justified Medicare DSH payments and uncompensated care payments based
on an initial determination that the hospital is eligible for such
payments, but the hospital may then be determined to be ineligible for
such payments at cost report settlement. In such situations, we must be
prepared and able to recoup the interim empirically justified Medicare
DSH payments and uncompensated care payments that the hospital
received.
For each Federal fiscal year, we proposed to estimate which
hospitals will receive an empirically justified Medicare DSH payment
(that is, eligible hospitals). We proposed to provide periodic payments
to these hospitals during the relevant Federal fiscal year so that they
can receive their uncompensated care payments on an interim basis. For
a fiscal year, each eligible hospital's interim uncompensated care
payments will be determined by multiplying the final values for Factor
1, Factor 2, and Factor 3 for that year and dividing the amount by the
number of periods over which the interim payments will be made.
Because we would be using historical data to estimate each
hospital's eligibility for empirically justified Medicare DSH payments
in FY 2014 and subsequent years, we acknowledged that a reconciliation
process would be necessary to account for cases in which a hospital's
eligibility for such payments changes after we have published our
estimates during the rulemaking process. For example, a hospital that
had not been estimated to be eligible for these payments may become
eligible during the course of a given payment period. In such cases,
our estimates would have indicated that the hospital was ineligible for
empirically justified Medicare DSH payments and, therefore, ineligible
for uncompensated care payments. That hospital would not receive
interim payments. However, if the data available at cost report
settlement were to indicate that the hospital is eligible for an
empirically justified Medicare DSH payment, the hospital would become
eligible for an uncompensated care payment based on that hospital's
Factor 3 value.
Therefore, we proposed that, at cost report settlement, the fiscal
intermediary/MAC will issue a notice of program reimbursement that
includes a determination concerning whether each hospital is eligible
for empirically justified Medicare DSH payments and, therefore,
eligible for uncompensated care payments in FY 2014 and each subsequent
year. In the case where a hospital received interim payments for its
empirically justified Medicare DSH payments and uncompensated care
payments for FY 2014 or a subsequent year on the basis of estimates
prior to the payment year, but is determined to be ineligible for the
empirically justified Medicare DSH payment at cost report settlement,
the hospital would no longer be eligible for either payment and CMS
would recoup those monies. For a hospital that did not receive interim
payments for its empirically justified Medicare DSH payments and
uncompensated care payments for FY 2014 or a subsequent year, but at
cost report settlement is determined to be eligible for DSH payments,
the uncompensated care payment for such a hospital is calculated based
on the Factor 3 value determined prospectively for that fiscal year.
We proposed to codify this policy regarding the manner and timing
of payments in new Sec. 412.106(h) of our regulations.
We invited public comment on this proposal.
The reconciliations at cost report settlement would be based on the
values for Factor 1, Factor 2, and Factor 3 that we have finalized
prospectively for a Federal fiscal year. For example, a hospital that
was estimated by CMS to receive empirically justified Medicare DSH
payments for FY 2014 and received interim uncompensated care payments
would not receive a different uncompensated care payment amount if the
hospital remained eligible for empirically justified Medicare DSH
payments at cost report settlement. In other words, we did not propose
to include a reestimation of Factor 1, Factor 2, or Factor 3 in the
reconciliation process. Rather, Factor 1, Factor 2, and Factor 3 are
estimates determined prospectively using methodologies we establish
through rulemaking. We recognize that, under this proposal, we may pay
a total amount that could either be more or less than the product of
Factor 1 and Factor 2. However, we believed this risk is inherent in
the use of estimates to determine the Factors, similar to the manner in
which we estimate the amount of total outlier payments under section
1886(d)(5)(A)(iv) although, as in this case, the amount of actual total
outlier payments might vary from that estimate. In the FY 2014 IPPS/
LTCH PPS proposed rule, we indicated that we do not know of any reason
to believe that there will be a bias toward systematic overpayment or
underpayment from year to year.
We proposed to codify this policy at Sec. 412.106(g)(1)(iv) of our
regulations.
We invited public comments on this proposal, especially in regard
to whether we should include Factor 3 within the reconciliation
process. We stated that, depending on the public comments received, we
may revise our proposed policy in the final rule so that at the time of
cost report settlement and reconciliation a hospital's final
uncompensated care payments could be based on Factor 3 numerators and
denominators estimated using more recent cost report data (and
associated inputs). In addition, we stated that we may revise our
proposed reconciliation process, as appropriate, to account for any
policy changes that we make in the final rule.
We also note that the uncompensated care payment will be reported
on the Medicare Hospital Cost Report. We recognized that hospitals have
their own cost reporting periods that may differ from the Federal
fiscal year and that may span more than one Federal fiscal year. In the
FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27592), we proposed that
hospitals would receive their uncompensated care payments with respect
to the fiscal year in which their cost report begins. For example, if a
hospital is estimated to be eligible for the empirically justified DSH
payment and also an uncompensated care payment in FY 2014 and has a
cost report period of January 1, 2014 through December 31, 2014, this
hospital would begin to receive interim payments for its uncompensated
care on October 1, 2013. If, at cost report settlement, this hospital
remained eligible for an empirically justified DSH payment, then the
hospital would receive its FY 2014 uncompensated care payment on its
cost report for the cost reporting period beginning on January 1, 2014
(that is, the hospital would neither owe nor be owed monies for its
uncompensated care payment). As another example, if that same hospital
is no longer eligible for an empirically justified Medicare DSH payment
at the time of settlement of its cost report for the cost reporting
period beginning January 1, 2014, the hospital would be required to pay
back the interim payments it received for its uncompensated care
payments. We
[[Page 50647]]
noted that this methodology would not delay the full payment of FY 2014
payments to hospitals with cost reporting periods that begin after
October 1, 2013. While it is possible to align interim and final
payments for the uncompensated care payment with individual hospital's
cost reporting periods, we noted that we believe it would be
administratively efficient and practical to pay the uncompensated care
payment on the basis of the Federal fiscal year because that is how it
is determined, and to reconcile that amount in the cost reporting
period that begins in the respective Federal fiscal year. We stated in
the proposed rule that if this proposal is finalized, we would revise
the cost report accordingly. We invited public comments on our
proposal.
Comment: Many commenters, including national hospital associations,
expressed concerns regarding the accuracy of the data used to determine
insured low-income days and requested that we establish a limited time
period after the final rule for data corrections to afford hospitals an
opportunity to provide the most current and best available data.
Specifically, the commenters were concerned about the accuracy and
completeness of the HCRIS data used to calculate Factor 3 in the
proposed rule, noting that the inaccuracies could be due to timing
issues related to when the HCRIS files are created, revised, and
reissued. Therefore, the commenters requested that we allow hospitals
an opportunity to validate the estimates and data used to determine the
uncompensated care payments. Some commenters also stated that the
Worksheet S-2 and Worksheet S-3 data being used are primarily from
unaudited cost reports and there are discrepancies between Medicaid
days reported on Worksheet S-2 versus Worksheet S-3. The commenters
also noted that many of the as-filed cost reports would not necessarily
include the final count of Medicaid days due to the nature of
retroactive Medicaid eligibility determination. These commenters
pointed out that this is more problematic because some States have a
longer Medicaid eligibility determination timeline than others, and
believed that hospitals in these States rely on secondary research to
identify a large volume of retroactive Medicaid eligible days. One
commenter stated that providers should be given sufficient time to
review SSI data before the Factor 3 percentages are used, and stated
that the 2011 SSI data should be published to allow for this. In
addition, some commenters urged us to allow a 30-day period after the
publication of the final rule for hospitals to submit corrections to
their cost reports; some commenters requested a 90-day period for
corrections.
Response: We understand the commenters' concerns regarding the
accuracy of the data used to calculate Factor 3, and as discussed
above, for this final rule we are taking several steps to address these
inconsistencies, including using the March 2013 update of HCRIS and
identifying a hospital's Medicaid days based on the Medicaid days
reported on the 2011, or if not available 2010, Medicare Hospital Cost
Report. For FY 2014 Factor 3 determinations, for hospitals filing CMS
Form 2552-10 that claimed DSH on their cost reports, we will determine
Medicaid days using Worksheet S-2, even if those data conflict with the
Medicaid days reported on Worksheet S-3. We believe that this is
appropriate because those hospitals' DSH payments are determined using
the data from Worksheet S-2. We also note that we believe that there
should be no discrepancy between the Medicaid days reported on
Worksheet S-2 and Worksheet S-3 and, therefore, have updated our
processes so that Medicaid days reported on Worksheet S-2 may no longer
be inconsistent with Medicaid days reported on Worksheet S-3. However,
we understand that for FY 2014 Factor 3 determinations for hospitals
filing CMS Form 2552-10 for either 2011 or 2010, that did not claim DSH
on their cost report, it may have been impossible for some of these
hospitals to enter data on Worksheet S-2 due to Medicare systems
issues. Therefore, for all hospitals that did not claim DSH on their
cost report for either 2011 or 2010, for the FY 2014 Factor 3
determination, we will use Medicaid days from Worksheet S-3. We believe
that this is appropriate so as not to disadvantage any group of
hospitals that were unable to report information on Worksheet S-2 for
their FY 2011 (or FY 2010) cost reporting period. Hospitals certify the
accuracy of the information on their cost reports at the time of
submission. As a result, we do not agree that providing hospitals
additional time to submit data will necessarily improve the accuracy of
the estimate used to calculate Factor 3 because such data could not be
audited in a meaningful timeframe and still allow payments to be made
in FY 2014. Therefore, we are not providing additional time after the
publication of the final rule for hospitals to submit changes to their
data.
In response to the comment requesting that CMS publish the 2011 SSI
ratios, on June 27, 2013, the FY 2011 SSI ratios were posted on the CMS
Web site at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. We note that CMS generally
publishes SSI ratios annually in the spring.
We are finalizing the proposed new provisions at Sec. 412.106(g)
and (h) to codify these policies. However, we note that we have made a
minor change to the provision at Sec. 412.106(h) to clarify that we
intend to make interim payments during the year, and not interim
payments on a periodic basis as we had proposed.
F. Medicare-Dependent, Small Rural Hospital (MDH) Program (Sec.
412.108)
1. Backgound
Section 1885(d)(5)(G) of the Act provides special payment
protections, under the IPPS, to a Medicare-dependent, small rural
hospital (MDH). (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684.) As we discussed in the FY 2011
IPPS/LTCH PPS final rule (75 FR 50287) and in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684), section 3124 of the Affordable
Care Act extended the expiration of the MDH program from the end of FY
2011 (that is, for discharges occurring before October 1, 2011) to the
end of FY 2012 (that is, for discharges occurring before October 1,
2012). Under prior law, as specified in section 5003(a) of Public Law
109-171 (DRA 2005), the MDH program was to be in effect through the end
of FY 2011 only. Section 3124(a) of the Affordable Care Act amended
sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II) of the Act to
extend the MDH program and payment methodology by striking out
``October 1, 2011'' and inserting ``October 1, 2012''. Section 3124(b)
of the Affordable Care Act made conforming amendments to sections
1886(b)(3)(D) and 1886(b)(3)(D)(iv) of the Act.
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50287 and 50414), we
amended the regulations at Sec. 412.108(a)(1) and (c)(2)(iii) to
reflect the statutory extension of the MDH program through FY 2012. In
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51683 through 51684), we
did not make any additional changes to the MDH regulatory text for FY
2012. As discussed below, the ATRA (Pub. L. 112-240) amended the Act to
extend the MDH program through the end of FY 2013.
[[Page 50648]]
2. Provisions of the ATRA for FY 2013
a. Background
Prior to the enactment of the ATRA, under section 3124 of the
Affordable Care Act, the MDH program authorized by section
1886(d)(5)(G) of the Act was set to expire at the end of FY 2012.
Section 606 of the ATRA amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an additional 1-year
extension of the MDH program, effective from October 1, 2012 to
September 30, 2013 (FY 2013). Section 606 of the ATRA also made
conforming amendments to sections 1886(b)(3)(D)(i) and
1886(b)(3)(D)(iv) of the Act. Prior to the enactment of the ATRA, in
the FY 2013 IPPS/LTCH PPS final rule, we discussed the expiration of
the MDH program at the end of FY 2012 (77 FR 53413 through 53414) and
revised the SCH regulation at Sec. 412.92(b) to change the effective
date of SCH status for MDHs that apply for SCH status with the
expiration of the MDH program (77 FR 53404 through 53405).
In a FY 2013 IPPS notice issued in the Federal Register on March 7,
2013 (78 FR 14689), we announced the extension of the MDH program for
FY 2013 in accordance with the provisions of section 606 of the ATRA.
In that notice, we explained that, as a result of section 606 of the
ATRA, the MDH program is now extended for 1 additional year, through
the end of FY 2013 (that is, effective October 1, 2012 through
September 30, 2013). The FY 2013 IPPS notice explained how providers
may be affected by the ATRA extension of the MDH program and described
the steps to reapply for MDH status for FY 2013, as applicable.
Generally, a provider that was classified as an MDH at the end of FY
2012 (that is, as of September 30, 2012) was reinstated as an MDH
effective October 1, 2012, with no need to reapply for MDH
classification. However, if the MDH had classified as a sole community
hospital (SCH) or cancelled its rural classification under Sec.
412.103(g) effective on or after October 1, 2012, the effective date of
MDH status was not retroactive to October 1, 2012. In the FY 2013 IPPS
notice, we also stated that we intended to make conforming changes to
the regulations at Sec. Sec. 412.108(a)(1) and (c)(2)(iii) in future
rulemaking to reflect the statutory changes made by section 606 of the
ATRA. We refer readers to the FY 2013 IPPS notice (78 FR 14689 through
14694) for additional information on the extension of the MDH program
through FY 2013 pursuant to section 606 of the ATRA and for additional
information on how and when MDH status was determined for hospitals
classified as MDHs prior to the September 30, 2012 expiration of the
program.
b. Conforming Regulatory Changes
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27593), we
proposed to make conforming changes to the regulations at Sec. Sec.
412.108(a)(1) and (c)(2)(iii) to reflect the statutory extension of the
MDH program through FY 2013 made by section 606 of the ATRA.
We did not receive any public comments on the proposed conforming
changes to the existing regulations text at Sec. 412.108 to reflect
the extension of the MDH program through FY 2013 in accordance with
section 606 of the ATRA. Therefore, in this final rule, we are adopting
as final the proposed revisions to paragraphs (a)(1) and (c)(2)(iii) of
Sec. 412.108 without modification.
c. Expiration of the MDH Program
Since section 606 of the ATRA extended the MDH program through FY
2013 only, the MDH program will no longer be in effect in FY 2014
absent a change in law to extend the program. Therefore, beginning in
FY 2014, all hospitals that previously qualified for MDH status will no
longer have MDH status and will be paid based solely on the Federal
rate.
As noted earlier, in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53404 through 53405), we revised our SCH policies to allow MDHs to
apply for SCH status and be paid as such under certain conditions,
following expiration of the MDH program at the end of FY 2012. We
codified these changes in the regulations at Sec. 412.92(b)(2)(i) and
Sec. 412.92(b)(2)(v). For additional information, we refer readers to
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405 and
53674). We note that those same conditions apply to MDHs that intend to
apply for SCH status with the expiration of the MDH program at the end
of FY 2013. Specifically, the existing regulations at Sec.
412.92(b)(2)(i) and (b)(2)(v) allow for an effective date of approval
of SCH status that is the day following the expiration date of the MDH
program. In accordance with these regulations, in order for an MDH to
receive SCH status effective October 1, 2013, it must apply for SCH
status at least 30 days before the end of the MDH program; that is, the
MDH must apply for SCH status by August 31, 2013. The MDH also must
request that, if approved as an SCH, the SCH status be effective with
the expiration of the MDH program provision; that is, the MDH must
request that the SCH status, if approved, be effective October 1, 2013,
immediately after its MDH status expires with the expiration of the MDH
program at the end of FY 2013, on September 30, 2013.
We note that an MDH that applies for SCH status in anticipation of
the expiration of the MDH program would not qualify for the October 1,
2013 effective date upon approval if it does not apply by the August
31, 2013 deadline. The provider would instead be subject to the usual
effective date for SCH classification, that is, 30 days after the date
of CMS' written notification of approval as specified at Sec.
412.92(b)(2)(i).
Comment: Several commenters expressed concern with the expiration
of the MDH program, citing serious detrimental effects that would
result to patients, hospitals, and communities. The commenters
encouraged the continuation of the MDH program.
Response: The MDH program, which provides special treatment of and
payment to small, rural, Medicare-dependent hospitals, is authorized by
statute through FY 2013. Therefore, a change in law would be necessary
in order for the MDH program to continue, or in order to reinstate it
once it expires. While we understand the commenters' concerns, CMS does
not have the authority under current law to continue the MDH program.
Comment: Several commenters continued to express their support of
the ``seamless transition'' policy we finalized in last year's rule.
However, some commenters requested that, in the event that the MDH
provision is reinstated, CMS allow providers that transitioned to SCH
status to revert back to MDH status retrospectively without the need to
reapply for MDH status. Similarly, these commenters requested that, if
providers cancel their rural status in anticipation of the expiration
of the MDH provision, CMS allow the providers to waive their
cancellation and revert to MDH status retroactively should the MDH
provision be reinstated. These commenters stated that CMS' current
regulations, which do not allow providers that transition to SCH status
or cancel their rural classification in anticipation of the expiration
of the MDH provision to be reinstated as MDHs retroactively upon the
reinstatement of the MDH provision, put providers in the unfair
position of having to guess whether or not Congress will reinstate the
MDH provision and weigh the effects of applying for SCH classification
or cancelling their rural status. A few others commenters pointed out
that CMS' policy to transition MDHs to SCH classification does not
address the needs of many of
[[Page 50649]]
the hospitals currently classified as an MDH because those hospitals do
not meet the criteria for an SCH, and recommended that CMS revise the
criteria for an MDH to become an SCH.
Response: The statute specifies that, in order to be an MDH, among
other requirements, a hospital must be located in a rural area and not
classified as an SCH. Hospitals that convert to an SCH or canceled
their rural status no longer meet the statutory criteria to be
classified as an MDH. If legislation is passed to authorize the
continuation of the MDH program, we will develop policy to implement
the specific provisions of such legislation. While we understand the
commenters' concerns about the expiration of the MDH program, the
statute specifies the criteria for a hospital to be classified as an
SCH and CMS does not have the authority to revise those statutory
criteria as requested by the commenters.
Comment: Some commenters requested that, if the MDH provision is
reinstated after October 1, 2013, CMS expedite the MDH reinstatement
process because many hospitals were not reinstated until several weeks
after the enactment of the ATRA.
Response: We understand those hospitals' concerns regarding the
time involved in the implementation of the reinstatement of their MDH
status after the enactment of the ATRA. While we have made every effort
to issue public notification and instructions to the MACs on our
implementation of the extension of the MDH program as provided for in
the provisions of the ATRA in a timely manner, we also are limited by
the time necessary to develop the policy and systems changes to
implement the specific provisions of the newly enacted legislation, as
well as the time required to undergo the issuance process. If
legislation is enacted to continue the MDH program, we will keep these
concerns in mind in the implementation of the specific provisions of
such legislation.
G. Hospital Readmissions Reduction Program (Sec. Sec. 412.150 through
412.154)
1. Statutory Basis for the Hospital Readmissions Reduction Program
Section 3025 of the Affordable Care Act, as amended by section
10309 of the Affordable Care Act, added a new subsection (q) to section
1886 of the Act. Section 1886(q) of the Act establishes the ``Hospital
Readmissions Reduction Program,'' effective for discharges from an
``applicable hospital'' beginning on or after October 1, 2012, under
which payments to those applicable hospitals may be reduced to account
for certain excess readmissions.
Section 1886(q)(1) of the Act sets forth the methodology by which
payments to ``applicable hospitals'' will be adjusted to account for
excess readmissions. Pursuant to section 1886(q)(1) of the Act,
payments for discharges from an ``applicable hospital'' will be an
amount equal to the product of the ``base operating DRG payment
amount'' and the adjustment factor for the hospital for the fiscal
year. That is, ``base operating DRG payments'' are reduced by a
hospital-specific adjustment factor that accounts for the hospital's
excess readmissions. Section 1886(q)(2) of the Act defines the base
operating DRG payment amount as ``the payment amount that would
otherwise be made under subsection (d) (determined without regard to
subsection (o) [the Hospital VBP Program]) for a discharge if this
subsection did not apply; reduced by . . . any portion of such payment
amount that is attributable to payments under paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d).'' Paragraphs (5)(A),
(5)(B), (5)(F), and (12) of subsection (d) refer to outlier payments,
IME payments, DSH adjustment payments, and add-on payments for low-
volume hospitals, respectively.
Furthermore, section 1886(q)(2)(B) of the Act specifies special
rules for defining ``the payment amount that would otherwise be made
under subsection (d)'' for certain hospitals. Specifically, section
1886(q)(2)(B) of the Act states that ``[i]n the case of a Medicare-
dependent, small rural hospital (with respect to discharges occurring
during fiscal years 2012 and 2013) or a sole community hospital . . .
the payment amount that would otherwise be made under subsection (d)
shall be determined without regard to subparagraphs (I) and (L) of
subsection (b)(3) and subparagraphs (D) and (G) of subsection (d)(5).''
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374), we finalized
policies to implement the statutory provisions related to the
definition of ``base operating DRG payment amount''.
Section 1886(q)(3)(A) of the Act defines the ``adjustment factor''
for an applicable hospital for a fiscal year as equal to the greater of
``(i) the ratio described in subparagraph (B) for the hospital for the
applicable period (as defined in paragraph (5)(D)) for such fiscal
year; or (ii) the floor adjustment factor specified in subparagraph
(C).'' Section 1886(q)(3)(B) of the Act, in turn, describes the ratio
used to calculate the adjustment factor. It states that the ratio is
``equal to 1 minus the ratio of--(i) the aggregate payments for excess
readmissions . . .; and (ii) the aggregate payments for all discharges.
. . .'' Section 1886(q)(3)(C) of the Act describes the floor adjustment
factor, which is set at 0.99 for FY 2013, 0.98 for FY 2014, and 0.97
for FY 2015 and subsequent fiscal years.
Section 1886(q)(4) of the Act sets forth the definitions of the
terms ``aggregate payments for excess readmissions'' and ``aggregate
payments for all discharges'' for an applicable hospital for the
applicable period. The term ``aggregate payments for excess
readmissions'' is defined in section 1886(q)(4)(A) of the Act as ``the
sum, for applicable conditions . . . of the product, for each
applicable condition, of (i) the base operating DRG payment amount for
such hospital for such applicable period for such condition; (ii) the
number of admissions for such condition for such hospital for such
applicable period; and (iii) the ``Excess Readmission Ratio . . . for
such hospital for such applicable period minus 1.'' The ``excess
readmission ratio'' is a hospital-specific ratio based on each
applicable condition. Specifically, section 1886(q)(4)(C) of the Act
defines the excess readmission ratio as the ratio of ``risk-adjusted
readmissions based on actual readmissions'' for an applicable hospital
for each applicable condition, to the ``risk-adjusted expected
readmissions'' for the applicable hospital for the applicable
condition.
Section 1886(q)(5) of the Act provides definitions of ``applicable
condition,'' ``expansion of applicable conditions,'' ``applicable
hospital,'' ``applicable period,'' and ``readmission.'' The term
``applicable condition'' (which is addressed in detail in section
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through
51666)) is defined as a ``condition or procedure selected by the
Secretary among conditions and procedures for which: (i) Readmissions .
. . represent conditions or procedures that are high volume or high
expenditures . . . and (ii) measures of such readmissions . . . have
been endorsed by the entity with a contract under section 1890(a) . . .
and such endorsed measures have exclusions for readmissions that are
unrelated to the prior discharge (such as a planned readmission or
transfer to another applicable hospital).'' Section 1886(q)(5)(B) of
the Act also requires the Secretary, beginning in FY 2015, ``to the
extent practicable, [to] expand the applicable conditions beyond the 3
conditions for which measures have been endorsed . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Advisory Commission in its report to Congress in
[[Page 50650]]
June 2007 and to other conditions and procedures as determined
appropriate by the Secretary.''
Section 1886(q)(5)(C) of the Act defines ``applicable hospital,''
that is, a hospital subject to the Hospital Readmissions Reduction
Program, as a ``subsection (d) hospital or a hospital that is paid
under section 1814(b)(3) [of the Act], as the case may be.'' The term
``applicable period,'' as defined under section 1886(q)(5)(D) of the
Act, ``means, with respect to a fiscal year, such period as the
Secretary shall specify.'' As explained in the FY 2012 IPPS/LTCH PPS
final rule, the ``applicable period'' is the period from which data are
collected in order to calculate various ratios and adjustments under
the Hospital Readmissions Reduction Program.
Section 1886(q)(6) of the Act sets forth the public reporting
requirements for hospital-specific readmission rates. Section
1886(q)(7) of the Act limits administrative and judicial review of
certain determinations made pursuant to section 1886(q) of the Act.
Finally, section 1886(q)(8) of the Act requires the Secretary to
collect data on readmission rates for all hospital inpatients for
``specified hospitals'' in order to calculate the hospital-specific
readmission rates for all hospital inpatients and to publicly report
these readmission rates.
2. Overview
The payment adjustment factor set forth in section 1886(q) of the
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH
PPS final rule, we addressed the issues of the selection of readmission
measures and the calculation of the excess readmission ratio, which
will be used, in part, to calculate the readmission adjustment factor.
Specifically, in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51660
through 51676), we addressed the portions of section 1886(q) of the Act
related to the following provisions:
Selection of applicable conditions;
Definition of ``readmission'';
Measures for the applicable conditions chosen for
readmission;
Methodology for calculating the excess readmission ratio;
and
Definition of ``applicable period''.
With respect to the topics of ``measures for readmission'' for the
applicable conditions, and ``methodology for calculating the excess
readmission ratio,'' we specifically addressed the following:
Index hospitalizations;
Risk adjustment;
Risk standardized readmission rate;
Data sources; and
Exclusion of certain readmissions.
In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through
53401), we finalized our policies that relate to the calculation of the
hospital readmission payment adjustment factor and the process by which
hospitals can review and correct their data. Specifically, in the final
rule, we addressed the portions of section 1886(q) of the Act related
to the following provisions:
Base operating DRG payment amount, including policies for
SCHs and MDHs and hospitals paid under section 1814(b) of the Act;
Adjustment factor (both the ratio and floor adjustment
factor);
Aggregate payments for excess readmissions and aggregate
payments for all discharges;
Applicable hospital;
Limitations on review; and
Reporting of hospital-specific information, including the
process for hospitals to review readmission information and submit
corrections.
In the FY 2013 IPPS/LTCH PPS final rule, we established a new
Subpart I under 42 CFR Part 412 (Sec. Sec. 412.150 through 412.154) to
codify rules for implementing the Hospital Readmissions Reduction
Program.
3. FY 2014 Policies for the Hospital Readmissions Reduction Program
a. Overview
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27594), for FY
2014 and beyond, we proposed to--
Refine the readmissions measures and related methodology
for the current applicable conditions (section V.G.3.b. of this
preamble);
Expand the ``applicable conditions'' for FY 2015 (section
V.G.3.c. of this preamble);
Specify additional policies for hospitals paid under
section 1814(b)(3) of the Act (Sec. 412.154(d)), including the process
to be exempted from the Hospital Readmissions Reduction Program and the
definition of ``base operating DRG payment amount'' (section V.G.3.d.
of this preamble);
Specify the proposed adjustment factor floor for FY 2014
(section V.G.3.e. of this preamble);
Specify the proposed applicable period for FY 2014
(section V.G.3.f. of this preamble);
Refine the methodology to calculate the aggregate payments
for excess readmissions (section V.G.3.g. of this preamble); and
Clarify the process for reporting hospital-specific
information, including the opportunity to review and submit corrections
(section V.G.3.h. of this preamble).
Comment: Some commenters requested that CMS conduct additional
analyses on the Hospital Readmissions Reduction Program. One commenter
suggested that CMS evaluate how hospitals work towards reducing
readmissions and determine if the Hospital Readmissions Reduction
Program is successful. Another commenter suggested that CMS analyze the
Hospital Readmissions Reduction Program to determine its impact on
mortality rates. One commenter stated that CMS should monitor the
program for unintended consequences, such as avoiding admissions for
difficult patients or placing more patients in observations to avoid
readmissions. Other commenters requested that CMS conduct additional
analyses on any unintended consequences with avoiding readmissions.
Response: We appreciate the commenters' feedback and suggestions.
However, we believe that there does not appear to be a meaningful
correlation between hospital risk-standardized mortality rates and
readmission rates. We believe that a hospital's performance on
mortality and readmissions measures represents different aspects of
quality. While a recent MedPAC report \18\ indicates that there may be
an inverse correlation between readmission and mortality rates, we note
that this inverse relationship has been found to be modest.\19\ We
recognize the commenter's concern and will monitor changes in the
strength of these inverse correlations over time. Further, we recognize
that performance-based payment programs, as with any pay-for-
performance or pay-for-reporting program, may create the potential for
unintended consequences. However, we remain committed to monitoring the
Hospital Readmissions Reduction Program and assessing unintended
consequences such as changes in utilization and patient outcomes over
time, and adjusting the program as needed. We will also continue to
make these analyses available to the public in the Chartbook posted
annually each Fall on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/OutcomeMeasures.html. We are especially cognizant
of those areas of concern raised by stakeholders, including
inappropriate shifting of care,
[[Page 50651]]
increased patient morbidity and mortality, and increases in the use of
observation services to avoid hospital readmissions. We remain
committed to quickly addressing these areas, as well as any other
unintended consequences that may arise as the Hospital Readmissions
Reduction Program progresses.
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\18\ http://www.medpac.gov/documents/Jun13_EntireReport.pdf.
\19\ Krumholz HM, Lin Z, Keenan PS, et al. Relationship between
hospital readmission and mortality rates for patients hospitalized
with acute myocardial infarction, heart failure, or pneumonia. JAMA.
2013; 309(6): 587-593.
---------------------------------------------------------------------------
b. Refinement of the Readmission Measures and Related Methodology for
FY 2014 and Subsequent Years Payment Determinations
(1) Overview of the Inclusion of Planned Readmissions for the
Calculation of the FY 2014 Readmissions Adjustment Factors
In the FY 2012 IPPS/LTCH PPS final rule, we adopted AMI, HF, and PN
readmission measures for the Hospital Readmissions Reduction Program
payment determinations beginning with FY 2013. During development of
the three readmission measures for AMI, HF, and PN, we consulted with
medical experts to identify readmissions that are typically scheduled
as follow-up care for each specific condition within 30 days of
discharge. We categorized these readmissions as planned follow-up care
and excluded them from being counted as a readmission. The AMI measure
finalized for the Hospital Readmissions Reduction Program included two
revascularization procedures (coronary artery bypass graft surgery
(CABG) and percutaneous coronary intervention (PCI) (76 FR 51667)). We
considered these procedures planned readmissions and excluded them from
the readmission calculation as long as the readmissions were not for
one of five acute conditions (HF, AMI, other acute/subacute forms of
ischemic heart disease, arrhythmia, and cardiac arrest).
During development of the HF and PN readmission measures, we did
not identify any readmissions that were typically planned as follow-up
care at the time of the patient's discharge. Therefore, the readmission
measures finalized for the Hospital Readmissions Reduction Program for
these two conditions did not exclude any planned readmissions from the
readmission calculation.
(2) Refinement of the Readmission Measures and Related Methodology for
the FY 2014 and Subsequent Years Payment Determinations
Since the development and implementation of the initial three
readmission measures adopted under the Hospital Readmissions Reduction
Program, we have received comments from the medical community, other
stakeholders, and the general public encouraging us to identify and not
count as readmissions a broader range of planned readmissions.
Stakeholders also made recommendations for expanding the number and
types of planned readmissions during the public comment period for the
FY 2013 IPPS/LTCH PPS proposed rule (as discussed in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53382 through 53398)).
Stakeholders commented that readmission measures are intended to
capture unplanned readmissions that arise from acute clinical events
requiring urgent rehospitalization within 30 days of discharge. In
addition, stakeholders commented that planned readmissions do not
generally signal poor quality of care. In response to stakeholders'
concerns, we have worked with experts in the medical community, other
stakeholders, and the public to broadly identify planned readmissions
for procedures and treatments for exclusion from the readmission
measures. Specifically, we developed an expanded ``planned readmission
algorithm'' in the CMS Planned Readmission Algorithm Version 2.1 Report
to identify planned readmissions across our readmission measures. In
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27595), we proposed to
apply the algorithm to the AMI, HF, and PN measures for FY 2014. The
CMS Planned Readmission Algorithm Version 2.1 Report is available on
the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
As discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27595), we developed the algorithm based on a hospital-wide (not
condition-specific) cohort of patients. We began the development by
using the Agency for Healthcare Research and Quality's (AHRQ's)
Clinical Classification Software (CCS) codes to group thousands of
individual procedures and diagnoses codes into clinically coherent,
mutually exclusive procedure and diagnosis categories (PROC-CCS
categories and Diagnosis-CCS categories, respectively). A panel of
independent, non-CMS clinicians then reviewed the procedure categories
and identified those that are commonly planned and require admission.
Clinicians also reviewed the diagnosis categories and identified those
that were acute diagnoses likely requiring hospitalization. Using these
procedure and diagnosis categories and some individual ICD-9-CM
procedure and diagnoses codes in the categories, we developed an
initial algorithm for identifying planned readmissions for a hospital-
wide cohort of patients.
The algorithm underwent several reviews by stakeholders. We
initially posted the detailed algorithm for informal public comment
during the measurement development process in August 2011. The National
Quality Forum (NQF) reviewed and made the algorithm available for
public comment during its endorsement review of the Hospital-Wide All-
Cause Unplanned Readmission Measure (NQF 1789). We also
recruited 27 surgical subspecialists nominated by their specialty
societies to review the algorithm and suggest refinements, which
resulted in Version 2.1 of the Planned Readmission Algorithm. In the
proposed rule, we proposed to use this algorithm in the readmission
measures under the Hospital Readmissions Reduction Program beginning
with FY 2014. A detailed description of this algorithm is included
later in this section.
As required by section 1886(q)(5)(A)(ii) of the Act, the first
three applicable conditions of AMI, HF and PN, must use readmission
measures that have been endorsed by the entity with a contract under
section 1890(a) of the Act; and such endorsed measures must have
exclusions for readmissions that are unrelated to the prior discharge
(such as planned readmission or transfer to another applicable
hospital). Because the statute requires that the readmission measures
for the three current applicable conditions (AMI, HF and PN) be NQF-
endorsed, we sought NQF's endorsement of the measures that were revised
to include the CMS Planned Readmission Algorithm Version 2.1. NQF
reviewed these revised measures through its ad hoc review process,
which reviews previously endorsed measures that undergo material
changes. Following ad hoc review, NQF endorsed the revised AMI (NQF
0505) and HF (NQF 0330) measures in January 2013 and
the PN measure (NQF 0506) in March 2013.
Comment: Several commenters stated that the Hospital Readmissions
Reduction Program uses unreliable measures. One commenter suggested
that the method used to calculate the number of excess readmissions
adjusts for the volume of eligible patients served by the hospital, and
weakens the incentive for low-volume hospitals to reduce their
readmission rates. Another commenter stated that it is not reasonable
to give a pass to hospitals with consistently high readmission rates
year after year because they are low volume.
[[Page 50652]]
Response: We appreciate the commenters' feedback. However, we
disagree that the Hospital Readmissions Reduction Program uses
unreliable measures for two reasons. First, the NQF both reviewed and
endorsed the measures used in the Hospital Readmissions Reduction
Program. As part of this endorsement process, the NQF requires that
measures meet criteria for scientific acceptability, which include
validity and reliability. Specifically, reliability under the NQF
measure evaluation criteria means that the measure both allows for
comparability and is well defined and precisely specified so it can be
implemented consistently within and across organizations.\20\ Second,
as previously addressed in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53379), ``We determined the 25-case threshold for public reporting
based on a reliability statistic that is calculated from the
intercluster correlation, a parameter of the model. We are maintaining
the minimum 25-case threshold that we adopted through rulemaking last
year.''
---------------------------------------------------------------------------
\20\ National Quality Forum (NQF), Measure Evaluation Criteria
(November, 2012). Available at: http://www/qualityforum.org/docs/
measure--evaluation--criteria.aspx.
---------------------------------------------------------------------------
We acknowledge that smaller hospitals typically have less certain
estimates because they have fewer cases for use in assessing quality.
This challenge is inherent in outcome measurements. However, one
advantage of the statistical model that we use for the measures is that
it allows for the inclusion of small hospitals while characterizing the
certainty of their estimates. The hierarchical logistic regression
model that we use to calculate the risk-standardized outcome measures
allows the inclusion of hospitals with relatively few observations, but
takes into account the uncertainty associated with sample size in
estimating their risk-standardized outcome rates. The model takes into
account the uncertainty in the estimate of outcome rates for low-volume
hospitals by assuming that each hospital is a typically performing
hospital. It weighs that assumption along with the outcomes for the
particular hospital in calculating the outcome rate. Therefore, the
estimated outcome rates for smaller hospitals will likely be closer to
the national rate because the limited number of eligible cases in the
hospital tells little about that hospital's true outcome rate.
Comment: One commenter suggested that CMS exclude patients coded
under ICD-9-CM code V15.81 (Personal history of non-compliance with
medical treatment) from the readmission measures.
Response: We appreciate the commenter's suggestion. We recognize
that some patients choose not to follow a recommended treatment plan,
even when they have access to the care they need. However, all
hospitals have the opportunity to reduce the rate of readmission, even
among less compliant patients. Improving readmission rates is the joint
responsibility of hospitals and clinicians. Measuring readmissions will
create incentives to invest in interventions to improve hospital care,
better assess the readiness of patients for discharge, and facilitate
transitions to outpatient status.
(a) Description of CMS Planned Readmission Algorithm Version 2.1
As described in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR
27595), this algorithm is a set of criteria for classifying
readmissions as ``planned'' using Medicare claims. The algorithm
identifies typical planned admissions that may occur within 30 days of
discharge from the hospital.
We based the CMS Planned Readmission Algorithm on three principles:
A few specific, limited types of care are always
considered planned (obstetrical delivery, transplant surgery,
maintenance chemotherapy, rehabilitation);
Otherwise, a planned readmission is defined as a nonacute
readmission for a scheduled procedure; and
Admissions for acute illness or for complications of care
are never planned.
The Planned Readmission Algorithm uses a flow chart and four tables
of procedures and conditions to implement these principles and to
classify readmissions as planned or unplanned. The flow chart and
tables are available in a report, CMS Planned Readmission Algorithm
Version 2.1, which is available on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
We incorporated the algorithm into each condition-specific and
procedure-specific readmission measure. For most readmission measures,
including the AMI, HF, and PN measures, we used one standard version of
the algorithm--the CMS Planned Readmission Algorithm Version 2.1.
However, for a subset of readmission measures, we revised the list of
potentially planned procedures or acute primary diagnosis after
applying the standard algorithm version because it was clinically
indicated. For example, for the Total Hip Arthroplasty (THA) and Total
Knee Arthroplasty (TKA) readmission measure that we proposed in the FY
2014 IPPS/LTCH PPS proposed rule and are adopting in this final rule
for FY 2015, we removed diagnostic cardiac catheterization from the
potentially planned procedure list because patients in the hip/knee
measure are typically well enough to undergo elective surgery and would
not be expected to need a catheterization within 30 days of discharge.
The details of these adaptations are available in the CMS Planned
Readmission Algorithm Version 2.1 report (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
Comment: Several commenters supported the refinement of the
readmission measures using the planned readmission algorithm. The
commenters appreciated that CMS considered and acted upon public
comments and suggestions made in last year's rule, and supported CMS'
continued efforts to exclude planned readmissions from the penalty
calculation.
Response: We appreciate the commenters' support of our proposal to
include a planned readmission algorithm for readmissions measures in
the Hospital Readmissions Reduction Program.
Comment: Several commenters suggested that CMS continually assess
the algorithm for planned readmissions to determine whether additional
diagnoses or procedures should be considered ``planned.''
Response: We appreciate the commenters' suggestion. We intend to
continually review the planned readmissions algorithm. Our measures
continually undergo maintenance to determine the need for updated
specifications, and to monitor for trends and any relevant coding
changes associated with the measures. With such updates, we will modify
the planned readmission algorithm as needed. If substantive updates are
required, we will inform the public of any changes to the planned
readmissions algorithm through rulemaking.
Comment: Some commenters stated that relying solely on claims data
is insufficient for proper risk-adjustment. One commenter stated that
risk-adjustment based solely on claims data loses clinical detail for
proper adjustment for severity. The commenter added, for example, that
our coding does not capture those patients who are readmitted from
hospice care.
[[Page 50653]]
Response: We have performed validation work to confirm the
scientific rigor of using claims data for risk adjustment in outcome
measures. We validated the AMI, HF, and PN mortality and readmission
measures with models that use medical record-abstracted data for risk-
adjustment. These analyses demonstrated that using claims data produces
estimated hospital-level risk-standardized mortality rates (RSMRs) and
risk-standardized readmission rates (RSRRs) that are very similar to
the rates estimated by models based solely on medical record data
(available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
This high level of agreement in the results based on the two different
approaches supports the use of the claims-based models for public
reporting. These analyses are available in the methodology report
located on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Our approach to gathering risk factors for patients also mitigates
the potential limitations of claims data. Because not every diagnosis
is coded at every visit, we use claims data for the year prior to the
index admission, as well as secondary diagnosis codes during the index
admission, for risk-adjustment.
Comment: One commenter requested that the measures be risk-adjusted
for hospitals located in rural areas because this may cause their
readmission rate to be higher than hospitals in more concentrated
markets.
Response: We routinely monitor the impact of readmission measures
on hospitals and have examined if hospitals in rural areas tend to have
higher risk-standardized readmission rates. Our most recent analyses
(available on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) examined hospital
readmission rates for different hospital referral regions and did not
find a relationship between rural referral regions and increased
readmission rates.
Comment: Several commenters addressed the proposed policy to not
risk-adjust measures for socioeconomic status and other factors. Some
commenters supported the policy and urged CMS to resist making any
changes to the Hospital Readmissions Reduction Program based on
socioeconomic status concerns. These commenters stated that the same
care protocols that work with a different population may also work with
patients of lower socioeconomic circumstances. The commenters added
that until CMS can disprove that notion, CMS should not modify the
program in a way that would shield certain hospitals, based on fairness
concerns about socioeconomic factors, from truly participating in a
program to change the way Medicare and Medicaid services and payments
are delivered.
Other commenters suggested that the readmission measures should
include adjustments for socioeconomic status and other factors that are
either outside the hospitals' or providers' immediate control or that
may adversely affect certain types of hospitals more than others.
Suggestions for variables to include in either the patient-level or the
hospital-level model included: patient race, ethnicity, language,
income, lifestyle, health literacy, dual-eligible status (that is,
eligibility for both Medicare and Medicaid), insurance status,
functional status, cognitive impairment, post-discharge care support
structure, and access to primary care. Some commenters suggested
stratification of the hospital calculations by the percentage of dual-
eligible patients. One commenter stated that a patient's ability to
afford medication should be included as a risk-adjustment variable
because socioeconomic status impacts the patient's ability to be
compliant with medications and a patient's ability to pay for
medications is separate and apart from care provided by the hospital.
Another commenter recommended that CMS conduct a thorough analysis of
the role economic factors play in readmissions. This commenter also
suggested that the analysis be conducted at the claims level, with
matching zip codes to existing poverty data to provide an accurate
understanding of the role of economic conditions. The commenter stated
that readmission measures should fully account for economic drivers.
Another commenter stated that chronic diseases as well as socioeconomic
status are related to hospital readmissions, and these factors comprise
major determinants of outcomes.
Response: We appreciate the commenters' feedback and suggestions on
this issue. We have continued to consider and evaluate stakeholder
concerns regarding the influence of patient socioeconomic status on
readmission and mortality rates. The Hospital Readmissions Reduction
Program, as pointed out by one commenter, seeks to transform the
Medicare payment and delivery system by financially incentivizing
providers to change the way they deliver care. The program's design
encourages hospitals to make changes to avoid payment penalties while
simultaneously enhancing the quality of health care provided to
patients. We routinely monitor the impact of socioeconomic status on
hospitals' results and have consistently found that hospitals that care
for large proportions of patients of low socioeconomic status are
capable of performing well on our measures. Our most recent analyses,
available on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf, again confirmed
this finding. The definition of low SES we used was whether the
beneficiary was enrolled in Medicaid, which is a proxy for low-income.
Many safety-net providers and teaching hospitals do as well or better
on the measures than hospitals without substantial numbers of patients
of low socioeconomic status. Our analyses also show that adding
socioeconomic status to the risk-adjustment has a negligible impact on
hospitals' risk-standardized rates. The risk-adjustment for clinical
factors likely captures much of the variation due to socioeconomic
status, therefore leading to more modest impact of socioeconomic status
on hospitals' results than stakeholders expect. We note that the goal
of risk-adjustment is to account for factors that are inherent to the
patient at the time of admission, such as severity of disease, so as to
put hospitals on a level playing field. The measures should not be
risk-adjusted to account for differences in practice patterns that lead
to lower or higher risk for patients to be readmitted or die. The
measures aim to reveal differences related to the patterns of care. The
measures do not adjust for socioeconomic status because the association
between socioeconomic status and health outcomes can be due, in part,
to differences in the quality of health care received by groups of
patients with varying socioeconomic status. The measures also do not
adjust for socioeconomic status, or other patient factors such as race
because we do not want to hold hospitals to different standards for the
outcomes of their patients of low socioeconomic status. Finally, we do
not want to mask potential disparities or minimize incentives to
improve the outcomes of disadvantaged populations. This approach also
is consistent with the guidance from the NQF, which states that risk
models should not obscure
[[Page 50654]]
disparities by adjusting for factors associated with inequality (such
as race or socioeconomic status). Furthermore, the statutory language
in section 1886(q)(5)(A)(ii)(I) of the Act requires that the measures
included in the Hospital Readmissions Reduction Program be NQF-
endorsed, and the measures as endorsed by the NQF are not currently
adjusted for socioeconomic status. However, we are committed to
tracking this issue and will continue to evaluate disparities in care
and the impact of patient's socioeconomic status on hospital's
readmissions rates moving forward.
Comment: Some commenters suggested that CMS separate Hospital
Readmissions Reduction Program-eligible hospitals into quartiles based
on the proportion of their patients that are dually eligible, such that
readmissions penalties would then be dependent on how hospitals perform
compared to hospitals with a similar proportion of dually eligible
patients. Several commenters expressed concern that hospitals with
higher proportions of low socioeconomic status patients are at a
disadvantage, and suggested that CMS stratify the measure score
calculation to address this concern. One commenter suggested that CMS
stratify hospitals by their proportion of dual-eligible patients and
calculate the measure score in four different hospital strata. Based on
commenters' understanding of the proposal, the commenters suggested
that CMS rank hospitals by their proportion of dual-eligible patients,
and divide hospitals into quartiles based on their rank. The commenters
further suggested that CMS apply the NQF-approved measure to each group
of hospitals to calculate the risk-standardized ratio that is used for
the Hospital Readmissions Reduction Program. Under this approach, each
hospital's ``expected'' (denominator) rate would be derived based on
how hospitals within its quartile perform with similar patients. In
other words, the benchmark for performance would be set within each
quartile of hospitals, rather than by including all hospitals in the
calculation and setting a uniform performance benchmark.
Another commenter suggested that CMS stratify patients by their
dual-eligible status and calculate two readmission ratios for each
hospital for each measure--one using dual-eligible patients and one
using all other patients. The commenter further suggested that CMS
combine these scores to derive a single, ``blended'' excess readmission
ratio for each hospital.
Response: We appreciate these suggestions. However, we continue to
believe that it is appropriate to include all hospitals and patients in
a single comparison group. The measures do not stratify hospitals or
patients by socioeconomic status or risk adjust for socioeconomic
status because the association between socioeconomic status and health
outcomes can be due, in part, to differences in the quality of health
care received by groups of patients with varying socioeconomic status.
We have consistently found that hospitals that care for large
proportions of patients of low socioeconomic status are capable of
performing well on our measures. Our most recent analyses (located on
our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf) again confirmed this finding.
Many safety-net providers and teaching hospitals do as well or better
on the measures than hospitals without substantial numbers of patients
of low socioeconomic status. Our analyses also show that adding
socioeconomic status to the risk-adjustment has a negligible impact on
hospitals' risk-standardized rates. The risk-adjustment for clinical
factors likely captures much of the variation due to socioeconomic
status, therefore leading to more modest impact of socioeconomic status
on hospitals' results than stakeholders expect. These findings suggest
that using all hospitals and patients to calculate excess readmission
ratios is most appropriate.
We will continue to monitor this issue carefully. We note that we
continue to provide support to hospitals with high numbers of dual-
eligible patients through other programs and to assist hospitals with
high excess readmission ratios with lowering their readmission rates
through the Partnership for Patients Program and the Quality
Improvement Organization Program.
Comment: One commenter suggested that the readmission measures
risk-adjust for the acuity of the condition at the time of admission.
Response: The measures, endorsed by the NQF and finalized in the FY
2012 IPPS/LTCH PPS final rule, risk-adjust for key factors that are
clinically relevant and have strong relationships with the outcome (for
example, patient demographic factors, patient coexisting medical
conditions, and indicators of patient frailty). Under the current NQF-
endorsed methodology, these covariates are obtained from Medicare
claims extending 12 months prior to, and including, the index
admission. This risk-adjustment approach adjusts for differences in the
clinical status of the patient at the time of the index admission, as
well as for demographic variables. A complete list of the variables
used for risk-adjustment and the clinical and statistical process for
selecting the variables for each NQF-endorsed measure, as proposed, is
available on the NQF Web site at: http://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1219069855841.
Comment: Some commenters stated that the planned readmission
algorithm does not account for the full range of planned readmissions,
or for unrelated readmissions. Other commenters suggested that CMS
exclude unrelated admissions from the payment adjustment. One commenter
added that the unintended consequences of our position to not exclude
unrelated readmissions may affect patient care. Other commenters stated
that CMS has ignored the Affordable Care Act requirements by not
excluding unrelated readmissions from the Hospital Readmissions
Reduction Program.
Response: We appreciate the commenters' feedback and suggestions.
However, we disagree that we have ignored the statutory requirements at
section 1886(q)(5) of the Act as established by section 3025 of the
Affordable Care Act relating to unrelated admissions. Section
1886(q)(5) of the Act requires us to use measures that contain
appropriate exclusions for readmissions that are unrelated to the prior
discharge. Section 1886(q)(5) of the Act then cites specific examples
of such unrelated readmissions, including planned readmissions and
transfers to another hospital. We note that we incorporated both
examples of unrelated readmissions cited by the statute in the Hospital
Readmissions Reduction Program. Further, we continue to review and
revise the area of unrelated readmissions through our expansion of
planned readmissions. For example, we included the planned readmissions
algorithm to address public comments raised last year relating to
expanding the number of planned readmissions.
Regarding other types of unrelated readmissions, we currently do
not seek to differentiate between related and unrelated readmissions
because readmissions not directly related to the index condition may
still be a result of the care received during the index
hospitalization. For example, a patient hospitalized for COPD who
develops a hospital-acquired infection may ultimately be readmitted for
sepsis. It
[[Page 50655]]
would be inappropriate to treat this readmission as unrelated to the
care the patient received during the index hospitalization.
Furthermore, the range of potentially avoidable readmissions also
includes those not directly related to the initial hospitalization,
such as those resulting from poor communication at discharge or
inadequate follow-up. As such, creating a comprehensive list of
potential complications related to the index hospitalization would be
arbitrary, incomplete, and, ultimately, extremely difficult to
implement. However, in coordination with medical experts, we expanded
the list of conditions considered planned. Generally speaking, planned
readmissions are not a signal of quality of care. Therefore, we have
worked with experts in the medical community, as well as other
stakeholders to carefully identify procedures and treatments that
should be considered ``planned'' and, therefore, not counted as
readmissions. For FY 2014, we have proposed that the measures identify
planned readmissions by using an expanded algorithm, which is a set of
criteria for classifying readmissions as planned using Medicare claims.
This algorithm identifies admissions that are typically planned and may
occur within 30 days of discharge from the hospital.
Comment: One commenter suggested that Left Ventricular Assist
Devices (LVADs) and heart transplants be excluded as planned
readmissions for HF patients.
Response: As part of the planned readmissions algorithm, patients
who are readmitted for a transplant are always classified as planned
readmissions and will not count as readmissions in the measures. The
same is true for LVADs because they are classified under CCS 49 (Other
or heart procedures).
Comment: One commenter suggested that hospitals have the ability to
code when a readmission is considered planned.
Response: We note that discharge status codes for planned
readmissions have been adopted by the NUBC, as discussed earlier in
this final rule, and allow for hospitals to identify planned
readmissions on the claim through the use of specific discharge status
codes. However, prior to considering use of such codes in our quality
measures, we will need to establish that hospitals are using these
codes in a valid and reliable manner relative to our planned
readmission algorithm. Accordingly, these discharge status codes are
not currently taken into account in the Hospital Readmissions Reduction
Program.
Comment: One commenter suggested that CMS exclude more admissions
from the AMI, HF, and PN measures because the penalties associated with
these conditions are very high.
Response: We appreciate the commenter's feedback. We are
continuously evaluating the AMI, HF, and PN measures and may consider
further exclusions to these measures in future rulemaking.
Comment: One commenter recommended the inclusion of AMI codes with
``0'' in the fifth digit in the ICD-9-CM code on the claim, indicating
``episode of care unspecified.'' The commenter noted that if the
episode of care is unspecified, it could be outside the 30-day
readmission timeframe. The commenter added that under the ICD-9-CM
guidelines, the ICD-9-CM codes 410.XX for AMI are used for ``acute''
condition for up to 8 weeks duration.
Response: We appreciate the commenter's suggestion and note that we
addressed this question in the FY 2013 IPPS/LTCH PPS final rule. In
that final rule (77 FR 53377), we stated that the AMI ICD-9-CM codes
described by the commenter are used to identify index hospitalizations,
not readmissions. The measures only identify the index admissions based
on the use of the principal discharge diagnosis, which should represent
the reason the patient was admitted to the hospital. Therefore, despite
the use of the word ``unspecified,''' in most cases, the AMI diagnosis
is the primary reason for admission and appropriately included as an
index case.
Comment: Several commenters suggested exclusions from the index
hospitalizations included in the measures, which included exclusions
for patients under ``extreme circumstances'' such as transplants, end-
stage renal disease, burn, trauma, psychosis, and substance abuse.
Response: We appreciate the commenters' suggestions. We addressed
this comment in the FY 2013 IPPS/LTCH PPS final rule. In that final
rule (77 FR 53377), we stated that, ``we appreciate the concern
expressed by some commenters that patients of these `extreme
circumstances' clinically could be sicker and more likely to be
readmitted. The measures address clinical differences in hospitals'
case-mix through risk adjustment rather than through excluding patients
from the measure as suggested by the commenter. The goal in developing
outcomes measures is to create a clinically cohesive cohort that
includes as many patients as possible admitted with the given
condition. Greatly expanding our list of exclusions would result in a
measure that was less useful and meaningful, because it would reflect
the care of fewer patients. In addition, we believe that by excluding
patients with significant comorbidities, the measure would not assess
of the quality of care for those patients. To fairly profile hospitals'
performance, it is critical to place hospitals on a level playing field
and account for their differences in the patients that present for
care. This is accomplished through adequate risk-adjustment for
patients' clinical presentation rather than exclusion of patients.''
After consideration of the public comments we received, we are
finalizing our proposal, without modification, to refine the
readmission measures and to adopt the planned readmissions algorithm
for the Hospital Readmissions Reduction Program.
(b) Counting of Readmissions That Occur After a Planned Readmission
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we
proposed a related change to the AMI, HF, and PN measures to address
unplanned readmissions that occur after a planned readmission but
within 30 days of the patient's initial index discharge. The AMI
measure finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51666)
counted unplanned readmissions for the index admission if they occurred
within 30 days of discharge from the index admission, even if they
occurred following planned readmissions (because the two other measures
did not have any planned readmissions, this method of counting only
applied to the AMI measure).
For the proposed revised AMI, HF, and PN measures, all of which now
account for planned readmissions by incorporating the CMS Planned
Readmission Algorithm Version 2.1, we proposed the following additional
change: If the first readmission is planned, it will not count as a
readmission, nor will any subsequent unplanned readmission within 30
days of the index readmission. In other words, unplanned readmissions
that occur after a planned readmission and fall within the 30-day post
discharge timeframe would no longer be counted as readmissions for the
index admission. The rationale for this proposed change was that, in
this case, either the index or the planned readmission could have
contributed to the patient's unplanned readmission. Therefore, it was
unclear whether the unplanned readmission should be attributed back to
the index admission.
[[Page 50656]]
We stated in the proposed rule that this proposed change in counting
practice would affect a very small percentage of readmissions
(approximately 0.3 percent of index admissions nationally for AMI, 0.2
percent for HF, and less than 0.1 percent for PN). However, we stated
that we intend to monitor trends in the proportion of planned
readmissions for evidence of misuse or misapplication, and other
unintended consequences.
Comment: Several commenters supported the proposal to change the
manner in which readmissions are counted following a planned
readmission.
Response: We appreciate the commenters' support of our proposal
relating to the counting of a readmission following a planned
readmission.
After consideration of the public comments we received, we are
finalizing the proposed change to the AMI, HF, and PN measures to
address unplanned readmissions that occur after a planned readmission
but within 30 days of the patient's initial index discharge, without
modification.
(c) Anticipated Effect of the Changes of CMS Planned Readmission
Algorithm Version 2.1 and Counting of Readmissions on the Readmission
Measures
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we stated
that the proposed changes to the measures in the proposed rule would
have had the following effects on the measures based on our analyses of
discharges between July 2008 and June 2011, if these changes had been
applied for FY 2013. We noted that these statistics were for
illustrative purposes only, and we did not propose to revise the
measure calculations for the FY 2013 payment determination. Rather, in
the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27596), we proposed to
apply these changes to the readmissions measures for the FY 2014
payment determination and subsequent years.
In the proposed rule, we stated that among hospitals that were
subject to the Hospital Readmissions Reduction Program in FY 2013
(Table V.G.1), the number of eligible discharges based on the July 2008
through June 2011 data were 501,765 discharges for AMI; 1,195,967
discharges for HF; and 957,854 discharges for PN:
The proposed 30-day readmission rate (excluding the
planned readmissions) would decrease by 1 percentage point for AMI; 1.5
percentage points for HF; and 0.7 percentage point for PN.
The new national measure (unplanned) rate for each
condition would have been 18.2 percent for AMI; 23.1 percent for HF;
and 17.8 percent for PN.
The number of readmissions considered planned (and,
therefore, not counted as a readmission) would increase by 4,942 for
AMI; 17,512 for HF; and 7,084 for PN.
In the proposed rule, we proposed to update the measures to: (1)
Incorporate the CMS Planned Readmission Algorithm Version 2.1 to
identify planned readmissions; and (2) not count unplanned readmissions
that follow planned readmissions. We invited public comments on this
proposal.
Table V.G.1--Comparison of Original AMI/HF/PN Measures Finalized in FY 2013 Relative to Revised AMI/HF/PN
Measures for FY 2014
[Based on July 2008 through June 2011 discharges from 3,025 hospitals]
----------------------------------------------------------------------------------------------------------------
AMI PN HF
-----------------------------------------------------------------------------
Revised Original Revised Original Revised Original
measure measure measure measure measure measure
----------------------------------------------------------------------------------------------------------------
Number of Admissions.............. 501,765 501,765 957,854 957,854 1,195,967 1,195,967
Number of Unplanned Readmissions.. 91,360 96,302 170,396 177,480 276,748 294,260
Readmission Rate.................. 18.2% 19.2% 17.8% 18.5% 23.1% 24.6%
Number of Planned Readmissions.... 12,811 7,869 7,084 0 17,512 0
Planned Readmission Rate.......... 2.6% 1.6% 0.7% 0.0% 1.5% 0.0%
Percent of Readmissions that are 12.3% 7.6% 4.0% 0.0% 6.0% 0.0%
Planned..........................
----------------------------------------------------------------------------------------------------------------
Comment: One commenter suggested that CMS clarify aspects of what
is counted as a readmission, including whether a patient's death during
a hospital readmission is counted for purposes of the Hospital
Readmissions Reduction Program.
Response: We appreciate the commenter's feedback. A patient's death
during the index hospitalization is excluded from the readmission
measure because no opportunity exists for a subsequent admission. The
same rationale applies when a patient dies after the index discharge
but within the 30-day post discharge period. However, a patient's death
during a readmission in the hospital is included in the measure because
they were discharged alive from the index admission and are, therefore,
eligible for readmission. For more information relating to the
exclusion criteria for a readmission, we refer readers to the FY 2012
IPPS/LTCH PPS final rule (76 FR 51660 through 51676).
Comment: One commenter requested clarification on what is meant
that patients without at least 30 days post-discharge enrollment in
Medicare Parts A and B are excluded from the readmission measures.
Response: Patients without at least 30 days post-discharge
enrollment in FFS Medicare are excluded from the readmission measures
because the 30-day readmission outcome cannot be assessed in this
group. An example of a patient without 30 days of post discharge
enrollment in Medicare Parts A and B would be a patient who enrolled in
Medicare Advantage within 30 days of being discharged. However,
patients who die during or after a readmission would be included in the
measures because the readmission measures assign readmission status as
a dichotomous ``yes/no'' value. Once a patient has been readmitted, the
readmission measures would assign readmission status as a ``yes'' even
if the patient subsequently died after the readmission.
Comment: One commenter suggested that CMS modify the definition of
transfer exclusion in the Hospital Readmissions Reduction Program to
take into account the level of care provided at the transferring
hospital.
Response: We appreciate the commenter's suggestion. We recognize
that a readmission for a patient transferred to a second acute care
hospital and then discharged to the subacute setting from that second
hospital may be related to events that
[[Page 50657]]
occurred at the first admitting hospital. In developing the measures,
we reviewed the approach to attributing the outcome carefully with
clinical experts and with technical expert panels, and developed the
attribution strategy that was most appropriate for each patient cohort.
For the medical admissions of AMI, HF, and PN, the hospital discharging
the patient retains primary responsibility for preparing the patient
for discharge and developing a post-discharge care plan to minimize
readmission risk, even if that risk was increased by management at a
prior hospital. We have addressed this issue differently for other
patient groups as appropriate. For example, for our readmissions
measure for patients undergoing elective hip or knee replacement, we
excluded patients who were transferred into the index hospital because
it is likely that the procedure for these patients was not elective. In
addition, we exclude patients who were admitted for the index procedure
and subsequently transferred to another acute care facility because the
index hospital that performed the joint replacement did not discharge
the patient to the subacute care setting and, therefore, cannot fairly
be held accountable for the readmission.
In summary, we are finalizing our proposal, without modification,
to use the revised versions of the AMI, HF, and PN measures to
calculate the payment adjustments for the Hospital Readmissions
Reduction Program in FY 2014. We believe that the revised measures will
address stakeholder suggestions to broaden the number of planned
readmissions and will result in a more accurate readmission calculation
for purposes of the payment adjustment.
c. Expansion of the Applicable Conditions for FY 2015
(1) Background
Under section 1886(q)(5)(B) of the Act, beginning with FY 2015,
``the Secretary shall, to the extent practicable, expand the applicable
conditions beyond the three conditions for which measures have been
endorsed as described in subparagraph (A)(ii)(I) . . . to the
additional 4 conditions that have been identified by the Medicare
Payment Commission in its report to Congress in June 2007, and to other
conditions and procedures as determined appropriate by the Secretary.''
The four conditions and procedures recommended by MedPAC are: (1)
coronary artery bypass graft (CABG) surgery; (2) chronic obstructive
pulmonary disease (COPD); (3) percutaneous coronary intervention (PCI);
and (4) other vascular conditions. Section 1886(q)(5)(A)(i) of the Act
directs the Secretary, in selecting an ``applicable condition,'' to
choose from among conditions and procedures ``that represent conditions
or procedures that are high volume or high expenditures under this
title (or other criteria specified by the Secretary).''
In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27597), in
accordance with section 1886(q)(5)(A) of the Act, effective for the
calculation of the readmissions payment adjustment factors in FY 2015,
we proposed to expand the applicable conditions and procedures to
include: (1) Patients admitted for an acute exacerbation of COPD; and
(2) patients admitted for elective total hip arthroplasty (THA) and
total knee arthroplasty (TKA). At this point, it was not feasible for
CMS to add readmission measures for three of the conditions identified
by MedPAC in its 2007 Report to Congress (CABG, PCI, and other vascular
conditions). We noted that inpatient admissions for PCI and other
vascular conditions seem to be decreasing, and these procedures are
being performed more in hospital outpatient departments. We stated that
this shift in setting for these procedures may make their future
inclusion in the Hospital Readmission Reduction Program more difficult
and impracticable because: (1) The statutory definition of a
readmission in section 3025 of the Affordable Care Act does not allow
admissions following procedures performed on an outpatient basis to
count as a readmission for purposes of this program, and (2) the shift
of this procedure to the outpatient setting may result in much lower
inpatient counts for this procedure, and hence potential statistical
modeling issues.
We also stated that we would explore how we may address CABG in
this program at a future time.
Comment: Several commenters addressed delaying implementation of
CABG and PCI measures in the Hospital Readmissions Reduction Program.
Some commenters supported delayed inclusion of a CABG readmission
measure and stated that CMS should explore options on developing a CABG
readmission measure for the Hospital Readmissions Reduction Program in
the future. Other commenters generally supported the proposal to
exclude vascular and PCI measures from the Hospital Readmissions
Reduction Program at this time. However, other commenters opposed the
proposal to exclude these measures from the program and requested
clarification on the proposal. These commenters suggested that CMS
include measures for CABG, PCI, and other vascular conditions because
MedPAC previously recommended inclusion of these measures in the
Hospital Readmissions Reduction Program. One commenter further stated
that, instead of THA/TKA, CMS should have focused on CABG, COPD,
Percutaneous transluminal coronary angioplasty, and other vascular
conditions for the Hospital Readmissions Reduction Program.
Response: We appreciate the commenters' feedback and suggestions.
However, did not propose to include measures for these conditions
because inclusion would not be feasible at this time. First, we found
that inpatient admissions for PCI and other vascular conditions appear
to be decreasing. Second, it appears that hospitals are increasingly
performing procedures relating to these conditions in outpatient
departments. Therefore, given the apparent shift in settings for these
procedures, inclusion of these measures in the Hospital Readmissions
Reduction Program is not currently practical. However, moving forward,
we will continue to review these conditions and may consider them in
future rulemaking.
Comment: Several commenters addressed the expansion of measures for
the Hospital Readmissions Reduction Program. One commenter suggested
that CMS make the process for selecting measures for the Hospital
Readmissions Reduction Program more transparent moving forward. Another
commenter suggested that CMS add a wider variety of conditions to the
program. Other commenters stated that CMS should ensure that hospitals
are aware of the proposed expansion of the Hospital Readmissions
Reductions Program and how the program works.
Response: We appreciate the commenters' suggestions and will take
them into consideration for future rulemaking. We will continue to
review and monitor the program to determine whether additional
conditions should be added. We also have taken a number of steps to
ensure that hospitals are aware of the proposed expansion and how the
program works, including press releases, open door forums, as well as
through the Federal rulemaking process. However, we maintain that our
measure selection process for the Hospital Readmissions Reduction
Program strives to ensure transparency and allows the public several
opportunities to comment on measures being selected for the Hospital
Readmissions Reduction Program. First, prior to being proposed in the
proposed rule, we place our measures on a measure under consideration
list, which is made public
[[Page 50658]]
by December 1 of each year. The Measure Application Partnership (MAP),
a multi-stakeholder group convened by the NQF, then reviews the
measures being proposed for Federal programs and provides input on
those measures to the Secretary. The MAP process also allows an
opportunity for the public to comment on the proposed measures being
considered for selection and to participate in the MAP process. Second,
should a measure be proposed through rulemaking for use in the Hospital
Readmissions Reduction Program, the public may comment on any measure
through the public comment period for the proposed rule. Therefore, we
believe that the various opportunities available both before and during
the rulemaking process provide safeguards to ensure public
transparency. However, we will continue to review the measure selection
process and make adjustments as needed to continue maintaining high
levels of public transparency.
Comment: One commenter agreed with all of MedPAC's public comments
on the Hospital Readmissions Reduction Program except for MedPAC's
recommendation to incorporate a hospital-wide readmission measure in
the program. Specifically, in its public comment, MedPAC recommended
that the law be redefined to address the following: The readmission
penalty formula; random variation with single condition readmissions
rates due to a small number of observations; readmission and mortality
related to heart failure, and readmission rates and penalties being
correlated with a low-income patient share.
Response: We appreciate the commenter's feedback. We emphasize that
we have included several of MedPAC's previously recommended conditions
for the Hospital Readmissions Reduction Program, including the
incorporation of the COPD readmission measure in the program. However,
other MedPAC recommendations could not be implemented for a number of
reasons. First, some of MedPAC's recommendations, such as those
relating to changes to the readmission penalty, would require a
legislative change. Second, in regard to those MedPAC recommendations
to include a PCI measure in the Hospital Readmissions Reduction
Program, we cannot implement the measure at this time because the
current PCI measure also uses outpatient data, which makes it
ineligible for the Hospital Readmissions Reduction Program. However, we
are working towards finding a suitable PCI measure for the Hospital
Readmissions Reduction Program and may introduce such a measure in
future rulemaking.
Comment: Some commenters expressed concern with measures
overlapping with other programs. One commenter suggested that CMS not
use the same measures in more than one program, such as the Hospital
IQR Program. Another commenter raised concerns about penalties that
would incur as a result of measures overlapping.
Response: We appreciate the commenter's feedback. We acknowledge
stakeholders' concern with potential measure overlap in our programs.
However, several stakeholders requested that we align our programs and
measures to decrease provider burden associated with multiple reporting
programs. Further, the Hospital Readmissions Reduction Program and the
Hospital IQR Program are separate hospital reporting programs with
different purposes and policy goals. The Hospital Readmissions
Reduction Program is a program that reduces payments to hospitals for
excess readmissions to increase patient safety in hospitals, therefore,
the payment adjustment is based on hospital performance on the
readmissions measures. On the other hand, the Hospital IQR Program is a
reporting program in which the applicable percentage increase applied
to the hospital's payment rate is dependent on whether the hospital
satisfactorily reported data on the Hospital IQR measures. Therefore,
although we acknowledge that similar measures may exist in both
programs, the measures are used and calculated for different purposes.
We maintain that the safety of our beneficiaries, coupled with the
overwhelming requests by stakeholders to align all programs and
measures, justify the use of some measures in more than one program.
However, we will in the future monitor this issue and revise and update
the program's measures, if needed.
Comment: MedPAC recommended that CMS include an all-condition
readmission measure in the Hospital Readmissions Reduction Program.
Response: We appreciate MedPAC's suggestion and will take it into
consideration in future rulemaking for the Hospital Readmissions
Reduction Program.
Comment: One commenter suggested that CMS include ESRD patients
under the age of 65 from the readmission measures. While the commenter
understood our current policy to exclude patients under the age of 65
from the readmissions measures and excessive readmissions data, the
commenter encouraged CMS to reconsider this policy for FY 2014 for
those with end-stage renal disease (ESRD) who are on dialysis and
readmitted for any of the diagnosis codes under the readmissions and
excessive readmissions reduction program.
Response: We appreciate the commenter's suggestion. However, we
exclude Medicare patients under the age of 65, including ESRD patients,
from the readmission measures because patients under the age of 65 have
markedly different clinical risk profiles from other patients in the 65
and over category that are included in the measure. In general, we seek
to address clinical differences in hospitals' case-mix through risk-
adjustment rather than through excluding patients from the measure
because the goal in developing outcomes measures is to create a
clinically cohesive cohort that includes as many patients as possible
admitted with the given condition. We include patients 65 and over,
including ESRD patients, in our measure and our risk-adjustment
methodology takes into consideration ESRD-related comorbidities such as
ESRD or dialysis and renal failure.
Comment: One commenter requested that CMS develop process and
outcomes measures to be reported alongside the readmission measures to
evaluate transitions of care.
Response: We appreciate the commenter's suggestion and will take it
into consideration in future rulemaking for the Hospital Readmissions
Reduction Program.
After consideration of the public comments we received and in light
of the MedPAC recommendation, we are finalizing our proposal to include
a measure of patients admitted for an acute exacerbation of COPD. Also,
although MedPAC did not recommend inclusion of patients admitted for
elective THA and TKA, we consider this category appropriate for the
Hospital Readmissions Reduction Program because it is a high-volume and
high-expenditure procedure and are finalizing the adoption of this
measure in this final rule.
For example, in 2003, 202,500 primary hip arthroplasties and
402,100 primary total knee arthroplasties were performed.\21\ The
number of procedures performed has increased steadily over the past
decade.\22\ Although these
[[Page 50659]]
procedures can dramatically improve patient health-related quality-of-
life, they are costly. In 2005, annual hospital charges totaled $3.95
billion and $7.42 billion for primary THA and TKA, respectively.\23\
The aggregate costs for THA are projected to increase by 340 percent
over a 10-year period, to $17.4 billion per fiscal year by FY 2015, and
for TKA, by 450 percent to $40.8 billion per fiscal year by 2015.\24\
Medicare is the single largest payer for these procedures, covering
approximately two-thirds of all THAs and TKAs performed in the United
States.\25\ THA and TKA procedures combined account for the largest
procedural cost in the Medicare budget.\26\ Therefore, as explained in
detail below, we believe that it is appropriate to include THA/TKA as
an applicable condition.
---------------------------------------------------------------------------
\21\ Kurtz S, Ong K, Lau E, Mowat F, Halpern M.: Projections of
primary and revision hip and knee arthroplasty in the United States
from 2005 to 2030. J Bone Joint Surg Am. Apr 2007;89(4):780-785.
\22\ Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM.
Economic burden of revision hip and knee arthroplasty in Medicare
enrollees. Clin Orthop Relat Res. May 2006;446:22-28.
\23\ Kurtz SM, Ong KL, Schmier J, et al.: Future clinical and
economic impact of revision total hip and knee arthroplasty. J Bone
Joint Surg Am. Oct 2007;89 Suppl 3:144-151.
\24\ Ibid.
\25\ Ong KL, Mowat FS, Chan N, Lau E, Halpern MT, Kurtz SM.
Economic burden of revision hip and knee arthroplasty in Medicare
enrollees. Clin Orthop Relat Res. May 2006;446:22-28.
\26\ Bozic KJ, Rubash HE, Sculco TP, Berry DJ. An analysis of
medicare payment policy for total joint arthroplasty. Journal of
Arthroplasty. 2008;23(6 Suppl 1):133-138.
---------------------------------------------------------------------------
We developed a hospital-level, 30-day, all-cause, risk-standardized
readmission measure for THA/TKA. NQF endorsed the measure (NQF
1551) in January of 2012. The measure incorporated the Planned
Readmission Version 2.1 algorithm and excludes transfers. Accordingly,
we believe that the THA/TKA measure met the criteria of applicable
condition and are finalizing it for the Hospital Readmissions Reduction
Program.
The rationale for expanding the applicable conditions and the
measures used to estimate the Excess Readmission Ratios are described
in detail below, as discussed in the FY 2014 IPPS/LTCH PPS proposed
rule (78 FR 27597 through 27599).
(2) COPD Readmission Measure
COPD is a leading cause of readmissions to hospitals.\27\ In 2007,
the MedPAC published a report to Congress in which it identified the
seven conditions associated with the most costly potentially
preventable readmissions. Among these seven conditions, COPD ranked
fourth.\28\ Evidence also shows variation in readmissions for patients
with COPD, supporting the finding that opportunities exist for
improving care. The median, 30-day, risk-standardized readmission rate
among Medicare fee-for-service patients aged 65 or older hospitalized
for COPD in 2008 was 22.0 percent, and ranged from 18.33 percent to
25.03 percent across 4,546 hospitals.\29\ Clinical trials and
observational studies suggest that several aspects of care provided to
patients hospitalized for exacerbations of COPD can have significant
effects on readmission.30 31 32 33 In addition, inclusion of
this measure in the Hospital Readmissions Reduction Program aligns with
CMS' priority objectives to promote successful transitions of care for
patients from the acute care setting to the outpatient setting, and
reduces short-term readmission rates. Therefore, as we stated in the FY
2014 IPPS/LTCH PPS proposed rule, we believe the COPD measure warrants
inclusion in the Hospital Readmissions Reduction Program for FY 2015.
We invited public comments on this proposal.
---------------------------------------------------------------------------
\27\ Jencks SF, Williams MV, Coleman EA. Rehospitalizations
among patients in the Medicare fee-for-service program. N Engl J
Med. April 2 2009;360(14):1478-1428.
\28\ Committee MPA. Report to the Congress: Promoting Greater
Efficiency in Medicare. 2007.
\29\ Grosso L.M., Lindenauer P., Wang C., et al.: Hospital-level
30-day Readmission Following Admission for an Acute Exacerbation of
Chronic Obstructive Pulmonary Disease: Report prepared for the
Centers for Medicare & Medicaid Services. 2011; Available at: http://www.qualitynet.org/.
\30\ Global Strategy for Diagnosis M, and Prevention of COPD.
2009; Available at: http://www.goldcopd.org/.
\31\ National Institute for Health and Clinical Excellence.
Chronic Obstructive Pulmonary Disease: Management of Chronic
Obstructive Pulmonary Disease in Adults in Primary and Secondary
Care (Partial Update):. National Collaborating Centre for Acute and
Chronic Conditions. Available at: http://www.nice.org.uk/nicemedia/live/13029/49397/49397.pdf.
\32\ Walters JA, PG Gibson, R Wood-Baker, M Hannay, EH Walters.
Systemic corticosteroids for acute exacerbations of chronic
obstructive pulmonary disease. Cochrane Database Syst Rev.
2009;CD001288(1).
\33\ Lightowler JV, Wedzicha JA, Elliott MW, Ram FS. Non-
invasive positive pressure ventilation to treat respiratory Failure
resulting from exacerbations of chronic obstructive pulmonary
disease: Cochrane systematic review and meta-analysis. Bmj.
2003;326(7382).
---------------------------------------------------------------------------
Comment: Several commenters supported the proposed expansion of
applicable conditions to include patients admitted for an acute
exacerbation of COPD and patients admitted for elective THA and TKA.
Response: We appreciate the commenters' support of the expansion of
the Hospital Readmissions Reduction Program.
Comment: One commenter suggested that CMS not expand the Hospital
Readmissions Reduction Program to include additional measures due to
lack of risk-adjustment of pre-existing conditions.
Response: The COPD and hip/knee measures risk-adjust for key
factors that are clinically relevant and are strongly correlated with
the likelihood for readmission (for example, patient demographic
factors, patient coexisting medical conditions, and indicators of
patient frailty). Under the current NQF-endorsed methodology, these
covariates are obtained from Medicare claims extending 12 months prior
to, and including, the index admission. This risk-adjustment approach
adjusts for differences in the clinical status of the patient at the
time of the index admission, as well as for demographic variables. A
complete list of the variables used for risk-adjustment and the
clinical and statistical process for selecting the variables for each
NQF-endorsed measure, as proposed, is available on our Web site at:
http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Comment: Some commenters recommended that CMS not expand the
Hospital Readmissions Reduction Program to include additional
conditions because the measures for the program are not reliable. The
commenters suggested that CMS raise the minimum case threshold required
for hospitals to quality for the Hospital Readmissions Reduction
Program to well over 25 cases in order to improve reliability.
Response: We appreciate the commenters' feedback. However, we
disagree that the Hospital Readmissions Reduction Program uses
unreliable measures. First, the NQF both reviewed and endorsed all
measures used in the Hospitals Readmissions Reduction Program. Second,
as previously stated in the FY 2013 IPPS/LTCH PPS final rule (77 FR
53379), ``We determined the 25-case threshold for public reporting
based on a reliability statistic that is calculated from the
intercluster correlation, a parameter of the model. We are maintaining
the minimum 25-case threshold that we adopted through rulemaking last
year.''
We have further considered how to best measure quality for low-
volume hospitals in order to address the concerns raised by
stakeholders. We acknowledge that smaller hospitals do typically have
less certain estimates because they have fewer cases for use in
assessing quality. However, this challenge is inherent in outcome
measurement. One advantage of the statistical model that we use for the
measures is that it allows for the
[[Page 50660]]
inclusion of small hospitals while characterizing the certainty of
their estimates. The hierarchical logistic regression model that we use
to calculate the risk-standardized outcome measures allows the
inclusion of hospitals with relatively few observations, but takes into
account the uncertainty associated with sample size in estimating their
risk-standardized outcome rates. The model takes into account the
uncertainty in the estimate of outcome rates for low-volume hospitals
by assuming that each hospital is a typically performing hospital. It
weighs that assumption along with the outcomes for the particular
hospital in calculating the outcome rate. Therefore, the estimated
outcome rates for smaller hospitals will likely be closer to the
national rate because the limited number of eligible cases in the
hospital tells little about that hospital's true outcome rate.
Comment: One commenter suggested that CMS provide hospitals with a
preview of their COPD and THA/TKA readmission data before these
measures are included in the Hospital Readmissions Reduction Program.
Response: We appreciate the commenter's suggestion. Hospitals will
have an opportunity to review and correct the readmissions data
relating to these measures prior to its release to the public on the
Hospital Compare Web site. We expect that these data will be provided
around June of 2014.
Comment: Several commenters addressed risk-adjusting the COPD, THA,
and TKA measures to account for socioeconomic status. One commenter
stated that CMS should not further expand the Hospital Readmissions
Reduction Program beyond current and proposed conditions without
properly planning to risk-adjust for education level and socioeconomic
status. Another commenter stated that a patient's ability to afford
medication should be included as a risk-adjustment variable because
socioeconomic status impacts the patient's ability to be compliant with
medications and a patient's ability to pay for medications is separate
and apart from the care provided by the hospital. One commenter
suggested that a hospital's performance on the COPD measure be compared
to its peer hospitals that serve a similar population, rather than to
all hospitals. For example, safety-net hospitals with large minority
populations should be compared only to each other, rather than to all
hospitals in the country.
Response: We appreciate the commenters' feedback. We have continued
to consider and evaluate stakeholder concerns regarding the influence
of patient socioeconomic status on readmission and mortality rates. The
Hospital Readmissions Reduction Program, as pointed out by one
commenter, seeks to transform the Medicare payment and delivery system
by financially incentivizing providers to change the way they deliver
care. The program's design encourages hospitals to make changes to
avoid payment penalties while simultaneously enhancing the quality of
health care provided to patients. We routinely monitor the impact of
low socioeconomic status, using the proportion of patients enrolled in
Medicaid as a proxy for low-income, on hospitals' results and have
consistently found that hospitals that care for large proportions of
patients of low socioeconomic status are capable of performing well on
our measures. Our most recent analyses, available on our Web site at:
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-AssessmentInstruments/HospitalQualityInits/Downloads/MedicareHospitalQualityChartbook2012.pdf, again confirmed this finding.
Many safety-net providers and teaching hospitals do as well or better
on the measures than hospitals without substantial numbers of patients
of low socioeconomic status. Our analyses also show that adding
socioeconomic status to the risk-adjustment has a negligible impact on
hospitals' risk-standardized rates. The risk-adjustment for clinical
factors likely captures much of the variation due to socioeconomic
status, therefore leading to more modest impact of socioeconomic status
on hospitals' results than stakeholders expect. We note that the goal
of risk-adjustment is to account for factors that are inherent to the
patient at the time of admission, such as severity of disease, so as to
put hospitals on a level playing field. The measures should not be
risk-adjusted to account for differences in practice patterns that lead
to lower or higher risk for patients to be readmitted or die. The
measures aim to reveal differences related to the patterns of care. The
measures do not risk-adjust for socioeconomic status because the
association between socioeconomic status and health outcomes can be
due, in part, to differences in the quality of health care received by
groups of patients with varying socioeconomic status. The measures also
are not risk-adjusted for socioeconomic status, or other patient
factors such as race, because we do not want to hold hospitals to
different standards for the outcomes of their patients of low
socioeconomic status. Finally, we do not want to mask potential
disparities or minimize incentives to improve the outcomes of
disadvantaged populations. This approach also is consistent with the
guidance from the NQF,\34\ which states that risk models should not
obscure disparities by adjusting for factors associated with inequality
(such as race or socioeconomic status). Furthermore, the statutory
language in section 1886(q)(5)(A)(ii)(I) of the Act requires that the
measures included in the Hospital Readmissions Reduction Program for
FYs 2013 and 2014 be NQF-endorsed. However, we are committed to
tracking this issue and will continue to evaluate disparities in care
and the impact of patient's socioeconomic status on hospital's rates.
---------------------------------------------------------------------------
\34\ National Quality Forum, Measure Evaluation Criteria
(November, 2012). Available at: http://www.qualityforum.org/docs/measure_evaluation_criteria.aspx.
---------------------------------------------------------------------------
(3) Overview of COPD Measure: Hospital-Level, 30-Day, All-Cause,
Risk-Standardized Readmission Rate (RSRR) following Chronic Obstructive
Pulmonary Disease (COPD) Hospitalization (NQF 1891)
The COPD readmission measure assesses hospitals' 30-day, all-cause
risk-standardized rate of readmission for an acute exacerbation of COPD
(AECOPD). In general, the measure uses the same approach to risk-
adjustment and hierarchical logistic modeling (HLM) methodology that is
specified for CMS' AMI, HF, and PN readmission measures previously
adopted for this program. Information on how the measure employs HLM
can be found in the 2011 COPD Readmission Measure Methodology Report
(available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html).
This approach appropriately accounts for the types of patients a
hospital treats (that is, hospital case-mix), the number of patients it
treats, and the quality of care it provides. The HLM methodology is an
appropriate statistical approach to measuring quality based on patient
outcomes when the patients are clustered within hospitals (and,
therefore, the patients' outcomes are not statistically independent)
and sample sizes vary across hospitals. The measure methodology defines
hospital case-mix based on the clinical diagnoses provided in the
hospitals' claims for the hospitals' patient inpatient and outpatient
visits for the 12 months prior to the hospitalization for COPD, as well
as those present in the claims for care at admission. However, the
methodology specifically does not
[[Page 50661]]
account for diagnoses present in the index admission that may indicate
complications rather than patient comorbidities.
As we did in the proposed rule, we are providing a summary of the
measure methodology below. For further details on the risk-adjustment
statistical model, we refer readers to the 2011 COPD Readmission
Measure Methodology Report that we have posted on the CMS Web site at:
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. NQF endorsed
the measure (NQF 1891) in March 2013 (http://www.qualityforum.org/QPS/1891).
Data Sources. The COPD measure is claims-based. It uses
Medicare administrative data from hospitalizations for
fee[hyphen]for[hyphen]service Medicare beneficiaries hospitalized with
an acute exacerbation of COPD (AECOPD).
Outcome. The outcome for the COPD measure is 30-day, all-
cause readmission, defined as an unplanned subsequent inpatient
admission to any applicable acute care facility from any cause within
30 days of the date of discharge from the index hospitalization. A
number of studies demonstrate that improvements in care at the time of
discharge can reduce 30[hyphen]day readmission rates.35 36
It is a timeframe that a readmission may reasonably be attributed to
the hospital care and transitional period to a subacute care setting.
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\35\ Gulshan Sharma, Kou Yong-Fang, Freeman Jean L, Zhang Dong
D, Goodwin James S.: Outpatient Follow-up Visit and 30-Day Emergency
Department Visit and Readmission in Patients Hospitalized for
Chronic Obstructive Pulmonary Disease. Arch Intern Med. Oct.
2010;170:1664-1670.
\36\ Nelson EA, Maruish ME, Axler JL.: Effects of Discharge
Planning and Compliance with Outpatient Appointments on Readmission
Rates. Psychiatr Serv. July 1 2000;51(7):885-889.
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The COPD readmissions measure assesses all-cause unplanned
readmissions (excluding planned readmissions) rather than readmissions
for acute exacerbations of COPD only. As we stated in the proposed
rule, we proposed this measure for several reasons. First, from the
patient perspective, a readmission for any reason is likely to be an
undesirable outcome of care, even though not all readmissions are
preventable. Second, limiting the measure to COPD[hyphen]related
readmissions may limit the effort focus too narrowly rather than
encouraging broader initiatives aimed at improving the overall care
within the hospital and transitions from the hospital setting.
Moreover, it is often hard to exclude quality issues and accountability
based on the documented cause of readmission. For example, a patient
with COPD who develops a hospital-acquired infection may ultimately be
readmitted for sepsis. It would be inappropriate to consider such a
readmission to be unrelated to the care the patient received for COPD.
Finally, while the measure does not presume that each readmission is
preventable; interventions generally have shown reductions in all types
of readmissions.
The measure does not count planned readmissions as readmissions.
Planned readmissions are identified in claims data using the CMS
Planned Readmission Algorithm Version 2.1 that detects planned
readmissions that may occur within 30 days of discharge from the
hospital. This algorithm is described briefly in section V.G.3.b.(2)(a)
of the preamble of this final rule and more detailed information can be
found on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. For the COPD measure, unplanned readmissions
that fall within the 30-day post discharge timeframe from the index
admission would not be counted as readmissions for the index admission
if they were preceded by a planned readmission (we refer readers to
section V.G.3.b.(2)(b) of the preamble of this final rule on the
counting of readmissions that occur after a planned readmission).
Cohort of Patients. COPD is a group of lung diseases
characterized by airway obstruction. Patients hospitalized for an acute
exacerbation of COPD (AECOPD) present with varying degrees of severity
ranging from a worsening of baseline symptoms (dyspnea, cough, and/or
sputum) to respiratory failure. To capture the full spectrum of
severity of patients hospitalized for an AECOPD, the measure includes
patients with a principal diagnosis of COPD, as well as those with a
principal diagnosis of respiratory failure with a secondary diagnosis
of an AECOPD. Requiring AECOPD as a secondary diagnosis helps to
identify respiratory failure due to COPD exacerbation versus another
condition (for example, heart failure). For detailed information on the
cohort definition, we refer readers to the 2013 COPD Readmission
Measure Updates and Specifications Report on the CMS Web site at:
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
Inclusion and Exclusion Criteria. The COPD measure
includes hospitalizations for patients who are 65 years of age or older
at the time of index admission and for whom there was a complete 12
months of Medicare fee-for-service (FFS) enrollment to allow for
adequate risk-adjustment. The measure excludes the following admissions
from the measure cohort: (1) Admissions for patients who die during the
initial hospitalization (these patients are not eligible for
readmission); (2) admissions for patients having a principal diagnosis
of COPD during the index hospitalization and subsequently transferred
to another acute care facility (these are excluded because the measure
focuses on discharges to a nonacute care setting such as the home or a
SNF); (3) admissions for patients that are discharged against medical
advice (AMA) (excluded because providers do not have the opportunity to
deliver full care and prepare the patient for discharge); (4)
admissions for patients without at least a 30-day post-discharge
enrollment in Medicare FFS (excluded because the 30-day readmission
outcome cannot be assessed in this group); and (5) additional COPD
admissions for patients within 30 days of discharge from an index COPD
admission will be considered readmissions and not additional index
admissions.
Risk-Adjustment. The COPD measure adjusts for differences
across hospitals in how at risk their patients are for readmission
relative to patients cared for by other hospitals. The measure uses
claims data to identify patient clinical conditions and comorbidities
to adjust patient risk for readmission across hospitals, but does not
adjust for potential complications of care. Consistent with NQF
guidelines, the model does not adjust for socioeconomic status or race
because risk-adjusting for these characteristics would hold hospitals
with a large proportion of patients of minority race or low
socioeconomic status to a different standard of care than other
hospitals. Rather, this measure seeks to illuminate quality
differences, and risk-adjustment for socioeconomic status or race would
obscure such quality differences.